Malaysian Retailer-Chains Association (MRCA) remains optimistic on the performance of the retail sector despite a 3% sales decline in 2Q11 (+5.5% in 1Q11). Hypermarkets and convenience stores did well in 2Q11 because they sell essential items, while the food and beverages (F&B) business suffered declines due to high raw food cost, utility charges and competition from new shopping malls in 2Q11. MRCA secretary-general Valerie Choo said MRCA hopes for growth in 4Q11 as she expects consumers will spend more during the year-end season with promotions such as the megasale. It projected the retail sales to grow by 4-5% this year. (Bloomberg)
Banks will tackle rising credit card debt with a new payment allocation method involving a “rejig” of interest rates imposed. Under new Bank Negara guidelines to be implemented from tomorrow (1 Oct), banks will tabulate credit card balances by focusing on expenses hit with the highest interest rate.
• This means payment received from cardholders for the Sep statement will first be used to offset items levied the highest interest, thus resulting in considerable savings in terms of the interest payable.
• Cash advance withdrawals are usually imposed the maximum 18% rate.
• Interest rate ranging from 13.5% to 17.5%, depending on the cardholder’s payment record, are applied on retail purchases.
• The new method was part of the revised credit card guidelines issued by the central bank on 18 Mar this year. (The Star)
US: Comfort drops to second-weakest on record
Consumer confidence slumped last week to the second-lowest level on record as Americans grew more concerned with their financial situation and the buying climate worsened. The Bloomberg Consumer Comfort Index dropped to minus 53 in the period ended 25 Sept from minus 52.1 the prior week. Another report showed the economy grew at a faster pace in the second quarter than previously estimated. The comfort gauge showed the share of households saying it was a bad time to buy needed goods and services climbed to the highest level in three years, raising the risk that the biggest part of the economy will slow heading into the holiday shopping season. A lack of jobs and growing concern that policy makers will be unable to spur the recovery may keep sentiment depressed. (Bloomberg)
US: Jobless claims in drop on seasonal adjustment issues
Claims for U.S. unemployment benefits fell more than forecast last week as an atypical calendar alignment made it more difficult for the government to adjust the data for seasonal changes. Applications for jobless benefits dropped by 37,000 in the week ended 24 Sept to 391,000, the fewest since April, Labor Department figures showed. The pace of firings has remained little changed this year while companies are reluctant to hire at a time when the economy is slowing and concerns of a European default rise. Federal Reserve policy makers last week announced more unconventional measures to boost jobs and the economy. (Bloomberg)
US stocks advance as jobless claims offset technology retreat
US stocks rose, rebounding from a 1% decline in the S&P’s 500 Index, as lower-than-estimated claims for unemployment benefits and a vote by German lawmakers to expand a European bailout fund helped offset losses by consumer and technology shares. The S&P 500 added 0.8% to 1,160.40 at 4 pm New York time after rallying as much as 2.2%. The Dow Jones Industrial Average added 143.08 points, or 1.3%, to 11,153.98. (Bloomberg)
The U.S. economy grew at a 1.3% pace in 2Q (+0.4% in 1Q), faster than estimated last month and helped by exports and spending on services. The revised rise in gross domestic product compares with a 1% gain previously calculated, Commerce Department figures showed. (Bloomberg)
U.S. pending home sales, or contract signings for existing homes, fell 1.2% in Aug after dropping 1.3% in the previous month, the National Association of Realtors reported. Economists called for a 2% decrease. (Bloomberg)
Asia: Taiwan ends rate rises as Asian economies seek to protect growth
Taiwan’s central bank refrained from raising interest rates, ending five straight quarters of increases as Asia’s policy makers seek to protect their economies from a faltering global recovery. The central bank left the discount rate on 10-day loans to banks at 1.875%, it said yesterday. Central banks from New Zealand to South Korea refrained from raising benchmark rates this month as Europe’s debt crisis and a struggling U.S. economy dimmed the outlook for the region’s exporters. A decline in Taipei home prices from a record earlier this year and slowing export-order growth have eased inflation pressures, weakening the case for further monetary tightening. (Bloomberg)
The eurozone’s economic sentiment indicator (ESI) fell by 3.4pts to 95.0 in Sep, the European Commission said. According to the surveys, confidence in all the sectors fell in Sep, with the biggest losses seen in service sectors (-3.7) and in industry (-3.2). Economists expected an ESI reading of 96.2 in Sep. (Xinhua, Bloomberg)
The European Commission's measure of consumer confidence fell to -19.1 in Sep (- 16.5 in Aug) and residents of euro-zone nations became more pessimistic about the outlook for the economy and more fearful of losing their jobs. (WSJ)
The European Commission's measure of industrial confidence fell to -5.9 in Sep (-2.7 in Aug), a weaker outcome than the forecast reading of -4.0. (WSJ, Bloomberg)
Euro: Germany backs Euro rescue fund to set stage for next steps
German lawmakers approved an expansion of the euro-area rescue fund’s firepower, freeing the way for European officials to focus on what next steps may be needed to stem the debt crisis. The lower house of parliament passed the measure with 523 votes in favor and 85 against, granting the fund powers to buy bonds in secondary markets, enable bank recapitalizations and offer precautionary credit lines. It raises Germany’s guarantees to EUR211bn (USD287bn) from 1EUR23bn. The main opposition Social Democrats and Greens said before yesterday’s session in Berlin that they’d vote with Chancellor Angela Merkel’s government, assuring passage. (Bloomberg)
Japan’s retail sales slumped for a second month in Aug as demand for appliances and autos fell, a sign that consumers’ concern about looming tax increases may be weighing on spending. Sales slid 1.7% mom in Aug, the trade ministry said in Tokyo today, the steepest decline since Mar. Economists called for a 0.2% increase. On a yoy basis, sales decreased 2.6%. (Bloomberg)
International investors expect the world economy to relapse into a recession, with more than one in three forecasting a global economic meltdown within the next year, according to a Bloomberg poll. About two-thirds of those surveyed say the international economy is deteriorating, up from just 18% who felt that way in the last poll, in May. (Bloomberg)
Global investors anticipate Europe’s debt crisis leading to an economic slump, a financial meltdown and social unrest in the next year with 72% predicting a country abandoning the euro as a shared currency within five years, a Bloomberg survey found. (Bloomberg)
U.S. mortgage rates fell to the lowest level in Freddie Mac records after the Federal Reserve announced a plan to reduce borrowing costs even further. The average rate for a 30-year fixed loan dropped to 4.01% in the week ended 29 Sep from 4.09%, Freddie Mac said. That’s the lowest in the company’s records dating back to 1971. (Bloomberg)
Indonesia's 2011 budget deficit will likely be less than 2% of GDP (2.1% previously) due to low government spending, said the Finance Ministry. Last year, the budget deficit was 0.62% (versus a projection of 2.1%). (Reuters)
Bank Indonesia (BI) lowered its 2011 forecast for foreign fund inflows, with portfolio inflows falling below US$10bn (vs US$12bn-US$13bn previously, and US$13.26bn in 2010). Foreign investment is expected to reach US$16bn this year, with the overall balance of payment still in a big surplus, leaving a possibility for the forex reserves to increase this year. (Jakarta Post)
Vietnam’s central bank said it will cap interest rates on dong deposits that are non-term and those less than a month at 6% to address “liquidity risks” amid concerns about the health of the nation’s banking system. It will maintain the existing 14% rate cap on deposits of one month or longer. (Bloomberg)
59% of respondents said China’s GDP, which rose 9.5% yoy last quarter, will gain less than 5% annually by 2016. 12% see such a slowdown within a year, and 47% said it will occur in 2 to 5 years, a quarterly Bloomberg poll showed. (Bloomberg)
Thailand’s energy policy committee plans to seek THB10bn in loans to finance domestic fuel subsidies, Energy Minister Pichai Naripthaphan said today. (Bloomberg)
Electricity tariffs in Singapore will decrease by an average of 1.2% from Oct to the end of the year, the first drop in 12 months, due to lower fuel oil prices. Tariffs for households will drop 1.1% or 0.3 cents per kilowatt-hour. (Channel News Asia)
Singapore is bracing for a shutdown of its largest refinery after a fire at Royal Dutch Shell's Bukom plant on Wednesday raised the prospect of disruptions to the region's oil flows.
• The refinery processes 0.5m barrels of crude oil per day and is Shell's largest.
• Fire comes at a time when refiners across Asia are running close to capacity
• Singapore's key position in global oil markets means any disruption could exaggerate the impact on regional prices in relation to the capacity taken offline. (Straits Times)
India’s wholesale price index for food articles rose 0.8% mom and 9.13% yoy from 8.84% in the previous week. (Wall Street Journal)
The Indian government raised its borrowing target for the current fiscal year by INR528 bn (US$10.8bn), surprising the market and fueling worries that it may overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. (Wall Street Journal)
India: Food inflation quickens, maintaining pressure on rates
India’s food inflation accelerated for the first time in four weeks, maintaining pressure on the central bank to raise borrowing costs to tame price gains. An index measuring wholesale prices of agricultural products gained 9.13% in the week ended 17 Sept from a year earlier, the commerce ministry said in a statement yesterday. It rose 8.84% the previous week. The rate of inflation in the world’s second-most populous nation remains above the level the central bank deems acceptable and has been “fairly stubborn,” Governor Duvvuri Subbarao said this week as he weighs the risks to expansion posed by a faltering global recovery against price pressures. (Bloomberg)
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