20120904 1016 Local & Global Economy Related News.

Cross-border dimension of policy-making has not been as extensive globally despite the growing inter-dependence between economies, said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz. She said the increased connectivity of the world had been exemplified by the swift spread of financial and economic shocks throughout the global economy and international financial system in 2008 and the global supply chain disruption emanating from Japan last year.Despite these changes, institutional arrangements and governance for policy cooperation and coordination had yet to reach the levels that were commensurate with the degree of global economic and financial integration, she said. On Asia, the surges and reversals of capital flows continue to present a major challenge to policy. Specific policy strategies had also been adopted to reduce the prospect of being destabilized by these flows, she said. Apart from that, Asian governments had been addressing the significant rise in inequality within economies in their  policy-making at the national and regional level, she said. (Starbiz)

More Employees Provident Fund (EPF) contributors are opting for flexible withdrawals after reaching 55 years of age, either on a monthly basis or via partial withdrawals. In a statement Monday, EPF said this showed that more members were becoming financial savvy to better manage their retirement savings, in view of improvement in life expectancy for Malaysians. This is evident through the rise of the EPF Flexible Age 55 withdrawals in 2Q12 with total applications surged 43% to 37,602 compared with 26,313 in 2Q11, it said. EPF CEO, Tan Sri Azlan Zainol, said the total amount withdrawn under the flexible withdrawals jumped 53.99%, amounting to RM1.51bn, compared with RM981.37m in 2Q11. (Bernama)

The implementation of the revised National Automotive Policy (NAP) will not be rushed but will be done in stages, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said. The government has already started the implementation of the revised policy since Jun 2012, and many more initiatives will be announced in due course. The revision includes incentives for production of energy-efficient vehicles and recently, Honda Malaysia Sdn Bhd benefited from the revised NAP. “We are currently talking to two or three more car makers to provide them with similar incentives, and to promote Malaysia as a regional hub for production of energy-efficient vehicles," Mustapa said. (Bernama)

World Bank: Global food costs may extend gains on El Nino
Global food prices that jumped in July may extend gains if an El Nino weather pattern develops or if importers begin hoarding supplies, the World Bank said. The World Bank’s Food Price Index rose 10% in July, after falling in the two previous months, according to a 30 Aug report that weighs US dollar prices of several commodities. Wheat and corn costs were up 25% each, while sugar rose 12% and soybean oil climbed 5%. Corn and soybeans surged to record highs last month on the Chicago Board of Trade, surpassing previous all-time highs set in 2008, as the worst Midwest drought in more than 50 years damaged crops. (Bloomberg)

Eurozone’s Markit manufacturing PMI contracted for a seventh month in a row in Aug, coming in at 45.1, down from a flash estimate of 45.3 (44.0 in Jul). (AFP)

European Central Bank chief Mario Draghi defended on Monday controversial measures taken to tame the eurozone debt crisis, including buying up government bonds, European MPs said. (AFP)

EU: Spanish unemployment to swell as public jobs vanish
Jerez de La Frontera, a Spanish town of 214,000 in southern Andalusia, is negotiating with unions to fire 13% of the 2,000 government workers who absorb 80% of its budget. “It’s not easy because these are people and families,” said deputy mayor Antonio Saldana. With a quarter of Spain’s workforce already jobless, Prime Minister Mariano Rajoy’s efforts to retain investor confidence by shaving over two-thirds of the nation’s budget deficit by 2014 will worsen the highest unemployment rate in the European Union. Ten-year yields at 6.9% mean “we can’t finance ourselves,” Rajoy said on 1 Sept. (Bloomberg)

The comments by European Central Bank (ECB)’s President Mario Draghi indicated that the ECB would be open to buying bonds with a maturity of two to three years, stressing that such purchases wouldn't break European Union treaties. (AWSJ)

Spain said it is urgently injecting EUR4.5bn (US$5.7bn) into  Bankia, a state-rescued lender still losing billions of euros. The state-backed Fund for Orderly Bank Restructuring (FROB) said its governing board had agreed to pump in the capital "with immediate effect" to restore its balance sheet. (CNA)

China’s official services PMI rose to 56.3 in Aug from 55.6 in Jul, whilst its official manufacturing PMI hit a nine-month low of 49.2 from 50.1 in Jul, chiming with its HSBC manufacturing PMI which slid to 47.6 in Aug from 49.3 in Jul, the lowest since Mar 2009 and the 10th straight monthly fall.(Reuters, AFP)

China's commercial banks are facing a  higher risk of increased bad loans, partly due to a lending spree to support massive economic stimulus three years ago, as 7 out of the 16 Chinese listed banks reported a rise in their Non-Performing Loan ratios in the first half of 2012. (Xinhua)

Japan’s sales of new cars, trucks and buses increased 7.3% yoy in Aug (36.1% in Jul), the  slowest pace in 11 months but the 12th straight month of growth. (WSJ)

Japanese capital spending in 2Q12 rose 7.7% yoy (3.3% in 1Q12), the third straight quarter of growth. (Reuters)

Japan: Yen near five-week highs versus Aussie, Kiwi on slowdown concerns
The yen traded within 0.3% of five-week highs against the Australian and New Zealand dollars as signs of a global economic slowdown increased the allure of the Japanese currency as a refuge. The yen held a three-day gain versus the greenback before data forecast to show US factory activity failed to expand in August, following reports yesterday that said manufacturing in the euro area and China contracted. The dollar remained lower against the euro on bets the Federal Reserve will consider a third round of so-called quantitative easing, which debases the US currency. (Bloomberg)

South Korea’s consumer prices rose 1.2% yoy in Aug, the lowest since the 1.1% of May 2000 (1.5% in Jul), whilst core inflation stood at 1.3% yoy in Aug (1.2% in Jul). (AFP)

India's manufacturing continued to expand, though the HSBC PMI ticked down to 52.8 in Aug from 52.9 in Jul. (WSJ)

Thailand’s  inflation inched down to 2.69% yoy in Aug from 2.73% in Jul. Analysts had expected Thai CPI to rise 2.65% last month. (Bloomberg)

Exports from  Indonesia fell 7.27% yoy in Jul, a fourth straight month of decline. But the slide was smaller than a forecast 9.2% drop.  Import growth slowed to just 0.7% versus a forecast of 6.6%. The trade deficit narrowed to US$177m from US$1,286m in Jun. (Jakarta Globe)

Indonesia’s inflation came in at 4.58% yoy in Aug, up from 4.56% in Jul. (Jakarta Globe)

HSBC's manufacturing purchasing managers' index for Indonesia rose to 51.6 in Aug from 51.4 in Jul, supported by a rise in new orders for the third straight month. (Dow Jones)