20100225 1024 Global Economic News.

Federal Reserve Chairman Ben S. Bernanke said the US economy is in a “nascent” recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus expires. “ A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee.

• Bernanke signaled that short-term interest rates would be kept near zero "for an extended period," as he said the Fed will "evaluate" whether additional monetary stimulus of some sort is needed. Unemployment, not inflation, is "the biggest problem we have," he said. 
• Bernanke left the door open to further purchases of mortgage backed securities and agency debt beyond March, and in response to questions from committee members, he said the Fed would also be evaluating whether it should extend its financing of new commercial mortgage backed securities past June. (Xinhua, Bloomberg)

The US Senate on Wednesday approved a US$15bn job-creation bill that would give businesses tax breaks for hiring the unemployed and states more money for infrastructure projects. The four-prong bill would:

• Exempt employers from Social Security payroll taxes on new hires who were unemployed; 
• Fund highway and transit programs through 2010;
• Extend a tax break for business that spend money on capital investments, such as equipment purchases;
• Expand the use of the Build America Bonds program, which helps states and municipalities fund capital construction projects. (CNN Money)

US new home sales unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand. Purchases declined 11% to an annual pace of 309,000, below the market forecast of 342,000. The median sales price dropped 2.4% yoy and the supply of unsold homes increased. (Bloomberg)

As banks around the world increasingly load up on government securities, the heightened risk of sovereign default makes the likelihood of a joint fiscal, banking and currency crisis much greater in the mature world, the chief economist for the Institute of International Finance (IIF) said. (Xinhua)

Global commerce contracted around 12.0% in volume terms last year, more than a previous estimate of 10.0%, said World Trade Organization Director-General Pascal Lamy. This is “the sharpest decline since the end of the Second World War,” Lamy told.

• However, world trade is “picking up” he added, without giving a forecast for this year. It’s too soon to know whether the current upward trend is “short-term” or “sustainable,” he said. (Bloomberg)

European industrial orders unexpectedly rose 0.8% mom for a second month in Dec 09 (+2.7% in Nov), led by a surge in demand for capital goods such as machinery and equipment. On an annualised basis, industrial orders increased 9.5% (-0.6% in Nov), the first annual gain since July 08. Economists forecast a drop of 1% mom in Dec 09. (Bloomberg)

Japan’s exports climbed 40.9% yoy in January (+12.0% in Dec 09), marking the biggest increase since Feb 80. Imports rose 8.6% yoy (-5.5% in Dec 09), resulting in a trade surplus of ¥85.2bn in January (¥544.2bn in Dec 09). The median estimate was for exports and imports to rise 39.5% and 12.1% respectively.. (Bloomberg)

Hong Kong’s economic growth beat estimates to rise by a seasonally adjusted 2.3% qoq in 4Q09 (0.4% in 3Q09). Financial Secretary John Tsang forecast an expansion of as much as 5% this year as he moved to counter the risk of a property bubble. Economists projected it would increase by 0.4% qoq in 4Q09. (Bloomberg)

Hong Kong will raise the stamp duty for luxury homes sales of more than HK$20m and increase the supply of land and apartments, Financial Secretary John Tsang said. The stamp duty measures could be extended to cheaper properties “if there is excessive speculation,” he said.

• At the same time, Tsang switched to forecasting a budget surplus for the year through 31 Mar, rather than a deficit, on land sales and extra government revenue from surging property and stock transactions. (Bloomberg)

Standard & Poor’s may downgrade Greece’s credit rating again by the end of March as a weak economy and political opposition threaten the country’s ability to cut the European Union’s largest budget deficit. “We believe that a further downgrade of Greece of one to two notches is possible within a month,” S&P analysts said. (Bloomberg)

Bank Indonesia (BI) doesn’t see much “pressure” to increase its benchmark interest rate in the first half of this year, central bank Deputy Governor Hartadi Sarwono said. “It seems that inflation is still within our expected range so that pressure to increase the BI rate isn’t big,” Sarwono said. (Bloomberg)

The Indonesian government and central bank are urging lenders to reduce borrowing costs to boost growth, according to State Enterprise Minister Mustafa Abubakar. Policy makers want Indonesia’s 121 commercial lenders to cut loan rates by between 1-2%. “Business people have been complaining about higher lending rates in Indonesia.” (Bloomberg)