20100513 1138 Global Economic News.

US’s trade gap widened to US$40.4bn in March from a slightly revised deficit of US$39.4bn in February. Imports and exports jumped 3.1% and 3.2% respectively. The trade gap, which was smaller than market consensus of US$41.0bn, was due in part to sharp increases in both the price and quantity of energy imports. Trade deficits with most major trading partners widened including those with China, Japan and the European Union.(Bloomberg)

The US government posted a budget deficit of US$82.7bn in April, the most ever run in the month when Americans file their tax returns. April has been a surplus month for the government because of the April 15 tax filing deadline. It was the 19th consecutive monthly deficit and surpassed the US$20.9bn shortfall last April.

• This brought the deficit for the first seven months of the fiscal year to US$799.7bnThe year-to-date deficit was down marginally from US$802.3bn a year ago. Receipts in April were about US$245.3bn, down from US$266.2bn a year earlier, and outlays were about US$327.9bn, up from US$287.1bn a year ago. 
• The Treasury Department expects that the deficit will reach US$1.56trn this fiscal year, up from a record US$1.41trn in fiscal 2009. (CNNMoney)

Europe’s economy expanded at a faster pace than expected by 0.2% qoq in the first quarter as a global recovery boosted exports, helping the region overcome the Greek fiscal crisis and consumers’ reluctance to increase spending. Economists had forecast growth of 0.1%.

• On an annual basis, euro-area GDP rose 0.5% in 1Q10 after declining 2.2% yoy in 4Q09. Germany’s GDP rose 0.2% qoq, followed by French (+0.1%) and Italy (+0.5%). By contrast, the Greek economy contracted 0.8% qoq. In Spain, the economy expanded 0.1% and Portugal grew 1.0%. (Bloomberg)

India’s industrial production grew 13.5% yoy in March for a sixth straight month (15.1% in February), adding to inflation pressures even as Europe’s debt crisis threatens to undermine the global economic recovery. The median market estimate was for a 15.1% increase. Manufacturing expanded 14.3%, followed by mining (11%) and electricity production (7.7%). (Bloomberg)

The end of second-round housing stimulus made for a 9.5% drop in purchase applications according to Mortgage Bankers' data for the May 7 week. The drop reverses a run of increases in late April including a 13.0% jump in the April 30 week as buyers rushed to get a contract in place before month-end.

• The outlook for the housing sector is uncertain but has improved in the last few weeks as mortgage rates have moved unexpectedly lower, the result of Europe's sovereign debt troubles and the resulting flight to safety, specifically flight to U.S. Treasuries. 
• Home owners are taking advantage of the move and are refinancing their mortgages as the refinance index jumped 14.8% in the week. Mortgage rates fell in the week led by a 6bp decline in 30-year fixed loans to an average 4.96%. (Bloomberg)

The Bank of Korea yesterday kept its benchmark interest rate unchanged at 2.0% for a 15th month as policy makers faced risks from the European debt crisis alongside signs that the domestic economic recovery is strengthening. The decision came after figures showed South Korea’s unemployment rate dropped to 3.7%, and Governor Kim said growth may exceed the economy’s potential.

• It also follows an agreement by policy makers three days ago to closely monitor the European crisis and take steps if needed to prevent it impeding the nation’s economic recovery. (Bloomberg)

The European Central Bank (ECB) does not intend to reveal how much is being spent on its unprecedented bond-buying programme because that information could assist speculators, a European monetary source said. (Bloomberg)

The European Commission said it is proposing to “reinforce decisively” economic governance in the European Union. It proposes to align national budget and policy planning” under a system of economic policy coordination, “so that Member States would benefit from early coordination at European level as they prepare their national budgets and national reform programs.” (Bloomberg)

David Cameron’s chancellor of the exchequer, George Osborne, will prepare an emergency budget within 50 days containing GBP6bn (US$9bn) of spending cuts to narrow Britain’s record deficit. The agreement also contains a levy on banks, a commission to investigate splitting retail from investment banking, plans to limit bonuses, and measures to increase lending to businesses. (Bloomberg)

Japan’s broadest indicator of economic health climbed to the highest level since 2008, signaling the economy sustained its expansion through the first three months of 2010. The coincident index climbed to 101.1 in March (100.0 in Feb). Economists had projected it would increase to 101.6. (Bloomberg)

Thailand's finance minister offered a slightly improved outlook for 2010 GDP - projecting growth of 4.5-5.0% - but noted the ongoing political crisis could shave 0.3% pt off that target. Korn Chatikavanij also said he expected first quarter GDP to have grown by 9.0% yoy. He added that once the political crisis is resolved, he expected the central bank to raise interest rates. He did not offer a timeframe, but the next rate setting meeting is scheduled for 2 Jun. (CNBC)

Bank Indonesia doesn’t make it its “priority” to increase the benchmark interest rate even as inflation tends to quicken because of higher world commodity prices and as the harvest season has ended, Deputy Governor Hartadi Sarwono said. The recent fund outflow from Indonesia is still “orderly” and the rupiah’s decline isn’t “worrisome,” he added. (Bloomberg)