20120130 1041 Global Economic Related News.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said: “The current interest rates continue to be accommodative. We will make an assessment of the degree of accommodation that is important for our economy to sustain growth and employment.” On whether inflation has peaked, she said: “I believe so. But they still remain at a risk-elevated level and therefore we have to be very mindful about the conditions.” On  global economy, she said: “For Asia, most of us will still see growth, even though there may be a slight moderation. We expect to see growth continue.” (Bloomberg)

Thailand’s manufacturing production index contracted 25.8% yoy in Dec (-47.3% in Nov).  The decline was shallower than consensus expectations of a 30% fall. Total capacity utilization improved to 52.3% in Dec (40.1% in Nov). (Bloomberg)

India’s wholesale price index for food articles fell 1.03% yoy in the week ended 14 Jan (-0.42% in the previous week). On a week-on-week basis, however, food prices climbed 0.3% wow. (WSJ)

Thailand’s foreign reserves increased to US$176.2bn as at 20 Jan (US$174.9bn in the previous week). (Bloomberg)


Bank of Thailand Governor Prasarn Trairatvorakul said  global economic uncertainty remains the key risk to Thailand’s economy this year. Inflation pressure in 2012 may be lower than last year. He said a government plan to transfer the burden of repaying bank bailout debt to the central bank won’t affect policy-making. (Bloomberg)


Japan’s consumer price inflation eased to -0.2% yoy in Dec (-0.5% in Nov), while inflation ex food and energy was unchanged at -1.1% in Dec. Both figures matched economists’ expectations. (Bloomberg)


Indonesia: Economy to maintain ‘upward trajectory’, Trade Minister says
Indonesia may sustain its economic growth, Trade Minister Gita Wirjawan said, as “fiscal prudence” helps improve the business climate and counter the impact on exports of the European debt crisis. The nation’s gross domestic product is “likely to stay on the upward trajectory,” Wirjawan said in a Bloomberg TV interview yesterday from Davos, Switzerland. “We’re not yet too much affected by what’s happening in Europe and also in the US, because exports only make up 26 percent of GDP unlike some other countries in Asia-Pacific.” Indonesia may trim debt to less than 20 percent of GDP in the next three years, from 24.5% last year, improving the business climate and leading to a higher rating, Wirjawan said. Moody’s Investors Service raised its sovereign rating on Indonesia to an investment grade Baa3 on 18 Jan. [Bloomberg]


Indonesia’s Jan inflation may reach 3.5% yoy, bolstered by food prices, Bank Indonesia Governor Darmin Nasution told reporters. (Bloomberg)


China: Signals caution on loosening as PBOC confounds analysts
China signaled caution toward more monetary loosening by holding off on a reduction in bank reserve requirements that some economists had predicted would come before a week-long holiday ending 28 Jan. Premier Wen Jiabao seeks to steer the world’s second- biggest economy through a property market slowdown and the weakest export growth since 2009 without re-inflating asset bubbles or driving up consumer prices. The central bank has left benchmark interest rates unchanged for the past six months, while making a single cut to reserve requirements, the first since 2008, that became effective in December. [Bloomberg]

EU: Italian, Spanish ratings cut two notches by Fitch on crisis
The credit ratings of Italy, Spain and three other euro-area countries were cut by Fitch Ratings, which said the five nations lack financing flexibility in the face of the regional debt crisis. Italy, the euro area’s third-largest economy, was cut two levels to A- from A+. The rating on Spain was also lowered two notches, to A from AA-. Ratings on Belgium, Slovenia and Cyprus were also reduced, while Ireland’s rating was maintained. While sovereign-bond yields have fallen in Italy, Spain in recent weeks as the European Central Bank added liquidity, the countries downgraded yesterday still lack financial flexibility, Fitch said. [Bloomberg]

EU: Sarkozy increases sales tax to finance cut in payroll charges
French President Nicolas Sarkozy announced increased sales taxes and levies on financial incomes to fund a EUR13bn (USD17bn) cut in payroll charges in the opening volley of a re-election bid that requires him to erase a 20-point poll gap in three months. The increase would amount to 1.6% and bring the rate of tax on most goods and services to 21.2%, Sarkozy said in a national broadcast as he reversed previous opposition to the move. Under the plan, the government would use revenue raised to finance a cut in payroll charges paid by employers to boost competitiveness. [Bloomberg]

EU: Euro officials said to discuss veto powers over Greek budget
European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit, two euro-region government officials said. Under the proposals, European institutions would have powers to implement austerity measures agreed under the terms of Greece’s bailout agreements, said one of the officials, who declined to be identified because the talks are confidential. The plan would accelerate decision making and strengthen the power of officials overseeing Greece’s budget as part of the so- called troika of the European Commission, the European Central Bank and the International Monetary Fund. [Bloomberg]

EU: IMF leads global push for Eurozone to boost firewall IMF Chief Christine Lagarde led a global push for the Eurozone to boost its financial firewall,  saying that if it is big enough it will not get used. Lagarde, supported by the British finance  minister, George Osborne, said the IMF could boost its support for the euro zone but pressed  its leaders to act first. Some attendees at the Davos Forum still doubted the viability of the  currency union. Countries beyond the 17-country bloc want to see its members stump up  more money before they commit additional resources to the IMF, which this month  requested an additional 500 billion euros ($650 billion) in funding. (Reuters)

EU: Euro officials said to discuss veto powers over Greek budget decisions 2 euro-region government officials said European policy makers are discussing plans to  directly intervene in Greek budget decisions as the country struggles to cut its deficit. Under  the proposals, European institutions would have powers to implement austerity measures  agreed under the terms of Greece’s bailout agreements. The plan would accelerate decision  making and strengthen the power of officials overseeing Greece’s budget as part of the socalled troika of the European Commission, the ECB and the IMF. With Greece struggling to  meet the terms of bailout agreements struck over the past 2  years, European officials are  trying to work out how to deal with countries that can’t meet the terms of bailout  agreements. A Greek official said that the Greek government rejects the plan because it’s  contrary to national sovereignty. (Bloomberg)

UK: Osborne says Treasury will take over in future bailouts Chancellor of the Exchequer George Osborne proposed laws to give the British Treasury sole  power over when to bail out banks, sweeping aside opposition from the central bank as he  seeks to end confusion over who should take charge during a crisis. The Financial Services Bill will give the chancellor power to order liquidity support for an institution, unwind its  operations and all other aid for the financial system that requires taxpayers’ money.  Lawmakers said the central bank wanted those powers to be exempt from the bill.  (Bloomberg)

France: Sarkozy plans to raise sales tax, cut payroll charges French President Nicolas Sarkozy unveiled plans to raise the country’s sales tax to offset a cut  in payroll charges for employers to raise competitiveness. Sarkozy said that he’ll raise the  value-added tax on most goods and services by 1.6 percentage points to 21.2%. Funds raised  from the higher tax -- opposed by a majority of French people -- will make up for a cut in  employers’ payroll charges, and is aimed at reducing labor costs and boosting  competitiveness.  Sarkozy said 500,000 French industrial jobs have been destroyed in past  decade, adding that reducing the payroll tax is key to cutting labor costs and creating jobs. (Bloomberg)

Spain: Jobless rate hits 17-year high of 22.8% Official data showed that Spain's jobless rate shot up to 22.85% at the end of 2011, the  highest in the industrialised world, as more than half of young people were out of work. The  National Statistics Institute reported that the number of unemployed burst through the 5m mark, surging 295,300 to 5.27m in 4Q 2011.  Even more dramatic, the jobless rate among  those aged 16-24 climbed to 51.4% at the end of last year from 45.8% on Sept 30. (AFP)

US: Treasury five-year yield falls to record low on fed strategy
Treasury five-year note yields fell to the lowest level ever after Federal Reserve officials unexpectedly said their benchmark interest rate will stay low until at least late 2014. Yields on the securities set three consecutive records after Fed Chairman Ben S. Bernanke said 25 Jan that the central bank is considering additional asset purchases to boost growth. US government debt rose for a third day yesterday as a report showed the US economy grew at a slower-than-forecast 2.8% annual pace in the fourth quarter. The Labor Department is expected to report on 3 Feb that unemployment remained at 8.5% this month. [Bloomberg]

US: Economy grows 2.8%, less than forecast Restrained spending by consumers held growth in the US economy to a 2.8% annual pace in  4Q 2011, slower than economists forecast while still the fastest pace in more than a year.  Commerce Department figures showed that GDP climbed at a 2.8% annual pace following a  1.8% gain in the prior quarter. The median forecast of 79 economists surveyed by Bloomberg  News called for a 3% increase. Fed officials this week said they were concerned about the  economy’s lack of vigor 2 years after the recession ended, prompting a pledge to keep  interest rates low at least until late 2014. The biggest gain in GDP since 2Q 2010 shows that  the world’s largest economy has so far withstood the effects of the debt crisis in Europe.  (Bloomberg)

US: Michigan consumer sentiment rises Confidence among U.S. consumers rose more than forecast in Jan to the highest level in  almost a year, on signs of improvement in the job market. The Thomson Reuters/University  of Michigan final index of consumer sentiment climbed to 75 from 69.9 at the end of Dec.  The median estimate in a Bloomberg News survey called for 74, which matched the  preliminary reading. The gauge averaged 89 in the 5 years leading up to the 18-month  recession that ended in Jun 2009. A strengthening labor market and higher stock prices may  be boosting confidence, helping raise the odds that a pickup in household spending will  continue into this quarter. At the same time, a sustained increase in gasoline prices and  limited wage gains may restrain sentiment. (Bloomberg)