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Chinese industrial profit up 28.3% to USD438b

by on August 28, 2011

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(MENAFN) China’s National Bureau of Statistics said that in 2011′s first seven months, the country’s industrial profit surged 28.3 percent to USD438 billion, reported Bloomberg. The agency added …

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Chinese industrial profit up 28.3% to USD438b

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China’s July inflation up 6.5%

by on August 9, 2011

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(MENAFN) China’s National Bureau of Statistics said that last month, the country’s inflation surged 6.5 percent from 2010′s same period, surpassing the government’s 2011 target of 4 percentage …

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China’s July inflation up 6.5%

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America’s Poor Twice As Likely To Say U.S. Is In A Depression

May 2, 2011

The recession might have officially ended last year. But to many of America’s poorest citizens, the economy certainly feels like depression. According to a new poll by Gallup , 55 percent of Americans believe the United States is currently in either a recession or a depression. Specifically, 26 percent think the U.S. is currently in a recession and 29 percent think it’s in a depression. How Americans feel about the economy is most stark, though, when divided by income group. Of those currently earning $75,000 or more, 31 percent say the U.S. economy is growing, while only 23 percent say the U.S. is currently dealing with a depression. Among those earning less than $30,000, only 21 percent say the economy is growing, while 46 percent say the U.S. is in a recession — more than double the percentage answered by the richer group. The division over whether this is a recovery or a depression is also noticeable when broken down by political party, with 18 percent of Democrats saying the U.S is in a depression, compared to 35 percent of Republicans, 35 percent of Tea Partiers and 34 percent of Independents. Officially, the recession ended on September 20, 2010, according to the National Bureau of Economic Research, an independent group that tracks recessions and recoveries. But with a tepid job market recovery and housing prices continuing to drop, many Americans apparently disagree with the technical definition of a “recession.” Perhaps the reason for the pessimism among America’s poor, Gallup postulates, is that inflation in the form or higher gas and food prices has cut into the pockets of poor Americans before a widespread jobs recovery. With corporate profits hitting record highs , on the other hand, America’s rich, who are more likely to own stock, are more likely to feel the benefits of this recovery. On Monday, Gallup released another poll indicating that 44 percent of Americans believe it’s very or somewhat likely that “today’s youth will have a better life than their parents,” the lowest level since data was first collected in 1983. But it was the the poor and young, that were most optimistic about the future, with 57 percent those 18 to 29 years old and 52 percent of those making less than $30,000 per year placing their faith in the future. Only 34 percent of those 50 to 64 years old and 37 percent of those making over $75,000 said the same.

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Mancession Over, Men Now Flourishing

March 5, 2011

Between December 2007 and June 2009 — the recession’s official timeframe, according to the National Bureau of Economic Research — the U.S. economy largely shed jobs from male-dominated industries: construction, manufacturing and production. Hence, the term ” mancession .” But in recent months, men are flourishing in the job market. In February, the unemployment rate for men was 7.8 percent while the overall unemployment rate is 8.9 percent. The unemployment rate for men 20 years and over has fallen to 8.7 percent from 10 percent in February of 2010. For women of the same age, the unemployment rate has hovered around 8 percent over the same period. “You have a situation now where the sectors that traditionally employ men have stopped losing jobs and are actually adding them,” said economist Dean Baker. “So there’s been a reversal. Men really took a very big hit in the first phase of the downturn. But for now it seems that the sectors that are gaining jobs most rapidly are the areas that are employing men.” In February, economic activity in the manufacturing sector expanded for the fifteenth consecutive month , according to the Institute for Supply Management’s monthly Report on Business, released this week. “Manufacturing appears to be red hot,” said Ryan Sweet, an economist at Moody’s Analytics. In February, the private sector added 222,000 jobs . Of these gains, 152,000 were in private service-providing industries and 70,000 were in goods-producing industries. Manufacturing gained 33,000 jobs, another month of positive news, but not as strong as the 53,000 positions added in January . Construction jobs grew by 33,000 in February, though improvement in this sector can, to some extent, be attributed to bad weather during January. Transportation and warehousing jobs were up 22,000, a rebound that can also be partly attributed to January’s inclement weather. Over the last three months, the sector has added 9,200 jobs per month on average. Temporary help services increased by 16,000 in February. Over the last two months, temporary help services added 5,300 jobs per month on average, lower than its average of 32,000 per month in the fourth quarter of last year. Leisure and hospitality saw increased employment in February (+21,000), and the industry has gained 9,000 jobs on average over the last two months. Retail trade positions decreased by 8,000 in February, a surprise since consumer spending has been on the mend. The retail sector has added 7,100 on average in the prior three months. Health care added 34,000 jobs, an increase over the prior three months’ average of 19,000.

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China’s Growth Soars, Concerns About Lending Standards Mount

January 20, 2011

BEIJING (By Aileen Wang and Kevin Yao): China finished 2010 with a bang, its growth soaring past forecasts and inflation slowing less than expected, numbers that could prod the government to intensify its easy-does-it approach to tightening. Evidence of robust growth may give officials confidence to take more aggressive steps to quell price pressures, from stricter lending curbs to interest rate rises, as rising food costs in recent weeks suggest inflation will rebound in coming months. China’s annual gross domestic product growth sped up in the fourth quarter to 9.8 percent from 9.6 percent in the third quarter, the National Bureau of Statistics (NBS) said on Thursday, defying expectations for a slowdown to 9.2 percent. “Inflation pressure is intensifying into January and the tightening pressure will intensify, especially considering the stronger-than-expected fourth-quarter GDP growth,” said Isaac Meng, economist with BNP Paribas in Beijing. Full-year growth picked up to 10.3 percent from 9.2 percent in 2009. With President Hu Jintao on a state visit to the United States, the figures served as a powerful reminder that despite controversy about China’s vast trade surplus, its economy is far from dependent on exports. Domestic investment and consumption contributed 9.5 percentage points to its growth last year, while net exports added just 0.8 percentage point. Consumer prices in December rose 4.6 percent from a year earlier, slowing from a 28-month high of 5.1 percent in November but staying above forecasts for a steeper fall to 4.4 percent. Other important data for December, from factory output to investment, painted a picture of stable expansion, showing that the world’s second-largest economy was not overheating despite the surprise jump in growth. Although the growth and inflation figures had been published in advance by local media, China’s main stock index shed 2.9 percent as investors viewed the strong set of data as bolstering the case for tightening. MORE TIGHTENING NEEDED China has officially raised banks’ required reserves seven times since the start of last year, with its most recent increase taking effect on Thursday. But it has increased interest rates only twice during that time and some analysts warn that more forceful moves are needed. The government is still debating the extent of credit curbs, and reports in recent days have pointed to Beijing imposing a lower ceiling on bank lending than some investors had expected. “Beijing still has more work to do to keep the economy on an even keel,” said Brian Jackson, an economist with Royal Bank of Canada in Hong Kong. “Risks are skewed to more aggressive action.” A Reuters poll showed that economists expect two interest rate rises in the first half of 2011. To keep banks from skirting restrictions on credit growth, the Chinese banking regulator said on Thursday that lenders must bring all of their off-balance-sheet loans sold to trusts back onto their books this year. In a sign that the various stabs at tightening are starting to bite, China’s benchmark short-term money market rate spiked 194 basis points on Thursday, heading for its biggest single-day rise on record as the latest required reserves increase took effect. To ease the tight market liquidity, the central bank conducted reverse repurchase agreements with selected banks, sources told Reuters. INFLATION WORRY Weekly food price movements had long pointed to a decline in inflationary pressure in December, but many analysts also reckoned that any slowdown in inflation could be temporary. December’s data showed a clear slackening in price pressures as monthly inflation eased to 0.5 percent from 1.1 percent in November. A drop in food price inflation to an annual rate of 9.6 percent in December from 11.7 percent in November was the main reason for the decline. But price pressures could pick up in January, because harsh winter weather could compound a surge in demand with the Lunar New Year holiday falling earlier in the calendar this year than in 2010. Indeed, food price data compiled by the commerce ministry shows vegetables and meat have become more expensive since the start of the year. “Growth momentum remains strong. However, inflation is the key focus of the market. It will be a challenging year for China to battle inflation,” said Dongming Xie, China economist at OCBC Bank in Singapore. Currency appreciation is another potential tool in Beijing’s tightening kit. It has nudged the yuan higher against the dollar over the past week, but dealers see the mini-burst of appreciation as politically motivated to try to soften U.S. criticism of China’s currency policy during Hu’s state visit. Analysts expect appreciation of just 5 percent this year, with Hu himself saying that inflation was hardly the most important factor in determining the exchange rate. Ma Jiantang, chief of China’s statistics agency, said he was confident that China would be able to control inflation in 2011 and that steps to limit the amount of cash in the economy would be instrumental to taming price pressures. Economists polled by Reuters forecast that Chinese consumer price inflation will average 4.3 percent this year, above the government’s target of capping it at 4 percent. Economic growth is expected to slow to 9.3 percent in 2011 from 10.3 percent last year. Copyright 2010 Thomson Reuters. Click for Restrictions .

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Andrew Sum: The Nation’s Recent College Graduates Face Significant Labor Market Problems

October 19, 2010

The Great Recession of 2007-2009 may have officially ended in mid-2009 according to the National Bureau of Economic Research, but a deep recession remains in the nation’s labor markets with very high levels of official unemployment, underemployment, and hidden unemployment. The economic burdens of the Great Recession have been very unevenly shared among U.S. workers. College educated workers (especially professionals, women, and those over 30 years old) have fared the best. The total number of college educated workers holding jobs requiring four year college degrees did not decline between 2007 immediately prior to the recession and 2010. Young college educated workers, particularly those 25 and under, however, have not fared very well over the past three years. They have experienced rising joblessness, underemployment, and malemployment problems (i.e. working in jobs that do not require a college degree). During the January-August period of 2010, we estimate that fewer than 50 of every 100 young B.A.-holders held a job requiring a college degree. The labor market difficulties of many young bachelor degree holders in the U.S. can best be seen in the types of jobs in which they were employed in the first eight months of the current calendar year. Of the 20 individual occupations employing the largest number of young, college graduates (25 and under), seven typically did not require any type of college degree to be employed. There were 175,000 young college graduates working as cashiers, retail clerks, and customer service representatives versus only 146,000 employed in all computer professional professions and all types of engineers combined. There were twice as many four year college graduates working as waiters, waitresses, and bartenders (80,000) as there were engineers (37,000). There were more college graduates working in office related jobs and as bank tellers than in all computer professional jobs (148,000 vs. 109,000). The likelihood that young bachelor degree holders will end up being employed in a college labor market job is not a random event. Obtaining employment in jobs requiring college degrees has been found to be associated with the majors of new college graduates (engineering, health, business, computer science majors fare better), those who had strong reading and math skills at entry into college, those living in low unemployment states, and having paid work experience in college-related jobs prior to graduation. Having parents who are employed college graduates also appears to matter by providing referrals to appropriate jobs. This growing problem of malemployment and joblessness among young college graduates has a number of dire economic effects on both the graduates themselves and many other young adults across the country. Those college graduates working in jobs that do not require college degrees are earning substantially less per week (30-40 percent less) than their peers who work in jobs that require college degrees. These substantially lower weekly earnings reduce the private and social economic return to college education for such individuals to close to zero. The presence of large numbers of jobless and malemployed young college graduates provides adverse signals to younger high school students contemplating whether to attend college especially among males living in lower income communities. The non-college labor market jobs obtained by these young graduates displace less educated young adults from employment, increasing joblessness among young adults with only a year or two of college or among high school graduates. This rising degree of malemployment among young college graduates, thus, has adverse consequences on the rest of society, pushing down the growth of real output and employment, wages, and earnings of the non-college educated. There is a critical need for national, state, and local political and educational policymakers and administrators to address this growing labor market problem. Prepared by: Andrew Sum and Paul Harrington, Center for Labor Market Studies at Northeastern University

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Unemployment Could Rise To 10.1 Percent In 2011, Economists Say

September 27, 2010

Even as the economy continues to grow, unemployment could rise over the next year to as high as 10.1 percent, according to a new paper by the San Francisco Fed (hat tip to the Wall Street Journal ). The paper’s authors, economists David Lang and Kevin Lansing, say that if the economic growth in the first half of 2011 is “at or below” the potential for growth, then unemployment will rise. And, they say, it’s looking like growth won’t meet its potential, which is estimated to be at least 2.1 percent annually for the next five years. Citing a rule called “Okun’s law,” the economists say that changes in the unemployment level generally correspond to changes in GDP, or economic output. If GDP growth remains lackluster, then unemployment could increase to 10.1 percent, from its current 9.6 percent. The National Bureau of Economic Research said last week that the recession ended in June 2009 , a technical demarcation that means the economy stopped shrinking and started growing. Indeed, according to data from the St. Louis Fed , the GDP bottomed out during that period and grew steadily over the next four quarters. Still, growth was modest. The seasonally adjusted annual growth rate for the GDP, according to St. Louis Fed data , was 0.9 percent in the second quarter of this year. Economists, such as Minneapolis Fed president Narayana Kocherlakota , have argued that the unemployment problem is “structural,” or that there is a “mismatch”: “Firms have jobs, but can’t find appropriate workers. The workers want to work, but can’t find appropriate jobs,” Kocherlakota said last month. “There are many possible sources of mismatch — geography, skills, demography — and they are probably all at work.” Others, though, such as Paul Krugman , have dismissed that theory as “foolish,” saying the problem is simply that companies don’t want to hire — that demand for labor is low. “Job openings have plunged in every major sector, while the number of workers forced into part-time employment in almost all industries has soared. Unemployment has surged in every major occupational category,” Krugman writes. The economic picture for most of the country remains bleak, as the net worth of American households and non-profits dropped in the second quarter of this year to a level not seen since the third quarter of 2009.

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The Recession Has Ended; Someone Should Send the Memo to Tenants

September 22, 2010

The National Bureau of Economic Research — the official referee of the economy — announced this week that it determined that the recession ended and economic recovery began 15 months ago in June 2009. However, according to commercial real estate service…

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Video: Achutan Calls End to Risk of U.S. Double Dip Premature: Video

September 20, 2010

Sept. 21 (Bloomberg) — Lakshman Achuthan, managing director of the Economic Cycle Research Institute in New York, talks about the outlook for the U.S. economy. The worst U.S. recession since the Great Depression ended in June 2009, the National Bureau of Economic Research said yesterday, as a slowdown in economic growth raises the possibility of another slump. Achuthan talks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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The Recession Is OVER, Says Economic Panel

September 20, 2010

(AP, JEANNINE AVERSA): It’s official: The longest recession the country has endured since World War II ended in June 2009, according to a group that dates the beginning and end of recessions. The National Bureau of Economic Research, a panel of academic economists based in Cambridge, Mass., says the recession lasted 18 months. It started in December 2007 and ended in June 2009. That was the longest of any recession since World War II. Previously the longest postwar downturns were those in 1973-1975 and in 1981-1982. Both of those lasted 16 months. The decision makes official what many economists have believed for some time, that the recession ended in the summer of 2009. The economy started growing again in the July-to-September quarter of 2009, after a record four straight quarters of declines. Thus, the April-to-June quarter of 2009, marked the last quarter when the economy was shrinking. At that time, it contracted just 0.7 percent, after suffering through much deeper declines. That factored into the NBER’s decision to pinpoint the end of the recession in June. Any future downturn in the economy would now mark the start of a new recession, not the continuation of the December 2007 recession, NBER said. That’s important because if the economy starts shrinking again, it could mark the onset of a “double-dip” recession. For many economists, the last time that happened was in 1981-82. The NBER normally takes its time in declaring a recession has started or ended. For instance, the NBER announced in December 2008 that the recession had actually started one year earlier, in December 2007. Similarly, it declared in July 2003 that the 2001 recession was over. It actually ended 20 months earlier, in November 2001. Its determination is of interest to economic historians – and political leaders. Recessions that occur on their watch pose political risks. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second one started in December 2007. NBER’s decision means little to ordinary Americans now muddling through a sluggish economic recovery and a weak jobs market. Unemployment is 9.6 percent and has been stuck at high levels since the recession ended. READ the NBER’s full release: sept2010

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A ‘Double-dip’ Recession Defined

July 1, 2010

WASHINGTON — Concerns are rising that the economy is at risk of slipping into a “double-dip” recession. High unemployment, Europe’s debt crisis, a slowdown in China, a teetering housing market and sinking stock prices are all weighing on a fragile U.S. recovery. So what exactly is a double-dip recession? Robert Hall has an idea of what one looks like but no precise definition. He’s chairman of the National Bureau of Economic Research, a group of academic economists that officially declares the starts and ends of recessions. In Hall’s view, a double dip is akin to a continuous recession that’s punctuated by a period of growth, then followed by a further decline in the economy. The NBER doesn’t define a double dip any more specifically than that, says Hall, an economics professor at Stanford University. In econo-speak, Hall explains: “The idea – hypothetical because it has yet to happen – is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle.” Hall says the closest the United States has come to a double dip was in 1980 and 1981. But the NBER concluded that those were two distinct, though closely spaced, recessions – “not a double dip,” he says. Not so, says Sung Won Sohn, professor at California State University, Channel Islands. Sohn says the back-to-back recessions of the early ’80s fit his definition of a double dip: A recession followed by a short period of growth followed by a recession. Brian Bethune, economist at IHS Global Insight, has a view similar to Hall’s: A period in which the economy shrinks, starts growing again and then shrinks again – for at least six months. “There is no mathematical formula; it’s a judgment call,” Bethune says. The NBER has declared the economy fell into a recession in December 2007. It hasn’t yet pinpointed an end to the recession. It said in April that it would be “premature” to do so. Many other economists say the recession ended in June or July of last year. The economy returned to growth again in the third quarter of 2009, after four straight quarters of declines. More recently, the economy has added jobs in each of the first five months of this year. Still, the threats to the recovery from overseas and at home are growing. So are the risks that the recovery will fade out. Economists say the odds of that remain low but have crept up since a couple of months ago. Analysts are downgrading their growth forecasts for the second half of this year. In determining the starts and stops of recessions, the NBER reviews data that make up the nation’s gross domestic product. The GDP measures the value of goods and services produced in the United States. The NBER also reviews incomes, employment and industrial activity. The panel, based in Cambridge, Mass., tends to take its time in declaring when a recession has started or ended. It announced in December 2008 that the recession had actually started one year earlier – in December 2007. And it declared in July 2003 that the 2001 recession was over. It had actually ended 20 months earlier – in November 2001. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second started in December 2007; its end date is pending the NBER’s determination. The timing of the NBER’s decision likely means little to ordinary Americans now muddling through a sluggish economic recovery and weak job market. Many will continue to struggle. Unemployment usually keeps rising well after a recession ends. After the 2001 recession, for instance, unemployment didn’t peak until June 2003 – 19 months later.

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A ‘Double-dip’ Recession Defined

July 1, 2010

WASHINGTON — Concerns are rising that the economy is at risk of slipping into a “double-dip” recession. High unemployment, Europe’s debt crisis, a slowdown in China, a teetering housing market and sinking stock prices are all weighing on a fragile U.S. recovery. So what exactly is a double-dip recession? Robert Hall has an idea of what one looks like but no precise definition. He’s chairman of the National Bureau of Economic Research, a group of academic economists that officially declares the starts and ends of recessions. In Hall’s view, a double dip is akin to a continuous recession that’s punctuated by a period of growth, then followed by a further decline in the economy. The NBER doesn’t define a double dip any more specifically than that, says Hall, an economics professor at Stanford University. In econo-speak, Hall explains: “The idea – hypothetical because it has yet to happen – is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle.” Hall says the closest the United States has come to a double dip was in 1980 and 1981. But the NBER concluded that those were two distinct, though closely spaced, recessions – “not a double dip,” he says. Not so, says Sung Won Sohn, professor at California State University, Channel Islands. Sohn says the back-to-back recessions of the early ’80s fit his definition of a double dip: A recession followed by a short period of growth followed by a recession. Brian Bethune, economist at IHS Global Insight, has a view similar to Hall’s: A period in which the economy shrinks, starts growing again and then shrinks again – for at least six months. “There is no mathematical formula; it’s a judgment call,” Bethune says. The NBER has declared the economy fell into a recession in December 2007. It hasn’t yet pinpointed an end to the recession. It said in April that it would be “premature” to do so. Many other economists say the recession ended in June or July of last year. The economy returned to growth again in the third quarter of 2009, after four straight quarters of declines. More recently, the economy has added jobs in each of the first five months of this year. Still, the threats to the recovery from overseas and at home are growing. So are the risks that the recovery will fade out. Economists say the odds of that remain low but have crept up since a couple of months ago. Analysts are downgrading their growth forecasts for the second half of this year. In determining the starts and stops of recessions, the NBER reviews data that make up the nation’s gross domestic product. The GDP measures the value of goods and services produced in the United States. The NBER also reviews incomes, employment and industrial activity. The panel, based in Cambridge, Mass., tends to take its time in declaring when a recession has started or ended. It announced in December 2008 that the recession had actually started one year earlier – in December 2007. And it declared in July 2003 that the 2001 recession was over. It had actually ended 20 months earlier – in November 2001. In President George W. Bush’s eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second started in December 2007; its end date is pending the NBER’s determination. The timing of the NBER’s decision likely means little to ordinary Americans now muddling through a sluggish economic recovery and weak job market. Many will continue to struggle. Unemployment usually keeps rising well after a recession ends. After the 2001 recession, for instance, unemployment didn’t peak until June 2003 – 19 months later.

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U.S. Economy: Home Starts Jump, Wholesale Prices Fall

May 18, 2010

By Shobhana Chandra and Courtney Schlisserman May 18 (Bloomberg) — Work began on more U.S. houses in April than at any time in over a year and wholesale prices unexpectedly decreased, showing the economy is strengthening without stoking inflation. Housing starts rose to a 672,000 annual rate last month, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level since October 2008, according to Commerce Department figures today in Washington. Another report showed producer prices dropped 0.1 percent, the second decrease in the past three months. Permits fell last month by the most since December 2008, a sign homebuilding will pause after a tax-induced jump in sales boosted companies like D.R. Horton Inc. Rising raw-material costs aren’t making their way up production lines, the price report showed, underscoring why Federal Reserve policy makers project inflation will be contained. “It’s encouraging to see starts gain some traction, but the decline in permits takes some of the luster off,” said Jonathan Basile , an economist at Credit Suisse in New York, who forecast the increase in construction and the drop in prices. “Inflation is subdued. There are cost pressures in the pipeline, but they’re not leaving the factory.” Stocks fell and Treasury securities rose as Germany’s plan to ban certain types of bearish investments sent the euro down to a four-year low against the dollar. The Standard & Poor’s 500 Index dropped 1.7 percent to 1,117.62 at 3:01 p.m. in New York. The S&P Supercomposite Homebuilding Index fell 1.3 percent. The 10-year Treasury note increased, pushing down the yield to 3.37 percent from 3.49 percent late yesterday. Fewer Permits Building permits , which are considered a leading indicator for homebuilding, fell 12 percent to a 606,000 annual rate last month, the report showed. Applications for both single-family and multifamily projects decreased. “With the first-time homebuyer credit behind us, we are not going to see the strength of housing demand we have in the last few months as people rushed to take advantage of that program,” Harvard University economics professor Martin Feldstein said in a Bloomberg Television interview. Feldstein is a member of the National Bureau of Economic Research’s Business Cycle Dating Committee, the panel charged with determining when U.S. recessions start and end. Economists’ Forecasts Starts were forecast to rise to a 650,000 annual rate, according to the median projection of 77 economists surveyed by Bloomberg. Estimates ranged from 620,000 to 700,000. The Commerce Department revised March data up to 635,000 from a previously reported 626,000. Starts rose 41 percent in April from the same month last year, the biggest year-over-year gain since 1994, while permits increased 16 percent. Construction of single-family houses increased 10 percent to a 593,000 rate in April, while permits fell 11 percent. Work on multifamily homes, such as townhouses and apartment buildings, dropped 19 percent to an annual rate of 79,000. Building is climbing after sales jumped following a government incentive of as much as $8,000 helped reduce the number of unsold new houses. Sales of new homes surged in March by the most since 1963, while purchases of existing homes rose for the first time in four months. Sales Increase The jump in sales brought the number of new houses for sale down to 228,000, the lowest since March 1971, allowing builders more room to begin projects even as they compete with foreclosed homes coming back on the market. D.R. Horton, the second-largest U.S. homebuilder by revenue, reported its second straight quarterly profit as net orders jumped 55 percent and closings rose 19 percent. About 80 percent of the closings were “spec” homes built in anticipation of customer orders, a strategy that paid off as buyers rushed to beat the tax deadline, President and Chief Executive Officer Donald R. Tomnitz said. “We have continued to sell strong on these specs through the month of April,” Tomnitz said on an April 30 conference call. The decline in prices paid to factories, farmers and other producers followed a 0.7 percent increase in March, figures from the Labor Department also showed. Excluding food and fuel , so- called core prices climbed 0.2 percent compared with 0.1 percent gains in the previous two months. Idle Capacity Companies have enough idle capacity to prevent bottlenecks even as sales rebound. The European debt crisis will probably also help restrain prices, one reason why economists are pushing back forecasts for when Fed policy makers will raise interest rates. “Core PPI remains very subdued,” Ian Shepherdson , chief U.S. economist at High Frequency Economics in Valhalla, New York, said in a note to clients. “There is no inflation threat here.” Producer prices were forecast to rise 0.1 percent in April, according to the median estimate of 76 economists in a Bloomberg survey. Projections ranged from a drop of 0.4 percent to an increase of 0.7 percent. Speculation that European measures to curb debt will erode economic growth has caused commodity prices to plummet in May, which may help contain inflation in coming months. The Reuters/Jefferies CRB Index of 19 raw materials yesterday slid to the lowest level in seven months. Economists at Morgan Stanley in New York were among those last week that said the Fed will keep the benchmark interest rate near zero for the rest of the year, in part because the debt crisis is reducing inflation expectations. They previously forecast central bankers would start raising rates in September. To contact the reporters on this story: Shobhana Chandra in Washington schandra1@bloomberg.net ; Courtney Schlisserman at cschlisserma@bloomberg.net

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College Graduates to Make Global Economy More Productive: Chart of the Day

May 18, 2010

By David Wilson May 18 (Bloomberg) — This year’s college graduates are likely to make the global economy more productive because of their education, judging by the results of a study from the National Bureau of Economic Research. The CHART OF THE DAY shows the average years of schooling worldwide for people at least 15 years old, according to data that economists Robert J. Barro of Harvard University and Jong- Wha Lee of the Asian Development Bank compiled for their study. They tracked education levels in 146 countries since 1950. During the past decade, the average rose by 0.78 year, in line with the 0.76-year average for the second half of the 20th century. People with college degrees increased to 6.7 percent of the population this year from 5.9 percent in 2000. “Human capital, particularly attained through education, is crucial to economic progress,” Barro and Lee wrote today in a posting on the Centre for Economic Policy Research’s Vox Web site that summarized their findings. Global economic output climbs by about 2 percent for each additional year spent in school, according to the study. Rates of return on undergraduate and graduate studies are as high as 18 percent for every year. Developing countries were primarily responsible for the past decade’s increase in education levels, based on the study data . In 24 “advanced” economies, the average amount of time in the classroom rose just 0.38 year. College graduates dropped to 14.5 percent of the population from 15.4 percent a decade ago. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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China Coal at Discount to Australia, Signaling Import Drop: Energy Markets

May 7, 2010

By Bloomberg News May 7 (Bloomberg) — Coal prices in China are their cheapest in 20 months against the benchmark Australian grades, signaling shipments to the world’s second-largest energy user are poised to fall. Power-station coal from Qinhuangdao, China’s largest port for the commodity, sells for $23.30 a metric ton less than coal delivered from Newcastle, Australia, the widest gap since September 2008, according to CLSA Asia-Pacific Markets. Prices of supplies from Newcastle reached a 19-month high of $152.90 a ton on April 30. The price discount “suggests a slowdown in Chinese coal imports” this quarter, Andrew Driscoll , head of resources research at CLSA Asia-Pacific Markets, said by telephone from Hong Kong. “Last year was an exceptional year. In the first half, competing demand for coal in the seaborne market was low and prices at a premium in China provided an incentive for more imports.” China, the world’s biggest user and miner of coal, boosted purchases from overseas and stepped up domestic production as economic growth of 11.9 percent in the first quarter led to a surge in power demand. The nation’s output reached a record 289 million tons in November, up from 227 million tons a year ago, the National Bureau of Statistics said. Production climbed to 280 million tons in March, 12 percent more than the 2009 monthly average, according to the bureau’s most recent data. Qinhuangdao’s coal cost $129.60 a ton upon delivery to southern China, the nation’s manufacturing hub. Buying Less European benchmark coal futures for May delivery at Rotterdam have risen 48 percent in the past year to yesterday’s $91.10 a ton. Prices for the June contract on the New York Mercantile Exchanged reached this year’s high of $64.22 on May 4. Prices have gained about 28 percent this year. China planned to cut imports as of last month as the cost of overseas supplies climbed and domestic output rose, the government said on April 23. Imports from Australia fell 67 percent to 767,268 tons in February from a record 2.32 million tons in June 2009, according to data compiled by the Australian Department of Foreign Affairs and Trade. Average monthly imports in 2008 were 190,239 tons. China increased purchases last year to take advantage of lower prices as the global recession sapped demand for commodities worldwide and cut shipping charges. The average Baltic Dry Index , a global benchmark for dry-bulk freight rates, had fallen 59 percent in 2009 from a year earlier. “We should see a decrease in purchases by traders and utilities because there aren’t opportunities to buy cheap seaborne supplies anymore,” Driscoll said. Sufficient Supplies Qinhuangdao thermal coal became cheaper than Newcastle grades in February, after being priced higher for more than half of last year, according to CLSA. China’s domestic supplies in the second half may climb when restructured and merged mines in the northern province of Shanxi, one the country’s two biggest coal-producing regions, resume output, the National Energy Administration said last month. “China has enough thermal coal, especially when the mine consolidations are over,” said David Fang , a Beijing-based director at the China Coal Transport and Distribution Association. The country, which has the world’s worst record in coal mine fatalities, shut 1,000 pits last year to improve safety. The government ordered small mines to merge and form better- managed ones with increased mechanization and better safety conditions. About seven people died daily from coal mine accidents in China last year compared with 18 deaths for the entire year in the U.S., the No. 2 producer. Demand Pick-Up A six-month long drought in China’s southwest caused an increase in coal demand after hydropower plants’ output declined. The proportion of coal shipped to China from Newcastle rose 22 percent in April from March when prices at the Australian port climbed to the highest in 18 months, according to Port Waratah Coal Services, operator of two terminals at the harbor. China became a net coal importer for the first time in 2009 after buying 125.8 million tons of the fuel when global prices were lower than the cost of domestic grades. “We won’t see a repeat of opportunistic buying by China,” said Paul Manley, a Beijing-based consultant at Wood Mackenzie. “We do not expect import levels to reach that of 2009.” — Chua Baizhen with assistance from Ben Sharples in Melbourne. Editors: Ang Bee Lin , Jane Lee . To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net

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Leading Economic Indicators Index in U.S. Rises 1.4% as Economy Recovers

April 19, 2010

By Bob Willis April 19 (Bloomberg) — The index of U.S. leading indicators rose in March by the most in 10 months, a sign the economy will keep growing into the second half of the year. The 1.4 percent increase in the New York-based Conference Board’s measure of the outlook for three to six months was more than anticipated and followed a revised 0.4 percent gain in February. Manufacturers are ratcheting up production and factory workers are putting in longer hours as companies rebuild inventories and ship more goods overseas. Further improvement in the job market will help sustain the economy’s recovery from the worst recession since the 1930s. “The economy really seems to be gaining momentum, with better-than-expected data coming from a wider variety of sources,” Russell Price , a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “The sectors that were doing well appear to be doing even better and those that were struggling appear to be seeing signs of renewed activity.” Today’s figure compared with a median estimate of 1.1 percent by 51 economists surveyed by Bloomberg News. Estimates ranged from gains of 0.5 percent to 1.5 percent. Seven of the 10 indicators in the leading index contributed to the gain, led by the interest-rate spread, an increase in factory hours, slower supplier deliveries, gains in stock prices and rising building permits. Shrinking money supply, fewer orders for capital goods and a drop in consumer expectations weighed on the index. Coincident Indicators The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.1 percent in March for a second month. The index tracks payrolls, incomes, sales and production, the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions. “Payroll employment made its first substantial contribution to the coincident economic index, suggesting a recovery that is beginning to gain traction,” Ataman Ozyildirim, an economist at the Conference Board, said in the news release. The positive spread between the yield on the 10-year Treasury note and the overnight fed funds rate reflects investor expectations the economy will keep improving. The supplier delivery index , a component of the Institute for Supply Management’s factory survey, rose in March to the highest level since June 2004, indicating slower delivery times as demand mounts. Higher Stock Prices The Standard & Poor’s 500 Index averaged 1,152.05 in March, compared 1,089.16 in February. The S&P 500 Index gained 8.7 percent this year through April 15. Building permits in March rose 7.5 percent to a 685,000 annual pace, the biggest gain since December, from the prior month, the Commerce Department reported last week. Average weekly initial jobless claims fell to 448,000 last month from 467,500 in February, a sign firings were easing. Payrolls rose 162,000 in March, the biggest monthly gain in three years, Labor Department figures showed April 2. JPMorgan Chase & Co. is among companies hiring. JPMorgan’s President Jamie Dimon last week announced plans to hire nearly 9,000 employees in the U.S. alone and more abroad as first quarter earnings rose 55 percent to $3.33 billion from a year earlier. “While the economy still faces challenges, there have been clear and broad-based improvements in underlying trends,” Dimon said in a statement. Growth Forecast Dean Maki , chief U.S. economist at Barclays Capital Inc. last week raised his forecast for U.S. growth this year to 3.8 percent from a prior estimate of 3.5 percent. Economists surveyed by Bloomberg in the first week of April forecast the economy would expand at a 3 percent rate this year, compared with last year’s 2.4 percent contraction. The gauge of lagging indicators increased 0.2 percent last month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit. The Federal Reserve last week said the economy expanded “somewhat” across most of the U.S. in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed. Fed Chairman Ben S. Bernanke told lawmakers there were “significant restraints” on a recovery he said would be “moderate” over the coming quarters. Seven of the 10 indicators that make up the leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. The Conference Board estimates new orders for consumer goods, bookings for capital goods and the money supply adjusted for inflation. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net .

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Jobs Report Makes It `Pretty Clear’ Recession Is Over, NBER’s Hall Says

April 2, 2010

By Steve Matthews April 2 (Bloomberg) — The biggest increase in employment in three years makes it “pretty clear” the deepest U.S. recession since the 1930s has ended, said the head of the group charged with making the call. Payrolls rose by 162,000 workers last month, the third gain in the past five months and the most since March 2007, figures from the Labor Department showed today in Washington. “I personally put lots of emphasis on employment,” Robert Hall , who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, said in an interview. “I would say ‘pretty clear’ is a good description” for whether the economic contraction has ended, he said. Among the top indicators the group uses is payrolls, according to its Web site . The government revised the January and February job count up by a combined 62,000, putting the March gain at 224,000 after including the updated data. “It’s great news that employment has finally stopped shrinking,” Hall, a Stanford University professor, said. Today’s report showed the payroll count from the government’s survey of businesses and the employment numbers from a separate survey of households have both been heading higher, Hall said. “That is looking better now,” he said. “I think the odds favor a continuing expansion in employment, but I don’t have great confidence.” Growth Outlook The economy probably grew by 2.8 percent in the first quarter of 2010, according to the median estimate of a Bloomberg News survey of economists last month, after a 5.6 percent pace of expansion in the fourth quarter of 2009. The committee waits to make a declaration until it can precisely date the start or end of a contraction, which usually takes six to 18 months, according to its Web site. “Our committee will continue to operate in a deliberate model,” Hall said. The panel has lagged declarations of other economists partly because it depends on payrolls, among the last economic indicators to show growth. The National Association for Business Economics in October 2009 said the recession had ended, while Federal Reserve Chairman Ben S. Bernanke said in September 2009 the contraction “very likely” had stopped. “Speaking personally, it now seems very clear that the recession has ended,” said another panel member, Harvard University professor Jeffrey Frankel , in an interview today. Frankel has said the most likely date for the recession’s end would be midyear of 2009. Economic output has been rising since around June or July, he said, while employment has only recently started to rise. To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net ;

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Sinopec Profit More Than Doubles on Lower Crude Oil Costs, Higher Sales

March 28, 2010

By Bloomberg News March 28 (Bloomberg) — China Petroleum & Chemical Corp. , Asia’s biggest refiner, more than doubled its net income last year after the government increased fuel prices and crude oil costs fell. Profit rose to 61.8 billion yuan ($9.1 billion) from 28.5 billion yuan in 2008, according to results released today by SSE InfoNet Ltd., a unit of the Shanghai stock exchange. Huang Wensheng , the Beijing-based spokesman of China Petroleum, known as Sinopec, declined to comment. Sinopec was due to announce earnings through the Shanghai and Hong Kong stock exchanges before the market open tomorrow. China raised fuel prices in the world’s fastest-growing major economy five times last year compared with once in 2008, while the average cost of crude oil dropped 38 percent amid the global economic slowdown. Sinopec’s earnings this year may fall as the government reins in energy costs to cool inflation. “I’m not as optimistic as I was for 2009 as inflation may prevent the government from adjusting fuel prices frequently,” Wang Aochao , head of China energy research at UOB-Kay Hian in Shanghai, said before the earnings announcement. “The authorities seem to have been cautious in raising prices so far this year.” Sinopec posted a full-year profit that beat analyst estimates. The median profit forecast of 15 analysts surveyed by Bloomberg News was 61.2 billion yuan. Refining operating profit in 2009 was 23.1 billion yuan, compared with a loss a year earlier, according to today’s statement. Revenue fell to 1.35 trillion yuan. Analyst Forecast Profit may rise to 63.73 billion yuan in 2010, according to a survey of 15 analyst estimates compiled by Bloomberg. Consumer prices rose 2.7 percent from a year earlier in February, the biggest increase in 16 months, the National Bureau of Statistics said on March 11. The government aims to keep the 2010 inflation rate below 3 percent. Sinopec, the country’s second-biggest oil company and supplier of 80 percent of China’s fuel needs, has risen 28 percent in Hong Kong trading over the past year compared with a 49 percent gain in the benchmark Hang Seng Index. Cnooc Ltd., China’s biggest offshore oil producer, has climbed 52 percent in the same period, while PetroChina Co. , China’s largest energy company, has advanced 30 percent. — Wang Ying , Baizhen Chua and John Duce . Editors: Ang Bee Lin , Ryan Woo . To contact the reporters on this story: Wang Ying in Hong Kong at Ywang30@bloomberg.net ;

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For a Head Start on China’s GDP Growth, Study Power Output: Chart of Day

March 17, 2010

By Lars Paulsson March 17 (Bloomberg) — Investors looking for an early indication on expansion in China, the world’s third-biggest economy, can study the latest power production, which signals “robust growth,” Standard Bank Plc said. The CHART OF THE DAY shows quarterly growth in gross domestic product reaching a two-year high of 10.7 percent last quarter, tracking rising electricity output since the start of 2009 as Chinese power generation climbed to a record 349.8 billion kilowatt-hours in December, according to the National Bureau of Statistics. “You don’t need to wait three to four months before the actual GDP numbers come out,” Walter de Wet , a commodities analyst at the bank, said in a phone interview from London. “You can just look at electricity. It is certainly timely and an indication of what’s happening in the real economy.” January’s power output of 339.4 billion kilowatt-hours, near December’s record, signals continued strong economic growth in China, de Wet said. The decline in February was because of the Lunar New Year holidays when China’s factories shut for a week, curbing energy demand, he said. Still, it gained 10.1 percent from a year earlier, which was unaffected by the holiday shutdown as that fell in the last week of January. China’s economy is forecast to expand 9.6 percent this year, up from 8.7 percent in 2009, according to a survey of 22 economists by Bloomberg in January. (To save a copy of the chart, click here.) To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net

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China Will Seek to Limit Inflation Rate to 5%, Morgan Stanley’s Roach Says

March 11, 2010

By Bob Willis and Thomas Keene March 11 (Bloomberg) — China won’t allow its inflation rate to exceed 5 percent, said Stephen Roach, chairman of Morgan Stanley Asia Ltd., after a report today showed the country’s consumer prices rose at the fastest pace in 16 months. “They certainly don’t want inflation to go anything in excess of, I’d say, 4.5 to 5 percent, they will lean against that, they will lean against property bubbles,” Roach said today in a Bloomberg Radio interview. “They are very focused on economic and financial stability.” It’s hard to get a “clean read” on market-based inflation in China, he said, because most utility prices are regulated. “They are now moving back up to a positive inflation rate, in a 3 to 4 percent zone, after going through deflation in the crisis,” Roach said. Consumer prices rose 2.7 percent in February from a year earlier, the National Bureau of Statistics said today in Beijing. The increase was more than the 2.5 rate forecast by economists and adds to the case for the government to pare back stimulus measures after production jumped 20.7 percent in the first two months of 2010, the most in more than five years. Roach said he didn’t expect any “dramatic” policy announcements in coming weeks. In the period between Premier Wen Jiabao’s annual speech to the National People’s Congress this month and the launch of the 12th Five-Year Plan early next year, China is likely to focus on “traditional, counter-cyclical stabilization policies,” he said. Such policies would probably focus on bank reserve requirements, “maybe a small currency adjustment” ahead of the U.S. Treasury’s biannual foreign-exchange report next month, and “possibly an interest rate hike or two.” Excessive Lending Another element of China’s policies would be the ongoing “clamp-down on excessive lending” for property speculation, he said. China’s 12th Five-Year Plan, which is being drafted in government agencies and ministries, is likely to be a “watershed event,” said Roach. “It’s going to shift the model to more of a pro- consumption model” from communist China’s dependence on exports and investment, he said. “The export and investment dynamic has pretty much outlived its useful purpose, especially in this post-crisis period where consumers in the West are going to be struggling for a number of years.” Roach also said the International Monetary Fund, rather than the European Union, is best placed to enforce the economic adjustments that Greece must take to overcome its budget crisis. “Long-term financing for Greece needs to come from within, and the IMF is the best institution to force that type of adjustment,” he said. “It sends a horrible signal to the rest of Europe, that they condone bad behavior,” should the European Union lead a rescue for Greece. To contact the reporter on this story: Robert Willis in Washington at bwillis@bloomberg.net

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China Inflation, Production Accelerate, Adding Pressure for Stimulus Exit

March 10, 2010

By Bloomberg News March 11 (Bloomberg) — China’s inflation reached a 16- month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the government to pare back stimulus measures. Consumer prices rose 2.7 percent from a year earlier, the National Bureau of Statistics said in Beijing today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. A weeklong holiday may have boosted prices. Production expanded 20.7 percent in the first two months of the year after an 18.5 percent gain in December. Premier Wen Jiabao aims to hold full-year inflation around 3 percent after banks flooded the financial system with money to drive a rebound from the global recession. Gross domestic product grew 10.7 percent last quarter and central bank Governor Zhou Xiaochuan said March 6 that anti-crisis policies, including the yuan’s peg to the dollar, must end “sooner or later.” “With economic growth quickening to more than 10 percent and record lending flowing through the financial system, economic overheating is a high possibility,” Qu Hongbin , chief China economist at HSBC Holdings Plc in Hong Kong, said before today’s release. “The government will stay very proactive this year and an inflation rate approaching 3 percent or topping the target may trigger an interest-rate increase.” Lending Growth Banks extended 700 billion yuan ($103 billion) of new loans in February, central bank data showed today. That compared with 1.39 trillion yuan in the previous month and 1.07 trillion yuan a year earlier. The median estimate was for 600 billion. Stocks held gains after the data, with the Shanghai Composite Index rising 0.4 percent as of 10:16 a.m. local time, and the MSCI Asia Pacific index advancing 0.5 percent. M2, a measure of money supply, rose 25.5 percent, compared with a 26 percent gain. The government targets 17 percent M2 growth for this year. Retail sales rose 17.9 percent in the first two months from a year earlier, and urban fixed-asset investment gained 26.6 percent. Retail sales grew 22.1 percent in February, the bureau said. Economists often look at January and February numbers together to eliminate distortions caused by a one-week Lunar New Holiday. China’s 2010 data is also boosted by comparisons with year-ago levels depressed by the financial crisis. ‘Entire Toolkit’ The government “will need to use the entire toolkit, including higher policy rates and a stronger currency” to achieve Wen’s inflation target, Brian Jackson , an emerging- market strategist at Royal Bank of Canada in Hong Kong, said ahead of today’s numbers. Trade data yesterday showed exports rebounding faster than economists forecast, while a property market report showed prices climbing by the most in almost two years. Commodity costs, reforms of China’s energy and resource pricing, and the effects of last year’s expansion of credit may add inflation pressures this year, China’s top planning agency told lawmakers last week. Baoshan Iron & Steel Co. and spirits manufacturer Kweichow Moutai Co. are among companies to have pushed up prices this year. Producer-price inflation climbed to 5.4 percent in February from 4.3 percent in January, the statistics bureau said today. Yuan Peg The central bank hasn’t raised benchmark interest rates since December 2007, before the financial crisis deepened. The one-year lending rate is at 5.31 percent and deposit rate is at 2.25 percent. China has also effectively pegged the yuan at about 6.83 per dollar since July 2008 to help exporters. The central bank has twice raised lenders’ reserve requirements this year. Deputy Governor Su Ning said this week that those moves were to prevent monetary conditions becoming “excessively loose” as the government continues to implement what it describes as a “moderately loose” stance. Policy makers are targeting lending of 7.5 trillion yuan, 22 percent less than last year’s actual figure, and pledging to crack down on property speculation. The government has tightened second-home mortgages and banks have scaled back favorable home loan rates. — Li Yanping . Editors: Paul Panckhurst , Chris Anstey . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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China CNR Raises $2 Billion in Shanghai IPO to Increase Train Production

December 22, 2009

By Bloomberg News Dec. 23 (Bloomberg) — China CNR Corp. raised 13.9 billion yuan ($2 billion) selling shares in Shanghai, capping the country’s status as the world’s biggest market for initial public offerings this year. CNR, the maker of rail cars used in Beijing’s subway, sold 2.5 billion shares at 5.56 yuan apiece, the top of its price range, according to a filing to Shanghai’s stock exchange today. The sale brings the amount raised by Chinese companies in mainland IPOs to at least 187 billion yuan this year, according to data compiled by Bloomberg, as record lending and government stimulus revive the economy. CNR will use funds to boost train production as China spends 5 trillion yuan to expand its rail network to a total 120,000 kilometers (75,000 miles) by 2020. Proceeds from the IPO “will allow CNR to expand production and develop new products while the government is trying to boost railway building,” said Ping Jingwei , an analyst at Shanghai Securities Co. CNR will “no doubt benefit from the share sale.” Ping rates shares of China South Locomotive & Rolling Stock Corp. , CNR’s main competitor, “in-line,” according to Bloomberg data. The IPO, China’s fourth largest this year, values Beijing- based CNR at 49.2 times its 2008 earnings a share, according to the filing. That compares with the 32.4 average ratio of the benchmark Shanghai Composite Index and 34.3 for China South Locomotive, Bloomberg data show. High-Speed Network Institutional investors ordered 62.1 times the 35 percent of the shares available after a so-called clawback arrangement through an offline sale. The remaining 1.625 billion shares were 74 times oversubscribed to both retail and institutional investors in an electronic tranche. CNR plans to use the proceeds to make high-speed trains and parts and to import technology, according to a prospectus filed to the Shanghai bourse on Dec. 10. China will own more than half of the world’s high-speed railways under the plan to expand its network. The nation accelerated its high-speed-rail development plan last year in the wake of the global financial crisis. Spending on railroads in China is growing faster than on any other area of investment, climbing 80.7 percent to 464.6 billion yuan in the first 11 months of the year from the same period in 2008, according to the National Bureau of Statistics. China South IPO In March, the Ministry of Railways made a 39.2 billion yuan agreement to buy 100 high-speed trains from CNR and one of its units for the Beijing-Shanghai high-speed railway, according to the China Daily. CNR is 91.2 percent owned by China Northern Locomotive, one of the 136 companies overseen by the State-Owned Assets Supervision and Administration Commission. The company was reorganized from state-owned China Northern Locomotive & Rolling Stock Industry (Group) Corp. in 2008. China South Locomotive sold shares in an initial public offering in Hong Kong and Shanghai in August 2008, raising $1.48 billion. China International Capital Corp. , Huatai Securities Co. and Huarong Securities Co. are arranging CNR’s share sale. — Zhao Yidi , Jiang Jianguo. Editors: Joost Akkermans , John Liu To contact Bloomberg News staff on this story: Yidi Zhao in Beijing at +86-10-6649-7575 or yzhao7@bloomberg.net ;

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Economists Who Foresaw November’s Better Labor Market Now Expect Job Gains

December 5, 2009

By Timothy R. Homan Dec. 5 (Bloomberg) — Some of the economists who anticipated the U.S. job market would see marked improvement in November now project job gains are around the corner, and possibly in the rearview mirror. Payrolls fell by 11,000 workers, while the unemployment rate dropped to 10 percent. Jobs were forecast to decline 125,000, according to the median estimate of 82 economists surveyed by Bloomberg News. Estimates ranged from decreases of 30,000 to 180,000. The drawdown in inventories and rising corporate profits are the most compelling reasons for payrolls to begin showing sustainable increases as soon as this month, these economists said. What’s more, the recent trend of upward revisions will probably continue, signaling the worst employment slump in the postwar era may have already ended. “We could see a positive number for November next month,” said Stefane Marion , chief economist at National Bank Financial Inc. in Montreal, whose forecast of a 30,000 payroll drop was the closest. “Firms now are beginning to redeploy some of their cash flows” by hiring new workers, he said. Revisions added 159,000 jobs to payroll figures previously reported for October and September, a report from the Labor Department showed yesterday in Washington. The previous month’s report added 91,000 for September and August. Profits, Inventories Corporate profits climbed 21 percent from January through September, the biggest three-quarter gain in five years, while inventories plunged at a record pace, according figures from the Commerce Department. Leaner stockpiles set the stage for recovery in production. “If you run down your inventories hard, you also cut your labor force,” said Peter Possing Andersen , an economist at Danske Bank A/S in Denmark who projected a decline of 50,000 jobs for November. He said the ramp up in production means the manufacturing industry, which has cut workers for the past two years, may stabilize and begin hiring in “a couple of months.” Still, some economists say that even if November’s figures are revised into positive territory, payrolls may not have reached their low point yet. “Revisions lately have been in the favorable direction,” said Neal Soss , chief economist at Credit Suisse in New York who forecast a 50,000 drop in payrolls. “We shouldn’t take that as evidence that we’re at the bottom.” The improving labor market indicates the deepest U.S. recession since the 1930s may have ended, said the head of the group charged with making the call. Yesterday’s report “makes it seem that the trough in employment will be around this month,” Robert Hall , who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, said in an interview. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Dollar Rally Erases Gain in Commodities, Stocks After November Jobs Report

December 4, 2009

By Michael P. Regan and Mary Childs Dec. 4 (Bloomberg) — The biggest rally in the U.S. dollar since June snuffed out an advance in commodities and equities as an unexpected drop in the unemployment rate triggered bets the Federal Reserve will lift borrowing costs. Gold slid the most in a year and two-year Treasuries tumbled. The Dollar Index , a gauge of the currency against six major trading partners, jumped as much as 1.5 percent. Odds that the Fed will boost interest rates by its June meeting rose to 53 percent from 31 percent a week ago, according to Fed funds futures trading. The Standard & Poor’s 500 Index lost 0.1 percent to 1,098.77 at 2:10 p.m. in New York, erasing a 1.8 percent rally, and oil and copper reversed earlier gains. “Good economic news is a boost for the dollar, because ultimately the Fed raises rates, and by raising rates you are going to push your currency up,” said Quincy Krosby , a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees about $641 billion. Stocks rallied at the start of trading after the Labor Department said the U.S. lost 11,000 jobs last month, the fewest since the recession began and less than one-tenth the 125,000 median estimate in a survey of economists. The unemployment rate dropped to 10 percent. The improving labor market indicates the deepest U.S. recession since the 1930s may have ended, though it is too soon to say precisely what month it stopped, said the head of the group charged with making the call. Employment ‘Trough’ “Today’s report makes it seem that the trough in employment will be around this month,” Robert Hall , who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, said in an interview. “The trough in output was probably some time in the summer. The committee will need to balance the midyear date for output against the end-of-year date for employment.” The dollar has slumped this year, spurring demand for commodities as an inflation hedge and alternative investment, as the Fed kept benchmark U.S. interest rates near zero percent to revive lending following the worst financial crisis since World War II. Before today, the Dollar Index sank 8.2 percent while gold rallied 38 percent. The Reuters/Jefferies CRB Index of 19 raw materials lost 1.2 percent today, paring its 2009 rally to 19 percent. Gold fell for the first time this week as the rising dollar spurred some investors to sell bullion on the heels of a rally to a record. Gold futures fell 4 percent from a record to $1,169.80 an ounce, set yesterday in New York. Gold’s Rally Gold’s rally pushed its 14-day relative strength index, a gauge watched by some investors as an indicator of future direction, to 83.5 yesterday. Some analysts and investors who use technical charts view a reading of more than 70 as a signal that the price may soon drop. Crude oil for January delivery fell $1.32, or 1.7 percent, to $75.14 a barrel. Canadian stocks fell for a second day as gold producers retreated the most since April. The S&P/TSX Index lost 1.2 percent as Barrick Gold Corp. plunged 9.7 percent. Two-year Treasuries fell the most since August, sending yields up as much as 14 basis points to 0.86 percent. Algricultural commodities also slid. Corn for March delivery fell 8.75 cents, or 2.2 percent, to $3.92 a bushel on the Chicago Board of Trade. A close at that price would be a weekly drop of 5.3 percent, the first since October. Before today, corn gained 17 percent since the end of September, reaching a five-month high of $4.25 on Nov. 18. Wheat futures for March delivery fell 15.25 cents, or 2.7 percent, to $5.5625 a bushel in Chicago. A close at that price would be the biggest drop since Nov. 24 and leave wheat down 2.4 percent for the week. Wheat touched a five-month high of $6.05 on Nov. 18. Soybean futures for January delivery fell 11 cents, or 1.1 percent, to $10.36 a bushel in Chicago, heading for the first weekly decline since Nov. 6. To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Mary Childs in New York at mchilds4@bloomberg.net .

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Yale Commodity `Gurus’ Gorton, Rouwenhorst Starting Firm With UBS Alumnus

December 3, 2009

By Asjylyn Loder and Chanyaporn Chanjaroen Dec. 3 (Bloomberg) — K. Geert Rouwenhorst and Gary Gorton , the Yale University professors whose research earlier this decade helped spur a commodities rush, joined UBS AG’s former head of commodities trading to start a new firm. SummerHaven Investment Management LLC may offer managed futures accounts, exchange-traded and mutual funds, as well as private funds. Rouwenhorst is a partner and Gorton a senior adviser to the Stamford, Connecticut-based firm. Ashraf Rizvi , 47, who spent 14 years at UBS, will lead the firm’s trading. Gorton, 58, and Rouwenhorst, 49, “are the gurus in the commodity space, there’s no question about that,” said Matt Hougan , editor of IndexUniverse.com . “They were essentially the first ones who really made the case for having a strategic long- term exposure to commodities in your portfolio.” Commodities will likely attract a record $60 billion this year as investors seek to diversify their assets, Barclays Capital said in a November report. Total commodity assets under management will probably expand to $230 billion to $240 billion by the end of the year, the bank said. SummerHaven, founded in April, will focus on futures linked to physical commodities in metals, energy, grains, livestock and as well as coffee, cocoa, cotton, sugar and orange juice. The firm won’t trade futures tied to equities, currencies or interest rates, said Kurt J. Nelson , 40, who is a SummerHaven partner and a former UBS colleague of Rizvi. ‘Commodity Exposure’ “We’re there to provide commodity exposure across a variety of products and for a variety of clients,” including retail, endowments and pension funds, said Nelson, who worked at UBS from 1996 to 1998, then again from 2007 to July. In between, he worked for American International Group Inc . Nelson, who assisted in UBS’s purchase of AIG’s commodity index business before he left UBS in July, declined to disclose SummerHaven’s assets under management. AIG is the insurer bailed out by the U.S. Gorton and Rouwenhorst’s 2004 paper “Facts and Fantasies About Commodity Futures,” funded in part by AIG, argued that an investment in a broad commodity index would have brought positive returns from 1959 to 2004. Both are professors of finance at the Yale School of Management. Fully-collateralized commodity futures have historically offered the same return for the same level of risk as equities, they wrote. Over a long period of time, commodities rose with inflation, and had a relatively low correlation to stocks and bonds, potentially rising when other assets fell, they said. ‘Influential’ Scholarship “I would guarantee that every major endowment and pension fund that has a strategic allocation to commodities, and that’s most of them these days, have a copy of their paper on their desk,” Hougan said. “It has been critical to the asset class.” Their scholarship was “influential” in decision-making by pension funds on commodity investments, said Chris Armitage , head of U.K. investment at FourWinds Capital Management , which manages about $1.4 billion in natural-resources funds. The research “filled a void” for those interested in commodity investing that lacked the data to analyze, Rouwenhorst said in a telephone interview. “It dawned on Gary and me some time in 2003 that there seemed to be interest in commodity investing, but nobody had studied the long-term returns of the asset class.” Whether their hypothetical models will translate into real- life profits remains to be seen, said Michael Frankfurter , trading manager of Cervino Capital Management LLC in Santa Barbara, California, a commodity trading adviser and investment adviser with $10 million under management. Commodity Products “They are not traders,” said Frankfurter. “There’s a completely different culture between traders and academics. Their formula is a fictional construct. You cannot do that in real life.” While this is Rouwenhorst’s first time starting his own firm, he has worked for the last five years with large commodities firms “helping them to implement ideas from research into successful commodity products,” he said. Rizvi will lead the firm’s trading, and partner Adam Dunsby , 41, co-founder and principal of Cornerstone Quantitative Investment Group from 1995 to 2008, will do the quantitative modeling, Nelson said. In addition to Gorton, senior advisers include Steven H. Bloom , founder of Sagamore Hill Capital Management LP , and Fumio Hayashi, a former economics professor at the University of Tokyo and research associate at the National Bureau of Economic Research. Hayashi co-authored a paper with Gorton and Rouwenhorst in 2006 titled “The Fundamentals of Commodity Futures Returns.” To contact the reporters on this story: Asjylyn Loder in New York aloder@bloomberg.net ; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

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Eric Schurenberg: Why It’s Worth it to Send My Kid to Yale

November 18, 2009

My child is applying to college. As those who’ve gone before me can well imagine, those six words are a death sentence for peace, sanity and intergenerational detente in my household. They also add up to a body blow to the family’s tangible net worth, since it’s likely to take close to a quarter million dollars to fund four years at the private selective institutions she’s aiming for. Ray Martin, the curmudgeonly special contributor to CBS MoneyWatch, thinks there’s no rational justification for paying elite private college tuitions, and he tells me so in this video . Lynn O’Shaughnessy, the author of the great College Solution blog, has her doubts as well. They have a point. It’s obvious that some kids from all kinds of colleges go on to make a ton of money . Gregg Easterbrook of The Brookings Institution, (a graduate of Colorado College) points out the undeniable fact that supposedly second-tier schools every year yield a profusion of wonderfully able graduates, and many of those schools turn more eventual Ph.D.s per capita than the Ivies . And the clincher: a 1998 study by Princeton’s Alan Krueger and Stacy Berg Dale of the Andrew W. Mellon Foundation that found that Ivy- caliber kids wind up making the same money whether they actually go to a high-SAT-score college or not . Believe me, I wish a) I could believe that, so that I could b) treat my daughter’s college as a discretionary expense not an investment, and c) send her to Montclair State and apply all the money I saved to my aching 401(k). But a) I don’t, and b) it isn’t, and c) I can’t. There are serious problems with the Krueger and Dale study. For starters, it contradicts much other research that shows a real payoff from attending an elite school. One example: a 1996 National Bureau of Economic Research (NBER) working paper by Dominic Brewer, Eric Eide and Ronald Erhrenberg, found not only that there was a significant return for attending a selective private college but that the benefit seemed to be growing over time . But what’s more problematic is this: Krueger and Dale found that if they defined “selective” by criteria other than SAT scores-namely, Barron’s rankings or tuition costs-the top schools actually do have an edge in building human capital. Citations of their study rarely mention this key hedge: Nevertheless, we still find a significant payoff to attending more elite colleges as measured by Barron’s selectivity rankings and tuition costs. Caroline Hoxby, an economics professor at Stanford, reviewed all the relevant studies this fall and concluded that my daughter is right to aim high. The long and the short of it is that studies with moderate to strongly credible identification strategies suggest that the returns are such that the typical student is sensible both when that student applies to selective colleges and when that student enrolls in one of the more-selective colleges among those that offer admission. So this year, I’m going to join the anxiety-ridden hordes and gamble that an expensive education is a good investment in my kid’s human capital. Does it burn me that so much of my tuition dollar will be spent on fancy gym facilities and gourmet dining halls? Don’t get me started. Is there a hint of parental vanity in all this? Guilty as charged. On the other hand, my daughter earned the grades that put her in the running for these colleges. So she did her job. Now it’s my job to fund the education she earned. Continue reading on CBS MoneyWatch.com

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Grant Cardone: Selling Starts, Recession Ends!

November 6, 2009

The so-called Great Recession, the longest and deepest since the Great Depression, may be over but you won’t feel relief unless you and your company are able to sell your products and services. Businesses and individuals may find relief in the idea that the Recession is finally ending, but trust me, you won’t feel any relief in how the market responds to your products and services unless you master selling, building the value-add propositions and closing the deal. Selling, not organizing, not planning, and not product development, is the most important skill of every company when coming out of a recession. The only way now to grow your company is to grow revenue and that means selling! Most economists think the recession ended in the summer or early autumn and the Commerce Department’s advance estimate of third quarter gross domestic product came in at 3.5 percent, the strongest gain since the third quarter of 2007. We won’t know for sure which month the recession ended until the National Bureau of Economic Research makes the call, and they usually wait for several months after the fact until the data are unequivocal. But who cares and what does it matter when it ended? The only thing that matters is how to you drive revenue by getting your products and services sold into the market. When the recession ended or began is no more than a history report. Surviving is about what you do today and tomorrow, not what happened yesterday. Even if the recession is over, the people and companies that need your products will still be left with residual fear for some time to come as a result of the economic implosion over the last year. Unemployment numbers will continue to climb and consumer confidence will stay weak. Decision makers will be protecting cash and continue to hoard cash. The single most important skill today is the ability to sell over objections, budgets, and fears. Just getting in front of the right person is an art. Overcoming fears and resistance and successful closing a transaction and getting companies or individuals to part with their cash is the lifeblood of the organization. If you are a business person and hate this idea of selling, you will feel like the recession continues on long after it is over. Now is the time that you and your organization learn everything about selling so that you can take market share away from the weak. Now is the time for your company to make sales training and sales solutions the number one most important single activity of the organization. Grant Cardone is the author of Sell to Survive and Closers Survival Guide

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Walmart Delivered S&P 500′s Only Gain During Recession: Chart of the Day

October 15, 2009

By Brendan Moynihan and Rita Nazareth Oct. 15 (Bloomberg) — Wal-Mart Stores Inc. is the only Standard & Poor’s 500 Index company that has rallied during the entire 22-month recession. The CHART OF THE DAY shows that shares of Walmart, the world’s biggest retailer, were up at the end of each week while the S&P 500 posted losses throughout most of the worst contraction since the 1930s. Walmart closed at $45.72 in New York Stock Exchange composite trading on Jan. 4, 2008, and has finished above that level every week since. “Walmart is a great example of a recession-proof company,” said Mark Bronzo , a money manager at Security Global Investors, which oversees $21 billion in Irvington, New York. “People believe that when you go there you’re getting consumer staples or necessities, like food, at the best price available. So, in an environment where people were very conscious of what they were spending, Walmart was able to deliver.” Walmart, based in Bentonville, Arkansas, peaked at $62.41 on Sept. 12, 2008, three days before Lehman Brothers Holdings Inc. filed for the world’s largest bankruptcy and triggered the worst stock market rout since the Great Depression. The retailer reported net income of $13.4 billion in the fiscal year ending in January, an increase of 5.3 percent from a year earlier even as U.S. gross domestic product shrank. A second chart illustrates the economic contraction with gauges the National Bureau of Economic Research uses to identify recessions and expansions. (To save a copy of the chart, click here.) To contact the reporters on this story: Brendan Moynihan in Brentwood, Tennessee, at bmoynihan@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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China’s Rural Migration, Wealth Gap Strain Post-Mao Party: Chart of Day

October 1, 2009

By Lee J. Miller and Daniel Ten Kate Oct. 1 (Bloomberg) — China’s communist regime, marking its 60th anniversary, faces a widening wealth gap between farmers and city dwellers that may threaten stability, even as the economy is poised to pass Japan’s as the world’s second largest. The CHART OF THE DAY tracks per-capita annual net income of urban and rural households from 1981, with farmers earning 30 percent of their city counterparts’ pay in 2007, from as much as 54 percent in 1985, based on National Bureau of Statistics data. “The basic thing is still jobs, and most of those are in the cities,” Willy Wo-Lap Lam , an adjunct professor of history at the Chinese University of Hong Kong, said by telephone. “At the best of times they have to create 25 million new jobs a year.” The lower panel shows the population split since 1978, with the rural proportion falling to 55 percent of the nation’s total in 2007, from 82 percent in 1978, the data show. The world’s most-populous country had 1.32 billion people at the end of 2007. China had 225 million rural workers who were not employed on farms at the end of last year, 140 million of whom migrated outside their home towns for work, the bureau said in a report on its Web site in May. That has strained social services in cities and prompted the government to keep restrictions on rural migration introduced in 1958 by Communist Party leader Mao Zedong , Lam said. “Politically it’s a threat because the bulk of social unrest and riots come from these unsettled rural migrant workers and peasants,” he said. “They would pose a big threat to the regime if they had free movement.” (To save a copy of the chart, click here.) To contact the reporters for this story: Lee J. Miller in Bangkok at lmiller@bloomberg.net ; Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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Wien Rebuilds Reputation as Strategist Sees S&P 500 Extending Gain to 77%

September 29, 2009

By Rita Nazareth Sept. 29 (Bloomberg) — The steepest rally in the Standard & Poor’s 500 Index since the 1930s is restoring Byron Wien’s reputation as a stock picker. Wien, hired by Blackstone Group LP last month, said he’s keeping his January forecast for a 33 percent annual gain in the benchmark index for U.S. equities, implying a 13 percent advance from yesterday’s close. More than six months ago, the S&P 500 needed to rise 77 percent to reach Wien’s year-end prediction of 1,200. “In March, that didn’t look too good, and people wouldn’t make eye contact with me,” said Wien, 76, vice chairman of Blackstone Advisory Services and the former chief market strategist for hedge fund Pequot Capital Management Inc. “But now, with three months to go, that looks like it may be realized. The horse is corporate earnings and economic activity. The horse drives the cart.” Wien’s year-end forecast for the S&P 500 is higher than the average estimate of strategists surveyed by Bloomberg of 1,037. It also exceeds the most bullish forecast of 1,100 from JPMorgan Chase & Co.’s Thomas Lee . The index closed at 1,062.98 yesterday after jumping 57 percent since March. The investment strategist is calling for the steepest annual gain in the S&P 500 since 1995 and biggest fourth-quarter rally in a decade. Wien says an economic recovery and earnings that exceed analysts’ forecasts will spur the stock market during the next three months. Earnings, Economy In the second quarter, 72.3 percent of S&P 500 companies topped the average analyst profit estimate, matching the highest proportion even in Bloomberg data going back to 1993. The Economic Cycle Research Institute’s gauge of U.S. economic growth surged 24 percent in the week ended Sept. 18, the fastest increase in data stretching back to 1968. Wien is also more optimistic than Wall Street strategists tracked by Bloomberg about corporate earnings. Combined earnings for S&P 500 companies will exceed $60 a share this year and rise to $75 in 2010, he said. The average strategist forecasts are $56.33 and $69.44, respectively. “What’s going to drive the stock market is whether the earnings momentum that we’ve seen is sustained,” Wien said. “The economy will be stronger, and corporate earnings both in the third and fourth quarters will be better than expected.” Companies in the S&P 500 traded for 20.2 times reported operating earnings from the past year on Sept. 22, data compiled by Bloomberg show, the highest valuation since 2004. ‘Further To Go’ “To some extent it’s overbought, but I still think it has further to go,” he said. “You have to say that if investors were very pessimistic in March, they are much more optimistic now, but not at extreme levels. I don’t think we’ll have a 10 percent correction before the end of the year.” Blackstone , the world’s biggest private equity firm, hired Wien last month to advise the company and its clients on the economy and politics. Pequot, his previous employer, said in May that it would shut down because of a federal insider-trading investigation. Before Pequot, Wien was senior market strategist at Morgan Stanley. At the start of 2008, Wien’s predictions included a 10 percent decline for the S&P 500 and the beginning of the first U.S. recession since 2001. The main benchmark for American equities sank 38 percent, the most since 1937, as financial shares collapsed and energy and metal producers tumbled. The economic contraction began in December 2007, according to the National Bureau of Economic Research . Most Attractive Within the 10 main industry groups in the S&P 500, Wien said technology, energy, raw-material and health-care companies are the most attractive. He predicted mergers between industries companies. U.S. stocks rose the most in five weeks yesterday as takeovers in the drug and technology industries added to evidence that mergers and acquisitions are rebounding from the slowest pace in six years. Takeovers involving U.S. companies have totaled $49.1 billion in September, compared with $26.6 billion in August and $36.8 billion in July, based on Bloomberg data. Through the third week of September, M&A dropped by about half in the U.S. to $492.5 billion this year, the slowest pace since 2003, Bloomberg data show. “I do think that M&A will be strong over the next few months,” Wien said. “Investors are confident and businessmen are confident, too. They see some attractive companies out there at attractive prices. And they’re willing to buy them.” To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net .

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Bank of China Vice President Zhu Sees Stock, Property Bubbles `Everywhere’

September 10, 2009

By Bloomberg News Sept. 10 (Bloomberg) — Bank of China Ltd., which led China’s $1.1 trillion lending spree in the first half, said ample liquidity has caused “bubbles” in stocks, commodities and real estate. “The potential risk is that a lot of liquidity goes to the asset market,” Vice President Zhu Min said in an interview in Dalian today. “So you see asset bubbles in commodities, stocks and real estate, not only in China, but everywhere.” China’s record credit expansion, which helped the country’s economy expand 7.9 percent in the second quarter, has raised concerns that bank loans have been diverted and used to buy stocks and real estate, fueling unsustainable gains in equity and property markets. House prices in the nation’s 70 biggest cities rose at the fastest pace in 11 months on record lending and climbing confidence, according to a National Bureau of Statistics report today. The Shanghai Stock Exchange Composite Index has gained 62 percent this year. Bank of China advanced 1 trillion yuan of new loans in the first six months, more than any other Chinese lender and the gross domestic product of New Zealand. The Beijing-based bank, the nation’s third-largest, said last month it plans to slow credit growth in the rest of the year and improve loan quality. Higher Capital Requirements China Construction Bank Corp., the nation’s second-largest, said last month it will cut new lending by 70 percent in the second half from six months earlier to avoid a surge in bad debt. Chairman Guo Shuqing said excess cash in the banking system has led to asset bubbles. The China Banking Regulatory Commission said on Sept. 3 it will implement stricter capital requirements for banks. Lenders were also required to raise reserves to 150 percent of their non-performing loans by the end of this year, up from 134.8 percent at the end of June. The Shanghai Composite Index briefly fell into so-called bear market territory last month on concern slowing lending growth and tighter capital requirements would derail a recovery in the world’s third-biggest economy. New loans in July were less than a quarter of June’s level. August new-lending figures are scheduled to be released on Sept. 11 and may show a 10 percent decline to 320 billion yuan, according to the median estimate of nine analysts surveyed by Bloomberg. Loans surged in the first six months of this year after the central bank scrapped quotas limiting lending in November to support the government’s 4 trillion yuan stimulus package. For Related News and Information: Top financial stories: FTOP Stories on China Banks: TNI CHINA BNK China’s monthly new loans: CNLNNEW HP Relative value comparison: 3968 RVC

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Union Workers Pay More State Taxes: NBER Study

August 24, 2009

Union employees bear more of the burden of high state corporate taxes than non-union employees, according to a new study distributed by the National Bureau of Economic Research.

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Treasuries Fall on Existing Home Sales Jump, Bernanke Outlook on Growth

August 22, 2009

By Daniel Kruger Aug. 22 (Bloomberg) — Treasuries fell for a second week as reports showed stabilization in the housing industry and Federal Chairman Ben S. Bernanke said the global economy is “beginning to emerge” from recession. Two-year note yields gained the most since the five days ended Aug. 7 after starts of single-family dwellings rose for a fifth month and sales of existing homes surged in July. Bernanke said that “prospects for a return to growth in the near term appear good.” The U.S. announced plans to sell $109 billion of two-, five- and seven-year notes next week, equal to the record for that combination of maturities. “It’s the trifecta coming into play,” said Kevin Flanagan , a Purchase, New York-based fixed-income strategist for Morgan Stanley Smith Barney. “Bernanke’s comments, which were interpreted to be more on the upbeat side than one would have originally thought. The existing home sales figures, adding to that. And you can’t dismiss the fact we have supply next week.” The yield on the two-year note rose four basis points on the week, or 0.04 percentage point, to 1.09 percent, according to BGCantor Market Data. The 1 percent security maturing July 2011 fell 2/32, or 31 cents per $1,000 face amount, to 99 26/32. The five-year note yield climbed five basis points to 2.56 percent and the seven-year note yield increased three basis points to 3.20 percent. Yields on 10-year notes were flat on the week and 30-year bond yields declined five basis points as producer prices fell 0.9 percent in July, more than forecast, capping the biggest 12- month drop on record, according to a Labor Department report released Aug. 18. The 10-year yield dropped as low as 3.37 percent, the lowest since July 14, after falling 28 basis points last week, the most since December. ‘Aggressive’ Central Banks The global economy is beginning to emerge from recession after “aggressive” action by central banks and governments, Bernanke said in a speech yesterday at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. Bernanke, speaking to an audience of central bankers and academic, warned that the world still confronts “critical” challenges. “Strains persist in many financial markets across the globe, financial institutions face additional significant losses and many businesses and households continue to experience considerable difficulty gaining access to credit,” Bernanke said. Recovery “is likely to be relatively slow at first, with unemployment declining only gradually from high levels.” The note of caution underscored the Fed’s decision last week to leave interest rates near zero for an “extended period” and to delay by a month the scheduled end to its program to buy Treasuries. Future ‘Consequences’ Policy makers have more than doubled the Fed’s balance sheet to $2.06 trillion since last September as central bankers have committed to buying assets, including $300 billion of Treasuries and $1.45 trillion of mortgages and agency debt to thaw credit markets that froze last year. The flood of liquidity could lead to speculative bubbles due to limited opportunities for investment, according to Joseph Stiglitz , winner of the Nobel Prize for economics. “As the balance sheet of the Fed has blown up, as the deficit of the U.S. and the debt has increased, people have asked the obvious question: will there be inflation in the future?” Stiglitz, a professor at Columbia University, said at a conference in Bangkok yesterday. “Right now we’re facing deflation, but some time in the future, there will be consequences.” The U.S. 10-year breakeven rate, a gauge of investor expectations for inflation that measures the difference in yield between index-linked and conventional bonds, rose to 190 basis points yesterday, from 9 basis points at the start of the year. The spread has averaged 220 basis points in the past five years. Employment Concerns Stocks advanced, with the Standard & Poor’s 500 Index gaining 2.2 percent on the week as investors bet on recovery. The economy is forecast to grow at an annualized rate 2.2 percent in the third quarter and 2 percent in the fourth quarter, according to a Bloomberg News survey of 57 economists. Rising job losses could temper gains in riskier assets. While the unemployment rate dipped last month, economists project it will reach 10 percent by early next year, restraining consumer spending. More Americans than forecast filed claims for jobless benefits last week. Applications rose to 576,000 the week ended Aug. 15, above the 550,000 median estimate of economists surveyed by Bloomberg News. “We will hold off on making a call on the payroll report pending more data, but the indications from claims thus far suggest that it will be on the disappointing side relative to last month’s outcome,” Goldman Sachs Group Inc. economists in New York led by Jan Hatzius wrote in a note to clients Aug. 20. Treasury 10-year yields climbed the most in a week since 2003 for the week ended Aug. 7 after the Labor Department said the economy lost 247,000 jobs in July, fewer than the 325,000 forecast in a Bloomberg News survey. More Supply The U.S. will sell $42 billion of two-year notes, $39 billion of debt maturing in five years and $28 billion of seven- year securities on three consecutive days beginning Aug. 25, equal to the amount of those notes sold last month. The Treasury’s sales last month of 2- and 5-year notes drew lower-than-forecast interest from investors amid concern the government’s deluge of borrowing would overwhelm demand. The Fed bought $2.599 billion in Treasuries during the week, the least since its program began in March, bringing its total purchases to $262.377 billion. The central bank on Aug. 19 announced plans to buy debt three times over the next two weeks, down from four times per two-week period. Policy makers said Aug. 12 they plan to slow the pace of Treasury purchases as the recession eases and signaled that the $300 billion program will end in October. The buying was previously scheduled to end in September. ‘Uncharted Territory’ The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaire Warren Buffett said. The “gusher of Federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary Aug. 19. While he applauded measures adopted by the Fed and officials from the administrations of George W. Bush and Barack Obama , Buffett said the U.S. is fiscally in “uncharted territory.” Marketable Treasury debt has increased 50 percent to $6.78 trillion since the end of 2007 as Bush and Obama borrowed to sustain the economy and the financial system after the U.S. entered its longest economic contraction since the Great Depression. The National Bureau of Economic Research, which dates business cycles, said the recession began in December 2007. The non-partisan Congressional Budget Office forecast the budget deficit for fiscal 2009, ending Sept. 30, will reach a record $1.85 trillion. To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net .

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U.S. Recession May Have Ended in June, Goldman’s McKelvey Tells Clients

August 19, 2009

By Carlos Torres Aug. 19 (Bloomberg) — The worst U.S. recession since the 1930s may already be over, according to Edward McKelvey , a senior economist at Goldman Sachs Group Inc. in New York. The gain in industrial production in July, the first in nine months, and the likelihood that output will continue to grow because of depleted inventories is “the best” signal that the contraction is over, McKelvey wrote in an e-mail to clients yesterday. The Business Cycle Dating Committee of the National Bureau of Economic Research , the Cambridge, Massachusetts-based private research group charged with calling turns in the economy, determined the current downturn started in December 2007. A June trough means the contraction would have lasted 18 months, making it the longest since the Great Depression. “The upturn in industrial production reported for July suggests that June could wind up being the NBER cycle low,” McKelvey wrote. The projection was “highly tentative” and “a lot has to happen before we can state this conclusion with conviction,” he said. A gain in gross domestic product this quarter and sustained increases in total sales adjusted for inflation, together with further increases in production, would help cement the verdict, McKelvey said. The NBER committee defines a recession as a “significant” decrease in economic activity over a sustained period of time. The decline would be visible in GDP, payrolls, industrial production, sales and incomes. Cash-for-Clunkers The government’s cash-for-clunkers program is among the reasons production, GDP and sales are all likely to increase this quarter, McKelvey said. General Motors Co. announced yesterday it called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosts second-half production. GM will add shifts at plants in the Canadian province of Ontario and in Lordstown, Ohio. The production changes add about 60,000 units to GM’s fourth-quarter plans, Mark LaNeve , the vice president overseeing U.S. sales, said in a conference call. The job market, which is likely to deteriorate further, is the one component that may not confirm the contraction is over, McKelvey said. For that reason, McKelvey said the task of predicting when recessions begin and end is “counterproductive” since most Americans will continue to feel glum as the jobless rate climbs and payrolls fall. Calling the end of the downturn comes “with considerable misunderstanding — bordering on distrust and disdain — from those who are experiencing recession by their own definition at first hand,” he said. “This is not to say that identifying recessions is pointless, but merely to suggest that a more natural criterion” for determining the length of contractions would be “a period during which unemployment rises significantly,” McKelvey said. To contact the report on this story: Carlos Torres in Washington at Ctorres2@bloomberg.net

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U.S. Recession May Have Ended in June, Goldman’s McKelvey Tells Clients

August 19, 2009

By Carlos Torres Aug. 19 (Bloomberg) — The worst U.S. recession since the 1930s may already be over, according to Edward McKelvey , a senior economist at Goldman Sachs Group Inc. in New York. The gain in industrial production in July, the first in nine months, and the likelihood that output will continue to grow because of depleted inventories is “the best” signal that the contraction is over, McKelvey wrote in an e-mail to clients yesterday. The Business Cycle Dating Committee of the National Bureau of Economic Research , the Cambridge, Massachusetts-based private research group charged with calling turns in the economy, determined the current downturn started in December 2007. A June trough means the contraction would have lasted 18 months, making it the longest since the Great Depression. “The upturn in industrial production reported for July suggests that June could wind up being the NBER cycle low,” McKelvey wrote. The projection was “highly tentative” and “a lot has to happen before we can state this conclusion with conviction,” he said. A gain in gross domestic product this quarter and sustained increases in total sales adjusted for inflation, together with further increases in production, would help cement the verdict, McKelvey said. The NBER committee defines a recession as a “significant” decrease in economic activity over a sustained period of time. The decline would be visible in GDP, payrolls, industrial production, sales and incomes. Cash-for-Clunkers The government’s cash-for-clunkers program is among the reasons production, GDP and sales are all likely to increase this quarter, McKelvey said. General Motors Co. announced yesterday it called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosts second-half production. GM will add shifts at plants in the Canadian province of Ontario and in Lordstown, Ohio. The production changes add about 60,000 units to GM’s fourth-quarter plans, Mark LaNeve , the vice president overseeing U.S. sales, said in a conference call. The job market, which is likely to deteriorate further, is the one component that may not confirm the contraction is over, McKelvey said. For that reason, McKelvey said the task of predicting when recessions begin and end is “counterproductive” since most Americans will continue to feel glum as the jobless rate climbs and payrolls fall. Calling the end of the downturn comes “with considerable misunderstanding — bordering on distrust and disdain — from those who are experiencing recession by their own definition at first hand,” he said. “This is not to say that identifying recessions is pointless, but merely to suggest that a more natural criterion” for determining the length of contractions would be “a period during which unemployment rises significantly,” McKelvey said. To contact the report on this story: Carlos Torres in Washington at Ctorres2@bloomberg.net

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U.S. Recession May Have Ended in June, Goldman’s McKelvey Tells Clients

August 19, 2009

By Carlos Torres Aug. 19 (Bloomberg) — The worst U.S. recession since the 1930s may already be over, according to Edward McKelvey , a senior economist at Goldman Sachs Group Inc. in New York. The gain in industrial production in July, the first in nine months, and the likelihood that output will continue to grow because of depleted inventories is “the best” signal that the contraction is over, McKelvey wrote in an e-mail to clients yesterday. The Business Cycle Dating Committee of the National Bureau of Economic Research , the Cambridge, Massachusetts-based private research group charged with calling turns in the economy, determined the current downturn started in December 2007. A June trough means the contraction would have lasted 18 months, making it the longest since the Great Depression. “The upturn in industrial production reported for July suggests that June could wind up being the NBER cycle low,” McKelvey wrote. The projection was “highly tentative” and “a lot has to happen before we can state this conclusion with conviction,” he said. A gain in gross domestic product this quarter and sustained increases in total sales adjusted for inflation, together with further increases in production, would help cement the verdict, McKelvey said. The NBER committee defines a recession as a “significant” decrease in economic activity over a sustained period of time. The decline would be visible in GDP, payrolls, industrial production, sales and incomes. Cash-for-Clunkers The government’s cash-for-clunkers program is among the reasons production, GDP and sales are all likely to increase this quarter, McKelvey said. General Motors Co. announced yesterday it called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosts second-half production. GM will add shifts at plants in the Canadian province of Ontario and in Lordstown, Ohio. The production changes add about 60,000 units to GM’s fourth-quarter plans, Mark LaNeve , the vice president overseeing U.S. sales, said in a conference call. The job market, which is likely to deteriorate further, is the one component that may not confirm the contraction is over, McKelvey said. For that reason, McKelvey said the task of predicting when recessions begin and end is “counterproductive” since most Americans will continue to feel glum as the jobless rate climbs and payrolls fall. Calling the end of the downturn comes “with considerable misunderstanding — bordering on distrust and disdain — from those who are experiencing recession by their own definition at first hand,” he said. “This is not to say that identifying recessions is pointless, but merely to suggest that a more natural criterion” for determining the length of contractions would be “a period during which unemployment rises significantly,” McKelvey said. To contact the report on this story: Carlos Torres in Washington at Ctorres2@bloomberg.net

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U.S. Recession May Have Ended in June, Goldman’s McKelvey Tells Clients

August 19, 2009

By Carlos Torres Aug. 19 (Bloomberg) — The worst U.S. recession since the 1930s may already be over, according to Edward McKelvey , a senior economist at Goldman Sachs Group Inc. in New York. The gain in industrial production in July, the first in nine months, and the likelihood that output will continue to grow because of depleted inventories is “the best” signal that the contraction is over, McKelvey wrote in an e-mail to clients yesterday. The Business Cycle Dating Committee of the National Bureau of Economic Research , the Cambridge, Massachusetts-based private research group charged with calling turns in the economy, determined the current downturn started in December 2007. A June trough means the contraction would have lasted 18 months, making it the longest since the Great Depression. “The upturn in industrial production reported for July suggests that June could wind up being the NBER cycle low,” McKelvey wrote. The projection was “highly tentative” and “a lot has to happen before we can state this conclusion with conviction,” he said. A gain in gross domestic product this quarter and sustained increases in total sales adjusted for inflation, together with further increases in production, would help cement the verdict, McKelvey said. The NBER committee defines a recession as a “significant” decrease in economic activity over a sustained period of time. The decline would be visible in GDP, payrolls, industrial production, sales and incomes. Cash-for-Clunkers The government’s cash-for-clunkers program is among the reasons production, GDP and sales are all likely to increase this quarter, McKelvey said. General Motors Co. announced yesterday it called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosts second-half production. GM will add shifts at plants in the Canadian province of Ontario and in Lordstown, Ohio. The production changes add about 60,000 units to GM’s fourth-quarter plans, Mark LaNeve , the vice president overseeing U.S. sales, said in a conference call. The job market, which is likely to deteriorate further, is the one component that may not confirm the contraction is over, McKelvey said. For that reason, McKelvey said the task of predicting when recessions begin and end is “counterproductive” since most Americans will continue to feel glum as the jobless rate climbs and payrolls fall. Calling the end of the downturn comes “with considerable misunderstanding — bordering on distrust and disdain — from those who are experiencing recession by their own definition at first hand,” he said. “This is not to say that identifying recessions is pointless, but merely to suggest that a more natural criterion” for determining the length of contractions would be “a period during which unemployment rises significantly,” McKelvey said. To contact the report on this story: Carlos Torres in Washington at Ctorres2@bloomberg.net

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Stocks in U.S. Jump, Treasuries Drop After Better-Than-Estimated Jobs Data

August 7, 2009

By Whitney Kisling Aug. 7 (Bloomberg) — U.S. stocks jumped after the unemployment rate decreased for the first time since April 2008, bolstering speculation that a recovering economy justifies the steepest rally in equities in seven decades. The dollar advanced and Treasuries capped their biggest weekly drop in six years. American Express Co. , Walt Disney Co. and General Electric Co. added at least 2.7 percent after the Labor Department said the nation lost 247,000 jobs last month, 78,000 fewer than economists projected, and the jobless rate fell to 9.4 percent from 9.5 percent. American International Group Inc. rallied 20 percent after its first profit since 2007 topped estimates. CBS Corp. and D.R. Horton Inc. climbed on analyst upgrades. “The market has a laser focus on the economy and on jobs, so any improvement in that leads to an improvement in the stock market,” said David Katz , who oversees $1.1 billion as chief investment officer of Matrix Asset Advisors in New York. “The worst is behind for the economy, and we’re on the mend.” The Standard & Poor’s 500 Index added 1.3 percent to a 10- month high of 1,010.47 at 4:07 p.m. in New York, completing a fourth straight weekly advance. The Dow Jones Industrial Average climbed 113.81 points, or 1.2 percent, to 9,370.07. The S&P 500 has rallied 49 percent from a 12-year low on March 9, the steepest surge since the Great Depression. The market’s advance restored almost $4 trillion in value to U.S. equities, according to data compiled by Bloomberg, after 2008 marked the worst year for stocks since the 1930s. Reports this month showed better-than-estimated sales of cars and existing homes and a contraction in service industries that was smaller than economists forecast. ‘Less Grim’ While profits at S&P 500 companies are falling for a record eighth straight quarter, results have surpassed projections by an average of 10 percent in the current season. Per-share earnings have beaten estimates at three-quarters of the 447 companies in the S&P 500 that released second-quarter results since June 17, according to data compiled by Bloomberg. “The economic news is getting less grim, and earnings estimates are ratcheting up,” said Michelle Clayman , chief investment officer at New Amsterdam Partners in New York, which manages $3 billion. “We’re now looking at earnings next year north of $70” a share for the S&P 500. Profit Outlook Companies in the S&P 500 will earn a combined $74.49 per share in 2010, according to forecasts compiled by Bloomberg as of yesterday. Overall profits are projected to rise 21 percent, led by an 85 percent increase at chemical and mining companies, a 54 percent gain at banks, brokers and insurers, and a 47 percent jump at energy producers, the data show. The S&P 500 and the Dow have gained 12 percent and 6.8 percent, respectively, in 2009 as better-than-expected earnings and improving economic data suggest the worst recession since the 1930s may be subsiding and investors regain some confidence in U.S. equities. The two gauges rose more than 2 percent each over the past five days, capping a fourth straight week of increases. The U.S. recession may have ended in July as the labor markets improved, Jeffrey Frankel , a member of the National Bureau of Economic Research’s business-cycle dating committee, told Bloomberg. Frankel’s panel previously said that December 2007 marked the beginning of the recession, which it defines as a “significant” decrease in economic activity over a sustained period of time. President Barack Obama said the July job numbers indicate “the worst may be behind us.” AIG Jumps AIG climbed 20 percent to $27.14 and more than doubled over the past week. The insurer bailed out by the U.S. government reported second-quarter earnings per share of $2.57 on an adjusted basis, beating the $1.50 average analyst estimate. Shares of AIG climbed 63 percent on Aug. 5, and rose 2.4 percent yesterday before results were released. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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