Monday, July 9, 2012
1--Euro zone fragmenting faster than EU can act, Reuters
Deposit flight from Spanish banks has been gaining pace and it is not clear a euro zone agreement to lend Madrid up to 100 billion euros in rescue funds will reverse the flows if investors fear Spain may face a full sovereign bailout.
Many banks are reorganising, or being forced to reorganise, along national lines, accentuating a deepening north-south divide within the currency bloc....
The longer that situation goes on, the less chance there is of a recovery in southern Europe and the bigger will grow the wealth gap between north and south.
With ever-higher unemployment and poverty levels in southern countries, a political backlash, already fierce in Greece and seething in Spain and Italy, seems inexorable
2--Retailers post worst sales in 3 years, marketwatch
As economic uncertainty sapped both consumer confidence and sentiment in June, shoppers also exercised caution with their wallets and delivered U.S. retailers’ worst monthly sales in three years.
Total June sales at stores open at least a year — a key performance metric that strips out the impact of new and closed stores — rose 0.1%, missing the 0.5% gain Wall Street was looking for. That was the smallest pace since sales declined in August 2009, according to Thomson Reuters. Sales rose 6.7% a year earlier.
3--Japan Current-Account Surplus Shrinks 63% As Machine Orders Drop, Bloomberg
Japan’s current-account surplus was the smallest for the month of May since at least 1985 and machinery orders fell the most in more than a decade.
The excess in the widest measure of trade shrank 63 percent from a year earlier to 215.1 billion yen ($2.7 billion), the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by
Bloomberg News was for a surplus of 493.1 billion yen. Machinery orders, an indicator of capital spending, fell 14.8 percent in May from the previous month, the Cabinet Office said, the biggest drop since 2001.
Japan’s trade position has weakened due to growing energy imports after last year’s earthquake and nuclear meltdown and also the yen’s gain of 4.9 percent against the dollar since mid- March. Prime Minister Yoshihiko Noda gave approval for a restart of reactors at the Ohi nuclear plant, which resumed power generation last week, to avoid power shortages and rolling blackouts over the summer.
“Today’s machinery order drop is very large, and it may be a signal that Japanese companies are becoming cautious about investment” amid concern about a global economic slowdown, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management in Tokyo. “Though exports have been slumping, we don’t expect Japan to have any major trade deficit.”
4--Corporations find cheap labor haven in US, WSWS
The economic crisis that erupted in 2008 has been seized on by major corporations and their political representatives in the United States to slash workers’ wages and impose speedup.
The World Socialist Web Site reported that production workers in the newly opened Chattanooga, Tennessee plant that makes the Volkswagen Passat start at $9 per hour. As contractors, they can be fired for the slightest infraction.
The phenomenon of international corporations moving production to the United States to take advantage of low wages by no means indicates a genuine manufacturing “recovery.” Since 2010, only 495,000 manufacturing jobs have been created. This compares to the loss of 5.8 million manufacturing jobs since 2000.
The most recent data indicates that the US manufacturing sector is contracting under the impact of a renewed downturn of the global economy. Last month, manufacturing activity shrank for the first time since July 2009.
The unions back the slashing of US wages in order to entice companies to bring production to the United States and bolster the union executives’ sagging dues base. For decades these organizations condemned Asian countries for “stealing” American jobs by paying low wages. The fact that, with their collusion, the US is becoming a poverty-wage manufacturing platform is an indictment of their nationalist and pro-capitalist policies.
5--Indentured Students Rise As Loans Corrode College Ticket, Bloomberg
6--Price Data Suggest Specter of Deflation in China, NY Times
Prices are tumbling across the Chinese economy, according to government data released Monday, as a flood of goods pouring out of the nation’s factories and farms exceeds anemic demand from Chinese households and businesses.
The downward trend makes it much harder for businesses to sell enough goods to repay loans that they took out, usually on the expectation of rising prices. Falling prices also discourage investment, which has slowed sharply this spring, and give consumers an incentive to delay purchases until prices can fall further.
The news of falling prices, together with a pledge by Prime MinisterWen Jiabao on Saturday to maintain stringent bans on real estate speculation, produced a slide Monday in mainland Chinese stock markets. The Shanghai stock market dropped 2.37 percent, while the Shenzhen stock market fell 2.21 percent.
7--European crisis sets off slide to global slump, WSWS
The European financial crisis is creating an economic vortex which is threatening to drag the rest of the world economy into a deepening slump.
Three years after the so-called Great Recession was officially declared over in the United States—by which time in previous recoveries economic expansion would have been well advanced—the latest data show that US manufacturing has begun to contract.
Contrary to the predictions of many economists, the Institute for Supply Management’s survey on economic activity showed a decline in its index from 53.5 in May to 49.7 in June, the lowest level since mid-2009. With a result below 50 indicating contraction, the number was described as a “terrible result,” indicating that the American economy is being adversely impacted by the euro zone financial crisis.
In Europe, manufacturing activity has declined every month since August 2011. Significantly, in Germany, the euro zone’s largest economy and the least affected by the crisis so far, figures for June showed manufacturing activity declining at its fastest rate since June 2009.
On Monday it was reported that the euro zone jobless rate rose to 11.1 percent in May, the highest level in the history of the single currency. Once again, unemployment rose in Spain, where the jobless rate is almost 25 percent. In Greece and Spain youth unemployment is around 52 percent.