Thursday, July 17, 2014

Japan's first quarter GDP was up 6.7% annualised, China exports rose 7 percent and India has new reforms

















 The picture in Asia is a story of continued growth with the over hanging concern of a capital contraction actually damaging the Chinese economy. Yet the end of the housing expansion surely means a diversion of capital to the lower rungs of the credit economy and a coming expansion of demand there.


Unlike both Europe and the USA who are both engaged in deflationary behavior, there remains plenty of room for economic expansion and attention to public needs bodes well.


I am actually more comfortable with the Asian situation than I am with either Europe or the USA who both seem to do the wrong thing consistently.



Japan's first quarter GDP was up 6.7% annualised, China exports rose 7 percent and India has new reforms


JUNE 10, 2014




1. Japan's economy grew an annualised 6.7 percent in the first quarter, up sharply from an initial reading of a 5.9 percent rise, and confirmed the fastest pace of growth since July-September 2011. The data beat the median market forecast for GDP to rise 5.6 percent.


The upward revision was largely due to a recalculation in capital expenditure that took into account finance ministry data showing a solid increase in spending.


Adding to the optimism, current account data showed foreign visitors spent more money than Japanese travelling abroad for the first time in 44 years, boding well for Japanese companies in the retail and tourism industry.


In comments to Parliament, BOJ Deputy Governor Kikuo Iwata sounded suitably upbeat, saying that he expects Japan's exports to turn up as advanced nations recover.


"The Japanese economy will continue growth above its potential rate as a trend as exports turn up and domestic demand remains firm," Iwata told parliament, adding that the economy is on a steady track to meet the BOJ's 2 percent inflation target.


2. China's exports gained steam in May thanks to firmer global demand, data showed on Sunday, but an unexpected fall in imports
signaled weaker domestic demand that could continue to weigh on the world's second-largest economy.


Exports rose 7 percent in May from a year earlier, quickening from April's 0.9 percent rise, while imports fell 1.6 percent, versus a rise of 0.8 percent in April.


Exports to the United States rose 6.3 percent in May, slowing from a rise of 12 percent in April, while shipments to the European Union rose 13.4 percent last month, compared with 15.1 percent in April. Exports to ASEAN countries rose 9.1 percent, quickening from 3.8 percent in April, the data showed.



3. India's new government has unveiled a programme for rapid economic reforms aimed at creating jobs and boosting foreign investment.


The announcement by President Pranab Mukherjee included plans designed to simplify taxation and reduce inflation.

Industrial reforms included attracting private investment to the coal and defence sectors.

UPDATE 2-Japan's economy picks up speed on unexpected surge in capex

Mon Jun 9, 2014 2:49am EDT





* Q1 GDP revised annualised +6.7 pct vs initial +5.9 pct
* Capex revised up to +7.6 pct vs preliminary +4.9 pct
* Consumer sentiment, service-sector mood brighten
* BOJ Iwata keeps upbeat view, economy on track
  • Travel balance turns to surplus, 1st time since 1970 (Adds BOJ Iwata quote, more data, graphic link, details)
By Leika Kihara and Tetsushi Kajimoto

TOKYO, June 9 (Reuters) - Japan's first quarter growth handily beat initial estimates on an unexpected surge in capital spending, fresh signs the world's third-biggest economy is in better shape to weather a hit to consumption from a sales tax hike.

Capital spending, long a weak link in the economy, is a key focus in Tokyo's campaign to engineer a revival after two decades of sub-par growth and grinding deflation.

"Companies don't tend to ramp up spending ahead of the sales tax hike, so the increase likely reflects improvements in corporate profits and diminishing slack," said Mitsumaru Kumagai, chief economist at Daiwa Institute of Research.

Japan's economy grew an annualised 6.7 percent in the first quarter, data showed on Monday, up sharply from an initial reading of a 5.9 percent rise, and confirmed the fastest pace of growth since July-September 2011. The data beat the median market forecast for GDP to rise 5.6 percent.

The upward revision was largely due to a recalculation in capital expenditure that took into account finance ministry data showing a solid increase in spending.

Adding to the optimism, current account data showed foreign visitors spent more money than Japanese travelling abroad for the first time in 44 years, boding well for Japanese companies in the retail and tourism industry.

In other encouraging news, Japanese consumer confidence rose for the first time in six months in May, further underscoring recent signs that the economic pain from the sales tax hike would be temporary. The service-sector sentiment index also edged up.

The tax, which was raised to 8 percent from 5 percent on April 1 to fix Japan's tattered finances, has caused distortions in data and raised worries about the outlook.

Monday's positive figures, however, back the Bank of Japan's view the economy will recover moderately led by domestic demand, with growing evidence of an uptick in business investment a particularly pleasing result for policy makers.

In comments to Parliament, BOJ Deputy Governor Kikuo Iwata sounded suitably upbeat, saying that he expects Japan's exports to turn up as advanced nations recover.

"The Japanese economy will continue growth above its potential rate as a trend as exports turn up and domestic demand remains firm," Iwata told parliament, adding that the economy is on a steady track to meet the BOJ's 2 percent inflation target.

ON TRACK

Corporate capital spending rose 7.6 percent, up from a preliminary 4.9 percent increase, an encouraging sign for Prime Minister Shinzo Abe who is keen for companies to spend more of their cash piles to drive a sustainable economic recovery.

On a quarterly basis, the economy grew 1.6 percent in January-March, up from a preliminary 1.5 percent expansion. It compared with a median market forecast for a 1.4 percent rise.

Some analysts warn of uncertainty ahead as companies start to feel the pinch from an increase in the sales tax to 8 percent from 5 percent in April.

"A surge in domestic demand helped Japan achieve high growth in January-March. But a reactionary slump is inevitable, which means the economy will contract in April-June," said Takeshi Minami, chief economist at Norinchukin Research Institute.

Moreover, analysts say weak factory output and household spending falling at the fastest pace in three years in April point to the tax hike's chilling effect on consumer spending.

Still, there are signs the economy will overcome the temporary dips in growth.

Under its "qualitative and quantitative easing" programme launched in April last year, the BOJ has been aggressively pumping money into markets on hope that banks will lend more to companies, which will then boost wages and capital spending.

Bank lending rose 2.3 percent in May from a year earlier, increasing for the 31st straight month and growing at a faster pace than 2.1 percent in April, BOJ data showed on Monday.
There was little market reaction to the GDP data.

"The market is more focused on data pertaining to inflation and its possible impact on the Bank of Japan's monetary policy," said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.

The BOJ has said Japan can weather the tax hike impact and resume a moderate recovery in July-September as exports - now a soft spot in the economy - gradually pick up.

Reflecting the continued weakness in exports, Japan posted its biggest trade deficit for the month of April, leading to a smaller-than-expected current account surplus, Ministry of Finance data showed on Monday.

But the current account data also showed that the travel balance swung to a surplus for the first time since 1970 as foreign visitors outnumbered Japanese travelling abroad. (Editing by Chris Gallagher & Shri Navaratnam)

China's May exports gain steam but imports fall unexpectedly

BY KEVIN YAOBEIJING 

Sun Jun 8, 2014 1:06am EDT


(Reuters) - China's exports gained steam in May thanks to firmer global demand, data showed on Sunday, but an unexpected fall in imports signaled weaker domestic demand that could continue to weigh on the world's second-largest economy.

Exports rose 7 percent in May from a year earlier, quickening from April's 0.9 percent rise, while imports fell 1.6 percent, versus a rise of 0.8 percent in April, the General Administration of Customs said.

China's trade surplus widened sharply to $35.9 billion in May from April's $18.5 billion, the customs office said.

That compared with market expectations in a Reuters poll of a 6.6 percent rise in exports, a 6.1 percent rise in imports and a monthly trade surplus of $22.6 billion.

"We do not think the May trade data will change the policy stance significantly," Louis Kuijs, an RBS economist in Hong Kong, said in a note.

"While the export data is reasonably positive, the weakness of domestic demand implied by the import data may keep the pressure up for initiatives to support growth," he said.

China's commerce ministry had predicted that the trade picture could brighten in May as base efforts fade and government support measures kick in. Analysts have attributed the weak trade figures partly to an inflated comparison base with last year due to a rash of fake invoicing of exports to beat currency restrictions. Authorities have cracked down on such activities since May of last year. "The data shows that the country's exports growth has returned to a normal level and will continue to improve," customs office spokesman Zheng Yuesheng told state television.'

Exports to the United States rose 6.3 percent in May, slowing from a rise of 12 percent in April, while shipments to the European Union rose 13.4 percent last month, compared with 15.1 percent in April. Exports to ASEAN countries rose 9.1 percent, quickening from 3.8 percent in April, the data showed.

TRADE TARGET IN DOUBT

The pick-up in exports follows a batch of factory surveys for May that showed improvement in activity, as the government steps up targeted measures to support growth, including quickening construction of railways and public housing and loosening credit conditions for selected banks.

The government has also unveiled some policy support for the export sector, including giving more tax breaks, credit insurance and currency hedging options to its exporters.

Last month, a senior commerce ministry official suggested China could miss its target for trade growth for a third consecutive year in 2014 as higher labor costs and weaker global demand hurt what had been one of the economy's main engines. [ID: nL3N0O614F]

China's combined exports and imports edged up 0.2 percent in the first five months from a year earlier, trailing far behind the annual growth target of 7.5 percent.

Analysts believe that China's property market could put downward pressure on growth even as global demand improves, as evidence mounts of a rapid cooling in what had been one of the few strong spots in the economy.

The government is due to release inflation data on Tuesday, and industrial output, retail sales and fixed-asset investment on Friday. New loan and money supply data will be issued between June 10-15.

A Reuters poll found analysts expect annual economic growth to slow to 7.3 percent in the second quarter from 7.4 percent in the previous quarter, with full-year growth of 7.3 percent in 2014, the weakest in 24 years and below the government target of 7.5 percent.

Premier Li Keqiang said on Friday the economy still faces relatively big downward pressures and pledged to continue to use targeted measures to support growth.

Indian government announces rapid economic reforms

Food inflation is among the highest in the world

India's new government has unveiled a programme for rapid economic reforms aimed at creating jobs and boosting foreign investment.

The announcement by President Pranab Mukherjee included plans designed to simplify taxation and reduce inflation.

Industrial reforms included attracting private investment to the coal and defence sectors.

He also spoke of India's hopes for good relations with neighbours and pledged to tackle violence against women.

The President's parliamentary address was made to lawmakers elected in Prime Minister Narendra Modi's landslide victory last month.

Mr Mukherjee said that the government would introduce a general sales tax, encourage foreign investment and speed up approvals for major business projects. It would also tackle bottlenecks that make India's food inflation the highest among major economies.

The anti-inflationary message will be welcomed by central bank governor Raghuram Rajan, who has made lowering India's growth-stifling high interest rates contingent on containing consumer prices.

India's economic expansion has slowed markedly, growing by 4.7% in the 2013-14 financial year and marking the second year of sub-5% growth.






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