Finance Blog number 1

Lawmakers grilled Toyota’s president, Akio Toyoda, in a hearing Wednesday aimed at discovering, among other things, why the automaker was slow to respond to safety issues related to sudden acceleration.

Mr. Toyoda acknowledged that the company had made mistakes and repeatedly apologized for the recent lapses in quality control. But he did not provide specific answers to questions about what the company knew about certain defects and when they were discovered.

Members of the House Committee on Oversight and Government Reform repeatedly asked Mr. Toyoda if his company had provided U.S. safety regulators with all the information they requested.

"According to my understanding, we fully shared the information we have with the authorities," Mr. Toyoda said, speaking through a translator.

Mr. Toyoda, who is the grandson of the company’s founder, read his opening remarks in English, but relied on a translator for the majority of his testimony. Yoshimi Inaba, the president of Toyota’s North America division, testified before the committee in English.

Committee members also peppered the executives with questions about why Toyota didn’t respond faster to customer complaints about sudden unintended acceleration.

In response, Mr. Toyoda acknowledged that the company’s efforts failed to live up to its core values and pointed to the company’s plans to set up a global commission to address complaints more quickly and efforts to increase transparency on safety issues.

However, some lawmakers did not find Mr. Toyoda’s answers sufficient.

Marcy Kaptur, D-OH, said she was "disappointed" with Mr. Toyoda’s testimony, adding that she did not feel he had shown sufficient remorse or taken enough note of the amount of complaints over the last decade.

The executives also came under fire for a 2009 memo in which Toyota staffers boasted of the company saving $100 million by negotiating a limited recall for certain cars.

Mr. Inaba, whose name appeared on the document, said the it was "inconsistent with the guiding principle of Toyota." He added that the report was made shortly after he rejoined the company and that he was not involved in writing it.

Toyota has been criticized for not responding quickly enough to customer complaints about sudden acceleration, which have been blamed for several accidents resulting in injuries or death. The automaker has recalled over eight million vehicles worldwide for this problem.

Mr. Toyoda attributed instances of unintended acceleration to certain factors, including the way the car is used or misused, and other "structural aspects." But he said he was "absolutely confident" that there are no defects with the design of Toyota’s electronic throttle control system.

After the nearly three hour hearing was over, Mr cash advance to savings account. Toyoda told reporters that he plans to make "sweeping changes" at the automaker.

"Going forward I intend to make every effort to achieve the transformation and rebirth of the company by making safety and ‘customer first’ the top priority," he said.

In response to the human toll of the company’s safety problems, Mr. Toyoda extended his condolences to members of the Salyor family, who lost four members in a crash involving a recalled Toyota vehicle in San Diego.

"I would like to send my prayers again," Mr. Toyoda said. "And I will do everything in my power to ensure that such a tragedy never happens again."

However, when asked if Toyota would pay for the medical or funeral expenses for drivers killed or injured in crashes involving defective Toyota cars, the executives hedged.

Mr. Inaba said the question will be resolved by the company’s legal team.

In his prepared remarks, Mr. Toyoda said the automaker’s rapid growth over the last few years contributed to the recent lapses in safety and outlined new steps the company will take to ensure quality control.

Toyota will devise a system to convey customer complaints from around the world to the company’s management in a timely manner, he said. It will also implement a system in which each region will be able to make recall decisions as necessary.

In addition, Toyota form a "quality advisory group" that Mr. Toyoda said will be "composed of respected outside experts from North America and around the world to ensure that we do not make a misguided decision."

Mr. Toyoda, who became the company’s president in June, said the automaker will "invest heavily" in quality in the U.S. and will establish an Automotive Center of Quality Excellence and will introduce the new position of Product Safety Executive.

Toyota has grown its sales in recent years, outpacing General Motors (GM, Fortune 500) as the world’s top-selling automaker. But its recent troubles have stained its reputation as a bright light in Japan’s otherwise stagnant economy.

Prior to Mr. Toyoda’s testimony, Department of Transportation secretary Ray LaHood testified before the House Oversight and Government Reform Committee. He defended himself against criticism for not having taken enough action concerning the faulty vehicles.

"We haven’t been sitting around on our hands," said LaHood. "When there needs to be a recall, we do it."

Aaron Smith, CNNMoney.com staff writer contributed to this report 

Source

Get instant health insurance quotes, compare medical insurance plans, and find affordable health insurance to fit your health care coverage needs.

Romania’s central bank unexpectedly cut its main interest rate to the lowest since January 2008 after the appointment of a government ended months-old political turmoil and signs that lenders may resume payments of a bailout loan.

The Banca Nationala a Romaniei trimmed the monetary policy rate to 7.5 percent from 8 percent at its first meeting since last month’s presidential elections, the Bucharest-based bank said in an e-mail today. The decision was expected by only two of 11 economists in a Bloomberg survey. Seven predicted no change and two predicted a smaller cut.

“This is a small surprise in timing, but not in direction,” Raffaella Tenconi, the chief economist at Wood & Co. in Prague, said in an interview today. “With the new government already going forward to meet the IMF requirements, a loosening doesn’t change our view of a stable leu in the near term.”

Traian Basescu was re-elected president last month and re- appointed Prime Minister Emil Boc, ending a political stalemate that had left the country without a government since October. The International Monetary Fund, which is leading a $30 billion bailout loan to Romania, has said it may resume loan payments.

Recovering Economies

Economies throughout east Europe are recovering from recession or contractions are slowing as demand picks up from their main trading partners in western Europe. Romania aims for economic growth of as much as 1.5 percent this year after an estimated contraction of 7.5 percent in 2009.

“It is worth noting the continued slowdown in real terms of the annual dynamics of credit to the private sector, especially of the leu-denominated component, amid weak demand for loans against the background of the recession,” the bank said in a statement after today’s decision business cards.

The Romanian leu held its gains against the euro after the announcement and traded 0.2 percent stronger at 4.2071 per euro as of 12:50 p.m. in Bucharest, while the Bucharest Stock Exchange’s main benchmark BET index rose 2.5 percent to 4867.35.

The IMF and the European Union froze the bailout payments to Romania last October after Boc’s previous administration collapsed and the ruling coalition of parties disintegrated in feuding. The lenders said they would visit Romania again in January to discuss the new government’s economic program and 2010 budget plan.

The IMF has said it would only consider unfreezing the payments after Romania installed a new government and passed a 2010 budget plan. The new government was approved in Parliament on Dec. 23 and Parliament is scheduled to vote on the budget plan by Jan. 15.

Romania’s inflation rate rose in November for the first time in 10 months, the National Statistics Institute said on Dec. 11. The rate rose to 4.7 percent from 4.3 percent in October, mainly because of an increase in taxes on tobacco.

The central bank said that increases in tobacco prices last year contributed 1.8 percentage points to the annual inflation rate. Tobacco accounts for 4.6 percent of the basket of products the central bank uses in its consumer price index.

Source

For no fax payday loans and payday advance loans, apply today and maximize your payday cash!

Shares of Internet retailer Amazon.com Inc hit an all-time high of $135.01 on a split-adjusted basis on Monday as the stock rose more than 2 percent.

The run-up in the shares comes on “Cyber Monday,” a day billed as a search for bargains on the Internet after the Thanksgiving Day holiday weekend.

(Reporting by Ellis Mnyandu; Editing by Padraic Cassidy)

Read more

Former Federal Reserve Chairman Alan Greenspan said he’s worried that lawmakers will hamper U.S. central bank efforts to rein in its monetary stimulus, and that inflation might “swamp” the bond market.

“It’s the politics in the United States that worries me, whether the Congress will basically feel comfortable” with the Fed withdrawing its stimulus, Greenspan said in a broadcast to Tokyo clients of Deutsche Bank Securities Inc. today. He later said that “if inflation rears its head, it will swamp long-term markets,” referring to bonds.

With U.S. unemployment running at a quarter-century high, the Fed may face resistance from lawmakers as it tries to promote price stability by raising its benchmark interest rate from near zero. The jobless rate reached 9.7 percent last month and employers have cut almost 7 million jobs, the biggest drop in any recession since World War II.

The former Fed chief, who counts Deutsche Bank among his clients, also warned that the U.S. must rein in its “very dangerous” level of debt, citing the threat of increased issuance of Treasuries undermining the dollar.

Greenspan, speaking via videoconference from Washington, indicated that successor Ben S. Bernanke and his fellow Fed policy makers have until next year before inflation will present a danger.

Inflation Outlook

“We’ve got worldwide disinflation in train and it will continue for a short while,” he said. “Our model says that by the early months of next year the rate of inflation will fall below 1 percent on an annual rate” before increasing.

American consumer prices fell 1.7 percent in August from a year earlier, according to the median forecast in a Bloomberg News survey of economists before the Labor Department reports the figure today. Prices fell 2.1 percent in July, the most since Harry S. Truman was president in 1950. Investors use the figures to gauge inflation, which erodes bonds’ fixed returns.

Benchmark 10-year Treasury notes yielded 3.44 percent as of 12:21 p.m. in Tokyo, according to data compiled by Bloomberg. They averaged 3.15 percent so far in 2009, compared with 4.16 percent the past five years. The dollar was at $1.4673 per euro, compared with its record low of $1.6038 reached in July 2008.

Greenspan said that if there were a significant issuance of Treasury securities that increased the national debt, “there would be of necessity downward pressure on the dollar.” At the same time, he said, “you can’t say that without saying what the counterparty currency would be.”

‘Very Dangerous’

Greenspan said one threat to Treasuries is the “very dangerous” level of U.S. national debt. “We’ve got to confront that issue immediately,” he said.

The nonpartisan Congressional Budget Office said last month that deficits between 2010 and 2019 will total $7.1 trillion. Those shortfalls, which are financed with borrowed money that’s tacked onto the national debt, would drive the debt up to 68 percent of the nation’s economy by 2019, from the current 54 percent, CBO said.

“The next six months seem reasonably easy to anticipate: no inflation, good economic growth,” Greenspan said. “Things are turning and it looks good for the near term.”

Greenspan said last month the U.S. economy could resume growth with a 2.5 percent expansion in the current quarter, while adding there was still a risk of a “second wave down.”

Growth Outlook

Economists surveyed by Bloomberg News this month put the odds of a double-dip recession in the next 12 months at 25 percent, up from 20 percent in August. The economy will expand at a 2.9 percent annual rate in July through September, according to the median of 61 estimates in the survey taken Sept. 3 to Sept. 10.

“This recession will not be over until home prices stabilize at a minimum,” Greenspan said. “The evidence suggests that we’re getting there, finally.”

Home prices in 20 U.S. cities fell in June at a slower pace than forecast, a sign that the real-estate crisis is dissipating. The S&P/Case-Shiller home-price index advanced 2.9 percent in the second quarter from the previous three months, the first increase since 2006 and the biggest in almost four years, according to an Aug. 25 report.

Bernanke yesterday said the worst U.S. recession since the 1930s has probably ended. At the same time, he warned that growth may not be strong enough to immediately reduce the unemployment rate.

Bernanke’s Call

“Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time,” Bernanke said at the Brookings Institution in Washington, responding to questions after a speech.

The remarks were the Fed chief’s most explicit yet that the contraction that began in December 2007 is over. They echoed comments this week by San Francisco Fed President Janet Yellen and followed a report yesterday showing retail sales rose last month by the most in three years, adding to evidence of a recovery.

Greenspan also weighed in on the debate over a regulator of risks across the financial system as Congress prepares the biggest overhaul of U.S. financial regulations since the 1930s, when the Fed was reorganized. The U.S. Treasury has proposed giving the Fed greater authority over the capital, liquidity, and risk-management standards of the largest financial firms.

Congressional leaders haven’t supported that proposal and are considering giving broader authority to a council of regulators.

“I’m not in favor of a systemic-risk regulator because I don’t think it’s feasible,” Greenspan said. “I think we have to recognize that there are limits to what we can do.”

Source

The U.S. trade deficit widened in July and imports gained by a record 4.7 percent, signaling a revival of commerce as the global recession eased.

The gap between imports and exports grew 16 percent, the most in more than a decade, to $32 billion from a revised $27.5 billion in June that was larger than previously estimated, the Commerce Department said today in Washington. In another sign the U.S. slump may be ending, a Labor Department report showed jobless claims last week fell to the lowest level since July.

Imports outpaced a 2.2 percent gain in exports as businesses replenished stockpiles of goods including pharmaceuticals, toys and televisions in anticipation of rising consumer demand, while automakers boosted purchases of parts and machinery. The export gain reflected renewed demand for U.S.- made goods among trade partners such as Mexico and Japan.

“We’ve also seen a pretty solid pickup in export growth and that should continue as we see evidence the global economy is picking up steam,” said Brian Bethune, chief financial economist at IHS Global Insight Inc. in Lexington, Massachusetts. Referring to the government’s auto trade-in program, he said “even before cash-for-clunkers got into its sweet spot, automakers were already in the process of ramping up production.”

The trade gap was projected to widen to $27.3 billion, from an initially reported $27 billion in June, according to the median forecast in a Bloomberg News survey of 74 economists. Deficit projections ranged from $25 billion to $30.3 billion.

Oil Prices

Imports rose to $159.6 billion after also increasing the prior month. The import figures reflected a rise in crude oil prices and demand for cars, automotive parts, goods such as computers and televisions and industrial supplies.

The number of Americans filing first-time claims for jobless benefits dropped by 26,000 to 550,000 in the week ended Sept. 5, lower than economists forecast, from a revised 576,000 the week before, Labor Department data showed.

Stocks rose after the reports. The Standard & Poor’s 500 Index closed up 1 percent at 1,044.14 in New York, while the Dow Jones Industrial Average ended the day up 0.8 percent at 9,627.48.

Imports of petroleum products increased to $22.4 billion, the highest since December, as crude oil prices rose to an average $62.48 a barrel in July from $59.17 in June, according to Commerce Department data.

Industrial Supplies

Imports of industrial supplies, which include crude oil, rose to $38.4 billion from $37 billion. Demand for consumer goods from abroad rose to $35.4 billion from $33.7 billion the prior month. Demand for capital goods rose to $30.2 billion from $28.9 billion, led by an increase in demand for cars and auto parts to $13.5 billion from $11.1 billion.

Purchases of auto parts and industrial supplies by companies such as General Motors Co. and Hyundai Motor Corp. got a boost from the “cash-for-clunkers” program and the annual retooling of plants.

The gain in auto imports was probably even bigger in August when the trade-in program spurred car sales to 14.1 million units on an annual basis, the most since May 2008.

Exports gained to $127.6 billion, led by sales of capital goods including cars, civilian aircraft and computers, as well as stronger demand for industrial supplies and consumer goods.

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit widened to $38.8 billion from $35.8 billion.

Growth Forecast

Economists surveyed by Bloomberg last month forecast the economy will grow at an average 2.1 percent pace in the second half of 2009.

Exports are likely to keep expanding as the global recession eases. The economy in China, the U.S.’s second- largest trading partner, may grow 9.5 percent next year after an 8.3 percent increase this year, according to a Bloomberg survey of 22 economists conducted the week ending Aug. 28.

The trade gap with China increased to $20.4 billion from $18.4 billion in the prior month.

At the same time, Alcoa Inc., the largest U.S. aluminum producer, is among companies profiting from rising demand in China for commodities. Alcoa last week raised its 2009 forecast for global aluminum consumption because of demand triggered by China’s 4 trillion yuan ($586 billion) in stimulus spending.

China Stimulus

Chief Executive Officer Klaus Kleinfeld said in an interview that he expects China’s consumption of the metal to rise 4 percent this year, compared with an earlier prediction of zero growth.

“China is back,” Kleinfeld said in an interview. “They had a lot of shovel-ready projects” planned for 2011 that are being started now as part of the country’s stimulus efforts, he said.

The U.S. trade gap with the European Union almost doubled to $8 billion from $4.5 billion, while the gap with Canada rose to $2.2 billion from $1.5 billion and the deficit with Mexico narrowed.

Former Federal Reserve Chairman Alan Greenspan yesterday said the U.S. economy will start to recover by yearend, helped by “remarkable growth” in productivity. In a speech in New York, he predicted “a fairly pronounced recovery, not only in the U.S.,” but globally.

Source

Japan’s exports fell for a tenth straight month in July as demand from all of the nation’s major markets deteriorated.

Shipments abroad tumbled 36.5 percent from a year earlier, steeper than June’s 35.7 percent drop, the Finance Ministry said today in Tokyo. The median estimate of 23 economists surveyed by Bloomberg News was for a 38.4 percent decrease.

Manufacturers are still reeling from plunging sales of cars and electronics even as the economy emerges from its worst postwar recession. Toyota Motor Corp., Japan’s largest carmaker, said today it will cut domestic production by 220,000 vehicles.

“The U.S. hasn’t quite recovered, and China’s economy looks somewhat shaky too,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “We’re unlikely to see a recovery in exports in the short term.”

The yen traded at 94.17 per dollar at 4:55 p.m. in Tokyo from 94.04 before the report. The Nikkei 225 Stock Average rose 1.4 percent after U.S. consumer confidence gained.

Exports may also have been eroded by the yen’s 1.7 percent advance against the dollar in July from June. A stronger yen cuts into exporters’ profits when they are repatriated back into local currency.

Declines in shipments accelerated in all major regions: Exports to China fell 26.5 percent, shipments to the U.S. slid 39.5 percent and those to Europe slumped 45.8 percent, according to today’s report.

Return to Growth

Japan’s gross domestic product grew an annualized 3.7 percent last quarter, the first expansion in more than a year, as governments worldwide poured more than $2 trillion into their economies to spur demand.

Prime Minister Taro Aso is struggling to cement an economic recovery as his ruling Liberal Democratic Party trails the opposition Democratic Party of Japan in polls ahead of an Aug. 30 election.

Toyota, which is shutting down an assembly line at its Takaoka plant in central Japan, and Nissan Motor Co. led a ninth straight drop in domestic auto production in June as exports to the U.S. plummeted, according to the Japan Automobile Manufacturers Association.

Nippon Steel Corp., the world’s second-largest steelmaker, last month widened its first-half loss forecast by 33 percent.

Not all economists forecast exports will continue to worsen. Robust growth in China, which overtook the U.S. as Japan’s largest overseas customer this year, will support demand, according to Kyohei Morita.

Continue Rising

“We do not believe a drop in exports would mark the start of a downward trend,” said Morita, chief economist at Barclays Capital in Tokyo. “Exports, especially to Asia and the U.S., are likely to continue rising.”

China’s economy expanded 7.9 percent last quarter, rebounding from the weakest growth in almost a decade. The nation’s 4 trillion yuan ($585 billion) stimulus to encourage consumer spending and investment in building projects has benefited Japanese manufacturers.

By volume, exports rose 2.4 percent in July from June, a fifth monthly increase, the Bank of Japan said today. The data correlate closely with the export component of GDP, according to London-based Capital Economics Ltd.

Export volumes “are set to drive strong growth in both industrial production and GDP” in the current quarter, said Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo. “The recovery from the trough is rapid, but the level is still badly depressed.”

Source

For the first time in his career, Bank of England Governor Mervyn King wants a more expansive monetary policy than his colleagues.

King’s push to expand the central bank’s bond-purchase program to 200 billion pounds ($329 billion) was overruled by the Monetary Policy Committee, minutes of their Aug. 6 meeting published yesterday showed. On the 14 other occasions that King has lost a vote since the central bank was given rate-setting independence in 1997, he opted for tighter policy every time.

King, who led a global push by central banks to start buying bonds in March, argues that too timid an approach may undermine optimism that Britain is recovering from its worst recession in a generation. The vote for an even looser approach than his colleagues prefer defies King’s image as an advocate of tight monetary policy with a track record of backing interest- rate increases. The pound dropped after yesterday’s report.

“It proves he’s not just a hawk, he’s more of an activist,” said George Buckley, an economist at Deutsche Bank AG in London. “He’s not afraid to vote against the rest of the committee if he thinks it’s the right thing to do.”

The MPC voted 6-3 to increase bond purchases by 50 billion pounds to 175 billion pounds, the minutes showed. King was joined by Timothy Besley and David Miles in voting for an increase of 75 billion pounds. All nine opted to keep the benchmark interest rate at a record low of 0.5 percent.

‘Less Severe’

The pound weakened against all of the 16 most-traded currencies tracked by Bloomberg after the report. The danger from doing too much stimulus is “less severe” than the cost of being too cautious, the minutes said.

The pound fell as much as 0.8 percent against the dollar before rebounding later in the day.

“The bank is clearly taking the view that the recovery isn’t very sustainable,” said Jamie Dannhauser, an economist at Lombard Street Research Ltd. in London. “There’s very little damage that can come from doing too much stimulus.”

King’s vote suggests he may try to steer the central bank towards a further expansion of the purchase program at future decisions, economists say. The last time the governor was outvoted, in June 2007, he pushed through the quarter-point rate increase he wanted at the next month’s meeting.

Clear Signal

King typically casts the final vote at policy meetings, a practice which suggests he would have known he was on the losing side when he made the call.

“He made the choice to vote for more quantitative easing even though he knew it would make no difference to the decision,” said David Tinsley, an economist at National Australia Bank in London and a former central bank official cheap car insurance. “It’s a clear attempt to signal the direction of his policy. He’s persuaded by the argument that doing more now is much less risky than doing less.”

King, who has now been outvoted three times since becoming governor in 2003, has rejected labels on his voting tendencies in the past and emphasized the importance of the 2 percent inflation target in the bank’s policy. He reiterated that mantra last week, saying the decision to increase bond purchases was justified by the fact that inflation may slow too much.

King says inflation, which stayed at 1.8 percent in July, could slow below 1 percent in coming months.

King’s caution on the strength of the economy echoes Prime Minister Gordon Brown, who said last month that government officials are “determined to keep our focus” on the recovery. Brown must call an election by June 2010, and his ruling Labour Party trailed the opposition Conservatives by 14 percentage points in a YouGov Plc opinion poll ended on Aug. 14.

ECB Concerns

While surveys this month showed U.K. services expanded the most in 1 1/2 years and manufacturing grew for the first time in more than a year in July, unemployment has risen to a 14-year high. The economy contracted 0.8 percent in the second quarter, even as France and Germany returned to growth.

European Central Bank officials are also showing concern on whether the euro region’s economy can gain traction. Bundesbank President Axel Weber said in comments published yesterday he’s not yet convinced Germany’s recovery is sustainable after government stimulus measures helped the economy unexpectedly return to growth in the second quarter.

In the U.K., economists say King’s stance shows his determination to keep printing money and avoid the fate of Japan in the 1990s, where a delayed reaction to a banking crisis contributed to the country’s so-called lost decade.

“There’s a clear consensus that the situation is serious and it isn’t going to improve dramatically in the near term,” said Danny Gabay, director of Fathom Consulting in London and a former central bank official. “The message is that the MPC as a whole fears Japan more than Zimbabwe,” where inflation reached nearly 500 billion percent last September.

Source

Russia’s economy contracted the most on record last quarter as rising unemployment sapped consumer demand, bank lending stalled and the government failed to approve a stimulus package until just two months ago.

Gross domestic product contracted an annual 10.9 percent in the second quarter, the Federal Statistics Service said today, citing preliminary data. The median estimate in a Bloomberg survey of seven economists was for output to shrink 10.2 percent. The service’s data go as far back as 1995.

Russia’s economic decline is worsening after output contracted 9.8 percent in the first quarter, ending 10 years of expansion that averaged close to 7 percent. The worst global financial crisis since the Great Depression undermined demand for Russia’s oil, natural gas and metals. Industrial production plunged as companies depleted stocks and struggled to raise funds during the credit crunch.

“We can’t develop like this any longer,” President Dmitry Medvedevsaid yesterday during a meeting with political party leaders in the Black Sea resort of Sochi. “It’s a dead end. And the crisis has placed us in a situation where we will have to make decisions on changing the structure of the economy.”

The ruble weakened for a fifth day versus dollar, its longest losing streak since February, slipping 1.4 percent to 32.2419 per dollar in Moscow, the lowest level since July 13. The currency lost 1.4 percent against the euro to 45.7151. Those movements left the ruble at 38.2879 against the central bank’s target currency basket.

Russia ‘Crumbled’

Russia “crumbled” after commodity prices collapsed, Medvedev said. Energy, including oil and natural gas, accounted for 68.8 percent of exports to the Baltic states and countries outside the former Soviet Union in the first six months of the year, Russia’s Federal Customs Service said last week.

Urals crude oil, Russia’s chief export earner, averaged $61.03 a barrel during the last quarter after reaching a record $142.5 in July 2008.

Russia failed to free itself of its reliance on commodities during Prime Minister Vladimir Putin’s tenure as President between 2000 and 2008, said Natalia Orlova, chief economist at Alfa Bank, Russia’s biggest privately-owned lender.

“Because of high oil prices, capital came in; banks transferred this capital into the economy,” she said. “Rising wages fed consumer growth, so there was no reason to invest or create new production. Now capital has stopped coming in and consumption has stopped. This model has ceased to exist. We don’t have a new one.”

Putin

Putin, 56, stepped down in May 2008 after two terms in office and became prime minister under his hand-picked successor, Medvedev.

The government has done “catastrophically little” to diversify the economy in the decade since the 1998 financial crisis, Sergei Voloboev, a Credit Suisse economist in London, said by phone. GDP probably shrank a seasonally adjusted 0.2 percent in the second quarter compared to the first three months, according to Credit Suisse.

“The economy approached the bottom in the second quarter, basically it hit the bottom around May, June,” said Tatiana Orlova, an economist at ING Groep NV in Moscow faxless payday loan online. “We should see some better-looking data” in the coming quarters.

Russian stocks were little changed after losing as much as 1.3 percent earlier today after the release. The 30-stock Micex index was trading at 1100.31 at 3 p.m. in Moscow after yesterday’s 1.3 percent retreat. The RTS Index lost 1.3 percent to 1051.45 today.

Stocks

The Micex Index, which is mostly made up of energy companies, slipped into a bear market in June after falling more than 20 percent from its high on June 1, on concern a prolonged recession will cut demand for fuel. It gained 8.4 percent in July and is up 79 percent this year.

The world’s biggest energy exporter may run a budget deficit as wide as 9.4 percent of GDP this year, the country’s first shortfall in a decade, as plummeting demand for commodities threatens to cut revenue by a third, according to the Finance Ministry.

Russia has earmarked 2.51 trillion rubles ($79 billion) in spending to battle the slump, including funding designated for carmakers, agriculture and construction. The “anti-crisis” program was signed into law by Putin on June 19.

‘Might Fail’

“The planned fiscal relaxation might fail to stimulate private consumption in the face of significant uncertainty about future income,” the International Monetary Fund said in a report published on Aug. 7. “Absent a more determined policy intervention, there is a risk that banks will continue to struggle to adjust balance sheets, stifling credit expansion and impeding a recovery.”

Russia’s economy will need between four years and five years to match last year’s pace of growth, Finance Minister Alexei Kudrinsaid yesterday. GDP in 2008 grew at the slowest pace since 2002, expanding 5.6 percent compared with 8.1 percent a year earlier. The IMF forecasts a 6.5 percent economic contraction for Russia this year, followed by growth of 1.5 percent in 2010.

The central bank’s five interest-rate cuts since April 24 have failed to spur lending as banks hold back on concern borrowers can’t repay loans. Lending to consumers dropped 1.1 percent in June for the fifth consecutive monthly decline and banks shrank their corporate loan books by 1.2 percent, according to central bank data.

Subsistence Level

By the end of 2009, 17.4 percent of the population, or 24.6 million people, will be living beneath the subsistence level of $185 per month, almost 5 percent more than before the crisis, the World Bank said in a report released in June.

Rising numbers of jobless and falling wages will cut the country’s nascent middle class by 10 percent, or 6.2 million people, to about 51.2 percent of the population, the Washington- based lender said. Household consumption, “the main source of growth in recent years,” is “collapsing,” it added.

The economy may start to show signs of recovery in the third quarter this year, Deputy Economy Minister Andrei Klepach said on July 23.

GDP expanded a non-seasonally adjusted 7.5 percent from the previous quarter after contracting 23 percent in the first three months, the office said.

Source

The U.S. economy may be on the cusp of a recovery and the impact of the nation’s stimulus plan should increase this quarter, said Laura Tyson, an adviser to President Barack Obama.

“We may have hit stability, we may be in the beginning of an upturn” based on the latest economic data, Tyson, a member of the White House’s Economic Recovery Advisory Board, said yesterday during an interview in Kuala Lumpur. Nobel Prize- winning economist Paul Krugman said the deepest slump since the Great Depression may be ending.

“It’s quite possible, though not certain, that retrospectively, we’ll say that the recession ended in July or August, maybe September,” Krugman said in a separate interview in the Malaysian capital. “My guess is that we’ve bottomed out now, that August was probably the trough month.”

Krugman, 56, cited last week’s government report showing that the pace of U.S. job losses slowed more than forecast in July and the unemployment rate dropped for the first time in 15 months. He also pointed to reports by the Institute of Supply Management that manufacturing, while still contracting, is on the mend.

Tyson, 62, cautioned that declining housing values and an overhang of unsold homes pose threats to a recovery, and it’s too early to say the jobs report is the beginning of a trend.

“We’ve had one number that’s been slightly stronger than expected,” she said. “It’s pretty hard to read a single month as creating a trend. Most of the forecasts are still that the unemployment rate rises through till the end of the year.”

Unemployment Falls

U.S. payrolls fell by 247,000 in July, after a 443,000 loss in June. The jobless rate unexpectedly dropped to 9.4 percent from 9.5 percent. Obama said last week that the unemployment numbers indicate “the worst may be behind us.”

The report propelled the Standard & Poor’s 500 Index above 1,000 for the first time since November as U.S. stocks rose for a fourth week. The S&P 500 rose 2.3 percent to 1,010.48, the highest since Oct. 6. The Dow Jones Industrial Average climbed 198.46 points, or 2.2 percent, to 9,370.07.

The Aug. 7 Labor Department report came a week after the Commerce Department said U.S. gross domestic product shrank at a better-than-forecast 1 percent annual pace in the second quarter after a 6.4 percent drop in the prior three months online payday loans.

There’s no reason for a second stimulus package now, Tyson said in the interview. She suggested on July 7 the U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small.” She told CNBC three days later that it’s premature to plan for a second stimulus package.

Stimulus Expectations

“We know that relative to plan, the stimulus package in place is performing along expectations,” Tyson said yesterday. “Right now, based on the evidence that the economy has put forward and the stimulus spend out relative to plan, there isn’t any reason to think about a next round.”

Policy makers may want to consider doing more for unemployed Americans, Tyson said. Employers have eliminated about 6.7 million jobs since the recession began in December 2007, the most since the Great Depression.

Congress will consider extending unemployment benefits next month when lawmakers return from their August recess, Majority Leader Harry Reid said Aug. 7. The Senate’s top Democrat said 1.5 million Americans may exhaust their benefits by the end of the year if Congress doesn’t act.

“That could be considered as a second stimulus or it could be considered as an extension of unemployment compensation,” said Tyson, a professor at the University of California’s Walter A. Haas School of Business, who was an adviser to Obama during last year’s presidential campaign.

1 Million Jobs

Krugman, a Princeton University economist, said the stimulus plan probably saved 1 million jobs. He said a second package is needed and should be directed at state and local governments as well as spending on construction projects.

The U.S. economy may be the first after Asia to “take off,” said Raghuram Rajan, the former chief economist of the International Monetary Fund who’s now a professor at the University of Chicago.

“Unemployment may continue rising and job losses may continue, but growth will start picking up in the U.S.,” Rajan, 46, said in an interview yesterday. “We will get a few quarters of rebound growth.”

Krugman, Tyson and Rajan were in Kuala Lumpur for the World Capital Markets Symposium, which starts today.

Source

The U.K. economy shrank more than twice as much as economists forecast in the second quarter as a record annual slump in construction, banking and business services kept Britain mired in the recession.

Gross domestic product contracted 0.8 percent from the first quarter, the Office for National Statistics said today in London. Economists predicted a 0.3 percent drop, according to the median of 32 forecasts in a Bloomberg News survey. From a year earlier, the economy shrank 5.6 percent, the most since records began in 1955.

Prime Minister Gordon Brown’s Labour Party trails the opposition Conservatives in polls less than a year before an election as the recession drives up unemployment. Bank of England policy maker Andrew Sentance said yesterday that the British economy may start to pick up in the second half of 2009.

“It’s a very sizeable recession indeed,” said George Buckley, chief U.K. economist at Deutsche Bank AG in London. “I think we’ve seen the worst, but what will the post-recession environment look like? There is a risk in the medium term that growth will be weaker than we’re used to.”

The pound dropped as much as 0.5 percent against the dollar after the report. The U.K. currency traded at $1.6466 as of 12:20 p.m. in London.

Today’s report is the first among the Group of Seven nations for the second quarter. The International Monetary Fund forecasts the U.K. will contract 4.2 percent this year, compared with 4.8 percent in the euro area and 2.6 percent in the U.S.

‘Return to Growth’

Brown said today that the Group of 20 nations need to take steps to revive the world economy.

“We are at a point where banks have been stabilized, but we don’t yet have a strategy for a return to growth,” Brown said at the opening of a meeting in his office in London.

Brown, who must call a general election by June, has trailed David Cameron’s Conservatives in every opinion poll this year. A July 19 survey by Ipsos-Mori Ltd. showed the ruling party lagging the biggest opposition party by 16 points.

“Today’s figures are fresh evidence of the sheer scale of the global downturn we’re fighting,” said Liam Byrne, a junior Treasury minister payday loans online. “But they also show the pace of slowdown is easing compared to the winter, which is why we remain cautious but confident that growth will return towards the end of the year.”

The data show the economy has now shrunk by 5.7 percent since the recession began last year. That compares with a total 6 percent slump in the recession period that ended in 1981, the statistics office said.

Annual Decline

Construction fell 2.2 percent on the quarter and 14.7 percent from a year earlier, which was the biggest annual drop since records began in 1948. Business services and finance slumped 0.7 percent on the quarter and had a record annual decline of 4.4 percent, the statistics office said.

While the government has committed as much as 1.4 trillion pounds ($2.3 trillion) to revive lending and rescue banks such as Royal Bank of Scotland Group Plc, it hasn’t stopped joblessness from increasing. Unemployment in the quarter through May increased by 281,000, the most since records began in 1971. The jobless-benefit roll has reached 1.56 million, the most in 12 years.

Policy makers unanimously voted on July 9 to keep the key interest rate at a record low of 0.5 percent and said they will review the size of their 125 billion-pound plan to print money in August, when they publish forecasts on growth and inflation.

Quarterly Predictions

The bank will “make a judgment about whether we need to add further to that stimulus” once the new quarterly predictions are available, Sentance said yesterday in an interview. “The economy is already benefiting from a big monetary stimulus as we go into the second half of this year and next year.”

Former policy maker David Blanchflower said in an interview on Bloomberg Television yesterday that the economy may not be through the worst, and the central bank risks stifling the recovery were it to raise rates or reverse the bond-purchase program prematurely.

“My worry is that the tightening comes too soon and people kill off any recovery that’s coming,” he said. “It’s very early days to say that you know the endgame is even in sight.”

Source