20100415 1128 Global Economic News.

US retail sales rose more strongly than expected by 1.6% mom in March (0.5% in Feb), pointing to a broadening of the manufacturing-led economic recovery as inflation pressures remain muted. This was the largest increase since Nov 09 as consumers stepped up purchases of motor vehicles (+6.7% vs. -1.9% in Feb) and a wide range of goods. Economists had forecast retail sales to increase 1.2% mom for March.

• Sales excluding autos and parts rose 0.6% mom in March (1.0% in Feb) as a combination of an early Easter holiday and warm weather boosted receipts at clothing stores. Economists had expected a 0.5% mom gain.
• Core retail sales, which exclude autos, gasoline and building materials, rose 0.5% (1.2% in Feb). (CNBC, CNN Money).

US consumer prices gained 2.3% yoy in March (2.1% in Feb), driven by a 41.0% climb in gasoline costs and 2.1% increase in electricity costs during the period. Core CPI increased 1.1% yoy in March (1.3% in Feb).

• Month-on-month, overall CPI inched up 0.1% (unchanged in Feb) while core CPI was unchanged in March (+0.1% in Feb). Economists had forecast for a 0.1% mom gain each for the overall prices and core CPI in March. (CNBC, CNN Money)

US mortgage applications fell 9.6% in the week ended 9 Apr, marking the second weekly decline. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 6.2%. (CNBC)

US inventories rose 0.5% in February (0.2% in Jan), the most since Jul 08, as companies boosted orders to try to keep up with sales. Business inventories were forecast to rise 0.4%. Companies had 1.27 months’ supply of goods on hand in February, matching the prior month’s reading as the lowest since Nov 07. (Bloomberg)

Fed chairman Ben Bernanke said that private sector demand will be "sufficient" to spur a moderate economic recovery in coming months, but he added that more time is needed to recover job losses. "A recovery in economic activity appears to have begun in the second half of last year," Bernanke told the Joint Economic Committee.

• Bernanke's speech was mostly upbeat, noting all the different areas where the economy has picked up. He pointed to higher GDP rates, increasing auto sales and a strengthening financial system as catalysts for the Federal Reserve to wind down programs that were propping up those sectors. 
• "Going forward, consumer spending should be aided by a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability," Bernanke said. 
• He cautioned that the unemployment rate and the housing market remain areas of concern. Bernanke also spoke about the need for policymakers to start tackling the growing federal deficit, to maintain "the confidence of the public and financial markets." (CNN Money)

The Obama administration's mortgage-modification program is not keeping pace with the deluge of foreclosures hitting the market. As of February, only 168,708 homeowners have received long-term mortgage modifications under the president's plan.

• This is a small fraction of the 6m borrowers who are more than 60 days behind on their loans, according to the Congressional Oversight Panel's latest report. The president's foreclosure-prevention plan will likely assist only 1m troubled borrowers, short of the administration's original goal of up to 4m homeowners. (CNN Money)

The Federal Reserve said the economy expanded “somewhat” across most of the US in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed. “While labor markets generally remained weak, some hiring activity was evident, particularly for temporary staff,” according to the Beige Book report. Consumer prices “generally remained level,” and producers had difficulty passing along increases of some raw materials, the Fed said. (Bloomberg)

US Treasury Secretary Timothy F. Geithner said China is likely to move toward a more flexible currency because its practice of pegging the yuan to the dollar limits the Asian nation’s ability to conduct monetary policy. “As a strong, large, independent, growing economy, it doesn’t make sense for that country to run a monetary policy exchange-rate regime that effectively lets the Federal Reserve set interest rates for their economy,” he said. (Bloomberg)

Dallas Federal Reserve Bank President Richard Fisher Wednesday said the economy is "ready" for the Fed to "normalize" the spread between the federal funds rate and the discount rate and said that is why his Bank's board of directors recently requested an increase in the primary credit rate.

• Fisher emphasized that a further increase in the discount rate would not represent a tightening of monetary policy -- merely a "normalization" of the spread between the funds rate and the discount rate. 
• Fisher also opposes the Federal Open Market Committee's continual assertions that it expects the federal funds rate to stay "exceptionally low ... for an extended period." (Xinhua)

The European Union (EU) described as “speculation” a German newspaper report that the EU aid package for debt-burdened Greece could total as much as €90bn (US$123bn) over three years. “There are still no sums fixed for 2011 and 2012 and any figures reported on are simply speculation,” Amadeu Altafaj, the commission’s spokesman for economic and monetary affairs, said. (Bloomberg)

European industrial production increased 0.9% mom in February (1.6% in Jan), led by demand for intermediate goods such as steel and car engines. February’s growth came above economists forecast for a 0.1% mom gain. From a year earlier, February production increased 4.1%. (Bloomberg)

South Korea’s credit ratings were raised to A1 from A2 at Moody’s Investors Service, It was due to the central bank increased its 2010 economic growth forecast and unemployment fell the most in a decade. (Bloomberg)

China’s foreign direct investment climbed 7.7% yoy to US$23.44bn in 1Q10. (Bloomberg)

Singapore raised its 2010 economic growth forecast for the second time this year and said inflation will accelerate more than expected, prompting the central bank to join regional counterparts in tightening monetary policy.

• Gross domestic product will increase 7.0-9.0% in 2010 (vs. previous forecast for 6.5% growth). 
• Consumer prices will rise in a range of 2.5-3.5% this year, compared with an earlier forecast for as much as 3.0%.
• The central bank said it will undertake a one-time revaluation and seek a gradual and modest appreciation of the currency. (Bloomberg)

Singapore’s economy grew an annualized 32.1% qoq in 1Q10 (-2.8% in 4Q09). That was better than the median estimate for an 18.4% increase. From a year earlier, the economy grew 13.1% (4.0% in 4Q09), compared with the median estimate for an 11.0% gain. (Bloomberg)

Oil surged after a US government report showed an unexpected decline in supplies as gasoline demand increased by the greatest amount in five years. Stockpiles dropped 2.2m to 354m in the week ended 9 Apr, the Energy Department said, the first decrease in 11 weeks. Inventories were forecast to climb 1.3m barrels.

• Gasoline use rose 1.3% in the four weeks ended 9 Apr, the biggest gain since Aug 04. 
• Crude oil for May delivery gained US$1.79, or 2.1%, to settle at US$85.84 a barrel on the New York Mercantile Exchange, ending a five-day decline. (Bloomberg)

The US and Indonesia signed an agreement paving the way for increased US investment in Indonesia. The agreement establishes a framework that “will allow a lot more capital to be deployed in Indonesia when the US is ready” to take that step, Gita Wirjawan, Indonesia’s chief investment coordinator said. (Financial Daily)

Vietnam’s central bank issued rules yesterday that free up short-term lending rates from cap, a move to rationalise rates that a former official says could see them ultimately fall. The State Bank of Vietnam earlier this year allowed the rates that commercial banks charge for medium- and long-term loans to be “negotiable”, freeing them from a cap of 1.5 times the policy base rate (now stands at 8.0%). (Financial Daily)

The IMF said economies that reduce large current account surpluses through currency appreciation or stimulus measures are able to maintain their economic expansion. Drawing on an analysis of 28 such “reversals” over the past 50 years for countries “considering a transition away” from surplus, the IMF said that it found no evidence of reduced growth.

• Expansion after such a move is “more balanced across domestic and external sources,” the fund said in its World Economic Outlook. The report comes as the Obama administration is pressing the Chinese government to end the yuan’s peg to the dollar. (Bloomberg)

Indonesia’s central bank will maintain a “careful” stance on monetary policy in the second half of 2010 as a possible increase in commodity and electricity prices may stoke inflation, Deputy Governor Hartadi Sarwono said. “I’m still comfortable with the current Bank Indonesia rate now and there is no plan to change our monetary policies.” (Bloomberg)