Finance Blog number 1

The current recession has created at least one growth industry: use of the phrase “green shoots.”

Since Federal Reserve Chairman Ben S. Bernanke first uttered the words almost four months ago to describe signs of a thaw in frozen credit markets, instances of the botanical metaphor in the press have climbed sevenfold. A Google search for “green shoots” returns 4.86 million hits.

“These may be the two most overused and annoying words of my investment career,” said John Mauldin, president of Millennium Wave Advisors LLC in Arlington, Texas. “Every possible sign of a recovery is anointed with the phrase.”

Declining interest rates on mortgages and business loans led Bernanke to say on the March 15 CBS News program “60 Minutes” that he detected “green shoots” in some financial markets where the Fed had acted to restart lending. The locution appeared 3,123 times in news articles last month, up from 436 in February, according to research by Japanese brokerage Nomura Holdings Inc.

Both bears and bulls have pressed the phrase into service.

Jim O’Neill, the chief economist at Goldman Sachs Group Inc., said April 27 that the green shoots of global economic recovery are “turning into daffodils,” when he upgraded his forecast for 2010 world growth to 3.2 percent from 2.8 percent.

‘It’s Moss’

“Housing is still a drag on the economy,” David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors, said May 26. “It may be green shoots, but they are growing slowly. It’s moss.”

Billionaire investor Warren Buffett joked June 24 that he had yet to see any green shoots, adding that his eyesight may be to blame.

“We’re not seeing them,” Buffett said on CNBC. “I had a cataract operation in my left eye about a month ago and I thought, maybe now I’ll be able to see some green shoots.”

Bernanke’s tendrils of economic hope have been compared with trees and mold. They have been said to be on the verge of blossoming, as well as in danger of withering, browning and succumbing to frost.

Nouriel Roubini, the New York University economist referred to as Dr. Doom for predicting the current crisis, enlisted the phrase to temper budding optimism about the economy.

“People talk a lot about these green shoots,” Roubini said June 22 in Paris cash loans. Yet looking at the economic data, he said, “I see more yellow weeds than green shoots.” Instead, he predicted the recession in the advanced economies would last another six to nine months.

Beyond Economy

The phrase has also spilled over into non-economic realms.

In a June 28 column on the Israeli-Palestinian conflict, Washington Post writer Jim Hoagland said, “Green shoots of peace are glimpsed in some quarters.” A June 21 entry on the Daily Kos blog about Iranian demonstrations carried the title “The Green Shoots of New Peace.”

While Bernanke may be identified with the phrase, he isn’t the first to use it. During the early 1990s recession, Britain’s former Chancellor of the Exchequer Norman Lamont declared that “the green shoots of economic spring are appearing once again.” That comment came back to haunt Lamont when growth failed to appear for months.

Accurate or not, Bernanke’s resurrection of the expression may have done some good this time around. Consumer and business confidence measures improved as it proliferated in the media, according to data compiled by Bloomberg.

‘Grip on the Public’

As “catch-phrases go, I can’t recall another business- related one that has had such a grip on the public,” said Bernie McSherry, a senior vice president at Cuttone & Co., one of the largest floor brokerages at the New York Stock Exchange. “Since green shoots don’t remain mere shoots forever, it’s time to retire the phrase and replace it with something indicative of where the economy is today.”

The term is “overused, not to mention overrated,” said David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates in Toronto. “It is more a comment on the human condition and the innate need for optimism” than an accurate description of the economy and markets, he said.

A substitute phrase may also be needed if the U.S. economy slows down again later this year, said Rosenberg, the former chief North American economist at Merrill Lynch & Co.

“We will not very likely see ‘brown manure’ as the catchy horticultural replacement to green shoots,” he said.

Source

China has a “very stable” foreign currency reserve policy that won’t be suddenly changed, central bank Governor Zhou Xiaochuan said.

“Our foreign exchange reserve policy is always quite stable,” Zhou told reporters at a central bankers’ meeting yesterday in Basel, Switzerland. “There are not any sudden changes.”

The People’s Bank of China on June 26 renewed its call for a new global currency, fueling speculation it will diversify its currency reserves, the world’s largest at more than $1.95 trillion. The comment, made in the central bank’s 2008 review, caused the dollar’s biggest decline against the euro in a month.

China’s reserve policy is aimed at “liquidity, safety and returns,” Zhou said. “You should realize it’s very stable.”

Chinese investors, the biggest foreign owners of U.S. Treasuries, cut holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. That reduction came a month after China boosted its holdings by $23.7 billion to a record.

At the end of 2008, the dollar accounted for 64 percent of global central bank reserves, down from 73 percent in 2001, according to the International Monetary Fund in Washington car insurance quotes.

China and Brazil in May began studying a proposal to move away from the dollar to settle trade and use yuan and reais instead.

‘Currency Swaps’

“We are discussing it,” Zhou said. The aim is to use local currencies “for some trade settlement and project investment. That’s the major thing, it’s not really to use currency swaps.”

Asked about China’s economy, Zhou said it may have grown more in the second quarter than in the first, when gross domestic product rose 6.1 percent from a year earlier, the slowest pace in almost a decade.

“I see that prevailing predictions are that the second quarter is a little bit better than the first quarter,” Zhou said.

Exports have slumped in the face of recessions in the U.S., Europe and most of China’s trading partners.

Still, China’s economy will grow 8 percent this year and achieve more than 9 percent annual expansion in 2011, Cheng Siwei, former vice chairman of the standing committee of the National People’s Congress, said on June 27.

Source

More than 1 in 6 British Airways staff have agreed to work for free, take unpaid leave or work part-time, the airline said Thursday after the announcement of cost-cutting measures last week.

"This is a fantastic first response. I want to thank everyone who has volunteered to help us pull through this difficult period," Willie Walsh, British Airways’ chief executive, said in a statement.

Of the 40,000-strong workforce, 6,940 employees had volunteered for unpaid leave, part-time working or unpaid work by June 24. Their actions will save the company up to $16 million.

British Airways last week asked its tens of thousands of staff to work for free for up to four weeks, spokeswoman Kirsten Millard said.

In June 16 e-mail to all its staff, the airline offered workers between one and four weeks of unpaid leave — but with the option to work during this period.

Last month, the company announced a record annual loss of £400 million ($656 million).

Walsh declared at the time there were "absolutely no signs of recovery" in the industry.

"In 30 years in this business and I’ve never seen anything like this. This is by far the biggest crisis the industry has ever faced," said Walsh.

A spokesman for one of Britain’s biggest unions said last week its workers could not afford to work for free for a month.

"It’s all well and good for Willie Walsh to say he’s prepared to work for free when he earns four times in a month what they do in a year," said Ciaran Naidoo, a spokesman for Unite paydayloan.

He pointed out that the airline was not ordering staff to work without pay.

"It’s a request — you can take unpaid leave or you can work for free, and the chances of people working for free are very unlikely, but there might be some people who want to take unpaid leave."

Demand for the airline’s passenger seats and cargo holds fell during the last financial year, while its fuel bill rocketed to almost £3 billion ($4.7 billion).

Walsh said British Airways’ woes were inextricably linked to the downturn in the global economy and that there had been no sign of any "green shoots" of recovery.

Like its premium-class competitors, British Airways is losing customers to cheaper rivals.

The airline’s premium passenger numbers fell 13% in the second half of last year, in line with the industry average.

Total traffic fell 3.4% and while the airline carried 33.1 million passengers last year, it was a drop of 4.3% from the previous year.

The dip in demand for British Airways’ flights has forced a switch in strategy at the airline.

From the end of last year, it has been trying to tempt passengers with lower fares, sacrificing profit per seat for "bums on seats."

It plans to reduce capacity by 4% next winter by parking up to 16 aircraft. 

Source

The Bank of England said financial institutions’ losses from the crisis have left them vulnerable to another wave of shocks, including the risk that the economy will stay mired in recession.

“Given their leverage and funding positions, banks in the United Kingdom and internationally will remain sensitive to further shocks for some time,” the central bank said today in London. “If economic recovery were to stall as a result of weak bank lending, losses on assets could rise, further affecting confidence in the banking sector.”

The bank’s biannual financial stability risk assessment follows Governor Mervyn King’s comments that banking problems may make the economy’s escape from recession a “long, hard, slog.” The report today also makes suggestions on regulation changes including greater capital buffers for institutions days before the Treasury unveils its own proposals for a revamp.

“Banks’ balance sheets remain sensitive to any setbacks in recovery in financial markets or real activity,” the bank said. “The economic downturn is still perceived by market participants as the highest risk to financial stability.”

Only 15 percent of banks said they are “very confident” in the financial system’s stability in the next three years, compared with 36 percent in July 2008, a survey of 34 institutions in the report showed. They cited an economic slump and borrower defaults as the biggest risks. Responses were collected from April 27 to May 15.

Bank Losses

U.K. banks’ loan book losses have now reached almost 400 billion pounds ($654 billion), the bank said, without giving a forecast. The European Central Bank said last week that lenders in the 16-nation euro region may lose a further $283 billion by the end of next year.

“While pressures on the major global banks have stabilized over the past few months, their balance sheets remain impaired,” the Bank of England said. “Rising household and corporate distress, and continuing falls in property prices, raise the possibility of further asset impairment.”

More losses risk adding further pressure to banks’ profitability and capital ratios, the bank said.

“Future revenue generation will need to balance the desire to de-leverage with the need to generate new business at profitable spreads,” the bank said in its report.

The global financial system is also vulnerable to shocks from lenders repatriating their financing in foreign countries, the report said. U.K. banks had to weather the withdrawal of about $100 billion of deposits to Russia in the fourth quarter.

Payout Liability

In the “highly unlikely event” that the British government had to pay out on all emergency guarantees and insurance facilities offered to banks, the total liability would be $2 payday loans no faxing.1 trillion, or 88 percent of gross domestic product, the BOE said. That compares with 73 percent in the U.S. and 18 percent in the euro area.

“There’s a concern out there that some banks have not strengthened their defenses sufficiently, particularly European banks,” Brandon Davies, former treasurer at Barclays Bank and managing director of Oceanic and Gatehouse Bank, said in an interview on Bloomberg Television. “Some U.K. banks with lending targets are doing things wrongly, trying to raise capital to meet your bad loans rather than restricting your lending to people who can actually repay you.”

The Bank of England, suggesting changes to financial regulation, said lenders should be required to provide their own insurance from shocks by building up capital buffers with common equity and liquidity buffers with high-quality government bonds. It said they also need plans to obtain funding in times of stress and to wind down their operations in case of failure.

Measures Needed

Banks should also boost disclosure of the value of the assets they own and give more details of their stress test and sensitivity analyses, the central bank said.

“Greater resilience will need to be based on a variety of measures,” Paul Tucker, deputy governor for financial stability at the bank, said in a statement. “The policy debate now under way matters enormously if we are to achieve a more stable financial system in the future.”

The report urged international regulators to cooperate more closely to manage risks posed by global financial institutions, whose cross-border claims have almost doubled in the past decade. Regulators must ensure they can monitor such firms while preventing them from becoming too big or complex, the bank said.

The bank still expressed a note of optimism that the slump may have past its worst after the U.K. economy contracted 1.9 percent in the first quarter, the most since 1979. Banks’ funding conditions are improving as capital markets reopen and interest rates fall, the report said.

“In recent months, market conditions have improved and there are signs that the pace of decline in gross domestic product is easing,” the bank said. “Some markets that had been effectively closed to all but the strongest institutions appear to be reopening.”

Source

One road to regulatory reform runs through Detroit and Utah — and there are signs the ride could get bumpy.

The Obama administration’s financial oversight reform program would force industrial loan companies, or ILCs — banks owned by the likes of retailer Target (TGT, Fortune 500) and carmaker Toyota (TM) — to submit to Federal Reserve rules and regulations.

Because Fed rules limit bank ownership, the plan could force big commercial firms to sell their banking arms. Doing so would close a regulatory loophole that has long chafed the Fed, which has no authority over nonbanks.

But the fight over the ILCs is just beginning. Any changes in the law must be enacted by Congress, and Sen. Bob Bennett, R-Utah — where many of the biggest ILCs are based — has fought previous efforts to close the loophole. Bennett claims ILCs haven’t been a problem during the recent crisis and says eliminating them will make credit less available to consumers.

Meanwhile, Ford Motor (F, Fortune 500) has sought federal permission to turn its Ford Motor Credit unit into an ILC in a bid to cut its borrowing costs as it competes with its government-backed Detroit rivals GM (GMGMQ) and Chrysler. Neither Ford nor the Federal Deposit Insurance Corp., which supervises ILCs, returned calls seeking comment.

Critics of industrial loan companies argue that strengthening the separation of banking and commerce would be a good thing at a time when the federal deposit insurance fund is under pressure.

"The taxpayer subsidies the ILCs have received are just enormous," said Art Wilmarth Jr., a law professor at George Washington University. "The government has to stop the proliferation of these entities."

The case against ILCs, Wilmarth said, can be summed up in four letters: GMAC, a troubled finance company once owned by General Motors that now lists the government as its biggest shareholder.

GMAC "is the poster child for why we shouldn’t have commercial ownership of banks," said Wilmarth.

Policymakers frown on commercial ownership of banks because it can lead to poor credit decisions and create more risks to the taxpayer-funded federal safety net.

Even so, ILCs started cropping up as niche lenders in a few states more than 20 years ago. Regulatory changes a decade ago led to the formation of some giant ILCs, including ones run by Merrill Lynch (now part of Bank of America (BAC, Fortune 500)) and General Electric (GE, Fortune 500).

But among the larger ILCs was a Midvale, Utah-based company called GMAC Automotive Bank, part of GMAC.

Trying not to repeat the mistakes of GMAC

For years, GMAC was a profitable part of General Motors. In 2006, though, GM sold a 51% stake to private equity firm Cerberus as it raised cash to restructure.

Since then, the picture has darkened at both GM and GMAC affordable health insurance quote for family. GM filed for Chapter 11 protection June 1, after receiving billions of dollars in bailout funds and spending months on the brink of bankruptcy.

Meanwhile, GMAC — the biggest provider of financing to the carmaker’s dealers and customers — was struggling to raise capital to qualify for its own federal aid.

At the end of December, the Fed cleared GMAC to become a bank holding company, while exempting it from Federal Reserve Board rules that govern a bank’s dealings with its affiliates. Since then, GMAC has received some $21 billion in taxpayer support, including Treasury funds and FDIC loan guarantees.

The government justified the move by citing "emergency conditions." It forced GM and Cerberus to sharply reduce their stakes in the company and said the conversion would allow GMAC, the main lender to customers of the troubled domestic automakers GM and Chrysler, to continue to extend credit to consumers.

But not everyone was persuaded by that logic. Taxpayers, Wilmarth said, are now bearing the costs of what is essentially a commercial failure — the collapse of GM after years of poor strategy and product decisions.

He said the poor results in recent years at GM and GMAC show the two were "propping each other up." GMAC then compounded its auto-lending errors by making a big bet on residential housing via the purchase of lender ResCap, he said.

"Everything they said wouldn’t happen with the ILCs has happened at this one institution," said Wilmarth. "Massive conflicts of interest, spreading subsidies from banks to commercial firms — all of it has come to pass."

In a prepared statement, a GMAC spokesperson said its Ally Bank unit, formerly known as GMAC Bank, is "well capitalized."

While its Detroit rivals GM and Chrysler have taken tens of billions of dollars in federal funding, Ford has declined to take bailout money.

But if Ford wants no part of the unpopular Troubled Asset Relief Program, the company has signaled it would like to join GMAC in raising low-cost funds by taking bank deposits. Ally Bank has raised more than $20 billion in deposits, in part by offering above-market certificate of deposit rates.

That’s why Ford’s credit arm has been seeking industrial loan company status. Getting it would allow the company to borrow more cheaply — though an approval could complicate the lives of policymakers set on closing the ILC loophole.

"I think they may have a battle on their hands here," said Raymond Gustini, a partner at law firm Nixon Peabody in Washington. "But for now, those who want to eliminate the loophole have the moral high ground."  

Source

German consumer confidence rose for a second month as the economic outlook brightened and retreating prices boosted household purchasing power.

GfK AG’s sentiment index for July, based on a survey of about 2,000 people, increased to 2.9 from a revised 2.6 in June, the Nuremberg-based market-research company said in a statement today. Economists expected the index to remain unchanged from an initially reported 2.5 in June, according to the median of 24 estimates in a Bloomberg News survey.

German business and investor sentiment increased this month on hopes that interest-rate cuts and government stimulus packages will lift the economy out of its worst recession in more than six decades. The coalition government led by Chancellor Angela Merkel, who faces national elections in September, is spending about 85 billion euros ($118 billion) to stimulate growth. Still, the Bundesbank expects the economy to shrink 6.2 percent this year and stagnate in 2010.

“Consumer hopes of economic stabilization are intensifying and accordingly, economic expectations are increasing moderately,” GfK said. “Reports that the inflation rate stood at zero percent in May are having a positive effect on income expectations and the propensity to buy.”

Germany’s inflation rate fell to zero in May for the first time in at least 13 years on lower energy costs and weakening demand. Oil prices have dropped by half from their peak last year, cutting the cost of gasoline and heating oil online cash advance.

‘Improving Slightly’

GfK’s measure of economic expectations rose to minus 22.6 from minus 28.3. A gauge of income expectations increased to minus 3.3 from minus 9.3 and an index of consumers’ propensity to spend rose to 14.5 from 12.5.

“The consumer climate is therefore improving slightly, although the level of the indicator remains comparatively low,” GfK said.

The economy is in a “stabilization phase,” Bundesbank President Axel Weber said last week. “However, we’re far away from a significant pick-up,” he added. The Frankfurt-based central bank forecast that exports will drop 16.8 percent this year, while unemployment will rise to 10.5 percent in 2010 from 8.2 percent today.

Still, there are signs that the worst may be over. Manufacturing orders held steady in April after increasing in March, while a measure of manufacturing activity rose to a seven month high in May.

“It is unclear whether” the rise in confidence “marks the beginning of a sustained recovery in consumer mood,” the report said. “The development of the employment market over the coming weeks will be decisive.”

Source

German business confidence probably rose for a third month in June, providing further evidence that the recession in Europe’s largest economy is easing.

The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, increased to 85 from 84.2 in May, according to the median of 29 forecasts in a Bloomberg News survey. The index reached a 26-year low of 82.2 in March. Ifo releases the report at 10 a.m. today.

Germany’s worst economic slump since World War II may be bottoming out as a global recovery improves prospects for exports. Manufacturing orders held steady in April after increasing in March and investor confidence rose to a three-year high in June. The coalition government led by Chancellor Angela Merkel, who faces national elections in September, is spending about 85 billion euros ($118 billion) to stimulate growth. Still, the Bundesbank expects the economy to shrink 6.2 percent this year and stagnate in 2010.

“Optimism is the wrong word,” said Holger Schmieding, chief European economist at Bank of America-Merrill Lynch in London. “Pessimism is abating. There’s evidence that the global economy has seen the trough and while Germany won’t immediately benefit, it will profit disproportionately later due to its focus on investment goods.”

Economists predict executives’ assessment of the current situation as well as their expectations will improve.

Signs of Improvement

Siemens AG, Europe’s largest engineering group, this month reiterated sales and earnings targets for the current year and Praktiker AG, Germany’s second-biggest home-improvement retailer, said last month revenue has rebounded in its domestic market since the end of March free business cards.com.

“There are signs which show that we already reached the bottom of the recession and that it will go up again soon,” Chief Executive Officer Wolfgang Werner told Praktiker shareholders on May 27.

Germany’s manufacturing and service industries contracted more slowly in May and unemployment rose less than economists forecast.

“Inventories are almost empty in many countries, so even a slight increase in demand means production goes up,” said Andreas Rees, chief German economist at UniCredit MIB in Munich. “The positive trend is intact, exports will rebound in the course of the year.”

Some companies are less sanguine.

“With the exception of China, global passenger-car markets are not showing any signs of recovery” and may not have “hit rock bottom yet,” Volkswagen AG’s group sales chief Detlef Wittig said June 12.

The economy is currently in a “stabilization phase,” Bundesbank President Axel Weber said last week. “However, we’re far away from a significant pick-up.”

The European Central Bank has cut its benchmark interest rate to a record low of 1 percent. It will offer to lend banks as much money as they want for 12 months in a new auction this week to help get credit flowing again.

Source

Japan’s government and central bank agree that the worst of the deepest postwar recession is over.

Demand is picking up even though “the economy is in a difficult situation,” the Cabinet Office said in Tokyo yesterday. The Bank of Japan said the world’s second-largest economy has “begun to stop worsening.”

Evidence the economy has turned a corner has mounted as companies bolstered industrial output at the fastest pace in 56 years in April and exports recovered from unprecedented declines. Central bank Governor Masaaki Shirakawa said this week he is “cautious” about the rebound because renewed demand may only be temporary.

“Policy makers are raising their economic assessments to reflect recent improvements, but they remain pretty cautious about the outlook,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “Exports are starting to turn around, but that doesn’t guarantee production will keep rebounding and support employment.”

The Nikkei 225 Stock Average rose above 10,000 for the first time in eight months last week and consumer sentiment climbed to a 14-month high in May. Stocks have retreated 2.9 percent this week and the yen has strengthened against the dollar on concern a recovery in the U.S., Japan’s largest export market, isn’t a sure thing.

“It seems clear the economy bottomed out between January and March,” Japan’s Finance Minister Kaoru Yosano told reporters at a press briefing yesterday. “There are signs the decline in personal spending on some items is ending.”

‘Engines Turn’

It may take some time before Americans start spending again. President Barack Obama said in an interview that unemployment may climb to 10 percent from the current 25-year high of 9.4 percent.

“You’re starting to see the engines of the economy turn,” Obama said. Still, he added that “it’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real-estate boom.

Japan’s export dependence has caused it to suffer the most from the global recession. Gross domestic product fell at an annual 14.2 percent pace in the three months ended March 31, the steepest contraction since records began half a century ago guaranteed payday loans. Analysts surveyed by Bloomberg expect the economy to grow this quarter, which would be the first expansion in a year.

“The upgrades by the BOJ and the government just mean the worst is over,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “The U.S. recovery will be postponed until the middle of next year so it’ll be impossible for Japan to have a solid recovery.”

‘Delicate Stage’

Economists say the economy may stutter after recovering from its worst contraction on record as Prime Minister Taro Aso’s 25 trillion-yen ($260 billion) stimulus plans wear off. The government said in yesterday’s report that rising unemployment may also discourage consumer spending and damp growth in the coming months.

“The Japanese economy is still at a delicate stage,” said David Cohen, head of Asian forecasting at Action Economics in Singapore. “At the end of the day, much will remain dependent upon the outlook for global export demand.”

Optimism that the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which has stayed at 0.1 percent since being cut in December.

“Given that employment and wages are deteriorating and deflation risk is rising, it’s difficult to expect a rate hike anytime soon,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The central bank won’t likely raise rates until fiscal 2011 at the earliest,” he said, referring to the year ending March 2012.

Job Shortage

Deteriorating prospects for consumers are also a risk, the Cabinet Office said in yesterday’s report. The unemployment rate rose to a five-year high of 5 percent in April and economists surveyed by Bloomberg expect it to climb to a record 5.8 percent next year. About two work seekers are competing for a single spot, the most severe job shortage on record.

“We aren’t in a recovery phase,” said Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office. “There is a risk that Japan’s economy will deteriorate again.”

Source

Japan’s government and central bank agree that the worst of the deepest postwar recession is over.

Demand is picking up even though “the economy is in a difficult situation,” the Cabinet Office said in Tokyo yesterday. The Bank of Japan said the world’s second-largest economy has “begun to stop worsening.”

Evidence the economy has turned a corner has mounted as companies bolstered industrial output at the fastest pace in 56 years in April and exports recovered from unprecedented declines. Central bank Governor Masaaki Shirakawa said this week he is “cautious” about the rebound because renewed demand may only be temporary.

“Policy makers are raising their economic assessments to reflect recent improvements, but they remain pretty cautious about the outlook,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “Exports are starting to turn around, but that doesn’t guarantee production will keep rebounding and support employment.”

The Nikkei 225 Stock Average rose above 10,000 for the first time in eight months last week and consumer sentiment climbed to a 14-month high in May. Stocks have retreated 2.9 percent this week and the yen has strengthened against the dollar on concern a recovery in the U.S., Japan’s largest export market, isn’t a sure thing.

“It seems clear the economy bottomed out between January and March,” Japan’s Finance Minister Kaoru Yosano told reporters at a press briefing yesterday. “There are signs the decline in personal spending on some items is ending.”

‘Engines Turn’

It may take some time before Americans start spending again. President Barack Obama said in an interview that unemployment may climb to 10 percent from the current 25-year high of 9.4 percent.

“You’re starting to see the engines of the economy turn,” Obama said. Still, he added that “it’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real-estate boom.

Japan’s export dependence has caused it to suffer the most from the global recession. Gross domestic product fell at an annual 14.2 percent pace in the three months ended March 31, the steepest contraction since records began half a century ago cash advance no fax. Analysts surveyed by Bloomberg expect the economy to grow this quarter, which would be the first expansion in a year.

“The upgrades by the BOJ and the government just mean the worst is over,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “The U.S. recovery will be postponed until the middle of next year so it’ll be impossible for Japan to have a solid recovery.”

‘Delicate Stage’

Economists say the economy may stutter after recovering from its worst contraction on record as Prime Minister Taro Aso’s 25 trillion-yen ($260 billion) stimulus plans wear off. The government said in yesterday’s report that rising unemployment may also discourage consumer spending and damp growth in the coming months.

“The Japanese economy is still at a delicate stage,” said David Cohen, head of Asian forecasting at Action Economics in Singapore. “At the end of the day, much will remain dependent upon the outlook for global export demand.”

Optimism that the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which has stayed at 0.1 percent since being cut in December.

“Given that employment and wages are deteriorating and deflation risk is rising, it’s difficult to expect a rate hike anytime soon,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The central bank won’t likely raise rates until fiscal 2011 at the earliest,” he said, referring to the year ending March 2012.

Job Shortage

Deteriorating prospects for consumers are also a risk, the Cabinet Office said in yesterday’s report. The unemployment rate rose to a five-year high of 5 percent in April and economists surveyed by Bloomberg expect it to climb to a record 5.8 percent next year. About two work seekers are competing for a single spot, the most severe job shortage on record.

“We aren’t in a recovery phase,” said Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office. “There is a risk that Japan’s economy will deteriorate again.”

Source

If you want to know how the recession is playing out in the average American city, you’ve got a front-row seat right here in St. Louis.

A report out today by the Brookings Institution ranks the country’s 100 largest metropolitan areas by their performance on four key economic indicators since the recession began. St. Louis ranked 49th. The only place more average is Nashville.

What it means to be in the middle of the economic pack these days is that 2.3 percent of the region’s jobs have vanished, and its unemployment rate is up by 3.2 percentage points. It means a relatively steep 4.6 percent fall in our "gross metropolitan product" — the sum value of everything that gets made here — and a much shallower 0.2 percent drop in housing prices, adjusted for inflation.

In other words, the economy here is lousy.

But the Brookings report also illuminates where things are lousiest, and where they are less so.

The best performing regions, it found, are largely in Texas, Louisiana and Oklahoma — the energy belt — followed by Northeastern cities with strong higher education, health care and biotech sectors and manufacturing that’s not tied to the auto industry.

The hardest-hit cities were housing boomtowns in Florida and inland California, and auto-making hubs such as Toledo, Youngstown and Detroit — which sits at the bottom of the list.

Now, as thoughts turn to recovery, those places that have fallen the furthest likely will take the longest to recover, said Howard Wial, a Brookings fellow who co-authored the report.

Meanwhile, a few lighter-hit regions such as Baton Rouge, La., and McAllen, Tex., already are beginning to bounce back.

"This is, regionally, going to be a tremendously varied recovery," Wial said free credit score online.

He thinks St. Louis likely will track the national economy, which many experts think will start growing again late this year or early next — though the job market will take longer to revive. Auto sector cuts have hurt here, Wial noted, but St. Louis’ economy is diverse and other, more-stable sectors have helped cushion the blow.

Still, St. Louis long has been slow-growth, and if it wants to jump ahead of the pack coming out of the recession, Wial said, it must build on its strengths in health care, advanced non-auto manufacturing and biotech.

That last one — biotech — is what brought dozens of local business leaders to Creve Coeur on Tuesday for the grand opening of the Bio Research and Development Growth Park. The $40 million building, next door to the Danforth Plant Science Center, will house plant sciences companies that are trying to turn their research into products they can sell.

As the center opens, it is 63 percent leased, said President Sam Fiorello, and two more buildings are planned. He envisions a campus with 400,000 square feet of offices and labs and more than 1,100 scientists, technicians and entrepreneurs, building new companies and making the region a real hub for plant sciences.

"Those are really good jobs," he said.

And it’s the kind of thing St. Louis must do, Fiorello and others at Tuesday’s ribbon-cutting said, if it hopes to get someplace after the recession that is, economically speaking, a little better than average.

Source