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(MENAFN) The Swedish Central Statistics Bureau (SCB) said that in November, the country’s industrial output declined by 1.9 percent compared with the previous month, reported Xinhua News. The …

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Sweden’s Nov industrial output down by 1.9%

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(MENAFN) Statistics Canada said that in December, jobless rate grew to 7.5 percent from the 7.4 percent recorded in the previous month, reported Bloomberg. The agency added that employment in the …

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Canada’s Dec unemployment rate up to 7.5%

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Chinese industrial profit up 28.3% to USD438b

August 28, 2011

(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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China’s July inflation up 6.5%

August 9, 2011

(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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Commercial Property News – Commercial property debt falls in 2010

June 4, 2011

The UK's commercial property market has been boosted by new figures that show its total debt is decreasing. The British Property Federation has released the statistics that illustrate a reduction in what is owed from …

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Women Continue To Let Men Handle Their Retirement

April 29, 2011

You’ve heard the statistics: More women than ever are involved in household finances, with a quarter of them in control. Working women have surpassed men in attainment of higher education — the first time in history. And yet, women still pass the buck when it comes to their own retirement security, according to a new survey from ING Direct USA and Dailyworth.com.

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For-Profit College Students Face Financial Woes

February 4, 2011

A quarter of all federal student loan borrowers at for-profit colleges defaulted on their loans within three years of beginning to repay them–more than twice the rate of their counterparts at non-profit institutions, according to new data released today by the Department of Education. In addition, students taking out loans at for-profit schools were responsible for nearly half of all federal student loan defaults within the three-year timeframe, even though students enrolled at such institutions made up less than 15 percent of college students nationwide. The findings released by the Department of Education come as the for-profit college sector faces heightened public scrutiny over questionable outcomes for students, many of whom leave the schools with debts they cannot repay. Average tuition at for-profit schools is nearly twice that of the in-state tuition at four-year public colleges, and more than five times the average tuition at community colleges, according to a Senate report released last year. The data released today is essentially a snapshot in time: The Department of Education analyzed students whose loans began coming due between October 2007 and September 2008, and tracked those students through last September. Overall, nearly 14 percent of students analyzed at all colleges nationwide went into default within the three years. But the numbers are particularly noteworthy for the for-profit sector, which at 25 percent had the highest default rate of any segment in higher education. Public non-profit schools had about 11 percent of borrowers defaulting in the three-year window, while students at private non-profit schools defaulted at a rate of less than eight percent. Though there is flexibility in repayment plans, federal student loans are among the most difficult debts to discharge. In most cases, the debt persists even after someone declares bankruptcy. Student loan default rates are a key factor in a college’s eligibility for federal student aid dollars. In the case of for-profit colleges, access to higher education grants and loans is essential to the industry’s survival. Many for-profit schools derive upwards of 80 percent of revenue from federal student aid. The three-year rates released by the Department of Education today won’t have a direct impact on student aid eligibility, but the same data in coming years will figure heavily into whether schools could face restricted access to higher education grants and loans. Currently, schools are graded on a two-year timescale for student loan defaults. Schools that have more than 25 percent of borrowers going into default within two years could face sanctions and limitations to federal student aid dollars. But Congress changed the rules in 2008, requiring an additional year of analysis to better gauge students’ ability to repay their loans. There have been concerns in Congress and among student advocates that some for-profit schools actively managed their default rates by placing students into loan deferment plans or other agreements that prevented defaults until the two-year window had passed. Comparing the two-year default data to the three-year default data sheds some light on how much one year can change the statistics. For the for-profit sector, the two-year student loan default rate was 11.6 percent, but by adding one more year of analysis, the default rate ballooned to 25 percent. The shift in defaults from the two-year to the three-year window was much less drastic at non-profit colleges. Public non-profit schools increased from a six percent two-year default rate to a 10.8 percent three-year default rate; private non-profit schools went from a two-year rate of four percent to a three-year rate of 7.6 percent. “You would expect the three-year default rates to be somewhat higher because students have a longer period of time in which to default,” said a Department of Education official who discussed the default data with reporters before it was officially released. “But if the three-year rate seems disproportionately high compared to other sectors, then that may be a sign that institutions in that sector or a particular institution is managing its default rate aggressively.” Schools are still officially transitioning from the two-year window to the three-year window in measuring loan defaults. The first year in which a college could be sanctioned based on the three-year loan data is 2014. Schools must have more than 30 percent of students default on loans within the three-year timeframe, in three consecutive years, to be restricted from federal student aid.

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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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Trade Deficit Falls To 9-Month Low On Big Demand From China, India

December 10, 2010

Buoyed by strong demand from China and India, the U.S. trade deficit dropped to its lowest level in 9 months, as exports rose to their highest level in two years. The trade gap narrowed 13.2 percent to $38.7 billion in October and exports gained 3.2 percent over the same period. A good portion of the this increase has been driven by manufactured goods. “Exports of manufactured goods have accounted for about two-thirds of the total growth in exports so far this year,” Mark Dorns, Chief Economist at the Department of Commerce said in a statement. These numbers should please the Obama Administration, who’ve set out to double exports over the next five years to combat high unemployment rates and encourage domestic manufacturers. Analysis by the Economics and Statistics Administration indicate that exports in will this year support close to 9.4 million jobs, an increase from a 2009 estimate that put the number at 8.5 million. Chris Cornell, an analyst for Moody’s Analytics , was optimistic about the trade report. “Trade will improve at a disproportionate rate until it settles into its long-run pattern,” he said. He noted that exports had recovered nearly all of their losses since the start of the recession, while imports are perhaps two-thirds of the way to recovery. “Our forecast for fourth quarter GDP growth is likely to be higher, though precisely how much higher remains up in the air,” he said. The White House’s five-year export goal may be feasible, at least according to Moody’s forecast results which showed exports expected to be about $3 trillion by the fourth quarter of 2014, which would indeed double the $1.25 trillion reported in the second quarter of 2009. But, much will depend on the economies of China and Latin America, Cornell cautioned. The U.S. trade deficit with China, its largest trade gap by far, dropped 8.3 percent to $25.5 billion in October, but still accounts for about 65 percent of the overall trade deficit.

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Middle-Class Struggles, Americans Treading Water In Gulf Between Rich And Poor

October 1, 2010

MOUNT VERNON, N.Y. — A Wall Street adviser leaves early for work to avoid panhandlers at his suburban train station. In coal country, a suddenly homeless man watches from a bench as wealthy women shop for dresses. A down-and-out waitress sits glumly on her stoop across the street from a gleaming suburb. A freshly elected politician loses his day job. They’re the faces of a census report released this week showing that the gap between the richest and poorest Americans is wider than ever. The recession technically ended in the middle of last year, but the numbers can’t tell the whole story. The census report translates to stories of impatience, resignation and hopelessness for those who are living it across the country. The recession technically ended in the middle of last year, but the numbers can’t tell the whole story. The census report translates to stories of impatience, resignation and hopelessness for those who are living it across the country. It’s the story of Roy Houseman, who, having barely finished celebrating his election to the City Council in Missoula, Mont., was laid off. It’s the story of Ashleigh Dorner, an unemployed Detroiter who has a car but no money for gas or insurance. It’s the story of John Morgan, a financial adviser who avoids interaction with the poor in the gritty New York suburb of Mount Vernon. And it’s the story of Charles Fox. ___ Fox, 68, has claimed a bench on High Street in Morgantown, W.Va. It’s tucked between a pizza shop and a gelato stand he can’t afford to visit. Beside him are two black trash bags stuffed with his belongings. He had a home until last month, when a fire burned down one of the last cheap motels in town. Now he sits in the morning sunshine, worrying about the approach of winter. “I ain’t found no place to live yet,” he says, staring down at the sidewalk. Morgantown’s metro area has the largest gap between rich and poor in the 50 states, the new census figures say. That’s partly because it’s a college town, and the number of students is growing rapidly, along with the low-paying jobs that support them. College towns also have highly paid professors, researchers and doctors. And they’re a landlord’s market: Fox, who was spending $450 a month on rent – three-quarters of his monthly disability check – says he can’t find a room for under $1,000 a month. He used to work in a coal mine, but a blocked artery in his leg makes walking and standing – and holding a job – difficult. At night, he finds a bunk at a packed homeless shelter. “I sit up here on the street in the daytime and just wonder, ‘Where am I going to go?’” he says. Tears fall as he adds, “Sometimes I go two or three days without anything to eat.” Across the street is Coni & Franc’s, where blouses go for $100 and gowns for thousands. But owner Constance Chico Merandi says she deals with the homeless and working poor, too. There’s a sale table with $10 shoes, and sometimes Merandi, 51, pulls an already discounted dress from her sale rack and lets it go for less to a woman dreaming of a wedding gown she knows she can’t afford. “It’s just part of living and coexisting here,” she says. “We realize we have to do something.” Meanwhile, Fox sits on his bench and waits for his luck to change. “You ain’t got a chance anymore in this town,” he says. “You really don’t.” ___ John Morgan, a financial adviser on Wall Street, goes to work earlier some mornings to avoid panhandlers at the railroad station in Mount Vernon, a struggling city of 68,000 bordering the Bronx. He has no interaction with other residents, including the poor – and doesn’t want any. Warily eyeing a man begging commuters for “train fare,” Morgan says, “This guy hits me all the time. At first I gave him a dollar or two and now he sees me coming.” Morgan, 64, is a widower who lives alone in a condominium apartment. He and his wife raised a family in a house in neighboring Pelham before moving two years ago to one of Mount Vernon’s more pleasant neighborhoods. “I don’t have anything to do with Mount Vernon,” Morgan says. “I shop in Pelham. I go straight out to my house on Long Island on the weekends. I’ve never spent a weekend in Mount Vernon.” As Morgan spoke, police patrolled the downtown train station, where a missing-woman flier hung. He has his doubts about the statistics revealing a wider gap between rich and poor. The data showed that the top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income. The bottom 20 percent took in just 3.4 percent of income. “Things aren’t good out there,” he says. “I think the rich are getting poorer and the poor are staying poor.” ___ Ashleigh Dorner was getting by, she says, until job losses in and around Detroit stunted business at the restaurants where she hustled for tips to augment her lower-than-minimum-wage pay. Around the same time, her boyfriend began bringing home less money as home improvement work dried up. Now she’s unemployed and they have to live on the $1,000 per month he earns and “a lot of help from family,” Dorner says, sitting with her 2-year-old daughter on the stoop of their rented home. They have no telephone. They have a car, but they can’t afford to put it on the road. “We don’t have money for car insurance or even gas,” says Dorner, 25. “My boyfriend rides his bike back and forth to work.” Their home on Detroit’s far east side is across the street from one of the affluent communities known as the Grosse Pointes. Jon Gandelot, 67, lives and practices estate planning law in Grosse Pointe Farms, where fancy homes sit serenely on professionally manicured lawns, just blocks from some of Detroit’s worst neighborhoods. Gandelot holds little hope for a recovered Detroit, where the unemployment rate is approaching 30 percent. Driving through the city to get to his suburb is “like day and night, but it has been this way for 30 years,” he says. “Detroit has always had promises of a renaissance. It just never comes to fruition,” says Gandelot, an estate planning attorney. Dorner says she knows her high school diploma doesn’t count for much in this economy, and she doesn’t resent her wealthy neighbors. “I don’t hold any hard feelings toward them,” she says. “I wish I could be in their situation.” ___ When the linerboard plant at Smurfit-Stone Container in Missoula, Mont., was shutting down, 29-year-old Roy Houseman became one of more than 400 workers in the cold. His situation was unique: As a newly elected city councilman, Houseman was expected to help move Missoula’s economy forward after losing $60,000 of his annual income. He was left with just the $12,500 a year he was pulling in as a part-time councilman. He saw his co-workers forced into retirement or out of Missoula. Most were in their 50s, an age that can cause a would-be employer to blanch. Houseman and his wife, Andrea, knew they didn’t want to leave Missoula. The mountain town is considered Montana’s cultural center, with its university, professional population and urbane atmosphere. But Missoula also has the state’s largest homeless shelter, serving as many as 350 people a day. Andrea Houseman was able to find a better-paying job to help them get by. Roy Houseman started graduate school at the University of Montana, hoping to position himself for better economic times. “As the recession goes, I think people try to find places to shelter – and universities are places to shelter,” he says. The Housemans put on hold their plans to have children, as well as their plans to save for retirement. “That’s one thing I have to say the recession has taught me,” Houseman says. “It’s hard to plan long term.” ___ Smith reported from Morgantown. Corey Williams in Detroit, Matt Volz in Helena, Mont., and Hope Yen in Washington contributed to this report.

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Oil And Gas Industry May Sue OSHA Over Flame-Resistant Clothing Requirement

September 23, 2010

Oil and gas drilling groups are so upset over a new federal policy requiring workers to wear flame-resistant clothing on well-drilling rigs that they may sue the Occupational Safety and Health Administration. The Association of Energy Service Companies, a large industry group that includes Halliburton and Key Energy, is weighing all its options — including legal and political steps — to fight OSHA on the issue, the group’s executive director told The Huffington Post, arguing that the new requirement could cost the industry up to $50 million to implement and then $100 million annually after that. “We’re not going to rule anything out at this point,” said Kenny Jordan, adding that AESC and other major oil industry groups, including the American Petroleum Institute and the International Association of Drilling Contractors, sent a letter to OSHA on September 2 to express their concerns about the enforcement memorandum. Jordan said that he plans to give OSHA on Thursday or Friday a deadline by which to respond to his group’s concerns. (h/t BNA’s Occupational Safety and Health Reporter ) The

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Oil And Gas Industry May Sue OSHA Over Flame-Resistant Clothing Requirement

September 23, 2010

Oil and gas drilling groups are so upset over a new federal policy requiring workers to wear flame-resistant clothing on well-drilling rigs that they may sue the Occupational Safety and Health Administration. The Association of Energy Service Companies, a large industry group that includes Halliburton and Key Energy, is weighing all its options — including legal and political steps — to fight OSHA on the issue, the group’s executive director told The Huffington Post, arguing that the new requirement could cost the industry up to $50 million to implement and then $100 million annually after that. “We’re not going to rule anything out at this point,” said Kenny Jordan, adding that AESC and other major oil industry groups, including the American Petroleum Institute and the International Association of Drilling Contractors, sent a letter to OSHA on September 2 to express their concerns about the enforcement memorandum. Jordan said that he plans to give OSHA on Thursday or Friday a deadline by which to respond to his group’s concerns. (h/t BNA’s Occupational Safety and Health Reporter ) The

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Kevin O’Connor: Don’t Make the Solution Part of Your Problem

September 15, 2010

The problem I’ve always been intrigued with innovation and how it can be forced. As an entrepreneur, my job is to create new products and companies; I can’t just sit around waiting for the light to go off while playing Halo. As an executive, I have also been part of a lot of painful strategic planning processes. In one instance, we hired a consultant who took us through an eight month ordeal costing more than $1 million. In the end, we agreed on a strategy that we came up with on the first day. I’ve noticed this happen time and time again. From my experiences working with companies to solve various problems, I’ve noticed a few “truths” that almost always occur when groups try to solve problems: The answers are already in the room. If you assemble a group of smart people who know your industry, they have already assimilated the mass of information from customers, employees, market research and elsewhere. The answers are in the room and not on some manufactured spreadsheet. Most of the time spent trying to solve a problem is typically wasted discussing options that don’t really matter. There are 98 things you could , but shouldn’t, be doing, but in reality there are only two things you need to do as a business to be successful. People often waste time talking about all the things that don’t really matter. Personality trumps. Unfortunately, there isn’t much correlation between speaking skills and quality of ideas. Most people are afraid to share their ideas for fear of looking stupid. But then there are the less deserving people who through force of personality get their way. In order to actually implement the solution, you need consensus and these meetings rarely build lasting consensus. The solution As executives, our goal is to generate as many ideas as possible, identify the top ideas and make a decision while building consensus. But how can you most effectively do that? Just follow these steps: State the problem clearly. Write at the top of the white board the problem you are trying to solve. For example: “How can we improve productivity?”, “What are the biggest problems facing our customers?”, “Which Sports & Recreation topics are best for comparison?” Brainstorm. Ask people to state their ideas succinctly — usually two to three words. Do not allow any discussion or comments on the idea. You want people to play off other people’s ideas and to feel free to say crazy ideas without fear of ridicule. Keep the flow going but don’t beat a dead horse — stop when the flow of ideas has ended. Lobby. As you are numbering each proposed idea, allow people to lobby or clarify their ideas. Make sure you combine similar ideas. Vote. Take the total number of ideas and divide by three — this is the number of votes each person gets. For example, if you have 30 ideas, each person gets 10 votes (30 ideas/3 = 10 votes). The next step is to read off each idea, count the number of votes each idea receives and write the total number of votes next to each idea. Select Top Ideas. You should (hopefully) see a coalescing of votes for the top two to five ideas. Focus your attention on these top ideas and forget about the rest. Here’s a recent example of a brainstorm we just had at FindTheBest . We are constantly coming up with dozens of new Comparison App ideas, but having only limited resources, we only focus on the top ideas. We brainstormed new App ideas and came up with the following (partial) list: E-Readers (5 votes) Fast Food Nutrition (6) Colleges (5) Yogurt Nutrition (1) Venture Capital Firms (5) Planets (1) Designers (0) Empires (1) Travel by Country (3) Future Jobs and Careers Forecast (7) Pulitzer Prize Winners (5) Cosmetics Brands (1) War Statistics (4) State Facts (1) US Presidents (2) Energy Drinks (3) Dating Websites (3) Vegas Hotels (3) Golf Courses (4) Pokémon (5) After voting, we narrowed down our 60 App ideas to the seven most popular ones (the ideas that received 5 votes and higher) and focused on developing those Apps. This efficient and collaborative process provides a platform for all ideas to be heard and for the top ideas to be carried out. After trying this process out, you’ll realize that you’ve just condensed a four hour meeting into 30 minutes and actually found the best solution to your problem. But aside from finding the best solution to your problem, you’ve built consensus between everyone within the company because each person was involved in creating the solution. I’ve used this system many times to help create business and product ideas and strategies resulting in tremendous success. So go out and try this method and let me know how it works or if you need help. Please post a comment with your results.

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Kevin O’Connor: Don’t Make the Solution Part of Your Problem

September 15, 2010

The problem I’ve always been intrigued with innovation and how it can be forced. As an entrepreneur, my job is to create new products and companies; I can’t just sit around waiting for the light to go off while playing Halo. As an executive, I have also been part of a lot of painful strategic planning processes. In one instance, we hired a consultant who took us through an eight month ordeal costing more than $1 million. In the end, we agreed on a strategy that we came up with on the first day. I’ve noticed this happen time and time again. From my experiences working with companies to solve various problems, I’ve noticed a few “truths” that almost always occur when groups try to solve problems: The answers are already in the room. If you assemble a group of smart people who know your industry, they have already assimilated the mass of information from customers, employees, market research and elsewhere. The answers are in the room and not on some manufactured spreadsheet. Most of the time spent trying to solve a problem is typically wasted discussing options that don’t really matter. There are 98 things you could , but shouldn’t, be doing, but in reality there are only two things you need to do as a business to be successful. People often waste time talking about all the things that don’t really matter. Personality trumps. Unfortunately, there isn’t much correlation between speaking skills and quality of ideas. Most people are afraid to share their ideas for fear of looking stupid. But then there are the less deserving people who through force of personality get their way. In order to actually implement the solution, you need consensus and these meetings rarely build lasting consensus. The solution As executives, our goal is to generate as many ideas as possible, identify the top ideas and make a decision while building consensus. But how can you most effectively do that? Just follow these steps: State the problem clearly. Write at the top of the white board the problem you are trying to solve. For example: “How can we improve productivity?”, “What are the biggest problems facing our customers?”, “Which Sports & Recreation topics are best for comparison?” Brainstorm. Ask people to state their ideas succinctly — usually two to three words. Do not allow any discussion or comments on the idea. You want people to play off other people’s ideas and to feel free to say crazy ideas without fear of ridicule. Keep the flow going but don’t beat a dead horse — stop when the flow of ideas has ended. Lobby. As you are numbering each proposed idea, allow people to lobby or clarify their ideas. Make sure you combine similar ideas. Vote. Take the total number of ideas and divide by three — this is the number of votes each person gets. For example, if you have 30 ideas, each person gets 10 votes (30 ideas/3 = 10 votes). The next step is to read off each idea, count the number of votes each idea receives and write the total number of votes next to each idea. Select Top Ideas. You should (hopefully) see a coalescing of votes for the top two to five ideas. Focus your attention on these top ideas and forget about the rest. Here’s a recent example of a brainstorm we just had at FindTheBest . We are constantly coming up with dozens of new Comparison App ideas, but having only limited resources, we only focus on the top ideas. We brainstormed new App ideas and came up with the following (partial) list: E-Readers (5 votes) Fast Food Nutrition (6) Colleges (5) Yogurt Nutrition (1) Venture Capital Firms (5) Planets (1) Designers (0) Empires (1) Travel by Country (3) Future Jobs and Careers Forecast (7) Pulitzer Prize Winners (5) Cosmetics Brands (1) War Statistics (4) State Facts (1) US Presidents (2) Energy Drinks (3) Dating Websites (3) Vegas Hotels (3) Golf Courses (4) Pokémon (5) After voting, we narrowed down our 60 App ideas to the seven most popular ones (the ideas that received 5 votes and higher) and focused on developing those Apps. This efficient and collaborative process provides a platform for all ideas to be heard and for the top ideas to be carried out. After trying this process out, you’ll realize that you’ve just condensed a four hour meeting into 30 minutes and actually found the best solution to your problem. But aside from finding the best solution to your problem, you’ve built consensus between everyone within the company because each person was involved in creating the solution. I’ve used this system many times to help create business and product ideas and strategies resulting in tremendous success. So go out and try this method and let me know how it works or if you need help. Please post a comment with your results.

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Real Misery Index Dropped During Summer Months, Hinting At Recovery

September 8, 2010

Though underemployment still looms over the economy, other encouraging signs of a recovery helped push down Huffington Post’s Real Misery Index to 24 in July-August from an all-time high of 33 in February-March 2010. The drop in the index was largely due to lower inflation rates in three key categories — food and beverage, gasoline and medical care — and to a precipitous decrease in credit card delinquencies compared to a year ago. After increasing dramatically for the last year, card delinquencies fell, an indication of Americans’ wariness about carrying debt, according to data provided by Fitch Ratings. “People are being more cautious,” Dwaine Kimmet, treasurer and vice president of financial services at Home Depot, told Bloomberg News . “They don’t want to be relying on credit cards.” Though the reduced reliance on credit cards is helping Americans save money, it also can slow down the recovery since reduced consumer spending hurts businesses and prevents employers from hiring. Indeed, Minneapolis Federal Reserve President Narayana Kocherlakota sees a modest recovery in the works but warns that the lack of vitality in the labor market is “disturbing.” In remarks prepared for business leaders in Missoula, Montana, Kocherlakota said, “I believe a modest recovery is under way in the U.S. and is likely to continue.” To formulate our index, which provides a better snapshot of the economy than the often-criticized misery index (inflation added to unemployment), we used a more accurate unemployment statistic (the U6 formulation), with the inflation rate for three essentials (food and beverages, gas, and medical costs), and year-over-year percent changes in credit card delinquencies, housing prices, food stamp participation, and home equity loan deficiencies. We gave equal weight to the broad unemployment numbers and the combination of the other seven metrics (with housing prices having an inverse relationship to the index). Thus, we added the broad unemployment U6 statistic (note: the current U6 was first introduced in 1994 so we used a similar number — the U7 — for the years 1985-1993) to the average of the seven other statistics.

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Russian house prices fall, despite economic recovery

August 6, 2010

Russian house prices dropped 7.56% during the year to Q1 2010. When adjusted for inflation, house prices fell 13.8% over the same period, according to the Federal State Statistics Service (Rosstat).

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China’s `Express Train’ Economy to Sustain Pace of Growth, Aberdeen Says

June 16, 2010

By Shiyin Chen June 17 (Bloomberg) — China’s economy is like a “runaway express train” and may sustain its pace of growth amid the nation’s tightening measures and Europe’s sovereign-debt crisis, Aberdeen Asset Management Plc said. The Conference Board said June 15 a leading economic indicator for the country gained the most in 14 months, following reports last week that showed a surge in exports, industrial production and retail sales that signaled strength in the world’s fastest-growing major economy. China’s domestic stock markets reopen today after a three-day holiday. The MSCI World Index rose 2.8 percent this week, trimming its losses this year to 4.9 percent, as the Chinese leading indicator and gauges tracking New York manufacturing and U.S. consumer confidence helped overshadow a downgrade in Greece’s debt rating by Moody’s Investors Service to junk status. The Shanghai Composite Index has fallen 22 percent this year, Asia’s worst performer. “The Chinese economy is a little bit like a runaway express train,” Peter Elston , a Singapore-based strategist at Aberdeen Asset, said in an interview yesterday. “Even if the West does go through some sort of relapse, I do see China being able to maintain some sort of momentum simply because it has the capital domestically that’s needed to supply its economy.” While the “weakness” in Europe and a possible slowdown in the U.S. may affect China’s exports, the nation’s economy is now less dependent on overseas shipments, according to Elston. The European crisis also suggests that there’s less reason for China’s government to continue tightening measures even amid “signs of overheating” in the nation’s economy, he said. Best-Performing Economy The Conference Board’s measure for the Chinese economy gained 1.7 percent to 147.1 in April, compared with a revised 1.2 percent increase in March. China is among the world’s best- performing economies, according to Bill Adams, resident economist for the New York-based research organization. Foreign direct investment in the country rose 27.5 percent to $8.13 billion in May, advancing for a 10th month in May, the Ministry of Commerce said on June 12. That’s more than the 23.2 percent median forecast of four economists surveyed by Bloomberg News. The economy is unlikely to suffer a “double dip” in its growth rate as the government maintains its moderately loose monetary policies, Ma Jiantang , head of the National Bureau of Statistics, said in an event in London yesterday. “I personally think there’s very little chance China’s economy will have a double dip,” Ma said. “Double dip means the economy will go back to the lowest growth rate last year of 6.2 percent.” Growing Credit Risks China’s banking regulator said this week it sees growing credit risks in the nation’s real-estate industry and warned of increasing pressure from non-performing loans. Risks associated with home mortgages are rising and a “chain effect” may reappear in real-estate development loans, the China Banking Regulatory Commission said in its annual report on June 15. The “bubble” in China’s property market is going to burst very quickly, with prices set to fall as much as 20 percent in the next 12 to 18 months, Nomura Holdings Inc. economist Sun Mingchun said in a Bloomberg Television interview yesterday. Real-estate prices jumped 12.4 percent across 70 cities in May, adding to the 12.8 percent record surge in April. China overtook Hong Kong as the world’s hottest housing market in the first quarter, with prices rising at more than double the rate of anywhere else, property adviser Knight Frank LLP said . Values soared 68 percent in China’s main cities from a year earlier, according to a global index compiled by the London-based broker. Gains for Hong Kong, India, Singapore, Australia, Malaysia and Indonesia helped lift average prices in the Asia-Pacific region by almost 18 percent. Falling Valuations The Shanghai Composite is valued at 15 times estimated profits, down from 24 times at the start of the year, according to data tracked by Bloomberg. A gauge of property shares on the Shanghai Composite slumped the most among five industry groups this year, falling 28 percent as policy makers imposed curbs ranging from a ban on loans for third-home purchases to higher mortgages and downpayments for second homes. While the drop in stocks means valuations in China have become “reasonable,” Elston said Aberdeen, which oversees about $259 billion globally, doesn’t hold any property or bank stocks in China. Scotland’s biggest fund company instead owns shares of PetroChina Co. and China Mobile Ltd. , as well as Hong Kong-based companies that do business in China, according to Elston. “We do think over the longer term, China will be an interesting place to invest,” he said. To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

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U.K. Inflation Slows for First Time in Three Months as Food, Travel Ease

June 15, 2010

By Jennifer Ryan June 15 (Bloomberg) — U.K. inflation slowed in May for the first time in three months as lower costs of items from food to transport eased price pressures in the economy. Consumer prices rose 3.4 percent from a year earlier, compared with 3.7 percent in April, the Office for National Statistics said today in London. Economists predicted 3.5 percent, according to the median of 30 forecasts in a Bloomberg News survey. Inflation has now exceeded the government’s 3 percent upper limit for three months. The Bank of England last week kept up its emergency stimulus for the economy to counter the drag on prices from the aftermath of the recession. Tesco Plc , the U.K.’s largest supermarket chain, said today that domestic revenue barely grew in the first quarter as it encountered “very low food inflation” and shoppers balked at the prospect of higher taxes. “Inflation has probably peaked and will come down over the course of the year,” Philip Shaw , chief economist at Investec Securities in London, said in a telephone interview before the report. “Growth remains relatively subdued, and there’s a degree of spare capacity which should help to mitigate some upward cost pressures.” The pound fell 0.2 percent against the dollar after the report, and traded 0.3 percent lower on the day at $1.4696 as of 9:35 a.m. in London. The benchmark two-year gilt fell 3 basis points today at 0.85 percent. On the month, consumer prices climbed 0.2 percent, compared with the median prediction for an 0.4 percent increase according to 24 economists’ forecasts in a Bloomberg News survey. Transport, Alcohol Lower prices of food, transport, alcohol, tobacco and recreation offset higher fuel costs in May. Gasoline prices rose to 120.5 pence ($1.78) per liter in the month, the highest since records began in 1996, the statistics office said. “Higher fuel costs have meant that customers have had to shift some of their spending to petrol at the expense of their normal shopping,” Tesco said in a statement today. “This, combined with very low food inflation — resulting from unusually high levels in the same period last year –constrained our ex-petrol like-for-like-sales growth.” Core inflation, which excludes the cost of food, tobacco, alcohol and energy prices, slowed to 2.9 percent from 3.1 percent the previous month, the statistics office said. The inflation rate has now held above the bank’s 2 percent target for a sixth month. Consumers’ expectations for price increases in the coming year rose to the highest since 2008 in May, a quarterly Bank of England survey showed. Britons predicted inflation of 3.3 percent in the next 12 months, up from 2.5 percent in February. Inflation ‘Resilience’ Policy maker Andrew Sentance said June 13 that inflation has shown “resilience” and “upward pressure” on price expectations will present central bank officials with “interesting debates” in the second half of the year as they consider how long to maintain emergency stimulus. Still, “the increase in inflation largely reflects temporary effects and is likely to moderate as those effects wane,” Chief Economist Spencer Dale said yesterday in the Bank of England’s quarterly bulletin. “This spare capacity should pull down on inflation.” The central bank last week kept its bond-purchase plan at 200 billion pounds ($295 billion) and the benchmark interest rate at a record low of 0.5 percent. Retail price inflation, a measure of living costs used in wage negotiations, slowed to 5.1 percent in May from 5.3 percent the previous month, the statistics office said. Excluding mortgage-interest payments it was also 5.1 percent, down from 5.4 percent. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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Rizwan A. Rahmani: The Unrealized Economic Potential of the Muslim World

June 11, 2010

The meteoric rise of China as an economic powerhouse may have its roots in a society that has a rich cultural history of innovation and exchange. But when China cut itself off from the world, it lay dormant for a long time, mired in feudalism and illiteracy. The Cultural Revolution brought a constrained societal structure of state-planned families, rigid education, and compulsory participation of both sexes in the workforce. This may have laid the early blueprint for its current industrial dominance, which accelerated to a frenzied pace once China loosened its grip on economic policies and encouraged trade. The biggest key to its success may lie in its workforce, which is literate (about 90 percent or better for women over fifteen years and older), abundant, skilled, cheap, and nearly half female. Women make about forty five percent of the Chinese workforces, and they are represented at many levels. They garner thirty eight percent of leadership positions, and increasingly they are filling seats in higher offices. So what does Chinese economic demography have to with the Muslim world? To put it bluntly, Muslim nations offer dismal demographic data regarding women in the workforce, and it is this data that will decide whether these countries are going to be economically or technologically significant in the future. As it stands now, none of these modern economically nascent Muslim nations are consequential in the areas I mentioned, some of which can be attributed to cultural and religious idiosyncrasies. Malaysia, a country with a high literacy rate for women, is a progressive yardstick by which other Muslim countries should be measured: it has 36 percent female representation in its overall workforce and in over 50 percent of technology jobs — a figure even higher than some industrialized western countries. Women account for 38 percent of all tertiary enrollments in Malaysia. Although even with these exemplary statistics, it is by no means an economic powerhouse, it is still better off than most other Muslim countries. Malaysia has some high-tech fabrication plants and a middle scale multi-sector manufacturing base, both of which women feature in significantly. Setting aside the issue of human rights and appealing solely to economic motivation for the sake of argument, the other countries should take note of this fact and start educating more women to join their workforce. Lebanon — which is quite modernized despite being battered by nearly four decades of civil war, foreign encroachments, and losses of livelihood and infrastructure — manages a 27 percent female presence in it workforce, and 45 percent in academic enrollment. The literacy rate among women is high in Jordan, Libya, Tunisia, Palestine, Syria, and Algeria at better than 50 percent for women over fifteen years of age, but they lack industries and a manufacturing base. There are some former soviet block Muslim countries that should, theoretically, have high literacy rates (free education for all being a promised fruit of communism) and should consequently have a good percentage of women in the workforce, but these countries are still quite arcane industrially and accurate data is not forthcoming. While they have industries, their manufacturing plants are in state of disrepair. Turkey, which is also very modernized and progressive, manages just a 22 percent representation of women in its labor force. This was a bit of a surprise for me because I expected it to be higher — forgetting its sheer size and predominance of rural areas over metropolises! Curiously, Iran fares better than Turkey at 25 percent women in the workforce. But there are other statistics about Iran that are quite revealing. For example, Iran has improved its percentage of women in the workforce since the fall of its Shah. And of all the Muslim countries, Iran has the highest rate of enrollment of women in its academic institutions, even surpassing men, at 60 percent: a fact that may astonish the American audience whose news diet is entirely based on anemic but ubiquitous cable news. So why do these Muslim nations have such poor representation of women in the workforce? Most of the other Muslim nations, other than the ones I mentioned, have far worse literacy rates. Pakistan, which touts itself as the only Islamic nuclear power, has one of the worst literacy rates for women, faring worse than the Muslim women of India. The treatment of women in these countries is deplorable, especially in the rural areas where local land owners reign supreme with little or no legal reach of the central government. Countries like Afghanistan, Pakistan, India, and sub-Saharan Africa are the worst offenders. Saudi Arabia is notorious for treating its women as second class citizens by wrenching away many rights; the women are mostly literate, but hardly factor in the workforce. Iran, despite its veiling laws for women and a code conduct between the sexes, leaves the citizenry alone when it comes to education. The Arabian Gulf countries treat their women only marginally better: they do not have compulsory veiling laws and there is a good literacy rate among women–however, women are not represented well in the workforce or in leadership positions. Yet even this good literacy rate statistic is spurious: a very high percentage (nearly 85 percent) of their population is foreign, and most of them immigrate there after being educated in their native countries. This ignoble treatment of women in Muslim countries is quite inscrutable when you consider the fact that the prophet Mohammad honed his interpersonal and negotiating skills working for a business woman from a well known family in Mecca. She hired him to manage her trade caravans to Syria and Yemen: he later became known for his deft and ethical business style, stemming from these trade dealings. He married his employer (who was older than him) at her own request, and she was his first wife. The pre-Islamic women of Arabia were pretty much treated like commodities. They had very poor civil rights and no legal representation. With the advent of Islam, they did acquire some important rights. They were given a form of binding financial nuptial agreement (haq mehr) that is bestowed upon the bride by the groom, and the bride has the right to collect this amount in the event of a divorce. They were given inheritance rights, the right to consent to a marriage, and divorce rights (Catholicism still doesn’t allow divorce legally: a difficult-to-win annulment is not exactly a divorce). Any asset that was brought into the marriage by the bride became the sole domain of the bride alone. Women could keep their lineage name (albeit coming from their father’s side)…and more. The bourgeoisie of the Indian subcontinent and of some of the other poor Muslim countries do educate and treat women better than other societal strata, and they do have better literacy rates than the national average. But these educated women tend to ‘marry up’, and tend not to practice their métier once married. They are either expected to or on their own volition, often fall into the traditional housewife role even after the children are reared or well looked after. In the subcontinent where I grew up (and in the Middle East), these educated women became the consummate socialites after marriage, entertaining friends, family, and extended family incessantly, and spending much of their time honing the art of gossiping to quell their ennui. Seldom did the socialites I saw around me volunteer their time towards community organizations or become part of an association or organization to further the economic or social cause of less fortunate Muslim women. Tragically some of these women happen to be, by training, doctors and teachers. There is an old African saying, “If you educate a man you educate an individual, but if you educate a woman you educate the community”–something that, sadly, is true unless these women apply themselves towards the noble professions they chose in the first place. If the Muslim world wants to succeed and become part of the modern economic fabric with a twenty-first century economy, it must not only educate its women far better but also incorporate them into their workforce without any social stigma. Perhaps an eighteenth century industrial economy with the help of colonization can promulgate a country into prosperity, innovation, and a high standard of living, but this is 2010. In the last fifty years of worldwide economic changes and growth, there hasn’t been a single country which had had rousing success without the help of both halves of the populous. With these lugubrious statistics the Islamic world faces, it’s quite unlikely we’ll see any dominant economic phoenix rising from the current pile of socio-economic ashes, which has been lying dormant for centuries now.

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China Fails to Draw Enough Bids at Bill Sales as Banks Seek Higher Yields

June 10, 2010

By Bloomberg News June 11 (Bloomberg) — China failed to draw enough bids at a sale of treasury bills for a third time this year as banks sought higher returns from longer-dated debt to protect against inflation. The finance ministry issued 11.45 billion yuan ($1.7 billion) of the 15 billion yuan of 91-day securities on offer at an average yield of 1.9062 percent, according to traders at BOC International Holdings and Agricultural Bank of China, who asked not to be identified. It sold 17.75 billion yuan of the 20 billion yuan of 273-day securities at an average yield of 2.0511 percent, the traders said. “The yields on shorter-dated debt are too low to attract investors as inflation quickens,” said Liu Junyu , a Shenzhen- based fixed-income analyst at China Merchants Bank Co., the country’s fifth-largest lender by market value. “Also, there is a shortage of cash in the financial system.” Chinese banks are seeking higher returns on debt investments as consumer prices topped the government’s targeted annual 3 percent ceiling in May. The People’s Bank of China this week raised interest rates on one-year and three-month bills to attract orders. Consumer prices rose 3.1 percent from a year earlier, the statistics bureau said today, more than the median 3 percent estimate in a Bloomberg News survey of 32 economists and April’s 2.8 percent gain. Money-Market Rates The yield on the one-year onshore interest-rate swap, a fixed cost paid to receive a floating one that indicates the longer-term outlook for borrowing costs, climbed three basis points today to 2.3 percent. The seven-day repurchase rate , which measures interbank funding availability, rose 27 basis points to 2.73 percent, the highest in more than a week, according to a daily fixing rate from the Interbank Funding Center. It has climbed 22 basis points this month. Lending in May exceeded the median forecast of 600 billion yuan in a Bloomberg News survey of 24 economists, according to central bank data today. In April, the amount was 774 billion yuan. M2 , the broadest measure of money supply, gained 21 percent from a year earlier, after a 21.5 percent gain in April. “Inflation concerns are certainly growing, there are a lot of economists concerned about that, and I think that would be enough to move money market rates,” said Ben Simpfendorfer , a Hong Kong-based economist at Royal Bank of Scotland Plc. “I think it’s the base effect at play here and inflation concerns are exaggerated” — Judy Chen . Editors: Allen Wan , Sandy Hendry To contact Bloomberg News staff for this story: Judy Chen in Shanghai at +86-21-6104-7047 or xchen45@bloomberg.net .

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China’s Stocks Gain as Economy Withstands European Crisis Retailers Rally

June 10, 2010

By Bloomberg News June 11 (Bloomberg) — China’s stocks rose, heading for gains this week, as higher-than-estimated loan growth and retail sales added to evidence the world’s third-largest economy is withstanding Europe’s debt crisis. Gree Electric Appliances Inc. and GD Midea Holding Co. led merchants higher as retail sales surged 18.7 percent. Jiangxi Copper Co. and Aluminum Corp. of China Ltd. gained more than 1 percent after metals prices rose a third day. Industrial & Commercial Bank of China Ltd. paced an advance for lenders after loan growth beat economists estimates and Goldman Sachs Group Inc. said banks offer “value” relative to the stock market. “The likelihood of a overheating in China is decreasing while the Europe crisis appears to be contained for now,” Li Jun, strategist at Central China Securities Holdings Co., said in Shanghai. “That’s good for the market though we may still go through a period of volatility. Recent wage increases are going to drive consumption.” The Shanghai Composite Index , which tracks the bigger of China’s stock exchanges, rose 1.1 percent to 2,589.62 at 10:11 a.m., adding to a 1.4 percent gain for the week and narrowing the year’s loss to 21 percent. The CSI 300 Index advanced 1.1 percent to 2,778.89. Stock exchanges in China will be closed June 14 to 16 for public holidays. Consumer discretionary stocks gained 1.1 percent, the third-biggest advance among the CSI 300 Index’s 10 industry groups. Retail sales rose 18.7 percent, compared with an 18.5 percent gain in the previous month. The economist estimate was also for 18.5 percent growth. Retailers Rally Gree Electric climbed 2.8 percent to 21.41. GD Midea added 3 percent to 12.85 yuan. Shanghai Bailian Group Co., an operator of department stores, added 0.6 percent to 14.70 yuan. Official data released yesterday in Beijing showed China’s exports jumped the most in six years and property prices rose at a near-record pace, signs that China is withstanding the sovereign-debt crisis in Europe. China is paying close attention to the European debt crisis and its impact on the country, Sheng Laiyun, spokesman for the National Bureau of Statistics, told a briefing in Beijing today. The drop in global commodity prices in the wake of the crisis will help ease inflation in China, he said. Sheng also said the bureau would investigate the leak of the economic data. A government official unveiled the figures at an investor conference June 9, Reuters reported, citing three unidentified people who attended the presentation. Inflation Consumer prices rose 3.1 percent from a year earlier, while producer prices gained 7.1 percent, today’s data showed. Banks extended 639.4 billion yuan of new local-currency loans last month, the central bank said on its website today. Industrial output gained 16.5 percent. Economists anticipated a 3 percent gain in consumer prices, according to the median of 32 estimates. Forecasts also indicated 600 billion yuan of new loans. ICBC gained 0.7 percent to 4.17 yuan. Bank of China Ltd., the third-largest lender, advanced 0.6 percent to 3.57 yuan. Banks offer “value” relative to the overall A-share market and investors should add ICBC, Industrial Bank Co. and China Construction Bank Corp. on “dips,” Goldman Sachs said. Accelerating price gains will pressure the government to raise the value of the yuan, which would hurt future exports, Monika Yang , who helps oversee $2 billion at Hamon Asset Management Ltd. in Hong Kong, said June 9. U.S. Treasury Secretary Timothy F. Geithner said in testimony to the Senate Finance Committee yesterday that China’s exchange-rate policy prevents a balanced global recovery and called for a stronger yuan that would help officials fend off inflation in the world’s third-largest economy. Lewis Turning Point China, once an abundant provider of low-cost workers, is heading for the so-called Lewis turning point, when surplus labor evaporates, pushing up wages, consumption and inflation, said Huang Yiping , former chief Asia economist at Citigroup Inc. The result may prompt manufacturers to switch to cheaper countries such as India and Vietnam. Hon Hai’s Foxconn Technology unit said it will raise salaries at Shenzhen factories to 2,000 yuan a month in October from 900 yuan in May, after a spate of worker suicides. Local governments have announced increases in minimum wages this year ranging from 5 percent in Hunan province to 27 percent in Ningxia, according to Morgan Stanley. “We have a longer-term trend of disappearing surplus labor because of the demographic changes,” Peng Wensheng , head of China research at Barclays Capital in Hong Kong, said in a Bloomberg Television interview today. ‘Robust’ Recovery U.S. stocks rallied yesterday, with the Standard & Poor’s 500 Index gaining the most in two weeks, as reports from China, Japan and Australia boosted optimism about the global economy. China is benefiting from a “robust” global economy, Adrian Mowat , JPMorgan Chase & Co.’s chief Asian and emerging- market strategist, said in an interview with Bloomberg Television yesterday. A measure of six metals traded on the London Metal Exchange , including copper, aluminum and zinc, rose 0.9 percent yesterday, a third-straight gain. Jiangxi Copper gained 1.2 percent to 28.32 yuan. Aluminum Corp. of China, the nation’s largest producer by market value, advanced 1.1 percent to 10.29 yuan. — Chua Kong Ho in Shanghai. Editors: Allen Wan , Richard Frost To contact Bloomberg News staff for this story: Chua Kong Ho in Shanghai at +86-21-6104-7011 or kchua6@bloomberg.net

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China Reaching a Lewis Turning Point as Inflation Overtakes Low-Cost Labor

June 10, 2010

By Bloomberg News June 11 (Bloomberg) — Shenzhen Jufeng Handicraft Co. was so eager to ensure employees returned to work after February’s Lunar New Year holiday that it threw them a party, handed out gifts and bused workers to homes 1,000 kilometers away. “We needed to do more to make them stay,” said Sunny Jia, sales manager of the Shenzhen-based company, which makes linen, leather bags and cabinets for such customers as Oscar Collections Ltd. in the U.K. “All our customers wanted orders shipped within a month.” China, once an abundant provider of low-cost workers, is heading for the so-called Lewis turning point, when surplus labor evaporates, pushing up wages, consumption and inflation , said Huang Yiping , former chief Asia economist at Citigroup Inc. The result may prompt manufacturers to switch to cheaper countries such as India and Vietnam. “If the first decade of the 21st century saw China rapidly rising as a global manufacturing center, the post-Lewis turning point could see the opposite,” said Huang , an economics professor at Peking University in Beijing. “Global manufacturing activities concentrated in China today may find their way elsewhere.” Shenzhen Jufeng’s efforts to retain workers, strikes at Honda Motor Co. factories and a 100 percent wage rise at Hon Hai Precision Industry Co.’s Shenzhen plants are signs of the watershed, named after the late Nobel Prize-winning economist W. Arthur Lewis . The point marks where manufacturing competitiveness and the pace of growth begin to turn down as labor costs rise. Restrained Growth China’s potential annual economic growth rate may slide to 9 percent by the middle of this year, from 11 percent, as the impact of a shrinking young labor force bites, said Lu Ting , an economist with Bank of America-Merrill Lynch in Hong Kong. As growth soaks up cheap labor and wages rise, China is losing the competitive advantages it had previously, said Robert L. Tignor, a professor of modern and contemporary history at Princeton University in New Jersey and author of the book “W. Arthur Lewis and the Birth of Development Economics.” “Arthur would have been really pleased to see that his theories have proven to be pretty valid when it comes to countries like China,” he said in a telephone interview. Countries with lower wage costs such as India and Vietnam stand to benefit in attracting manufacturing. Minimum wages in Shanghai are $141 a month, compared with $77 in Mumbai and $74 in Hanoi, according to Morgan Stanley calculations based on Japan External Trade Organization data. Vietnam Competition “In lower-end export industries there’s already a case for China having lost competitiveness against places like Vietnam,” said Jim Walker , Asianomics Ltd.’s chief economist in Hong Kong. Regional labor shortages begin when the ratio of job openings to job seekers rises above 0.96, according to Ha Jiming , Hong Kong-based chief economist at China International Capital Corp. In eastern China in May the ratio reached 1.01, while in the Pearl River Delta region bordering Hong Kong it hit 1.26 and in Fujian province 1.14, according to Beijing-based CICC. The surplus of rural workers suitable for labor-intensive work has fallen to about 25 million from about 120 million in 2007, squeezing job markets in eastern provinces, said Ha, a former International Monetary Fund economist. “I don’t know exactly when there won’t be enough workers,” said Wang Gang Qiang, president of Ningbo-based Ningbo Ocean Textiles (Group) Co. Ltd. “I do know shortages will get worse.” Far to Go China’s wages are still far below those in developed competitors such as Japan, and income gains will boost consumer spending, helping put a floor under the nation’s growth, said Qu Hongbin , chief China economist at HSBC Holdings Plc in Hong Kong. Companies serving “the bottom of the food chain” are those poised to benefit, said Russell Hoss , who manages the EPH China Fund from Newport Beach, California. Menswear retailer China Lilang Ltd. and restaurant chain Ajisen (China) Holdings Ltd., both based in Hong Kong, are stocks the EPH China Fund owns that Hoss says are likely to benefit. “The future trajectory is that China is not only an export country,” said Johnny Yu, foreign trade manager at China Crown Textile Co. in Shanghai. “With rising wages consumption will rise.” Local governments have announced increases in minimum wages this year ranging from 5 percent in Hunan province to 27 percent in Ningxia, according to Morgan Stanley. Worker Strife Hon Hai’s Foxconn Technology unit said it will raise salaries at Shenzhen factories to 2,000 yuan a month in October from 900 yuan in May, after a spate of worker suicides. The increase prompted Macquarie Group Ltd. and Daiwa Securities Group Inc. to cut their investment ratings on Hon Hai. Honda, based in Tokyo, raised pay by 24 percent at a parts- making factory in Foshan, Guangdong province, last month after a strike crippled its production in China. Two more facilities were hit by strikes this week. Wages in privately owned companies will rise as much as 17 percent annually over the next three years, said Jun Ma , an economist at Deutsche Bank AG in Hong Kong. A construction boom fueled by 4 trillion yuan ($586 billion) of stimulus and record bank lending has boosted job opportunities in western and central China. Manufacturers including Ningbo-based Dejin Textile Co., Shanghai-based China Crown Textile and Shenzhen Jufeng say that’s made it harder for them to attract migrants to coastal factories. “Workers don’t want to leave their children and wives” now that more jobs are available near home, said Shenzhen Jufeng’s Jia. “The inland regions are booming because the government is spending so much.” Chongqing’s Lure Ningbo Ocean Textiles’s Wang cites the city of Chongqing, 2,400 kilometers (1,492 miles) up the Yangtze river from Shanghai, as an example of the difficulties he faces recruiting. Chongqing’s economy expanded 14.9 percent last year. “Chongqing workers used to go to the east coast to work,” he said. “Now their home is a booming city, and lots of companies have moved there. Why do people there need to leave?” China’s export recovery is also tightening labor markets. Shipments abroad surged 48.5 percent from a year earlier in May, the most in more than six years after excluding distortions caused by the Lunar New Year holiday. The number of people hired last year in eastern China’s provinces, the backbone of the country’s three-decade economic growth, fell by 8.8 million because job seekers had been lured to inland areas by rising wages, according to the National Bureau of Statistics in Beijing. The pay gap between the eastern region and inland China is now 5 percent, down from 15 percent five years ago, according to Ha at CICC. “Wages in the eastern areas aren’t attractive enough,” statistics bureau spokesman Sheng Laiyun said. “Younger peasant workers are demanding better work conditions and welfare.” — Kevin Hamlin . With assistance from Rich Miller in Washington. Editors: Adam Majendie , Anne Swardson To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

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Stocks, Commodities Jump on Economic Growth Outlook Euro Gains

June 10, 2010

By Nikolaj Gammeltoft and Claudia Carpenter June 10 (Bloomberg) — Stocks rallied, sending benchmark indexes to their biggest gains in two weeks, after economic reports from China, Japan and Australia showed accelerating growth. The euro strengthened a third day, gold fell and Treasuries extended losses after a 30-year bond sale. The Standard & Poor’s 500 Index increased 3 percent to 1,086.84 at 4 p.m. in New York and the MSCI World Index advanced 2.4 percent, the biggest gains since May 27. The euro surged 1.1 percent to $1.2114, while the New Zealand dollar strengthened versus all 16 of its most-traded peers and Australia’s dollar rose against all but the so-called kiwi. Oil climbed to a four- week high. Ten-year Treasury yields jumped 14 basis points to 3.32 percent, the biggest increase since May 27. The largest rise in China exports in six years bolstered confidence the fastest-growing major economy will continue to fuel the global recovery. Japan expanded at an annualized 5 percent rate in the first quarter. Demand for riskier assets also was stoked as the European Central Bank raised its euro- region growth forecast and planned to extend offerings of cash and keep buying government bonds to fight the debt crisis. “China’s export numbers are looking better than expected and the European situation is beginning to stabilize so investors are less worried,” said Michael Holland , who oversees more than $4 billion as chairman of Holland & Co. in New York. “Plus the selloff yesterday didn’t make a lot of economic sense so that set us up for a pop today.” Yesterday’s Losses Erased The S&P 500 fell 0.6 percent yesterday as a late-day slide wiped out an early 1.5 percent rally. Today’s gains came even as more Americans than anticipated filed applications for unemployment benefits last week, a sign firings remain elevated. Initial jobless claims dropped by 3,000 to 456,000, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. Caterpillar Inc., Chevron Corp. and American Express Co. climbed at least 4.8 percent to lead the Dow Jones Industrial Average up 273.28 points, or 2.8 percent, to 10,172.53 after the gauge closed below 10,000 for four straight days. Goldman Sachs Group Inc. fell 2.2 percent to $133.77, the lowest in more than a year, on reports that the Securities and Exchange Commission is probing the firm’s $2 billion Hudson Mezzanine collateralized debt obligation. The stock posted the biggest of only four declines in the S&P 500. BP Defended at JPMorgan BP Plc fell 6.7 percent 365.5 pence in London, a seven-year low, while its U.S. shares rallied 12 percent as JPMorgan Chase & Co. said the recent rout in the stock has overshot the potential damage from the Gulf of Mexico oil spill. The stock has tumbled 46 percent in New York and 44 percent in London since the April 20 explosion at its Deepwater Horizon rig in the Gulf of Mexico triggered the worst oil spill in U.S. history. BP bonds and credit-default swaps are trading as if the energy company has lost its investment-grade rating as costs mount from the spill. Almost 10 shares rose for every one that fell on the Stoxx Europe 600 Index, which rallied 1.6 percent. Automakers and construction companies were the biggest gainers among 19 industry groups on the European benchmark index. Daimler AG rallied 3.1 percent in Frankfurt after forecasting Mercedes-Benz sales will advance at twice the rate of the overall market on demand from China. Lafarge SA, the world’s biggest cement maker, gained 5.1 percent in Paris after Citigroup Inc. recommended buying the shares. Asian Shares Rally Asian stocks rose the most in a week, with the MSCI Asia Pacific Index jumping 1.1 percent. Commonwealth Bank of Australia gained 1.3 percent in Sydney. Dentsu Inc., Japan’s biggest advertising agency, rose 2.6 percent in Tokyo. Developing-nation shares climbed for a third day, with the MSCI Emerging Markets Index advancing 1.6 percent as stocks rallied from Brazil to Taiwan. Chinese shipments abroad climbed 48.5 percent in May from a year earlier, more than the 32 percent median forecast in a Bloomberg survey, and separate figures showed a jump in property prices. Australian employers added workers in May for a third straight month, the statistics bureau said in Sydney today. The number of people employed gained 26,900 from April, compared with the median estimate of 23 economists surveyed by Bloomberg News of a 20,000 increase. The euro’s gain against the dollar brought it to an almost one-week high and the shared currency strengthened 1.2 percent to 110.68 yen. The ECB forecast the currency region’s economy will expand around 1 percent in 2010 compared with a previous forecast of around 0.8 percent. It will grow about 1.2 percent in 2011, lower than an earlier projection of around 1.5 percent because of weaker domestic demand. China on Euro The 16-nation euro will survive Europe’s debt crisis, the head of China’s national pension fund said, according to a report by Reuters. Dai Xianglong , chairman of the National Council for Social Security Fund, also said China faces the risk of losses on its currency reserves because of growing debt in the U.S., according to the report. The ECB said it will continue buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. The euro extended its advance as Germany’s highest constitutional court rejected an attempt by a lawmaker to preliminarily block the nation from granting guarantees as part of its share in the euro-area rescue fund. “The ECB is addressing liquidity issues, there’s news that the German court has rejected efforts to block Germany from participating in the guarantees of the stabilization mechanism,” said Marc Chandler , global head of currency strategy at Brown Brothers Harriman & Co. in New York. “There are some rumors that China may move on its currency and that may also be helping the euro trade higher.” Dollar Weakens The dollar weakened against 14 of its 16 most-traded peers and the Dollar Index, which tracks the currency against six major trading partners, lost 1 percent to 87.047. Oil rallied 1.5 percent to a four-week high of $75.48 a barrel in New York. Copper for delivery in July rose 0.4 percent to $2.8625 a pound in New York. The S&P GSCI Index of commodities rose 1.3 percent, a fourth-straight gain, to a four- week high of 495.111. Gold for August delivery dropped 0.6 percent to $1,222.20 an ounce in New York as the rally in stocks and the euro reduced demand for the precious metal as a safe haven. Treasuries extended losses after the U.S. sold $13 billion of 30-year bonds. Yields on U.S. debt increased before the auction, helping to boost demand. The 30-year bond declined more than 1 point after the sale on eased concern Europe’s sovereign- debt crisis would slow the worldwide recovery. Spanish bonds rose as the government auctioned three-year notes, with demand higher than at an auction of similar-maturity securities in April. The yield on the 10-year bond fell 10 basis points to 4.47 percent, with the extra yield investors demand to hold the securities instead of benchmark German bunds narrowing 14 basis points to 186. The yield on the 10-year bund was 4 basis points higher at 2.6 percent. To contact the reporters for this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Claudia Carpenter in London at ccarpenter2@bloomberg.net

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Stocks, Commodities Rally on Growth Outlook Euro Gains

June 10, 2010

By Nikolaj Gammeltoft and Claudia Carpenter June 10 (Bloomberg) — Stocks and commodities rallied after economic reports from China, Japan and Australia showed accelerating growth, while the euro strengthened for a third day and gold fell. BP Plc shares touched a 13-year low in London. The Standard & Poor’s 500 Index increased 2.3 percent to 1,079.77 at 11:32 a.m. in New York, while the MSCI Asia Pacific Index and the Stoxx Europe 600 Index rose more than 1 percent. The euro advanced 1 percent to $1.21, while the New Zealand dollar strengthened versus all 16 of its most-traded peers and Australia’s dollar rose against all but the so-called kiwi. Oil and copper rallied more than 1 percent. Ten-year Treasury yields increased 8 basis points to 3.26 percent. The biggest rise in Chinese exports in six years bolstered confidence that the world’s fastest-growing major economy will continue to fuel global growth. Japan’s economy extended at an annualized 5 percent rate in the first quarter. Demand for riskier assets was also stoked as the European Central Bank planned to extend offerings of unlimited cash and keep buying government bonds to fight the sovereign debt crisis. “China’s export numbers are looking better than expected and the European situation is beginning to stabilize so investors are less worried,” said Michael Holland , who oversees more than $4 billion as chairman of Holland & Co. in New York. “Plus the sell-off yesterday didn’t make a lot of economic sense so that set us up for a pop today.” Yesterday’s Losses Erased The S&P 500 fell 0.6 percent yesterday as a late-day slide wiped out an early 1.5 percent rally. Today’s gains came even as more Americans than anticipated filed applications for unemployment benefits last week, a sign firings remain elevated even as the economy is expanding. Initial jobless claims dropped by 3,000 to 456,000 in the week ended June 5, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. Caterpillar Inc., Alcoa Inc. and American Express Co. climbed at least 3.7 percent to lead gains in all 30 stocks in the Dow Jones Industrial Average as the gauge rebounded above 10,000 after closing below for four straight days. BP Plc fell 5.4 percent 370.6 pence in London, paring losses of as much as 12 percent that dragged it to a 13-year low. The stock has tumbled almost 40 percent since the April 20 explosion at its Deepwater Horizon rig in the Gulf of Mexico, triggering the worst oil spill in U.S. history. Credit-default swaps insuring BP’s debt for five years surged 208 basis points to an all-time high 594, according to CMA DataVision. European Markets Eight shares rose for every one that fell on the Stoxx 600. Automakers were the biggest gainers among 19 industry groups on the European benchmark index. Daimler AG rallied 3.5 percent in Frankfurt after forecasting Mercedes-Benz sales will advance at twice the rate of the overall market on demand from China. Lafarge SA, the world’s biggest cement maker, gained 5.1 percent in Paris after Citigroup Inc. recommended buying the shares. Asian stocks rose the most in a week. Commonwealth Bank of Australia gained 1.3 percent in Sydney. Dentsu Inc., Japan’s biggest advertising agency, rose 2.6 percent in Tokyo. Developing-nation shares climbed for a third day, with the MSCI Emerging Markets Index advancing 1.4 percent. Benchmark indexes in Brazil, India, Taiwan, and the Czech Republic jumped more than 1.5 percent. Australian employers added workers in May for a third straight month, the statistics bureau said in Sydney today. The number of people employed gained 26,900 from April, compared with the median estimate of 23 economists surveyed by Bloomberg News of a 20,000 increase. Euro Strengthens The euro’s gain against the dollar brought it to a one-week high and the shared currency strengthened 1.1 percent to 110.61 yen. The 16-nation euro will survive Europe’s debt crisis, the head of China’s national pension fund said, according to a report by Reuters. Dai Xianglong , chairman of the National Council for Social Security Fund, also said China faces the risk of losses on its currency reserves because of growing debt in the U.S., according to the report. The ECB said it will continue buying state debt and pumping unlimited funds into the banking system as part of a strategy by European policy makers to stop the euro region from breaking apart. The euro extended its advance as Germany’s highest constitutional court rejected an attempt by a lawmaker to preliminarily block the nation from granting guarantees as part of its share in the euro-area rescue fund. ECB Moves “The ECB is addressing liquidity issues, there’s news that the German court has rejected efforts to block Germany from participating in the guarantees of the stabilization mechanism,” said Marc Chandler , global head of currency strategy at Brown Brothers Harriman & Co. in New York. “There are some rumors that China may move on its currency and that may also be helping the euro trade higher.” The dollar weakened against 14 of its 16 most-traded peers and the Dollar Index, which tracks the currency against six major trading partners, lost 0.9 percent to 87.092. Gold for immediate delivery dropped 0.8 percent to $1,223.30 an ounce, the third consecutive decline. Copper for delivery in three months rose 1.4 percent to $6,427.50 a metric ton on the London Metal Exchange. Crude oil for July delivery rose for a third day, adding 1.8 percent to $75.68 a barrel on the New York Mercantile Exchange. Spanish bonds rose as the government auctioned three-year notes, with demand higher than at an auction of similar-maturity securities in April. The yield on the 10-year bond fell 10 basis points to 4.47 percent, with the extra yield investors demand to hold the securities instead of benchmark German bunds narrowing 11 basis points to 194. The yield on the 10-year bund was 4 basis points higher at 2.6 percent. To contact the reporters for this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Claudia Carpenter in London at ccarpenter2@bloomberg.net

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Asia Stocks Rise on Japan GDP, Australia Jobs Kiwi Gains on Rate Increase

June 9, 2010

By Linus Chua and Anna Kitanaka June 10 (Bloomberg) — Asian stocks rose, led by energy producers, and U.S. index futures rebounded after economic reports from Japan to Australia showed accelerating growth. The New Zealand dollar rose after the central bank raised interest rates and the Korean won fell. The MSCI Asia Pacific Index climbed 0.8 percent to 110.71 as of 1:23 p.m. in Tokyo, boosted by a 1.2 percent rally in the S&P/ASX 200 Index and a 0.5 percent increase in the Nikkei 225. Standard & Poor’s 500 index futures gained 0.3 percent. The New Zealand dollar strengthened against all 16 of its most-traded counterparts, including a 2.7 percent advance versus the won. Japan’s economy grew at an annualized 5 percent rate in the three months ended March 3, Australian employers added workers for a third straight month and the Federal Reserve’s Beige Book survey said the U.S. economy expanded in all 12 Fed districts for the first time in more than two years at a “modest” pace. “Macro data has been good and the signs of a modest recovery are on track,” said Nader Naeimi , a Sydney-based strategist at AMP Capital Investors, which holds $90 billion “Macro economic data hasn’t really suffered. Volatility has been settling down a bit compared to what it was.” Advances beat decliners two to one on the MSCI Asia benchmark. A gauge of energy stocks in the index jumped 1.3 percent. The S&P/ASX 200 Index climbed after Australia’s jobless rate fell to 5.2 percent from 5.4 percent. The number of people employed gained 26,900 from April, the statistics bureau said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for an increase of 20,000. New Zealand’s dollar climbed after central bank Governor Alan Bollard raised the benchmark interest rate to 2.75 percent, the first increase in three years as the nation’s economy recovers from recession. He also said borrowing costs were raised as “underlying inflationary pressures are expected to increase.” South Korea’s won slumped 1.5 percent to 1,267.85 per dollar after Vice Finance Minister Yim Jong Yong said the government will “soon” announce plans to reduce volatility in capital flows. The Maeil Business Newspaper said today the regulations will limit banks’ currency-forward transactions, raising concern they may reduce foreign-exchange borrowings used to hedge such trades and take the proceeds out of the country. Crude oil reversed earlier losses in New York on expectations of higher fuel demand as China’s exports surged and as the falling dollar spurred investors to buy commodities. Oil for July delivery was at $74.36 a barrel, down 2 cents, in electronic trading on the New York Mercantile Exchange. The contract earlier dropped as much as 66 cents, or 0.9 percent, to $73.72 a barrel. Yesterday, it rose $2.39, the biggest advance since May 27, to settle at $74.38. Futures have fallen 6.6 percent this year. To contact the reporters for this story: Linus Chua at lchua@bloomberg.net ; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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China’s Property Prices Rise 12.4% in May, Second-Fastest Pace on Record

June 9, 2010

By Bloomberg News June 10 (Bloomberg) — China’s property prices rose at the second-fastest pace on record in May, showing little sign yet that the government crackdown on speculation will work to avert an asset-price bubble. The 12.4 percent gain compared with a record 12.8 percent increase in April from a year earlier. The residential and commercial price data for 70 cities was released today in statement in the National Bureau of Statistics newspaper. The data series began in 2005. Officials may introduce a trial property tax after already tightening sales rules for developers, raising some down payment requirements and restricting loans for multiple-home buyers, according to state media. China’s benchmark stock index is down 21 percent this year on concern a slowdown in property sales and construction, along with Europe’s debt crisis, will damp the nation’s growth. “So far the property tightening measures are mainly cooling transactions” rather than prices, said Xiong Peng, a Shanghai-based analyst at Bank of Communications Co., the nation’s fourth-largest lender by market value. “A property tax is the other shoe that has yet to drop.” May’s increase from a year earlier was higher than the 12 percent median estimate in a Bloomberg News survey of seven economists. Property prices rose 0.2 percent from April, while the value of sales slid 25 percent. Sales in Beijing, Shanghai and Shenzhen, the nation’s wealthiest cities, fell as much as 70 percent in May from the previous month and land sales for residential development projects in 70 Chinese cities fell 14 percent, the official Shanghai Securities News reported earlier this month. — Li Yanping . Editors: Paul Panckhurst , Chris Anstey To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net

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Australia’s Employers Added 26,900 Workers in May, More Than Estimated

June 9, 2010

By Jacob Greber June 10 (Bloomberg) — Australian employers added workers in May for a third straight month, underscoring the central bank’s assessment that economic growth will accelerate this year as a mining investment boom stokes hiring. The number of people employed gained 26,900 from April, the statistics bureau said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for an increase of 20,000. The jobless rate fell to 5.2 percent from 5.4 percent. A rebound in demand from China for resources is spurring hiring at companies including Chevron Corp. as it expands energy projects in Western Australia, keeping the nation’s jobless rate at almost half the level of the U.S. and Europe. The surge was a key reason central bank Governor Glenn Stevens boosted borrowing costs six times since early October in the Group of 20’s most aggressive round of monetary policy tightening. “The leading indicators of employment remain strong and we expect that solid labor hiring will continue through 2010,” David de Garis , a senior economist at National Australia Bank Ltd. in Melbourne, said ahead of today’s report. The jobless rate will fall to around 4.25 percent in a year’s time, he said. The number of full-time jobs gained 36,400 in May and part- time employment decreased 9,400, today’s report showed. Robust demand for workers may prompt Stevens to resume increasing borrowing costs later this year to prevent wage pressures from stoking inflation. The governor kept the benchmark lending rate at 4.5 percent last week, saying monetary policy is “appropriate for the near term.” Economic Rebound Australia has led most developed nations in boosting borrowing costs as evidence mounts of an economic rebound, partly stoked by rising demand in Asia for iron ore, coal and energy. New Zealand’s central bank today raised its benchmark interest rate for the first time in three years, signaling that faster inflation is a bigger threat to growth than further gains in the nation’s currency. The Bank of Canada on June 1 increased its target interest rate to 0.5 percent from a record-low 0.25 percent, the first Group of Seven country to do so since last year’s global recession. The Reserve Bank of Australia predicts the nation’s economic growth rate will almost double in the next two years to 4 percent, pushing underlying inflation toward the top of its 2 percent to 3 percent target range. Inflation Pressures Inflation pressures may build as projects such as the A$43 billion ($36 billion) Chevron Corp. -led Gorgon natural gas project in Western Australia increases demand for skilled workers. More than A$100 billion of resources projects in Western Australia are likely to generate about 40,000 construction jobs and 12,500 permanent positions, a state government report released last year forecast. Australian job advertisements in newspapers and the internet climbed 4.3 percent in May, rebounding from the first drop in three months, a report by Australia & New Zealand Banking Group Ltd. showed June 7. Higher employment will also help offset the impact on household spending of the central bank’s 150 basis points of interest rate increases since October, according to a report published today by research company Access Economics. “The broader economic story is one of recovery,” Access Director David Rumbens said today. “Over 250,000 new jobs have been created between August 2009 and April 2010, and over 70 percent of these have been full-time positions. That is providing a significant boost to consumer incomes.” Consumer Spending Still, there are signs that the central bank’s interest rate moves have prompted some consumers to cut spending. Retail sales almost stagnated in the first quarter, when gross domestic product growth slowed to 0.5 percent from 1.1 percent in the fourth quarter. Home-loan approvals fell in April for a seventh month, and surveys of business and consumer confidence fell, reports showed this week. Australia’s participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.1 percent in May from 65.2 percent, today’s report showed. To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Aussie, Kiwi Dollars Rise as Hungary Eases Concern on Greece-Like Default

June 7, 2010

By Yoshiaki Nohara June 8 (Bloomberg) — The Australian and New Zealand dollars rose against the yen, ending a two-day loss, as Hungary eased concerns it faces a Greece-like debt crisis, reviving demand for higher-yielding assets. The so-called Aussie strengthened against all of its 16 major counterparts as Hungary’s government pledged to control its budget deficit and make structural changes to overhaul the economy. The New Zealand dollar rallied amid speculation the nation’s central bank will raise interest rates from a record low on June 10. “Hungary was obviously used as an excuse,” said Ray Attrill , global research director at Forecast Ltd. in Sydney. “Short-term speculative players are moving quickly” to buy back the Aussie and kiwi. “That’s why we are seeing more volatility,” he said. Australia’s currency rose 1.1 percent to 74.87 yen as of 11:09 a.m. in Sydney. It gained to 81.65 U.S. cents from 81.04 cents in New York yesterday. New Zealand’s dollar advanced 0.9 percent to 60.76 yen. It fetched 66.25 U.S. cents from 65.87 cents. Hungary’s domestic politics roiled global markets last week as officials in Prime Minister Viktor Orban ’s government compared the country to Greece while claiming the previous administration lied about public finances. ‘Do Everything’ “What we have decided is that we will do everything to be able to follow the planned deficit path,” Mihaly Varga , Orban’s chief of staff, said yesterday in Lovasbereny, Hungary. The Reserve Bank of New Zealand will raise the official cash rate to 2.75 percent from a record low 2.50 percent on June 10, according to all except two of the 15 economists in a Bloomberg News survey. Swaps traders are betting on a 72 percent chance of a rate increase next week, according to a Credit Suisse AG index . “The word on the street remains that the RBNZ will swallow hard and hike rates on Thursday,” David Watt , a senior currency strategist in Toronto at Royal Bank of Canada, wrote in a note today. The kiwi’s decline below 66 U.S. cents yesterday “suggests the market does not see a potential rate hike as providing much lift beneath the kiwi’s wings.” Gains in the Aussie may be limited before a report forecast to show Australian home-loan approvals fell in April for a seventh month, adding to signs the nation’s economic growth is slowing. ‘Disappointing News’ “With the external backdrop for the Australian dollar having deteriorated significantly in the eyes of speculative investors and a circuit breaker not apparent in the short-term, the currency is vulnerable to any disappointing domestic economic news,” John Kyriakopoulos , Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a note today. The number of loans granted to build or buy houses and apartments dropped 2 percent in April, according to the median estimate of economists in a Bloomberg News survey before the statistics bureau’s report tomorrow. Australian government bonds fell. The yield on the 4.5 percent note maturing in April 2020 rose four basis points to 5.33 percent, according to Bloomberg data. A basis point is 0.01 percentage point. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.29 percent. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Canada Becomes First G-7 Member to Raise Key Interest Rate Since Recession

June 1, 2010

By Greg Quinn June 1 (Bloomberg) — The Bank of Canada raised its key interest rate from a record low today, the first Group of Seven country to do so since last year’s global recession, and said further moves will be “weighed carefully” against future growth in Canada and elsewhere. The target rate on overnight loans between commercial banks rose to 0.5 percent from 0.25 percent, as predicted by 25 of 27 economists surveyed by Bloomberg News. It was Mark Carney ’s first increase as governor and the bank’s first since July 2007. “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments,” the Ottawa-based central bank said in a statement. The next decision is July 20. The bank said Canada’s recent growth and inflation have been “largely as expected” while the global recovery is “increasingly uneven.” Canada’s output grew at a 6.1 percent annualized pace, twice that of the U.S. in the first quarter, while the central bank predicts inflation will exceed its 2 percent target over the next year. “The bank did add a heaping dose of caution,” said Sal Guatieri , senior economist at BMO Capital Markets in Toronto. “The bank will keep a very close eye on further contagion to financial markets and commodity prices from Europe’s debt crisis.” Europe Concerns The Canadian dollar declined 0.8 percent to C$1.0530 per U.S. dollar at 9:45 a.m. in Toronto, compared with C$1.0445 yesterday. One Canadian dollar buys 94.96 U.S. cents. The yield on the two-year Canadian government bond declined to 1.71 percent from 1.82 percent yesterday. The Bank of Canada said today that domestic growth was “robust” in the first quarter, while Europe and the debt crisis were mentioned four times in the policy makers’ statement. IKEA Canada said March 31 it is expanding its store in Ottawa, adding 125 workers, and Teva Pharmaceutical Industries Ltd., the world’s largest generic drugmaker, said May 27 it will spend C$56 million to expand its Stouffville, Ontario production plant. “The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan and other industrialized economies, and the possibility of renewed weakness in Europe,” the statement said. ‘Considerable’ Stimulus Brazil, Malaysia and Peru have already raised rates this year. Earlier today, Australia’s central bank left its benchmark interest rate unchanged at 4.5 percent after six previous increases since October, and signaled it may keep borrowing costs steady in coming months as it assesses the impact of the most aggressive rate increases in the Group of 20. India’s central bank boosted its reverse repurchase rate for the second time in five weeks on April 20. The Federal Reserve may not raise its key lending rate until the fourth quarter, and the European Central Bank may wait until the first quarter of next year, according to separate Bloomberg surveys. “This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 percent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery,” the bank said today. Rising Demand Canada has benefited from rising demand for copper, gold, wheat and oil from emerging economies such as India and China. The country is the world’s second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Private companies led a 108,700 gain in jobs last month, the largest in records dating from 1976, and the unemployment rate fell to 8.1 percent from 8.2 percent. Job growth is supporting retail sales, which set a record high in March according to Statistics Canada. Canada should raise rates “without delay,” the Organization for Economic Cooperation and Development said May 26, as it predicted the country’s growth will lead the G-7 this year at 3.6 percent. The Bank of Canada said in April that inflation will be “slightly higher” than its 2 percent target in the next year. Inflation accelerated to 1.8 percent in April from 1.4 percent in March. ‘Rich Resources’ The central bank also said today it will reduce the excess C$3 billion in the system that settles overnight commercial bank payments back to the usual C$25 million in settlement balances by June 16. The bank had used extra cash in the system to help keep the benchmark rate close to 0.25 percent. As well, the bank said today it would make purchase and resale transactions with major bond dealers a permanent feature of its monetary policy framework. “Canada has a better position than many other countries in terms of those really rich resources we have in Canada, and how that needs to fuel an upcoming recovery,” Siemens Canada Ltd. Chief Executive Officer Roland Aurich said in a May 26 interview in Ottawa. Siemens may soon open a new factory in Ontario to produce wind turbine blades to take advantage of local demand, he said. ‘Cautious’ on Recovery Aurich also said that Canada needs more export growth and a smooth end to government stimulus for a true recovery. Finance Minister Jim Flaherty said May 3 that that while the country’s recession is “technically” over, he was still “cautious” about the recovery. Canada’s dollar, identified as a risk to future growth by the bank in April, has weakened against the U.S. dollar since April 20. A stronger currency makes the country’s exports less competitive. The bank in April increased its assumption for the Canadian dollar to 99 U.S. cents, after saying in its January report the currency would average 96 U.S. cents. The bank should avoid boosting the country’s dollar too much with rate increases, said Brad Miller, Chief Executive Officer of IMW Industries Ltd. in Chilliwack, British Columbia. The high currency “is the flip side of our success,” said Miller, whose company makes natural gas machinery. “When you look at manufacturing it makes us less competitive.” To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net .

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China&rsquos Manufacturing Expands at Slower Pace as Growth Cools

June 1, 2010

By Bloomberg News June 1 (Bloomberg) — China’s manufacturing expanded at a slower pace than estimated in May, prompting stock declines across Asia on concern growth in the world’s third-largest economy may slow. The Purchasing Managers’ Index fell to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said in an e- mailed statement today, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. A separate index released by HSBC Holdings Plc and Markit Economics fell to 52.7, the lowest level in a year. The figures came as reports showed a drop in property sales in Beijing, Shanghai and Shenzhen, offering signs that the government crackdown on property speculation is having an impact. The MSCI Asia Pacific Index, which in May had its biggest monthly drop since 2008 on concern the region’s growth will be hurt by Europe’s crisis, snapped a four-day winning streak. “The fall in the headline PMI shown in the May surveys might be an early sign of a slowdown” in China, said Brian Jackson , a Hong Kong-based strategist at Royal Bank of Canada. It “may be exacerbated by euro-area weakness and recent measures from Beijing to rein in the property market.” China’s Shanghai Composite Index fell for a third day, losing 1.93 percent to 2542.095 at 1:47 p.m. local time. Slower growth may compel China to delay raising benchmark interest rates or letting the yuan appreciate against the dollar even after the economy grew 11.9 percent last quarter. Chances Fading The “chances of further policy tightening are fading as a result of events in Europe and a still unfolding correction in the property market,” Ben Simpfendorfer , a Hong Kong-based economist at Royal Bank of Scotland, said before today’s data. He forecasts rates to stay unchanged this year and the yuan’s dollar peg to remain until at least the end of the third quarter. Premier Wen Jiabao said yesterday in Tokyo that the world needs to guard against the possibility of a second economic slump. China will continue its proactive fiscal policy to consolidate its recovery, Finance Minister Xie Xuren said May 28. Comparable indicators in manufacturing around the world in May are forecast to indicate global output growth has peaked. Australia’s manufacturing growth slowed in May and economists predict reports due today will show U.S. manufacturing cooled while Europe’s grew at the same pace as the previous month. “The overheating risk is likely to ease as tightening measures filter through,” Qu Hongbin , chief China economist at HSBC, said in today’s release. “We see robust economic growth without double-dip risks not least because of massive existing infrastructure investment and resilient private consumption.” Indicate Expansion HSBC’s survey, covering more than 400 manufacturing companies, is weighted more toward smaller, privately owned business than the government’s PMI, according to the bank. Readings above 50 for both surveys indicate an expansion. The central bank has kept the key one-year lending rate at 5.31 percent and the deposit rate at 2.25 percent since December 2008 after cuts to counter the financial crisis. The yuan is trading at about 6.83 per dollar under a policy in place since July 2008 to aid exporters. The Shanghai Composite Index fell 9.7 percent in May, the biggest monthly decline since August, on concern the European debt crisis is worsening and the government will step up property measures. The benchmark has declined more than 20 percent this year. In contrast with investors’ pessimism, Capital Economics Ltd. said this week that the Chinese economy is “gliding to a soft landing.” Slower Growth “The economy may continue to maintain relatively fast growth, but the growth rate may slow,” Zhang Liqun , a researcher at the State Council’s Development and Research Center, said in the statement from the logistics federation. “The May PMI may be an indication that the economic rebound is stabilizing.” An output index fell to 58.2 from 59.1 in April, today’s report showed. The new-order index slid to 54.8 from 59.3 and an export-order index dropped to 53.8 from 54.5. The input-price index decreased to 58.9 from 72.6. While year-on-year economic indicators for May are likely to show slower growth, “all this is telling us is that it is now a year since China’s stimulus started to be felt,” said Mark Williams , a London-based economist for the firm. Economic momentum “remains strong.” Seasonal Adjustment Williams also said that the official PMI normally falls in May, “a sign that the seasonal adjustment applied is not particularly effective.” Nomura Holdings Inc. and Bank of America-Merrill Lynch expressed similar views ahead of today’s data. The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics. Chinese policy makers are trimming stimulus this year after the $1.4 trillion lending binge that revived growth in 2009. Officials are targeting a 22 reduction in new loans and have sold bills and raised banks’ reserve requirements to suck money out of the financial system. Restraining inflation expectations and keeping housing affordable are two of the government’s key goals after urban property prices jumped a record 12.8 percent in April from a year earlier. Wuhan Iron & Steel Group , the nation’s third- biggest steelmaker, said May 26 that demand for steel is declining, partly because of curbs on property loans. — Sophie Leung , Li Yanping . Editors: Lily Nonomiya , Chris Anstey To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net Yanping Li in Beijing at yli16@bloomberg.net

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German Unemployment Declines Twice as Fast as Forecast on Rising Exports

June 1, 2010

By Rainer Buergin and Christian Vits June 1 (Bloomberg) — German unemployment fell more than twice as much as economists forecast in May as exports from Europe’s biggest economy surged, bolstering the recovery. The number of people out of work declined a seasonally adjusted 45,000 to 3.25 million, the lowest since December 2008, the Nuremberg-based Federal Labor Agency said today. Unemployment was forecast to shrink by 17,000, according to the median of 28 estimates in a Bloomberg survey. The adjusted jobless rate fell to 7.7 percent from 7.8 percent. “The labor market seems to turn much earlier than many had thought,” Carsten Brzeski , an economist at ING Group in Brussels, said in a note to investors. “It should only be a matter of a few months before the unemployment rate returns to its pre-crisis level.” Demand for goods including Siemens AG turbines and Daimler AG cars in emerging economies such as China is prompting companies to add workers. While the euro area’s fiscal crisis is undermining consumer confidence in the region, it’s also providing a boost to exporters. The euro has fallen 15 percent against the dollar this year. German exports surged 10.7 percent in March, the most in 18 years, the Federal Statistics Office in Wiesbaden said May 10. Factory orders rose 5 percent in March, more than three times economists’ forecast. Manufacturing Boost The euro remained lower against the dollar after the report and was down 0.9 percent to $1.2197 as of 8:59 a.m. in London. Bonds rose, with the yield on the 10-year German bund falling 6 basis points to 2.597 percent. “The spring recovery in the labor market continued in May,” Labor Agency head Frank-Juergen Weise told reporters in Nuremberg. “Current developments reflect once again a clear improvement in the most important indicators.” The economy will probably grow “strongly” in the second quarter, boosted by exports, the Bundesbank said May 26. Capacity utilization among manufacturers will rise to 79.8 percent in the quarter, the highest since the final quarter of 2008, it said . The Organization for Economic Cooperation and Development raised its global growth outlook on May 26 and said the German economy will expand 1.9 percent this year and 2.1 percent in 2011 after contracting 4.9 percent last year. Still, German business confidence unexpectedly fell last month after Europe’s debt crisis rattled financial markets and fueled concerns about the future of the euro. At the same time, additional budget cuts by countries trying to reduce their deficits could damp economic growth and curb European demand for German goods. ‘Significant’ Improvement Chemicals maker Lanxess AG on May 28 said the second quarter is proceeding well and reiterated its outlook for a “significant” improvement in earnings this year because of exports. The company said it will spend as much as 150 million euros ($184 million) in 2010 to expand facilities in Germany. Airbus SAS plans to add 800 workers at its German factories this year, Hamburger Abendblatt reported May 19, citing Chief Executive Officer Thomas Enders . While Germany’s economy shrank 4.9 percent last year, the most since World War II, the government limited the unemployment increase with incentives for companies to retain workers. Chancellor Angela Merkel ’s Cabinet in April extended the job incentives program until 2012, having earlier extended it to the end of this year. According to OECD data, Germany’s jobless rate was 7.3 percent in March. The equivalent rate in France was 10.1 percent and the U.S. rate was 9.7 percent. To contact the reporters on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net ; Christian Vits in Frankfurt at cvits@bloomberg.net .

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Subbarao Risks `Falling Behind’ on Rates After India’s Growth Accelerates

May 31, 2010

By Unni Krishnan and Kartik Goyal June 1 (Bloomberg) — India’s central bank needs to be less wary of the fallout of Europe’s debt crisis and raise interest rates to curb inflation stoked by growth, economists said. Asia’s biggest economy after Japan and China expanded 8.6 percent last quarter from 6.5 percent in the previous three months, India’s statistics office said in New Delhi yesterday. The acceleration in growth came even as consumer spending slowed, a drag that may lift in coming months, according to HSBC Group Plc economist Frederic Neumann. The Reserve Bank of India said last month it will be “cautious” in tightening the monetary policy even as the country’s consumer-price inflation rate is the highest among Group of 20 nations. India’s stance, in the face of risks to growth posed by Europe’s sovereign-debt crisis, may be echoed across the Asia Pacific this week as central banks from Australia to the Philippines set interest rates. “If India’s central bank pays too much attention to Europe and waits for clarity, then it risks falling behind the curve,” said Ramya Suryanarayanan, an economist at DBS Bank Ltd. in Singapore. “It is important that interest rates are normalized.” She expects a quarter-percentage point increase in rates by the end of June. The Mumbai-based Reserve Bank has raised interest rates twice since mid-March by a quarter-percentage point each time. Consumer Prices The bank’s benchmark reverse-repurchase rate is 3.75 percent while the consumer-price inflation rate for industrial workers touched about 13 percent in April. Prices paid by farm workers are close to 15 percent, hurting the purchasing power of the 650 million people who live in India’s countryside. In contrast, consumer prices are running at 2.9 percent in Australia, 3.9 percent in Indonesia and 4.4 percent in the Philippines. The Reserve Bank of Australia may leave the overnight cash rate target at 4.5 percent today, according to a Bloomberg News survey. Bank Indonesia will probably maintain its benchmark rate on June 4 and borrowing costs in Philippines may be kept unchanged on June 3, separate surveys showed. “The euro jitters may have left policy makers across the world in a more accommodative mood, but in India tightening is now needed to avoid a hard landing later on,” HSBC’s Neumann said. “They should add some urgency to the tightening cycle.” Benchmark 10-year Indian government bond yields rose 17 basis points last week, the biggest increase in more than a month, as traders increased bets Governor Duvvuri Subbarao will boost rates. The yield closed at 7.56 percent yesterday. The rupee lost 4.3 percent against the U.S. dollar last month and the Sensitive Index declined 3.5 percent in the period. Consumption As growth accelerated last quarter, consumption by individuals and companies increased 2.6 percent, the weakest pace in eight years, data from the statistics office showed. “This, presumably, reflects in part soaring food prices, which eroded real disposable incomes and made shoppers generally more cautious,” the Hong Kong-based Neumann said. “With agriculture prices now easing, we expect consumption to get a real kick over the coming quarter, helped, too, by rising incomes as a tightening labor market spurs wage growth.” Rains in this year’s June-September monsoon season will be “normal,” the weather office forecast in April, boosting prospects for agriculture and rural incomes. Salaries are increasing in urban areas as well with companies including Tata Consultancy Services Ltd., India’s biggest exporter of software services, boosting employees’ pay. Tata Consultancy said in April it plans to spend about $200 million on wage increases this year. The central bank acknowledges that consumer demand is strengthening, making inflation a “visible” concern, Subir Gokarn , who is in charge of monetary policy at the Reserve Bank, said in an interview in Warsaw on May 26. Still, he said the “pace and magnitude” of monetary policy actions will be conditioned by global developments. To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net .

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Stocks Rise in Europe, Canada as Oil Gains Spanish Bonds Drop

May 31, 2010

By Andrew Rummer and Alexander Cuadros May 31 (Bloomberg) — Stocks in Europe, Canada and Brazil advanced along with oil as investors speculated the global economy will withstand the debt crisis in the euro zone. Spanish government bonds fell after Fitch Ratings stripped the nation of its AAA rating, and shares fell in Israel. The Stoxx Europe 600 Index gained 0.3 percent. The Standard & Poor’s/TSX Composite Index climbed 0.4 percent and the Bovespa advanced 0.4 percent as of 11:59 a.m. New York time. Crude rose 0.3 percent. The yield difference between Spanish and German 10- year bonds widened to 159 basis points. Stocks fell in Israel on concern tensions may escalate after 10 people were killed as commandos clashed with pro-Palestinian activists. Stock exchanges in the U.S. and U.K. were closed for holidays. Canada’s economy grew at the fastest pace since 1999 in the first quarter, led by consumer spending and manufacturing. Developing nations remain “a source of strength for the world economy,” European Central Bank President Jean-Claude Trichet said today via video link to a Bank of Korea conference. “There was no bad news over the weekend,” said Eduardo Favrin , who oversees about $2.5 billion in stocks as head of equities for HSBC Global Asset Management’s Brazil unit in Sao Paulo. “The absence of the American market really dries out the liquidity in other markets.” ‘A Little Bit’ The MSCI World Index of stocks in 24 developed markets has rallied 57 percent from its low in March 2009 after the economy recovered from the worst recession since World War II and central banks kept interest rates near record lows. Federal Reserve Bank of Chicago President Charles Evans told reporters in Seoul today that he “wouldn’t be surprised” if the Fed’s policy of low rates “gets extended just a little bit.” The Stoxx 600 pared its loss for May to 5.8 percent, the biggest monthly retreat since February 2009. The MSCI Asia Pacific Index, which rose less than 0.1 percent today, has slumped 9.8 percent since April 30. The S&P 500 fell 8.2 percent. Equities plunged around the world this month on concern a debt crisis is spreading from Greece. Shares of Sanoma Oyj rose 2.9 percent in Helsinki trading after the biggest Nordic media company agreed to sell its Welho unit. Daimler AG led automakers higher as Deutsche Bank AG lifted its share-price estimate for the world’s second-largest maker of luxury cars. Spain’s IBEX 35 slipped 0.7 percent after Fitch Ratings downgraded the nation to AA+. Behind Only Germany Canada’s S&P/TSX pared its May retreat to 4 percent, which is the second-best performance among 24 developed markets in the world, trailing only Germany. Gross domestic product grew 6.1 percent at an annualized pace in the January-March period, Statistics Canada said today. Economists predicted a 5.9 percent expansion, based on 20 predictions gathered by Bloomberg News. The Bank of Canada had projected a 5.8 percent gain. “Over the next one-two months a relatively resilient economic and profit outlook should push riskier assets up,” Jan Loeys , a London-based strategist at JPMorgan Chase & Co., wrote in a report e-mailed today. “Confidence surveys remain strong and lower interest rates, oil prices and a cheaper euro are providing positive feedback from the market correction.” Oil rose to $74.21 a barrel in New York. Futures are down 14 percent in May, poised for the biggest monthly retreat since December 2008. Yields on Spain’s 10-year bonds climbed to 4.25 percent, while the payout on German bunds fell to 2.66 percent. The difference surged to 1.64 percentage points on May 7, the highest since 1996. The MSCI Emerging Markets Index gained for a fourth day, rising 0.7 percent. The advance trimmed its May slump to 9.5 percent, its worst month since October 2008. Indexes for South Korea, Thailand and Indonesia rose more than 1 percent today. Israeli shares fell the most in four days on concern tensions may escalate following the deaths of the pro- Palestinian activists. The TA-25 Index lost 1.6 percent and the shekel weakened 1 percent against the U.S. dollar. Turkey’s ISE National 100 Index retreated 1.5 percent, snapping a three-day rally. The international flotilla carrying aid to Gaza included Turkish-registered vessels. The lira dropped 0.3 percent versus the U.S. dollar. To contact the reporters on this story: Andrew Rummer in London at arummer@bloomberg.net ; Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net .

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Stocks Rise in Europe, Canada, Brazil as Oil Rallies Spanish Bonds Slump

May 31, 2010

By Andrew Rummer and Alexander Cuadros May 31 (Bloomberg) — Stocks in Europe, Canada and Brazil advanced along with oil as investors speculated the global economy will withstand the debt crisis in the euro zone. Spanish government bonds fell after Fitch Ratings stripped the nation of its AAA rating, and shares fell in Israel. The Stoxx Europe 600 Index gained 0.3 percent. The Standard & Poor’s/TSX Composite Index climbed 0.4 percent and the Bovespa advanced 0.4 percent as of 11:59 a.m. New York time. Crude rose 0.3 percent. The yield difference between Spanish and German 10- year bonds widened to 159 basis points. Stocks fell in Israel on concern tensions may escalate after 10 people were killed as commandos clashed with pro-Palestinian activists. Stock exchanges in the U.S. and U.K. were closed for holidays. Canada’s economy grew at the fastest pace since 1999 in the first quarter, led by consumer spending and manufacturing. Developing nations remain “a source of strength for the world economy,” European Central Bank President Jean-Claude Trichet said today via video link to a Bank of Korea conference. “There was no bad news over the weekend,” said Eduardo Favrin , who oversees about $2.5 billion in stocks as head of equities for HSBC Global Asset Management’s Brazil unit in Sao Paulo. “The absence of the American market really dries out the liquidity in other markets.” ‘A Little Bit’ The MSCI World Index of stocks in 24 developed markets has rallied 57 percent from its low in March 2009 after the economy recovered from the worst recession since World War II and central banks kept interest rates near record lows. Federal Reserve Bank of Chicago President Charles Evans told reporters in Seoul today that he “wouldn’t be surprised” if the Fed’s policy of low rates “gets extended just a little bit.” The Stoxx 600 pared its loss for May to 5.8 percent, the biggest monthly retreat since February 2009. The MSCI Asia Pacific Index, which rose less than 0.1 percent today, has slumped 9.8 percent since April 30. The S&P 500 fell 8.2 percent. Equities plunged around the world this month on concern a debt crisis is spreading from Greece. Shares of Sanoma Oyj rose 2.9 percent in Helsinki trading after the biggest Nordic media company agreed to sell its Welho unit. Daimler AG led automakers higher as Deutsche Bank AG lifted its share-price estimate for the world’s second-largest maker of luxury cars. Spain’s IBEX 35 slipped 0.7 percent after Fitch Ratings downgraded the nation to AA+. Behind Only Germany Canada’s S&P/TSX pared its May retreat to 4 percent, which is the second-best performance among 24 developed markets in the world, trailing only Germany. Gross domestic product grew 6.1 percent at an annualized pace in the January-March period, Statistics Canada said today. Economists predicted a 5.9 percent expansion, based on 20 predictions gathered by Bloomberg News. The Bank of Canada had projected a 5.8 percent gain. “Over the next one-two months a relatively resilient economic and profit outlook should push riskier assets up,” Jan Loeys , a London-based strategist at JPMorgan Chase & Co., wrote in a report e-mailed today. “Confidence surveys remain strong and lower interest rates, oil prices and a cheaper euro are providing positive feedback from the market correction.” Oil rose to $74.21 a barrel in New York. Futures are down 14 percent in May, poised for the biggest monthly retreat since December 2008. Yields on Spain’s 10-year bonds climbed to 4.25 percent, while the payout on German bunds fell to 2.66 percent. The difference surged to 1.64 percentage points on May 7, the highest since 1996. The MSCI Emerging Markets Index gained for a fourth day, rising 0.7 percent. The advance trimmed its May slump to 9.5 percent, its worst month since October 2008. Indexes for South Korea, Thailand and Indonesia rose more than 1 percent today. Israeli shares fell the most in four days on concern tensions may escalate following the deaths of the pro- Palestinian activists. The TA-25 Index lost 1.6 percent and the shekel weakened 1 percent against the U.S. dollar. Turkey’s ISE National 100 Index retreated 1.5 percent, snapping a three-day rally. The international flotilla carrying aid to Gaza included Turkish-registered vessels. The lira dropped 0.3 percent versus the U.S. dollar. To contact the reporters on this story: Andrew Rummer in London at arummer@bloomberg.net ; Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net .

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Canada’s Economy Grows Fastest Since 1999, Pressuring Bank to Raise Rates

May 31, 2010

By Greg Quinn May 31 (Bloomberg) — Canada’s economy expanded at the fastest pace in a decade in the first quarter, led by consumer spending and manufacturing, increasing pressure on the country’s central bank to raise interest rates tomorrow. Gross domestic product grew 6.1 percent at an annualized pace in the January-March period, Statistics Canada said today in Ottawa. Economists predicted a 5.9 percent expansion, based on 20 predictions gathered by Bloomberg News. The Bank of Canada had projected a 5.8 percent gain. The central bank will probably raise its key interest rate to 0.5 percent tomorrow from a record low 0.25 percent, a majority of economists say , the first increase among the Group of Seven since last year’s global recession. Governor Mark Carney has said a faster-than-expected recovery will help to push inflation above the bank’s 2 percent target. Consumer spending rose 1.1 percent in the first quarter from the fourth quarter, led by semi-durable goods such as clothing and footwear, Statistics Canada said. Investment in housing rose 5.4 percent, the fourth straight gain. IKEA Canada said March 31 it is expanding its store in Ottawa, adding 125 workers, while Teva Pharmaceutical Industries Ltd., the world’s largest generic drug maker, said May 27 it will spend C$56 million ($53 million) to expand its Stouffville, Ontario production plant. Conditional Commitment Carney cut the benchmark lending rate to 0.25 percent in April 2009, the lowest since the bank was founded in 1934. He also made a “conditional commitment” to keep it there through the first half of this year unless the inflation outlook shifted. Carney abandoned the pledge last month, citing faster than expected growth and inflation. Private companies led a 108,700 gain in jobs in April, the largest in records dating from 1976, and the unemployment rate fell to 8.1 percent from 8.2 percent. Manufacturing rose at a 4.2 percent pace in the first quarter and construction increased 2.5 percent, Statistics Canada said today. Fixed capital investment rose 2 percent in the first quarter, and businesses added C$8.1 billion to their inventories after reducing them by C$1.2 billion in the fourth quarter, the report said. Exports of goods and services advanced 2.9 percent, the third consecutive gain, while imports rose 3.4 percent. The country’s terms of trade improved for a fourth straight quarter, as export prices rose more quickly than import prices. Rising Demand Canada has benefited from rising demand for commodities from emerging economies such as India and China. The country is the world’s second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. On a monthly basis, the economy grew 0.6 percent in March, the seventh straight gain, led by manufacturing, mining, wholesaling and retailing. Economists predicted growth of 0.5 percent, according to the median of 18 estimates taken by Bloomberg News. Statistics Canada changed its estimate of fourth-quarter growth to 4.9 percent from an initially reported 5 percent. The agency also reported separately today that factory prices increased 0.3 percent in April, while their raw material costs rose 1.7 percent. Economists predicted industrial prices would decline 0.2 percent and material costs would gain 1.4 percent. To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net .

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European May Economic Confidence Unexpectedly Slips, Inflation Accelerates

May 31, 2010

By Simone Meier May 31 (Bloomberg) — European confidence in the economic outlook unexpectedly worsened in May and inflation accelerated less than economists forecast as the euro region’s debt crisis shook markets. An index of executive and consumer sentiment in the 16 euro nations fell to 98.4 from 100.6 in April, the European Commission in Brussels said today. Economists had forecast an unchanged reading, based on the median of 25 estimates in a Bloomberg News survey. Consumer-prices rose 1.6 percent in May from a year ago, a separate report showed, below the 1.7 percent rate forecast by economists. Inflation was 1.5 percent in April. The euro-region economy may struggle to gather strength after the threat of contagion from Greece’s budget woes eroded investor sentiment and forced governments to step up spending cuts to reduce deficits. While a drop in the euro has helped bolster exports, it’s also pushing up import costs. The Stoxx Europe 600 Index has lost 7 percent over the past two months. “The worsening in economic confidence confirms that the sovereign-debt woes in the southern periphery have started to spill over into the real economy,” said Martin van Vliet , an economist at ING Group in Amsterdam. “Domestic recovery prospects in the euro zone are darkening.” The euro remained higher against the dollar after the reports were published and was up 0.3 percent to $1.2306 as of 10:21 a.m. in London. Consumer Sentiment Confidence among consumers fell to minus 18 in May from minus 15 in April, the commission report showed. Sentiment in the retailing, construction and services industries also declined. Manufacturing sentiment rose to minus 6 from minus 7. The commission said that the latest confidence reading is influenced by a “change of classification of economic activities,” affecting the level of business surveys. The consumer index wasn’t affected by the new method, it said. The euro-region economy may expand 0.9 percent this year and 1.5 percent in 2011, the commission forecast on May 5. Inflation may average 1.5 percent this year and 1.7 percent in 2011, while unemployment is seen rising to 10.4 percent from 10.3 percent this year, it said. To help contain the budget crisis, European policy makers earlier this month unveiled a 750 billion-euro ($922 billion) rescue package. Spain, Portugal and Italy have stepped up budget cuts as part of the plan. An index of economic confidence in Greece dropped to 61.9 in May from 69.1 the previous month, the commission report showed, while a gauge for Portugal fell to 91.1 from 93.8. Sentiment in Spain also declined. Euro Weakness The euro’s 14 percent drop against the dollar this year has helped support the region’s export-led recovery as rising unemployment weighs on consumer demand and companies hold back investment. The Organization for Economic Cooperation and Development on May 26 raised its global growth forecast for this year, citing a faster expansion in economies including China. Daimler AG , the world’s second-largest luxury carmaker based in Stuttgart, Germany, on May 28 raised its profit forecast for the Mercedes-Benz division for the second time in six weeks on reviving global demand. “Demand has stabilized on a lower level,” Stefan Fuchs , chief executive officer of Fuchs Petrolub AG , Germany’s largest maker of lubricants, said on May 3. “We still don’t know if this is just re-stocking. The question is if the recovery is sustainable.” The commission’s gauge measuring euro-region manufacturers’ confidence in their export orders rose to minus 30 this month from minus 32. An index of employment expectations advanced to minus 10 from minus 13 and a gauge of order books also increased, today’s report showed. Still, companies may struggle to raise prices as consumers hold back spending amid uncertainty about the recovery. “If you strip energy, there’s no great pressure there,” said Alan McQuaid , chief economist at Bloxham Stockbrokers in Dublin. “I don’t think inflation is a near-term problem.” Today’s inflation report is an initial estimate and the statistics office will release a breakdown of May consumer prices along with core inflation on June 16. To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net

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Indian Economic Growth Accelerates, Increasing Pressure on Interest Rates

May 30, 2010

By Kartik Goyal May 31 (Bloomberg) — India’s economic growth accelerated, adding pressure on the central bank to raise interest rates even as Europe’s sovereign-debt crunch threatens the global recovery. Gross domestic product rose 8.6 percent in the three months ended March 31 from a year earlier after a revised 6.5 percent gain in the previous quarter, the statistics office said in a statement in New Delhi today. That matched the median estimate in a Bloomberg News survey of 22 economists. India and China, the world’s fastest-growing major economies, are weighing the risk of Europe’s debt crisis reducing demand in the market that accounts for a fifth of their exports. For India, the room to pause on monetary tightening is limited because its benchmark inflation rate is more than three times that in China. “The biggest threat in India is from inflation and the risk that the economy overheats,” Kevin Grice , an economist at Capital Economics Ltd. in London, said before the report. “This, in the end, would force the Reserve Bank of India to aggressively hike policy rates, which would inevitably bring far lower growth later on.” India’s central bank said May 19 that it will raise rates only cautiously even though they are “out of line” with the key wholesale-price inflation rate, running at 9.59 percent. In comparison, China’s $4.3 trillion economy expanded 11.9 percent in the first quarter and consumer prices rose 2.8 percent in April from a year earlier. Stocks Gain India’s Sensitive Index extended gains after the GDP report, increasing 0.4 percent to 16,935.70 at 11:10 a.m. on the Bombay Stock Exchange. The yield on the 10-year government bond rose 3 basis points to 7.51 percent from before the report. The rupee was little changed, maintaining the 4.5 percent drop against the U.S. dollar this month, making imports costlier and impeding central bank Governor Duvvuri Subbarao’s efforts to cool inflation. The Reserve Bank’s benchmark reverse repurchase rate is at 3.75 percent after two quarter percentage point increases since mid-March. Manufacturing rose 16.3 percent in the three months through March from a year earlier, compared with a 13.8 percent gain in the previous quarter, today’s report showed. Farm output rose 0.7 percent from a contraction of 1.8 percent and mining grew 14 percent. ‘Source of Strength’ European Central Bank President Jean-Claude Trichet said today that emerging nations have weathered the global recession better and are a “source of strength” for the world economy. GDP in the euro region rose 0.5 percent in the first quarter from a year earlier, according to the European Union’s statistics office. Growth in India’s $1.2 trillion economy, Asia’s largest after Japan and China, is accelerating as rising incomes boost demand for cars, mobile phones and air travel. Salaries in India may increase at the fastest pace in the Asia Pacific in 2010, according to Hewitt Associates Inc., the Lincolnshire, Illinois- based human resources adviser. Car sales by companies including Maruti Suzuki India Ltd. and Tata Motors Ltd. rose 39.5 percent in April from a year earlier, the biggest jump for the month since 1999, according to the Society of Indian Automobile Manufacturers. 3G Auction The government’s auction of high-speed wireless licenses this month highlights corporate enthusiasm for the nation’s prospects. Companies including Newbury, England-based Vodafone Group Plc, the world’s biggest mobile-phone operator by sales, took part and the sale raised 677.2 billion rupees ($14.3 billion), almost double the amount budgeted by Finance Minister Pranab Mukherjee . Services including air travel, which account for about 55 percent of India’s economy, expanded the most in 21 months in April, according to the Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics. The Organization for Economic Cooperation and Development said May 26 that China and India need “a much stronger tightening of monetary policy” to counter inflation and reduce the risk of asset bubbles. Some economists say Indian Prime Minister Manmohan Singh’s government has made slow progress in creating new capacity in infrastructure such as power, roads and ports, which is adding to inflation pressures and limiting economic expansion. Infrastructure Woes “The shortage of infrastructure has an adverse impact on growth and it increases the cost of operations for companies,” said Shashanka Bhide , chief economist at the New Delhi-based National Council of Applied Economic Research. The finance ministry estimates that India produces about 10 percent less electricity than it needs, and roads, which account for 65 percent of the nation’s cargo, are plagued by single lanes and irregular surfaces. India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, in March lowered its target for spending on roads and ports, after failing to complete planned projects. Projected investment in electricity, roads and wharves may reach 407 billion rupees in the five years to March 2012, half the original goal, according to the Planning Commission, a government office that sets investment targets. Singh wants to boost growth to a 10 percent pace, which he says is needed to pull the 828 million people living on less than $2 a day out of poverty. To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

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Kan Says G-20 May Discuss Impact of Europe Crisis on Currencies Next Week

May 27, 2010

By Toru Fujioka May 28 (Bloomberg) — Group of 20 finance ministers and central bankers may discuss the effect of the European sovereign debt crisis on currencies at next week’s meeting in South Korea, Japanese Finance Minister Naoto Kan said. “Some nations may have an interest in discussing currencies,” Kan said at a news conference in Tokyo today. “I think discussion of the impact of the European situation on currencies will be on the main agenda,” as well as financial regulation and developments in the global economy, he said. Japan’s currency has been rising because of Europe’s fiscal woes and concern about financial regulation in the region, Vice Finance Minister Naoki Minezaki said yesterday. The yen has gained this month against all 16 major currencies tracked by Bloomberg News, threatening the competitiveness of the exporters that have led the nation’s economic recovery. The yen climbed 9.9 percent versus the euro this month and 2.9 percent against the dollar. It traded at 91.22 per dollar and 112.38 against the euro at 10:03 a.m. in Tokyo. A yen at 90 to the dollar is “tough” for Japanese exporters, Hiromasa Yonekura , head of the nation’s biggest business lobby, told reporters in Tokyo yesterday. G-20 finance officials are scheduled to meet on June 4-5 in Busan, South Korea. The group consists of the European Union, U.S., Japan, China, India, the U.K., Australia, South Korea, Argentina, Brazil, Canada, France, Germany, Indonesia, Italy, Mexico, Russia, Saudi Arabia, South Africa, and Turkey. Japan’s economic growth accelerated to an annual 4.9 percent pace in the first quarter, led by exports. Government reports today showed the unemployment rate rose to 5.1 percent in April, household spending fell and deflation deepened, underscoring the country’s reliance on demand from abroad. Consumer prices excluding fresh food slid 1.5 percent from a year earlier, the statistics bureau said. Spending by households dropped 0.7 percent. Kan said he will try to spur jobs to help overcome the country’s “mild deflationary phase.” “Employment conditions have an impact on deflation because if employment improves, that will help wage growth and narrow the gap between demand and supply,” he said. “I will work to improve employment with an understanding that it’s crucial factor to overcome deflation.” To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Japanese Prices Decline, Unemployment Rises in Signs Recovery Is Slowing

May 27, 2010

By Aki Ito May 28 (Bloomberg) — Japan’s unemployment rate unexpectedly increased in April and the decline in consumer prices deepened, signaling that domestic demand is restraining the nation’s recovery from its deepest postwar recession. The jobless rate rose to 5.1 percent from 5 percent, the statistics bureau said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for no change. Prices excluding fresh food slid 1.5 percent from a year earlier after dropping 1.2 percent in March. The reports come a day after government figures showed a sustained rebound in exports, driven by demand from Asia’s emerging economies, and highlight Japan’s reliance on trade to sustain growth. The export revival hasn’t been strong enough to spur hiring that would in turn boost household spending, which unexpectedly fell in April, today’s data showed. “It’ll probably take until next fiscal year for companies to step up hiring,” Noriaki Matsuoka , an economist at Daiwa Asset Management Co. in Tokyo, said before the reports. The Nikkei 225 Stock Average has tumbled 12 percent this month on concern that the European sovereign debt woes may derail the global recovery. It rose 1.5 percent at 9:08 a.m. in Tokyo as China’s commitment to investing in Europe allayed concern the crisis will worsen. The yen traded at 90.99 per dollar from 90.98 before the reports. Household spending dropped 0.7 percent in April from a year earlier, the bureau said. The median estimate of economists surveyed was for a 2.5 percent increase. Retail sales rose 4.9 percent from a year earlier, led by gas stations and auto showrooms. Fading Stimulus Japan’s economy expanded at a 4.9 percent annual pace in the three months ended March, extending its rebound from its worst postwar recession, data showed last week. That report showed that outlays on durable goods increased at a slower pace, while spending on other components failed to pick up, adding to concerns that stimulus boosts are fading. Government programs have provided incentives for people to buy cars and electronics. Finance Minister Naoto Kan cited “severe” job prospects this week as one factor that has kept the government from upgrading its assessment of the economy since March. A separate government report today showed the ratio of jobs to applicants fell to 0.48, meaning there are 48 jobs for every 100 candidates. It was the first deterioration in the measure in eight months. Takeda Pharmaceutical Co. aims to reduce its workforce by about 10 percent, it said this month. Asia’s largest drugmaker wants to save 50 billion yen ($550 million) over three years. The drop in consumer prices was exacerbated by the introduction of a government waiver on high school tuition fees as part of a pledge to assist households. Prices fell at a faster rate than the 1.4 percent median estimate of economists. Bank of Japan “Excluding the school fee effect, which is temporary, downward pressure on prices will keep waning, but the pace will be very slow,” said Hiroshi Watanabe , a senior economist at Daiwa Institute of Research in Tokyo. “Given this, the Bank of Japan’s exit from its emergency policy mode is still remote.” Japanese retailers continue to cut prices to spur consumer spending. Nitori Co. , a furniture retailer, this week said it will lower prices of about 500 items by as much as 40 percent – - the company’s ninth round of discounts since 2008. “Spending on some items, such as cars and home electrical appliances, are robust thanks to government subsidies, but consumers are still penny-pinching for everyday products,” said Daiwa Research’s Watanabe. Faced Pressure The Bank of Japan has faced pressure to fight deflation from the government, whose ability to spur the economy is constrained by record public debt . Kan has been urging the bank to adopt an inflation target, and last week repeated that he expects it to support the recovery. Central bank Governor Masaaki Shirakawa this week warned against becoming too fixated on prices when setting policy. Central banks should aim to achieve a stable financial environment that helps sustain growth, and price stability is “not the sole factor,” he said. The central bank last month began developing measures to encourage banks to lend in areas that may spur growth. It has held the benchmark interest rate at 0.1 percent since December 2008 and offered banks 20 trillion yen in three-month loans under a separate program. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

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Taiwan Outpaces China as Growth Reaches Fastest Pace in More Than 30 Years

May 20, 2010

By Chinmei Sung and Weiyi Lim May 21 (Bloomberg) — Taiwan’s economy grew at the fastest pace in more than 30 years last quarter on surging sales of computer chips and display panels to China, as it heals ideological wounds with its neighbor in favor of trade ties. Gross domestic product rose 13.27 percent in the three months to March 31 from a year earlier, the most since 1978 and more than the median estimate in a Bloomberg News survey for an 11 percent gain, the statistics bureau said yesterday in Taipei. Taiwan, Singapore and Japan all reported yesterday that growth accelerated in the first quarter, boosted by a rebound in global trade. In Taiwan, which outpaced China’s 11.9 percent expansion, policy makers are weighing the risk of raising interest rates from a record low against fallout from the debt crisis sparked by Greece, after April export orders from Europe fell 11 percent from the previous month. “Taiwan benefited a lot from a rebound in the Chinese economy,” said Tony Phoo , an economist at Standard Chartered Plc in Taipei. “The economy is still prone to external uncertainty, with the Greek crisis already feeding into the export data.” The statistics bureau yesterday raised its 2010 GDP growth projection to 6.14 percent from 4.72 percent, and its annual inflation forecast to 1.4 percent from 1.27 percent. The Central Bank of the Republic of China (Taiwan) has kept its benchmark interest rate at 1.25 percent since March last year to help extract the island from its deepest recession on record. Trade Agreement President Ma Ying-jeou , who abandoned his predecessor’s pro-independence stance after taking office two years ago, has pushed for a trade agreement with China to prevent Taiwan from being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year. The proposal sparked opposition demonstrations amid concern China may boost its influence over Taiwan. The two have been ruled separately since Nationalist troops fled to the island after losing a civil war to Mao Zedong ’s Communists in 1949. Ma reiterated this week that the accord won’t harm the island’s “sovereignty.” He said a reduction in cross-strait tensions will encourage the mainland “in the long run” to remove the more than 1,000 missiles it has aimed at Taiwan. Exports to China, Taiwan’s biggest trading partner and No. 1 overseas investment destination, soared 62 percent in April from a year earlier, after an 82 percent gain in March. Record Revenue That helped Taiwan Semiconductor Manufacturing Co. , the island’s biggest company by market value, forecast revenue would rise this quarter to a record NT$100 billion ($3 billion) to NT$102 billion and allow it to expand its workforce. “We will recruit more than 3,000 engineers this year,” JH Tzeng , spokesman for Taiwan Semiconductor, said yesterday. The world’s largest custom chipmaker also plans to convert 2,400 contract positions to permanent during the year, he said. A separate report yesteerday showed export orders , an indication of shipments in the next one to three months, rose 35.15 percent in April, a seventh monthly increase. “The return of inflation will start to concern the central bank, and the CBC will need to take preemptive measures by starting to withdraw monetary stimulus before the economy gets overheated,” Liu Li-Gang , a Hong Kong-based economist at Australia and New Zealand Banking Group Ltd., said before the GDP release. “However, the uncertainty in Europe may delay a rate hike.” Central banks around the world are trying to gauge whether a 750-billion-euro ($925-billion) package of measures organized by the European Union and the International Monetary Fund to rescue the region’s debt-laden governments will stabilize financial markets. Asia’s Expansion In Singapore, GDP grew an annualized 38.6 percent from the previous three months in the first quarter, and Japan’s economy expanded at the fastest pace in three quarters in the period ended March 31, reports yesterday showed. “Our cargo business nearly tripled in the first quarter from a year earlier, as we benefited from robust export growth,” Bruce Chen , spokesman for China Airlines, Taiwan’s biggest airline company, said by phone yesterday. “Our passenger business also rose after we added new destinations.” Chinese visitors to Taiwan in the first quarter outnumbered Japanese for the first time on record as relaxed rules spurred travel to an island off limits to mainlanders for 60 years. The statistics bureau said yesterday that Chinese visitors tripled in the first quarter from a year earlier. The planned trade accord with China has attracted overseas investors, spurring Taiwan’s dollar in April to its biggest monthly advance since September. The currency reached NT$31.269 per U.S. dollar on April 27, the strongest since August 2008. The Taiwan dollar fell 0.2 percent to close at NT$32.175 against the U.S. currency yesterday, according to Taipei Forex Inc. To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net . Weiyi Lim in Taipei at Wlim26@bloomberg.net

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German Economy Unexpectedly Grew in First Quarter on Exports, Investments

May 12, 2010

By Christian Vits May 12 (Bloomberg) — Germany’s economy unexpectedly grew in the first three months of the year as rising exports and company investment outweighed the effects of the cold winter. Gross domestic product , adjusted for seasonal effects, rose 0.2 percent from the fourth quarter, when it also gained a revised 0.2 percent, the Federal Statistics Office in Wiesbaden said today. Economists predicted stagnation, the median of 31 estimates in a Bloomberg News survey shows. France’s economy grew 0.1 percent in the first quarter after 0.5 percent expansion in the fourth, Paris-based Insee said in a separate report. While the harshest winter in 14 years suppressed construction, latest reports suggest the German economy, Europe’s largest, came roaring back to life when building sites reopened with the arrival of spring. Germany has also found a silver lining in Europe’s sovereign debt crisis. The euro’s 16 percent decline against the dollar since late November is making its exports more competitive abroad. Foreign sales rocketed 10.7 percent in March, the biggest jump in 18 years. “The growth momentum is much better than the figure suggests as harsh weather conditions restrained expansion,” said Andreas Rees , chief German economist at UniCredit in Munich. “We’ll see very, very strong growth in the second quarter due to catch-up effects and the reviving global economy. A weaker euro is the icing on the cake.” The euro rose to $1.2651 at 8:40 a.m. in Frankfurt from $1.2632 before the GDP report was released. It’s still close to a 14-month low. Exports, Investment The statistics office said exports and capital investment made positive contributions to first-quarter GDP. Rising inventories and government spending also supported growth, compensating for the negative impact of construction, weaker private consumption and imports. From a year earlier, GDP increased 1.6 percent when adjusted for the number of working days. Fourth-quarter GDP growth was revised up from an initial estimate of zero. The Bundesbank forecasts expansion of 1.6 percent this year after the economy contracted 5 percent in 2009, the most since World War II. Cold weather kept consumers at home and closed building sites over winter, weighing on economic growth. The spring thaw released pent-up demand. Industrial production jumped 4 percent in March, driven by a 26.7 percent surge in construction activity. Companies Upbeat Deutsche Post AG, Europe’s biggest postal service, yesterday raised its full-year outlook after package and freight volumes increased. Germany’s Adidas AG, the world’s second- largest sporting-goods maker, expects to double its profit this year as the soccer World Cup boosts sales, Chief Executive Officer Herbert Hainer said on May 6. Growth across the 16-nation euro region may be uneven this year as governments rein in spending to cut budget deficits. Finance ministers this week announced an unprecedented aid package worth almost $1 trillion to counter the fiscal crisis that engulfed Greece and undermined confidence in the euro. “The rescue package will avoid an uncertainty shock,” said Joerg Kraemer , chief economist at Commerzbank AG in Frankfurt. “The German economy will continue to grow more strongly than the rest of the region in coming months.” To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net

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China’s Stocks Fall, Entering Bear Market on Inflation, Property Concerns

May 11, 2010

By Bloomberg News May 11 (Bloomberg) — China’s stocks dropped, sending the benchmark index into a bear market, on concern the government will raise borrowing costs to combat inflation and unveil more measures to curb soaring housing prices. The Shanghai Composite Index , which tracks the bigger of China’s stock exchanges, fell 51.31, or 1.9 percent, to close at 2,647.44, the lowest in almost a year. The measure slid 21 percent from the close of 3,338.66 on Nov. 23, a sign analysts say is a bear market. The CSI 300 Index lost 2 percent today. China’s consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said today. Faster inflation and the prospect of asset bubbles put pressure on the government to raise interest rates for the first time since 2007. “If inflation isn’t contained, the central bank will have to raise interest rates,” said Zhao Zifeng , who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “We’ll still need to gauge housing prices in the coming months as the previous crackdown measures were put in place not long ago. More tightening policies could follow.” The Shanghai index has slid 19 percent this year, the world’s worst performer among the 93 gauges tracked by Bloomberg, on concern government will increase efforts to curb speculation in the property market, hurting economic growth. The People’s Bank of China has ordered lenders to set aside more deposits as reserves three times in 2010. The government also imposed a ban last month on loans for third-home purchases and raised mortgage rates and down-payment requirements for second home purchases to curb housing prices. China’s government aims to contain full-year inflation at 3 percent and avert property bubbles after record credit growth drove an economic rebound. — Zhang Shidong . With assistance from Shiyin Chen in Singapore. Editors: Allen Wan , Linus Chua To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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China Inflation Accelerates as Loans Surge, Property Prices Rise by Record

May 10, 2010

By Bloomberg News May 11 (Bloomberg) — China’s inflation accelerated, new lending topped economists’ estimates and property prices rose by a record, highlighting the threat of overheating in the fastest- growing major economy. Consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said in statements today. New lending of 774 billion yuan ($113 billion), announced by the central bank, was more than any of 24 economists forecast. Chinese policy makers should focus on preventing excessive gains in asset prices and liquidity as Europe’s rescue package makes another global slump less likely, central bank adviser Li Daokui said in an interview yesterday. The increase in property prices across 70 cities was the most since data began in 2005, defying a government crackdown on speculation that intensified last month. “Price pressures have been building throughout the economy, strengthening the case for higher interest rates and a stronger yuan,” said Brian Jackson , a Hong Kong-based strategist at Royal Bank of Canada. “China is at risk of overheating, with spot fires breaking out in various parts of the economy.” The gain in consumer prices compared with a 2.4 percent increase in March and the 2.7 percent median estimate of 30 economists surveyed by Bloomberg News. Producer prices jumped 6.8 percent, also topping estimates, today’s release from the statistics bureau showed. Record Credit Growth China’s government aims to contain full-year inflation at 3 percent and avert property bubbles after record credit growth drove an economic rebound. Investors are concerned stimulus withdrawal and a slowdown in construction could choke off growth after an 11.9 percent expansion in the first quarter. The Shanghai Composite Index dipped briefly into a bear market yesterday, sliding 20 percent from a November high, even as global stocks surged on measures to end Europe’s debt crisis. The benchmark rose 0.7 percent as of 10:15 a.m. today. Industrial production rose 17.8 percent in April from a year earlier, after an 18.1 percent gain in March, today’s data showed. That compared with economists’ median forecast for an 18.5 percent gain. Investment, Retail Sales Baoshan Iron & Steel Co. , China’s largest publicly traded steelmaker, has been running plants at full capacity as carmakers including General Motors Co. said they can’t build enough vehicles to meet demand. Urban fixed-asset investment climbed 26.1 percent in the first four months from the same period in 2009, the statistics bureau said today. Retail sales rose 18.5 percent in April from a year earlier, the agency said. The gain in producer prices was the biggest in 19 months and more than economists’ 6.5 percent median estimate. In March, the costs of goods as they leave the factory rose by 5.9 percent. While developers Guangzhou R&F Properties Co. and China Overseas Land & Investment Ltd. are reporting slowing sales as the government intensifies the crackdown on property speculation, April prices rose 12.8 percent, the most since data began in 2005. Tightening Lending Besides tightening rules for second and third-home purchases, China has increased banks’ reserve requirements three times this year, withdrawing cash from the financial system. Still, policy makers have left benchmark interest rates and the yuan’s peg to the dollar unchanged. “The double-dip risk in the world economy is likely to be reduced to a minimum,” Li said in an interview in Beijing, expressing his personal view of the European aid plan. “China’s growth rate is not a problem this year, and the main policy focus should be on preventing excessive gains in asset prices and liquidity.” The central bank said yesterday that the nation faces increasing risks to “price stability,” citing loose global monetary conditions, rising commodity prices and the world’s recovery. Rising labor, resource and environmental costs in China may push up prices, it added. China International Capital Corp. yesterday cut its estimate for China’s economic growth this year to 9.5 percent from 10.5 percent, citing property tightening measures and overseas “uncertainties.” Adjustments to interest rates and changes to currency policy may be delayed, the investment bank said. European policy makers yesterday unveiled a loan package worth 750 billion euros ($962 billion), including International Monetary Fund backing, to stem a sovereign debt crisis that threatened to shatter confidence in the euro. — Kevin Hamlin , Li Yanping , Sophie Leung , Jay Wang , Chia-Peck Wong . Editors: Paul Panckhurst , Michael Heath . To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

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Pound Poised to Rally as Gordon Brown’s Economy Rebounds on Home Lending

May 10, 2010

By Anchalee Worrachate and Ben Levisohn May 10 (Bloomberg) — Investors are turning the most bullish on the pound versus the euro since the collapse of Lehman Brothers Holdings Inc. in 2008 as they judge the U.K. economy a better bet than the rest of Europe’s. Even as general elections failed to produce a winner for the first time in more than 30 years and the nation’s debt load threatens a credit downgrade, the premium traders pay to bet sterling will weaken against the euro has all but evaporated in the past 10 weeks. The pound gained 4 percent versus the euro in that time. Purchasing power parity, a measure of the relative cost of goods, shows the U.K. currency is 13 percent undervalued, based on data compiled by Bloomberg. Growth in home-loan approvals and consumer confidence , as well as falling claims for jobless benefits, are buoying Britain’s currency, ahead of a new government that will replace Prime Minister Gordon Brown’s defeated Labour administration. The euro tumbled 4.1 percent against the dollar last week as Greece’s debt crisis spread. “Europe is getting worse and worse every week and Britain is getting better,” said John Taylor , who helps oversee $7.5 billion as chairman of New York-based FX Concepts Inc., manager of the world’s largest currency hedge fund. “The pound isn’t a great currency but it’s a hell of a lot better than the euro.” Changing Forecasts Sterling, trading at 87.25 pence per euro at 7:53 a.m. in London today, will appreciate to 80 pence by the end of the year, BNP Paribas SA said on May 6, changing its forecast from a decline to 97 pence. Bank of Nova Scotia, Canada’s third-largest lender, changed its prediction to 82 pence from 90. European policy makers yesterday unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to resolve the sovereign-debt crisis that’s undermining the euro. “The weaknesses in the EU framework that have emerged are much bigger than we initially thought,” said Camilla Sutton , a Bank of Nova Scotia currency strategist in Toronto. “The problems for the U.K. are significant. The problems facing the euro zone are far bigger.” The last time sterling traded at 80 pence per euro was in November 2008, less than two months after Lehman filed for bankruptcy on Sept. 15 amid a banking crisis that drove the global economy into its deepest postwar recession. The pound is up 2.4 percent from its low this year on March 10, after falling 7.4 percent the previous six weeks, Bloomberg Correlation-Weighted Indexes show. ‘Disappointed’ Traders “People who bet a few months ago that the pound will fall because of the prospect of a hung parliament must have been disappointed because the pound has been quite resilient,” said Stephen Jen , a managing director at hedge fund BlueGold Capital Management LLP in London and a former International Monetary Fund economist. “When it comes to currencies, I tend to look at the economic outlook and valuation. The U.K. economy is flexible and recovering and it’s cheap.” Factory production, which Bank of England policy maker Kate Barker said on March 9 was failing to benefit from the pound’s weakness, is rebounding. A manufacturing index based on a survey of companies by Markit Economics and the Chartered Institute of Purchasing and Supply rose to 58 in April, the highest level in 15 1/2 years, according to a May 4 survey. Cookson Group Plc, the world’s biggest maker of ceramic linings for metal smelters, said April 26 that first-half profit will rise as much as 20 percent. Dyson Ltd., a maker of bagless vacuum cleaners, said last month it plans to recruit 350 engineers and scientists to work on new products. Risk Reversals Mortgage approvals increased for the first time in four months in March, the Bank of England said May 4. Traders turned the most bullish on the pound versus the euro last week since October 2008. The premium for one-month call options, which grant the right to buy the euro against the pound, fell to a low of minus 0.5 percentage point on May 6, relative to puts, which grant the right to sell. It closed at 1.4 percentage points on March 1. Economic growth will accelerate to a 2.2 percent annual rate by the end of the year, from minus 0.3 percent in the first quarter of 2010, according to the median of nine analyst forecasts compiled by Bloomberg. Europe’s economy may grow 1 percent, the data show. Interest Rates As the economy expands, the Bank of England may raise interest rates to cool inflation, according to HSBC Holdings Plc and Goldman Sachs Group Inc. Consumer prices rose 3.4 percent in March from a year earlier, breaching the central bank’s upper limit for the second time this year, the National Office of Statistics said April 20. The European Central Bank may cut rates to stave off a slump fueled by Greece’s debt crisis, Citigroup Inc. said May 4. “The BOE will try to be proactive in bringing inflation under control,” said Paul Mackel , a director of currency strategy at HSBC in London. “Growth will be strong enough to stomach any particular tightening.” While HSBC expects rates will rise to 1.25 percent this year from the record low 0.5 percent, “if the political situation turns out to be much more uncertain than has been the case that type of view would be less warranted,” Mackel said. Liberal Democrat leader Nick Clegg , who holds the balance of power after the election, held at least three sessions of talks with Conservative David Cameron during the weekend on a proposed alliance to oust Brown. 1974 Precedent The last time a British election failed to produce a clear winner, it took four days before Conservative leader Edward Heath resigned as premier, allowing the Queen to name Labour’s Harold Wilson to head a minority government. The pound fell 28 percent the next two years and the government’s failure to rein in the budget deficit led to an IMF bailout. A deficit that is almost 12 percent of the economy, compared with 3.3 percent in Germany, may weigh on sterling. Standard & Poor’s affirmed its “negative” outlook on the U.K.’s AAA rating on March 29 “in the absence of a strong fiscal consolidation plan.” Moody’s said March 15 that Britain has moved “substantially” closer to losing the top rank as debt costs climb. Fitch Ratings said March 24 the pace of deficit reduction is too slow. “The problems aren’t radically different than those that are plaguing southern Europe,” said David Gerstenhaber , founder of New York-based Argonaut Management LP, which oversees about $1 billion. “On a structural basis, it’s running a major budget deficit and has engaged in significant quantitative easing; more may be in store, which would challenge the currency if that comes to pass.” ‘Slim’ Chance The likelihood that a U.K. coalition government will hurt the pound “seems slim,” Mansoor Mohi-uddin , global head of the currency strategy at UBS AG in Singapore, wrote in a report April 26. “All political parties are committed to cutting Britain’s record budget deficit. Any future coalition government would agree to tighten fiscal policy through a new budget this summer. Moreover, the U.K. doesn’t face runaway inflation as it did in the 1970s.” Rising yields on British government bonds relative to German bunds may attract investors to the pound, according to Citigroup. Two-year gilts yield 0.54 percentage point more than bunds, up from minus 0.02 percentage point at the start of the year. Purchasing Power Parity Surpassing 0.3 percentage point “was a key pivot towards the end of 2008,” when the pound gained 3.4 percent in the final quarter of the year, Citigroup technical analysts including Tom Fitzpatrick in New York and London-based Shyam Devani wrote in a note to clients on April 21. “Euro-sterling is vulnerable.” Purchasing power parity, a measure of the cost of goods relative to other countries, shows the pound is 13 percent below its true value against the euro, the fourth-largest disparity among the currencies of the Group of 10 countries, Bloomberg data show. “You’ll know the pound has gone too far when the Brits are flying over to Europe to do their shopping,” said Jacob Bourne , head of inflation trading at Capstone Investment Advisors in New York. To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net ; Ben Levisohn in New York at blevisohn@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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South Korea’s Exports Increase for Sixth Straight Month on Global Recovery

April 30, 2010

By Jungmin Hong and Eunkyung Seo May 1 (Bloomberg) — South Korea’s exports increased for a sixth consecutive month in April as a recovering global economy boosted demand for semiconductors and cars. Overseas shipments rose 31.5 percent from a year earlier to $39.88 billion, the Ministry of Knowledge Economy said in Gwacheon today. That compared with the median forecast of a 31.8 percent gain in a Bloomberg News survey of ten economists. Imports climbed 42.6 percent to $35.47 billion, leaving a trade surplus of $4.41 billion. Economies across Asia are reporting faster growth as the region leads the world out of the worst global recession since World War II. Samsung Electronics Co. , Asia’s biggest maker of semiconductors, flat screens and mobile phones, posted a seven- fold increase in profit for the first quarter and Hyundai Motor Co. boosted sales in the U.S. and China this year. “Both exports and imports will likely grow further as the global economy is gathering pace,” Kim Jae Eun , an economist at Hyundai Securities Co. in Seoul, said before the report. “It will lead to a strong start for the second quarter.” Overseas sales to China, the biggest buyer of South Korean goods, rose 50.4 percent in the first 20 days of April, today’s report showed. Shipments to the U.S. climbed 28.5 percent and those to Japan gained 32.4 percent over the same period. The World Bank forecasts China’s economy will expand 9.5 percent this year, with imports climbing 16.4 percent. The International Monetary Fund this month upgraded its global growth forecast for 2010 to 4.2 percent from 3.9 percent. Display Panels Shipments of semiconductors increased 97.9 percent last month and display-panel exports gained 38.4 percent, according to today’s report. Overseas sales of cars advanced 61.8 percent. South Korea, Asia’s fourth-largest buyer of crude oil, imported 1 percent less of the fuel in April from a year earlier, the ministry said today. Imports declined to 69.6 million barrels last month from 70.3 million barrels a year ago. Taiwan’s exports climbed in March for a fifth month, soaring 50.1 percent from a year earlier, as a pickup in global growth boosted demand for the island’s electronic goods. Malaysia’s shipments rose 18.4 percent in February from a year earlier after advancing 37 percent in the previous month, the most in more than 11 years. South Korea’s government forecasts exports will rise 13 percent this year to $410 billion, compared with a 14 percent decline in 2009. The nation’s trade surplus in the second quarter is expected to be bigger than the reading in the first three months of the year which was $3.3 billion, the ministry said today. Factory Output Industrial production in South Korea grew for a ninth straight month in March, jumping 22.1 percent from a year earlier, the statistics office said yesterday. That was more than the 19.8 percent median forecast in a Bloomberg News survey of 14 economists. Asia’s fourth-largest economy accelerated more than estimated last quarter as the global recovery spurred demand for electronics and consumer spending advanced, prompting the government to warn about speculative gains in the currency . As stronger growth pushed the won close to a 19-month high against the U.S. dollar, the Ministry of Strategy and Finance said on April 27 that investors have bet “excessively” on the currency’s rise. A strong won could hurt exporters. ‘Upward Pressure’ The government’s comments on the won put a brake on the currency’s appreciation. The currency, which has gained 15 percent in the past year, rose 2.1 percent in April. The Kospi stock index yesterday closed 0.8 percent higher at 1,741.56, advancing for the 12th straight week, the longest winning streak since June 2007. “Strong exports and foreign investors’ purchase of Korean stocks and bonds will likely add upward pressure on the won, which will likely prompt more government intervention,” Kim at Hyundai Securities said. The Bank of Korea kept the benchmark interest rate at a record-low 2 percent for a 14th straight month on April 9 as the government presses for low borrowing costs to spur the economy ahead of provincial elections in June. To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net Jungmin Hong in Seoul at jhong47@bloomberg.net

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Japan Household Spending, Wages Rise as Consumer Prices Tumble 13th Month

April 29, 2010

By Aki Ito and Keiko Ujikane      April 30 (Bloomberg) — Japan’s household spending, wages and job openings increased, while consumer prices tumbled for a 13th straight month, signaling a sustained recovery that’s still not strong enough to end deflation.      Today’s statistics were released hours before Bank of Japan policy makers are scheduled to announce their decision on monetary policy. Board members must decide whether to step up their efforts to contain price declines by expanding a 20 trillion yen ($212 billion) lending program for lenders. The bank is forecast to keep its benchmark interest rate near zero. “The economy’s recovery is steadily continuing,” said Hiroshi Miyazaki , chief economist at Shinkin Asset Management Co. in Tokyo. Even so, “deflationary pressures are still deep- seated in the economy,” he said. Household outlays rose 4.4 percent in March from a year earlier, the biggest gain since May 2004, the statistics bureau said today in Tokyo. Consumer prices excluding fresh food slid 1.2 percent from a year earlier. Wages advanced 0.8 percent, the first increase in 22 months, the Labor Ministry said. The ratio of jobs to applicants climbed to 0.49, meaning there are 49 jobs for every 100 candidates, the Labor Ministry said. The unemployment rate unexpectedly climbed to 5 percent as college graduates entered the job market. The median estimate of economists was for the rate to stay at 4.9 percent. Factory Output A Trade Ministry report showed industrial production climbed 0.3 percent in March from February, when output declined for the first time in a year. The increase was less than the 0.8 percent median estimate of 28 economists surveyed by Bloomberg. Output climbed 6.7 percent in the first quarter, the fourth straight gain. Inventories declined 1.6 percent last month, signaling companies’ excess capacity is narrowing and deflationary pressure is moderating, said Curtis Freeze , chairman of Honolulu-based Prospect Asset Management Inc. “ As long as that figure contracts we’re in good shape,” Freeze said on Bloomberg Television. The Nikkei 225 Stock Average rose 1.4 percent at the lunch break in Tokyo. The yen traded at 94.10 per dollar at 11:56 a.m. in Tokyo from 94.05 before the figures were published. The yield on Japan’s 10-year bond was unchanged at 1.285 percent. Exports to Asia have fueled Japan’s recovery from its worst postwar recession. A pickup in demand from the region prompted Canon Inc. to raise its full-year profit forecast and helped JFE Holdings Inc. post higher earnings in the three months ended March 31. Firm Recovery “We are on track for a firm recovery,” Yoshiki Shinke , a senior economist at Dai-Ichi Life Research Institute in Tokyo. Today’s numbers “prove that the pickup in exports is starting to benefit households,” he said. Figures released earlier this month showed retail sales surged the most in 13 years in March and consumer confidence climbed to the highest level in more than two years. Still, deflation continues to damp the outlook for companies. Matsuya Foods Co. and Zensho Co. , operators of beef- bowl restaurants, this month slashed prices, following Yoshinoya Holding Co., the country’s biggest chain. Yoshinoya said this month its loss will expand almost seven times from an initial forecast because of the discount competition. Production Forecasts The economic recovery may slow as the effects of government stimulus measures wear off, according to economist Mari Iwashita chief market economist at Nikko Cordial Securities Co. in Tokyo. Companies surveyed by the Trade Ministry said they will increase output 3.7 percent in April before cutting it by 0.3 percent in May, today’s report showed. BOJ Governor Masaaki Shirakawa and his colleagues will hold the key rate at 0.1 percent today, all 16 economists surveyed by Bloomberg News said. Thirteen said they expect the board to refrain from adding funds to the banking system. Policy makers have signaled over the past month that they may raise their projections for gross domestic product and prices in a twice-yearly outlook report later today. Finance Minister Naoto Kan said today that the central bank may forecast deflation will end next fiscal year by predicting consumer prices will either increase or be unchanged. Currently the board sees a 0.2 percent decline for the year ending March 2012 and a 0.5 percent drop in the current year. The central bank is expected to announce its policy decision early afternoon and release its economic forecasts at 3 p.m. in Tokyo. Shirakawa will speak to the press at 3:30 p.m. Kan last week last week called for price gains of as much as 2 percent. The ruling Democratic Party of Japan this month said it may include an inflation target in its platform for a July upper house election. The BOJ will face “mounting pressure as the election approaches,” said Hiroaki Muto , a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “For politicians, it’s easy to blame the central bank for lingering deflation and stagnant economic growth, and by doing that they can show the public they’re taking some action.” To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net ; Aki Ito in Tokyo at aito16@bloomberg.net

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New Zealand Consumer Prices Rose Less-Than-Expected 0.4% in First Quarter

April 19, 2010

By Tracy Withers April 20 (Bloomberg) — New Zealand consumer prices rose less than economists expected in the three months through March, giving central bank Governor Alan Bollard more room to delay an interest-rate increase until the third quarter. Consumer prices increased 0.4 percent from the fourth quarter, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of 14 economists was for a 0.6 percent gain. Annual inflation was 2 percent, unchanged from the year through December. Bollard said March 11 he expected to increase the benchmark interest rate from a record-low 2.5 percent around the middle of this year as the economy rebounds. Indicators in the past month suggest a first-quarter decline in housing and consumer spending will slow the recovery, boosting the case for the central bank to hold off raising borrowing costs. “ There’s nothing to really push the Reserve Bank into going in June,” said Nick Tuffley , chief economist at ASB Bank ltd. in Auckland, who previously expected an increase that month. “The odds are marginally in favor of July over June at the moment.” New Zealand’s dollar declined to 70.88 U.S. cents at 11:25 a.m. in Wellington from 71.25 cents immediately before the report. Ten of 15 economists surveyed by Bloomberg News last week say Bollard will raise the official cash rate at the meeting on June 10. Two tip an increase on April 29 and three expect a move in the third quarter. Traders Bet Traders are betting the rate will be 4.01 percent in a year’s time, down from 4.13 percent immediately before the report, according to a Credit Suisse index based on swaps trading. New Zealand’s economy expanded 0.8 percent in the fourth quarter, the fastest pace in two years, as it emerged from a recession that began in early 2008. The central bank forecast on March 11 that growth will accelerate to 0.9 percent in the first quarter. Cameron Bagrie , chief economist at ANZ National Bank Ltd. in Wellington, said that pace of recovery may not occur until the second half of the year. Retail sales declined for the second time in three months in February, according to government figures on April 14. First-quarter house sales slumped 12 percent from the fourth quarter, according to Real Estate Institute figures on April 16. Spare Capacity Inflation pressures are subdued, the New Zealand Institute of Economic Research Inc . said April 6, citing a quarterly survey. Its gauge of capacity utilization, or spare capacity in the economy, fell in the first quarter and companies expect profits will decline in the second quarter because they are unable to pass on cost increases, it said. Bollard is required by the government to keep annual inflation between 1 percent and 3 percent on average over the medium term. He expects inflation will accelerate to 2.8 percent by the end of 2011. Food and fuel stoked inflation in the quarter, the statistics agency said. Food prices increased 1 percent led by fruit, meat, fresh milk, cheese and butter. Gasoline prices surged 6.9 percent. Excluding fuel, consumer prices would have been unchanged in the quarter, the agency said. Bollard’s primary focus is on non-tradable inflation, a core measure of prices that aren’t influenced by currency fluctuations and fuel. University Fees Non-tradable prices rose 0.5 percent from the fourth quarter, today’s report showed. The measure gained 2.1 percent from a year earlier, the smallest gain in more than eight years. Non-tradable inflation was stoked by a 4.8 percent jump in education prices reflecting higher university course fees and the removal of government subsidies for adult and community education courses. Rents increased 0.5 percent and the cost of purchasing a new home rose 0.2 percent, today’s report showed. Land taxes and charges for water and waste disposal were unchanged. Electricity prices gained 0.2 percent. Tradable prices gained 0.1 percent from the fourth quarter, as the price of imported computers, cameras, appliances and new car declined. International air travel costs dropped 8.3 percent. Excluding the increase in gasoline, tradable prices fell 0.6 percent, the agency said. From a year earlier, tradable prices increased 2 percent. To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

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Aussie Drive to Parity Derailed by Yuan, Rate Outlook

April 19, 2010

By Candice Zachariahs April 19 (Bloomberg) — The Australian dollar’s push to parity with the U.S. dollar is in jeopardy as central bankers signal they may slow the pace of interest-rate increases and China moves closer to revaluing the yuan. After rallying 28 percent the past 12 months, more than any other currency tracked by Bloomberg, Morgan Stanley predicts the Aussie may tumble 16 percent by year-end because higher borrowing costs will curb growth. Barclays Capital, which in December forecast a peak of $1 in 2010, now expects the Australian dollar to be the biggest loser from what it calls a “significant” yuan revaluation. The currency is “fully priced,” said Scott Ainsbury , a New York-based money manager who helps invest about $9 billion at FX Concepts Inc., the world’s biggest foreign-exchange hedge fund. “It’s probably time to lighten up,” he said. The Aussie may weaken about 3 percent before rising by year-end. Traders and strategists say Reserve Bank of Australia Governor Glenn Stevens may have increased borrowing costs too far, too fast after lifting the nation’s overnight cash rate to 4.25 percent this month from 3 percent in October. Home-loan approvals fell in February for a fifth month, and retail sales and building approvals declined more than forecast, according to the median estimates of 19 economists in a Bloomberg survey. Avoiding Recession The RBA’s most aggressive tightening cycle since 2000 comes amid growing speculation China will allow its currency to appreciate to help cool an economy that expanded at the fastest pace in almost three years last quarter. That means China, Australia’s largest trading partner, may buy fewer commodities produced by companies such as Melbourne’s BHP Billiton Ltd. and Perth’s Woodside Petroleum Ltd. , demand that helped Australia avoid the global recession and expand 2.7 percent in 2009. “A yuan revaluation could prove to be a reason for a market rather long Aussie to trim its positions,” Sean Callow , a senior currency strategist at Westpac Banking Corp. in Sydney, said about the bullish sentiment. “As part of an effort to cool inflation and tighten monetary conditions, a revaluation would certainly be a negative for the Aussie.” China told banks to stop loans for third-home purchases in cities with excessive property price gains and suspend lending to buyers who can’t provide tax returns or proof of social security contributions, according to a State Council statement on April 17. Currency Forecasts The Aussie, as the currency is known by traders, fell 1 percent last week to 92.43 U.S. cents, after rising from 72.25 U.S. cents a year earlier. It declined 0.4 percent to 92.02 cents as of 12:40 p.m. in Sydney, compared with April 16. Measured by Bloomberg Correlation-Weighted Currency indexes, Australia’s dollar dropped 0.93 percent last week, the most this year. Australia’s currency will likely trade at 93 cents by June, according to the median estimate of 26 strategists surveyed by Bloomberg. In January, they predicted an exchange rate of 95 cents. The year-end estimate is 92 cents. “Valuations are extremely stretched,” Calvin Tse , a strategist at Morgan Stanley, wrote in an April 15 research report to clients. The firm is the most bearish surveyed, expecting a drop to 84 cents by the end of this quarter and to 78 cents in December. Traders are more bullish than strategists. The difference in the number of wagers by hedge funds and other large speculators on a gain compared with those on a drop — so-called net longs — rose to 80,674 on April 13, the most in three years, figures from the Washington-based Commodity Futures Trading Commission show. Housing Cracks “The only thing we don’t like about the Australian dollar is that everyone else likes it,” said Axel Merk , president of Palo Alto, California-based Merk Investments LLC, which manages $550 million in mutual funds that specialize in currencies. “If the Chinese allow their currency to move higher they have more purchasing power, and they can buy more commodities.” Merk’s Hard Currency Fund , designed to protect against a weaker U.S. dollar by investing in currencies of countries that target inflation, has about 11 percent of its cash in the Aussie, which may reach parity this year, he said. Rate increases are starting to temper the housing market. Mortgage costs have risen more than the RBA’s cash target, to 6.25 percent in March, based on the average discounted floating rate charged by the nation’s four biggest lenders. ‘Soft Elements’ Home-loan approvals fell 1.8 percent in February to 50,287 from January, when they declined a revised 7.3 percent, the statistics bureau said April 12 in Sydney. Two weeks earlier, the government said retail sales dropped 1.4 percent from January, and the number of permits granted to build or renovate houses and apartments decreased 3.3 percent. “Australia has some soft elements in its economy and these interest rate hikes will bring them to the fore,” said Venkatraman Anantha-Nageswaran , the Singapore-based global chief investment officer at Bank Julius Baer & Co., a 120-year-old Swiss private bank. “I wouldn’t buy the Aussie dollar at current levels.” Interest-rate swaps showed this month traders expect that tightening of monetary policy by the U.S. Federal Reserve over the next 12 months will match that by the RBA, based on Credit Suisse AG indexes. Australia’s benchmark compares with a range of zero to 0.25 percent in the U.S. and 0.1 percent in Japan. Rate Outlook Royal Bank of Scotland Plc forecast in January the Aussie would be at parity with the greenback by March. It now expects a peak of 95 U.S. cents in June and September before slipping to 90 cents by year-end, as Australia’s rate advantage over the U.S. diminishes, said Greg Gibbs , a currency strategist in Sydney with RBS. “The situation where we needed historically low interest rates has passed,” RBA Assistant Governor Guy Debelle told a Senate committee April 12. “So we’re moving back to something around average levels, which is not far from where we are now.” High relative rates are one of two main reasons why international investors have put money into the Aussie. The other is China, where 4 trillion-yuan ($586 billion) of stimulus spending on housing, highways and power grids sparked record imports of iron ore from Australia, the largest shipper. China’s government said April 15 its economy expanded at an 11.9 percent pace in the first quarter. Growth is so strong that Chinese officials are taking steps to keep the economy from overheating. The cabinet raised minimum mortgage rates and down payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation after prices rose at a record pace in March. Yuan Forecasts Economists expect the next steps will include allowing the yuan to strengthen, with the median estimate in a Bloomberg News survey climbing 3 percent to 6.62 per dollar by year-end, from 6.8261 today. The currency has traded at about 6.8 to the dollar since July 2008. Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill in London said China may allow the yuan to strengthen 2 percent to 5 percent as soon as this week and permit it to float freely within five years. A revaluation may drive up prices of commodities as dollar- based imports to China become more affordable, Citigroup Inc. said in March. There could be a repeat of the price surge in 2005, when the Reuters/Jefferies CRB Index of 19 raw materials surged about 10 percent in the first six weeks after China ended its peg, the bank said. Negative Reaction “The Aussie has generally reacted negatively to any sign of a tightening of policy by China,” said David Forrester , a Singapore-based strategist at Barclays. Barclays predicts the Aussie will weaken to 84 cents in the next six months, as China allows a 5 percent annualized rate of appreciation and its central bank raises rates three times this year. Australia’s dollar fell as much as 1.3 percent intra-day to 91.71 cents on Jan. 12 when the People’s Bank of China announced higher bank reserve requirements and guided its benchmark one- year bill yield higher for the first time in 20 weeks. It surged 1.3 percent on July 21, 2005, when China increased the yuan’s value by 2.1 percent, only to slump 4.3 percent over the next five months, the second-biggest drop after the yen among the most-traded currencies tracked by Bloomberg. “We had a tightening in monetary conditions globally outside of Australia, while Australia was sitting pat, so its interest-rate advantage was eroded,” Forrester said. “We expect a similar outcome in the coming six months.” To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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China Faces `Close Call’ on Interest-Rate Rise After Growth Surges 11.9%

April 15, 2010

By Bloomberg News April 16 (Bloomberg) — China’s growth spurt in the first quarter came with a slowdown in inflation, complicating decisions on when and how to further tighten monetary policy. The economy grew 11.9 percent from a year earlier, the biggest gain since the second quarter of 2007, the statistics bureau said in Beijing yesterday. Consumer prices rose less than economists expected, climbing 2.4 percent in March. Within hours of the data, the government announced measures to cool the real-estate market, underscoring concern that asset bubbles may be forming after a record increase in values in March. Economists are split on the likely timing of the nation’s first rate increase since 2007, with Royal Bank of Canada predicting one in the next fortnight, while Bank of America- Merrill Lynch sees no move until the fourth quarter. “There is still no consensus among policy makers on interest-rate hikes and it is a close call whether the central bank can win over the dovish voices,” said Wang Qian , chief China economist at JPMorgan Chase & Co. Tightening measures may continue to include loan curbs, reserve requirements for banks and industry-specific measures to cool asset prices, Wang said. A Bloomberg News survey of 19 economists after the data yesterday showed that three expect an interest-rate increase in the next fortnight. Four say May, four predict June and eight bet on the second half of the year. Eleven of 15 economists said that the yuan would strengthen against the dollar this quarter, meaning that China will scrap a peg in place since July 2008 to aid exporters. Betting on Yuan Non-deliverable yuan forwards were little changed at 6.6145 per dollar as of 8:55 p.m. in Hong Kong yesterday, suggesting the currency will gain about 3.2 percent in the next 12 months. Speculation on Chinese currency policy intensified after U.S. Treasury Secretary Timothy F. Geithner had an unscheduled meeting with Chinese Vice Premier Wang Qishan in Beijing on April 8 and delayed a report which could brand the nation a currency manipulator. In Singapore, the central bank this week announced a one-time revaluation. China’s economic growth beat the 11.7 percent median estimate in a Bloomberg News survey of economists while inflation was below a 2.6 percent forecast and February’s 2.7 percent. In a report, UBS AG yesterday endorsed an assessment by China’s cabinet on April 14 of the economic situation as “extremely complicated” and added that policy makers and investors need to pay attention to “the rising risk of asset bubbles and resource misallocation.” Output Climbs Industrial production climbed 18.1 percent in March and retail sales increased 18 percent, yesterday’s data showed. Car sales leapt 76 percent in the first quarter from a year earlier, with Mercedes-Benz (China) Ltd. reporting a doubling. Urban fixed-asset investment increased 26.4 percent in the first quarter from a year earlier. Producer prices rose 5.9 percent in March. A separate report this week showed that property prices jumped a record 11.7 percent in March. China’s data added to signs that Asia’s recovery is strengthening. Singapore’s economy expanded in the first quarter at the fastest pace since at least 1975, with 32.1 percent annualized growth from the previous three months, a report showed this week. The Bank of Japan raised yesterday its economic assessment for seven of the country’s nine areas.     While China doesn’t release quarter-on-quarter figures, Royal Bank of Scotland estimated 14.5 percent economic growth on that basis. The median of seven economists’ estimates yesterday was 11.2 percent. Controlling Lending Instead of raising rates like Australia and India, China has targeted a 22 percent reduction in new loans from a record of $1.4 trillion last year and twice asked lenders to set aside more cash as reserves. The last time China’s growth accelerated to more than 11 percent, in the first quarter of 2006, the central bank raised rates within a month. China’s cabinet on April 14 signaled caution in ending crisis policies, saying first-quarter economic growth was largely driven by stimulus policies and a comparison with low levels in 2009. After the GDP announcement, the government announced requirements for bigger home down payments and said it will study extra taxes, including on individuals’ profits from property sales. “The case for policy tightening remains intact given the risks of China’s economy overheating,” said Brian Jackson , a Hong Kong-based strategist at Royal Bank of Canada. Yesterday’s property measures “suggest policy makers remain reluctant to use the blunt instrument of higher interest rates, but it is unlikely that extra fine-tuning will be enough to slow down the property market.” — Li Yanping , Kevin Hamlin , Jay Wang. Editors: Paul Panckhurst , John Fraher. To contact the Bloomberg News staff on this story: Yanping Li in Beijing at yli16@bloomberg.net

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