Global finance blog - news, jokes, life…

Pakistan’s central bank Governor Shahid Kardar said the outcome of dialogue between the government and political opposition on an economic reform agenda will set the course for the next interest rate decision.

“We welcome the negotiations going on between the government and political parties,” Kardar said on Jan. 29, after unexpectedly keeping the benchmark interest rate unchanged at 14 percent until the end of March. “The next policy decision will depend on the progress the government makes to cope with all the problems.”

Kardar, who blames Pakistan’s above-15 percent inflation rate on government borrowings, said the three rate increases since July are “crowding out” investment and curtailing growth. Prime Minister Yousuf Raza Gilani’s economic team met with the main opposition last week to seek a consensus on ways to cut the nation’s budget deficit and spur growth.

“The private sector is the hope for the economy and the central bank had to keep that balance,” said Bilal Subhani, head of research at JSK Securities Ltd. in Karachi, who had forecast the rate would remain unchanged. “The next review depends on the government’s efforts.”

The decision to keep the rate unchanged was predicted by only three of 17 economists in Bloomberg News survey. The rest forecast a half point increase.

“It is expected tangible steps will be taken to steer the economy back on track,” the central bank said in its monetary policy statement. “This provides a window of opportunity and the focus should be on subsequent developments.”

The nation’s benchmark Karachi Stock Exchange KSE100 Index has gained 28 percent since July 1. Pakistan rupee declined 0.1 percent to 85.63 against U.S. dollar during the period.

Lagging Behind

Pakistan’s $168 billion economy is lagging behind as emerging markets from neighboring India to China help lead the global economic rebound from the deepest postwar recession.

Pakistan, already sapped by terrorism, was set back by floods in 2010, its worst in the nation’s 63-year history. The government forecasts the economy will expand 2.5 percent in the year through June, slower than the original target of 4.5 percent. India’s $1.3 trillion economy may grow 8.5 percent in the year ending March 31, the central bank estimated this week.

Any agreement with Gilani will require a 30 percent cut in government spending, restructure state-owned money-losing companies, including cash advance loans.bloomberg.com/pakistan-international-airlines-corp/” href=”http://www.bloomberg.com/apps/quote?ticker=PIAA%3APA” density=”sparse” title=”Get Quote” ticker=”PIAA:PA” class=”web_ticker”>Pakistan International Airlines Corp. and Pakistan Steel Mills Corp., and set a new price mechanism for power and gas, Ahsan Iqbal, a spokesman for the opposition Pakistan Muslim League of former prime minister Nawaz Sharif, said Jan. 20.

Higher Borrowing

Government borrowing more than doubled to 355 billion rupees ($4.14 billion) from July 1 to Jan. 15, compared with a year earlier, according to the central bank.

The International Monetary Fund, which bailed out Pakistan with an $11.3 billion loan in November 2008, has urged the government to cut subsidies and end tax exemptions.

Political wrangling within the ruling coalition forced Gilani to reverse an increase in fuel prices this month — a rollback also demanded by Sharif — and defer plans to tax more services. The next gasoline price revision is scheduled for today.

The petrol-price reversal, which runs the risk of a wider budget deficit, was criticized by U.S. Secretary of State Hillary Clinton, who urged Pakistan not to “reverse progress.”

Maria Kuusisto, an analyst at consultant Eurasia Group, said in a Jan. 14 telephone interview from London, that Pakistan’s budget shortfall may touch 8 percent of gross domestic product, or 1.3 trillion rupees in the year through June from 6.3 percent in the previous year.

Kardar, in a Dec. 13 interview with Bloomberg News, blamed government borrowing for price pressures and said raising rates may impede investments and undermine economic growth.

The finance ministry has proposed to overhaul a law that would limit government borrowings. The law is yet to be approved by parliament.

Consumer prices in Pakistan climbed 15.46 percent in December from a year earlier, the most among the 17 countries tracked by Bloomberg.

Hundreds of civilians and security officials have died in retaliatory bomb and gunfire attacks since Pakistan’s army began an October 2009 offensive against Taliban guerrillas in the tribal region of South Waziristan, near the border with Afghanistan.

Source

Prime Minister David Cameron will reassert his commitment to eliminating Britain’s budget deficit amid criticism that his plans are choking economic recovery.

British banks, households and the government all need to reduce their indebtedness to restore a balanced economy, Cameron will tell the World Economic Forum in Davos, Switzerland today.

“Our first priority is to kill off the specter of massive sovereign debts,” Cameron will say, according to remarks released by his office in London. “We can’t just flick on the switch of government spending or pump the bubble back up.”

Cameron is fighting back against warnings that his plan to almost eliminate the deficit within four years is too severe. Critics including billionaire investor George Soros say the squeeze is sapping economic confidence just as accelerating inflation puts pressure on the Bank of England to end its emergency stimulus.

Britain’s economy unexpectedly shrank 0.5 percent in the final three months of 2010 as the coldest December in a century hampered services and retailing, data this week showed. That suggests the recovery faded even before Cameron’s government implements the fiscal squeeze, the largest since World War II.

Consumer confidence plunged the most in almost two decades in January, hit by an increase in sales tax, according to a survey published today by GfK NOP Ltd. The Confederation of British Industry said yesterday its retail-sales index fell for the first time in three months and stores see further weakness.

Soros Warning

Soros, who reportedly made $1 billion selling the pound in 1992, said this week that the government will have to rethink its budget deficit-cutting plan or risk pushing the economy back into recession. Cameron’s plan cannot “possibly be implemented without pushing the economy into a recession,” Soros said.

Chancellor of the Exchequer George Osborne, who also speaks at the Davos gathering today, will hit back at criticism from the opposition Labour Party by warning that its policies left Britain more indebted than most other major nations instant payday loan.

“Over the last decade our economy became perhaps the most extreme example of any major economy of the dangerous imbalances that now need to be unwound,” Osborne will say, according to extracts of his speech released by the Treasury.

Osborne will vow to press ahead and fight the “vested interests” resisting the cuts. He will promise to reduce regulations and simplify the tax system in order to encourage economic growth.

‘Illusion of Growth’

Britain experienced “the biggest housing boom, the most leveraged banks, the most indebted households, the biggest budget deficit,” Osborne will say. “An illusion of growth built on easy money that has now turned to dust. Adjustment will not be without struggle.”

Cameron will say that without determined action to cut the deficit, higher real interest will prevent a recovery from materializing.

The prime minister made the deficit, which grew to 11.1 percent of gross domestic product in the last fiscal year, his top priority after Standard & Poor’s threatened to lower the U.K.’s AAA credit rating in May 2009. S&P affirmed the rating after the government presented the fiscal plan in October.

“Already we’re making progress,” Cameron will say. “Not long ago we were heading towards the danger zone where markets start to question your credibility. Yet in the past eight months we’ve seen our credit rating — which was on the brink of being downgraded — affirmed at the triple A level.”

Source

China will impose property taxes in some cities to help curb surging prices, the finance ministry said Thursday, part of a broader effort to control high inflation.

A statement on the ministry’s website didn’t name the cities affected, but China’s commercial capital Shanghai and the southwestern city of Chongqing have already announced plans for the taxes. Each city involved will decide the details of its own property tax, state media reported.

Surging housing costs across China are hurting the government’s efforts to cool inflation that has mainly been attributed to surging food prices but is spreading to other parts of the economy.

Thursday’s move comes a day after the government made its latest move to cool the property market, announcing it would require buyers of second homes to make a 60 percent down payment, up from 50 percent.

The property tax news comes just before China’s biggest holiday of the year, the Lunar New Year, which begins next week. State media tried to soften the news by reminding citizens that people in other countries such as the United States pay property taxes as well.

“The collection of property taxes helps balance the distribution of income and narrow the gap between rich and poor,” said the finance ministry statement.

The money raised will be used to fund affordable housing, it said.

The entire country will have property taxes “when conditions are ripe,” the statement said.

Many economists believe China’s economy remains dangerously dependent on investment in real estate and construction. Such spending shot up 23.8 percent over a year earlier in 2010.

The sale by local governments of land-use rights provides a huge share of their revenues. Such sales rose 70 percent in 2010, helping push property prices 6.4 percent higher compared with a year earlier.

In Shanghai, housing prices rose to a record average of 24,176 yuan ($3,652) per square meter in December, state media has reported, up 7.6 percent from November and up 21 percent from January 2010.

The state-run Xinhua News Agency on Thursday said Shanghai has set its property tax rate at 0.4 percent to 0.6 percent. The report had no other details. Chongqing set its tax rate at 0.5 percent to 1.2 percent.

Many other big Chinese cities are facing similar trends, raising worries about a financially perilous asset bubble.

Shanghai is preparing to levy a property tax on purchases of newly built, luxury homes. While such a tax is unlikely to have much impact on the overall market, authorities say they expect it to help bring the market under better control.

Source

Asian stock markets were mixed on Wednesday as President Barack Obama delivered a State of the Union policy speech, vowing to create jobs and spur growth in the world’s No. 1 economy.

Japan’s Nikkei 225 stock average fell 42.03 points, or 0.4 percent, to 10,422.39 in the morning session. Shares in Indonesia and Malaysia were lower.

Elsewhere, South Korea’s Kospi rose 0.8 percent to 2,102.89. China’s Shanghai Composite index climbed 0.8 percent to 2,698.39. Hong Kong’s Hang Seng index was marginally down at 23,775.80. Shares in Singapore and Taiwan were higher.

Australia’s stock market was closed for a public holiday.

In Washington late Tuesday, Obama said in the State of the Union address he would boost spending for education, innovation and infrastructure as ways the government can support America’s foundation and help businesses create jobs for a generation.

Obama also called for an overhaul of corporate taxes that would eliminate many loopholes and deductions in exchange for lower rates cheap pay day loans.

On Wall Street overnight, the Dow Jones industrial average slipped just 3.33 points, or less than 0.1 percent, to 11,977.19. The U.S. stocks were under pressure Tuesday on a round of disappointing earnings results including those from manufacturing company 3M.

Across Asia, investors also traded with caution, awaiting a statement by the Federal Reserve, which concludes a two-day meeting Wednesday.

In currencies, the dollar was quoted at 82.06 yen in Tokyo Wednesday, little changed from 82.20 yen in New York late Tuesday. The euro edged up to $1.3690 from $1.3685.

Benchmark crude for March delivery edged up 27 cents to settle at $86.46 a barrel on the New York Mercantile Exchange.

Source

U.S. companies’ employment outlook improved to a 12-year high this quarter after sales strengthened and economic growth picked up, a survey showed.

The percentage of businesses expecting to increase payrolls in the next six months exceeded the share projecting more firings by 35 points, the most since the question was first asked in 1998, according to a survey by the National Association for Business Economics issued today in Washington. Sixty-two percent of respondents planned to boost spending on new equipment this year, up from 48 percent in the October survey.

“Things are headed in the right direction,” Shawn DuBravac, chief economist at the Consumer Electronics Association in Arlington, Virginia, who analyzed the results, said in an interview. “Topping everything is the high number of firms suggesting they will increase their headcount in the future.”

The report adds to evidence, including a drop in claims for unemployment benefits, showing the job market is strengthening in early 2011. Payrolls rose by 103,000 workers in December, less than the median forecast of economists surveyed by Bloomberg News, and the unemployment rate fell to 9.4 percent from 9.8 percent a month earlier, according to Labor Department figures released Jan. 7. Economists surveyed by Bloomberg this month forecast unemployment will average 9.3 percent this year.

Sales, which the report showed climbed in the last three months of 2010 for the sixth straight quarter, and higher profits are making businesses optimistic enough to consider expanding staff.

More Hiring

Forty-two percent of respondents said they anticipate an increase in hiring within the next six months, compared with 39 percent in the October survey. The share planning to trim payrolls fell to 7 percent from 11 percent last quarter.

A jump in payrolls “won’t happen overnight, and we’re probably several years from seeing the unemployment rate that we enjoyed prior to the downturn,” said DuBravac. “The fact that you see them thinking about hiring shows businesses are likely feeling comfortable with the recovery.”

Eight out of 10 respondents, the most since the October 2006 survey, projected the U.S. economy will expand from 2 percent to 4 percent in 2011. Last quarter, 54 percent said the economy would grow by that much. The median estimate of 71 economists surveyed by Bloomberg this month forecast a 3.1 percent growth rate for this year.

Payroll-Tax Cut

As part of the January survey, the group asked respondents about the $858 billion bill President Barack Obama signed into law on Dec. 17, which extended Bush-era tax cuts for two years. The measure also renewed emergency jobless benefits for the long-term unemployed through 2011, cut payroll taxes this year by two percentage points and included accelerated tax depreciation for equipment purchases.

While 53 percent said the legislation will probably boost sales, 62 percent said it will not sway decisions on business investment, and 68 percent said it will have little influence on hiring, the report said.

Of the 56 percent surveyed who said a portion of their firms’ sales come from abroad, about 4 of 10 said international sales increased last quarter, according to the survey. Two percent said exports declined.

Eighty-four NABE members responded to the survey, conducted between Dec. 17, 2010, and Jan. 5. The National Association for Business Economics, founded in 1959, is the professional organization for people who use economics in their work.

Source

The number of American workers in unions declined sharply last year, the Bureau of Labor Statistics reported Friday, with the percentage slipping to 11.9 percent, the lowest rate in more than 70 years.

The report found that the number of workers in unions fell by 612,000 last year to 14.7 million, an even larger decrease than the overall 417,000 decline in the total number of Americans working.

“It was a very tough year for unionized workers,” said John Schmitt, a senior economist with the Center for Economic and Policy Research in Washington.

“We’re seeing declines in the private sector, and we’re seeing declines in the public sector.”

In one piece of good news for unions, the bureau said that median weekly earnings for union members

ask the expert

Karl Zellmer, vice president of air conditioning sales at Emerson

Karl.Zellmer@emerson.com

1-937-498-3011

When is a good time for people to convert their homes to geothermal energy?

Now. Homeowners have a great opportunity to stay warm, cut energy bills and reduce their carbon footprint at the same time. The answer may lie in upgrading to geothermal heating and cooling. This technology is rapidly gaining popularity, popping up everywhere from small businesses and homes, to retail outlets, schools, nursing homes and hotels.

This is a good time to consider geothermal because of a 30 percent federal tax credit for home energy upgrades

Most Asian stock markets advanced Wednesday, with the region’s high-tech shares pushing higher after strong earnings results from Apple Inc. and IBM Corp.

Japan’s Nikkei 225 stock average rose 0.2 percent to 10,538.93. The electronics sector, including Sony Corp. and Hitachi Ltd., posted strong gains.

Elsewhere, South Korea’s Kospi added 0.5 percent to 2,106.65 and Australia’s S&P/ASX 200 advanced 0.3 percent to 4,813.70. Benchmarks in New Zealand and Taiwan also rose.

In New York Tuesday, the Dow Jones industrial average hit its highest close since June 2008, led by Boeing Co. and Caterpillar Inc. The two companies contributed more than half of the Dow’s 50 point rise.

The Dow rose 50.55 points, or 0.4 percent, to finish at 11,837.93. The broader Standard & Poor’s 500 index edged up 1 cash advance america.78, or 0.1 percent, to close at 1,295.02. The Nasdaq rose 10.55, or 0.4 percent, to 2,765.85.

Apple had weighed on the Nasdaq after the company announced that its CEO, Steve Jobs, was taking another medical leave. Its shares fell 2.2 percent. But the company announced after the market closed that its net income soared 78 percent in the holiday quarter thanks to brisk sales of iPads and iPhones.

IBM also reported after market close that its net income in the fourth quarter rose 9 percent, topping analysts’ expectations.

In currencies, the dollar fell to 82.25 yen from 82.59 yen late Tuesday. The euro stood at $1.3423 from $1.3387.

Source

JEFFERSON CITY

Taiwan says two hypermarkets have removed 3,300 pounds (1,600 kilogram) of boneless U.S. beef because a banned growth drug was found in the meat.

Taiwan’s Department of Health said residue of beta agonist was detected in the three shipments of beef ordered by Costco and local hypermarket chain RT-Mart. The statement issued Saturday said all the beef has been removed.

The drug, under the trade name Paylean, makes pigs and cows develop muscle tissue faster.

It is banned in Taiwan but allowed in several countries including the United States and South Korea.

Source