"High prices for food, fuel and other goods are troubling Despite a slight dip in China's year-on-year consumer price inflation rate to 8.3% in March, from 8.7% in February, inflation remains at the top of the government's short-term policy concerns. According to a regular survey by the People's Bank of China (PBC, the central bank), a new high of 49% of respondents complained that prices were too high in the first quarter of 2008. These sentiments were echoed in a study by a market research firm, ACNielsen, which showed that consumers were cutting back on discretionary spending.Worrying trends in underlying inflation have emerged, with price rises triggering increases in minimum monthly wage rates and welfare benefits. In Shanghai, for example, the minimum monthly wage rose on April 1st to Rmb960 (US$137) from Rmb840, and unemployment insurance rose to Rmb550 (from Rmb410). Allowances for poor rural households within Shanghai's jurisdiction have risen to Rmb3,200 a year. ..." (2008-4-25)
April 25, 2008
China's inflation worries
April 24, 2008
Bankers' trust
"Why have banks been paying so much in the interbank market?SINCE last August, some of the world's most powerful central bankers have battled with growing resourcefulness to restore the law of gravity to the market that banks use for short-term borrowing. As the credit crisis has deepened, the central banks have made more money available against a broader range of collateral for longer periods to a wider group of financial firms. By throwing money at the situation, they have aimed to lower the London Interbank-Offered Rate (LIBOR) that banks charge each other for anything up to three-month loans (it helps determine borrowing rates for firms and households, too). But the rate remains stubbornly high; it has jumped again recently on reports that the British Bankers Association, which sources quotes each day from a panel of banks, is investigating whether banks have been reporting lower rates than they are actually paying in order to appear healthier than they are.Before the crisis broke, typically banks would provide unsecured three-month loans to each other at rates that were barely higher than their cost of borrowing from the central bank. But last August, the gap between LIBOR and the overnight indexed swap (OIS) rate (a gauge of expected central-bank rates over the same period) widened sharply in Europe and America (see left-hand chart). At times, the gap was almost as wide as during the Y2K fears at the turn of the century. According to a recent paper* published by the Bank for International Settlements, the higher risk premium reflected in the rise of LIBOR over the OIS rate responds to several factors, particularly credit and liquidity risk. The first points to the bigger chance that a bank will go bust over a three-month period than overnight. As for liquidity, a three-month loan can less readily be exchanged for cash than an overnight one and lenders require a reward for that risk. ..." (2008-4-24)
Till debt us do part
"An island victim of the global credit crunchICELAND'S central-bank governor, David Oddsson, recently gave a gloomy speech, calling conditions ?harsh and often stormy?. He said the ?headwinds? were not going to ?wash away on the outgoing tide?. Mr Oddsson's meteorological metaphors came at a moment when Iceland's much trumpeted foray into world markets was tainted by reports of financial disaster. In brief, the Icelandic economy is in trouble, thanks to a huge amount of foreign debt incurred by its banks. The population of Iceland is just over 300,000. Except for sheep, fish and dairy products, virtually everything consumed on the island is imported. The current-account deficit is enormous (though the government's budget is in large surplus). To finance it, the island's three big banks?Landsbanki, Glitnir and Kaupthing?have borrowed freely on the international capital markets, stretching themselves far beyond their modest depositor base at home. ..." (2008-4-24)
Sales of new U.S. homes plunged in March
"Sales of new homes plunged in March to the lowest level in 16½ years as housing slumped further at the start of the spring sales season." (2008-4-24)
Stagnant Market Has Ups, Downs Across Region
"The District far outshone its suburban neighbors in housing prices in 2007.
" (2008-4-24)
Falling House Prices Take Toll in Va. Suburbs
"Housing prices declined across Northern Virginia last year, with the outer suburbs leading the drop.
" (2008-4-24)
April 22, 2008
Shiller: Housing slump may exceed Depression
"An influential economist who long predicted the housing market bubble cautioned Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the Great Depression." (2008-4-22)
Existing home sales fell 2 percent in March
"Sales of existing homes fell in March while the median home price declined, compared with the price a year ago, as a severe slump in housing showed no signs of abating." (2008-4-22)
No More Line of Credit for You!
"More borrowers find their home-equity lines of credit cut off or canceled.
" (2008-4-22)
The pain in Spain
"Spain's long property boom has come to a painful endThe Spanish economy has been a driving force for economic activity in the euro area for more than a decade, with year-on-year GDP growth exceeding the average rate of expansion in the euro area in every quarter since 1995. The good times are now over. Turmoil in the world's financial markets has coincided with the bursting of Spain's decade-long housing bubble, raising fears of a deeper and more abrupt economic slowdown than previously thought. The weakness began last year in the housing market?the major driver of the Spanish economy over the last ten years?with a decline in residential building permits of 11% in 2007 (in the fourth quarter alone the number of permits slumped by a disturbing 29% year on year). And the danger signs are now spreading to other sectors of the economy. Price-adjusted retail sales contracted by around 2% year on year in each of the three months to February 2008, while consumer confidence fell back to its lowest level for more than a decade in the first quarter. The manufacturing sector is also taking a hit. According to Eurostat data, year-on-year growth in manufacturing orders has slowed down markedly since the start of 2008, with the European Commission's business confidence survey revealing that sentiment in the services industry in March had fallen to its weakest level since the inception of the survey in 1996 (admittedly a good period for the Spanish economy). ..." (2008-4-22)
April 21, 2008
Nat City Posts Loss, Raising $7B in Offering
"The Cleveland bank missed Wall Street's expectations, due to slumping housing and credit markets.
" (2008-4-21)
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