September 10, 2008

Fall fall fall....

German Exports Fall as Global Slowdown Cools Demand (Update1)

By Christian Vits

"Sept. 9 (Bloomberg) -- Exports from Germany, Europe's largest economy, declined more than economists forecast in July as cooling global growth curbed demand."

"Sales abroad, adjusted for working days and seasonal changes, fell 1.7 percent from June, the Federal Statistics Office in Wiesbaden said today. Economists expected a drop of 1.1 percent, the median of 10 forecasts in a Bloomberg News survey showed. In the year, exports rose 7 percent."

"Exporters are grappling with a slowdown in the economies of their main trading partners. Europe's gross domestic product shrank 0.2 percent in the second quarter and may not recover in the third, raising the risk of the region's first recession since the euro was introduced in 1999. While oil prices fell 28 percent from a July record, they're still up almost 40 percent over the past year, boosting inflation and damping the outlook."

"``Today's result matches recent negative data,'' said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. ``There's a risk of a drop in gross domestic product in the third quarter. We don't see a significant recovery anytime soon.''"

"Imports rose 7.4 percent from June. That's the biggest gain since June 2002. In the year, imports gained 16 percent."

"The trade surplus narrowed to 13.9 billion euros ($20 billion) from 19.9 billion euros in June. Economists forecast a surplus of 17.5 billion euros. The surplus in the current account, the measure of all exports including services, narrowed to 11.8 billion euros from 18.9 billion euros in June."

Dropping Orders

"German factory orders unexpectedly fell in July, extending their longest-ever declining streak and increasing the likelihood that the economy is heading for a recession."

"The German economy contracted 0.5 percent in the second quarter and may not recover in the third as investments falter and consumer spending slumps. The VDMA lobby has said that plant and machine orders dropped for a third straight month in July, led by sliding foreign demand."

"German business confidence declined to a three-year low last month and consumer optimism fell to the lowest level in five years. Growth is slowing globally after the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit."

"Landesbank Baden-Wuerttemberg, Germany's biggest state-owned bank, had a net loss in the first six months of the year following writedowns related to the credit-market collapse, the company reported on Aug. 28."

"Bertelsmann AG, Europe's largest media company, cut its 2008 profit forecast after advertisers slashed marketing budgets to cut costs amid the economic slowdown."

Asian Demand

"Some companies are trying to offset falling European and U.S. orders by expanding in Asia and oil-exporting countries. German exports to India more than tripled in the four years through 2007 to 7.4 billion euros, the statistics office said."

"Adidas AG Chief Executive Officer Herbert Hainer last week repeated the company's forecast, saying growth in emerging markets following this summer's Beijing Olympics will drive sales at the second-largest sporting-goods maker."

"Shipments to countries outside the European Union rose 10 percent from a year earlier, today's report showed. Exports to EU member states increased 5.4 percent from July 2007. Imports from within the EU trade bloc rose 13.7 percent from a year ago."

"Still, the German government forecasts growth will slow to 1.7 percent this year and 1.2 percent in 2009 from 2.5 percent in 2007. Economy Minister Michael Glos said Aug. 26 the economy is ``exposed to a serious economic stress test.''"

To contact the reporter on this story: Christian Vits in Frankfurt at

"Last Updated: September 9, 2008 02:47 EDT"

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New Zealand May Cut Benchmark Rate a Second Time Amid Recession

By Tracy Withers

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"Sept. 10 (Bloomberg) -- New Zealand central bank Governor Alan Bollard will cut interest rates for the second time in seven weeks tomorrow as spending slows amid a recession, easing pressure on inflation."

"The Reserve Bank will cut the official cash rate a quarter point to 7.75 percent, according to 13 of 14 economists surveyed by Bloomberg. One expects Bollard will lower the rate a half point when he announces his decision at 9 a.m. in Wellington."

"Bollard cut borrowing costs in July for the first time in five years, and said further reductions are likely as the economy slows. The Treasury Department said this week the economy was in a recession in the first half of 2008 and may also contract in the third quarter amid a slump in housing investment and rising unemployment."

"``The slowdown in the economy is well and truly entrenched and the inflation outlook has improved,'' said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. ``We continue to expect a cautious easing cycle.''"

"Bollard, 57, will cut the rate twice more this year, according to the economists surveyed by Bloomberg. The rate will be 6.75 percent by March, the lowest level since September 2005, they forecast."

"The central bank will probably revise its forecast for the economy to show gross domestic product contracted in the second quarter, putting New Zealand in its first recession since 1998, said Tuffley. The economy shrank 0.3 percent in the first three months of the year."

Construction Slows

"Construction fell 5.8 percent in the second quarter, according to a Sept. 8 government report. Retail spending dropped 1.4 percent, the most in 13 years. The government publishes second-quarter GDP figures on Sept. 26."

"The Treasury Department this week reiterated it expects the economy shrank in the three months ended June, and said it couldn't rule out a further contraction in the three months through September."

"The decline in domestic demand was led by record-high credit costs and soaring food and fuel prices, which curbed consumer spending and stalled the housing market."

The jobless rate rose to a two-year high in the second quarter and hiring intentions have declined.

"``The New Zealand economy stalled in the first half, reducing company profits, so employers became more hesitant in their hiring plans,'' Catherine Lo-Giacco, general manager of Manpower New Zealand, said in a report yesterday."

House Sales

"House prices fell 4.5 percent in August from a year earlier, according to the government valuation agency. That followed a 2.2 percent drop in July, the first decline since the series began in February 2005."

"House sales fell to a 16-year low in June, before gaining in July as sellers lowered prices to complete deals, according to the Real Estate Institute."

"While the economy stalls, high fuel and food prices have driven faster inflation. Consumer prices rose at the fastest pace in 18 years in the second quarter and the central bank forecasts the inflation rate will be close to 5 percent in the year to September."

"``The Reserve Bank has no headroom and needs to limit the scope for flow-on into inflation expectations,'' said Robin Clements, chief New Zealand economist at UBS AG. ``There doesn't look to be a sense of urgency that would demand aggressive easing at this time.''"

Bollard expects the inflation rate will slow to 3 percent by mid-2010. The central bank is required to keep average inflation between 1 percent and 3 percent.

Gasoline Prices

"Gasoline prices have slumped 8 percent since Bollard's July 24 rate cut, adding to signs inflation may have peaked."

Central bankers around the world are grappling with slowing economic growth while surging fuel and food prices fan inflation.

The Reserve Bank of Australia this month lowered its benchmark for the first time in seven years as economic growth weakens. Governor Glenn Stevens said this week it may be six months before inflation eases.

"The European Central Bank last week kept interest rates unchanged at a seven-year high, citing inflation concerns even as the euro-region economy contracted in the second quarter. The Bank of England kept its rate steady after economic growth stalled in the three months ended June 30."

"Following is a table of forecasts for New Zealand's cash rate at the next three reviews, and the target at the end of the first and second quarters next year."

2008 2009
Sept. Oct. Dec. March June
Median 7.75% 7.5% 7.25% 6.75% 6.75%
4Cast 7.75% 7.75% 7.5% 7.25% 6.75%
ANZ National 7.75% 7.5% 7.25% 7.25% 7.0%
ASB Bank 7.75% 7.5% 7.25% 6.75% 6.75%
BNZ 7.75% 7.5% 7.25% 6.75% 6.25%
Barclays 7.75% 7.75% 7.5% 7.25% 7.0%
Citigroup 7.75% 7.5% 7.25% 6.75% 6.5%
Deutsche 7.75% 7.5% 7.25% 6.75% 6.25%
First NZ 7.75% 7.5% 7.25% 7.25% 7.0%
Goldman Sachs 7.75% 7.5% 7.25% 6.75% 6.0%
JPMorgan 7.75% 7.5% 7.25% 6.75% 6.25%
Macquarie 7.75% 7.5% 7.25% 6.75% 6.5%
RBC 7.5% 7.25% 7.0% 6.5% 6.25%
UBS 7.75% 7.5% 7.25% 6.75% 6.75%
Westpac 7.75% 7.5% 7.25% 7.0% 7.0%

To contact the reporter on this story: Tracy Withers in Wellington at

"Last Updated: September 9, 2008 08:01 EDT"

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"Australia, New Zealand Dollars Drop as Commodities, Stocks Fall "

By Candice Zachariahs

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"Sept. 10 (Bloomberg) -- The Australian dollar dropped below 80 U.S. cents for the first time since August 2007 and New Zealand's traded near a two-year low as commodities and equities tumbled, slashing demand for the countries' high-yielding assets."

"The Australian dollar has slid 18 percent in eight weeks since reaching a 25-year high on July 16 as concerns intensified that the U.S. subprime collapse will slow global growth. The country relies on exports of raw materials including coal, gold and iron ore for a sixth of its economy. The Bloomberg Forward Global Commodity Index dropped for a ninth straight day yesterday to 212.79, the lowest since Jan. 23."

"``The atmosphere is extremely negative for anything leveraged to global growth,'' said Peter Jolly, head of research at National Australia Bank Ltd. in Sydney. ``We've seen sizable falls in equities and commodities overnight and that's dragged the Australian dollar lower.''"

"The Australian dollar touched 79.83 U.S. cents, the lowest since August 2007, before strengthening to 80.78 U.S. cents at 4:47 p.m. in Sydney from 81.39 cents in late Asian trading yesterday. It bought 86.69 yen from 87.97 yen yesterday."

The New Zealand dollar fell 0.6 percent to 67.14 U.S. cents from 67.54 cents late in Asia yesterday. It bought 72.00 yen from 73 yen yesterday.

"Jolly forecast the Aussie, as the currency is called, will trade between 70 and 80 cents for the next six months."

Worst Performer

"The Australian dollar was the worst performer among the 16 most-active currencies traded against the greenback after the price of gold, the country's third-most valuable raw material export, fell for a seventh straight session."

Raw materials account for 60 percent of Australia's exports and sales of commodities such as lumber make up 70 percent of New Zealand's overseas shipments.

"The Australian and New Zealand currencies also declined against the yen as the Standard & Poor's 500 Index of U.S. stocks slumped 3.4 percent, its biggest drop since February 2007."

"Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, led financial shares lower on growing concern about its ability to raise capital. Shares in Asia pared losses after Yonhap News said the Korea Development Bank will seek to buy a stake in Lehman."

Risk Aversion

"Share market declines often indicate investors are less willing to put their money into riskier assets using strategies such as carry trades. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. The risk is that currency market moves erase those profits."

"Borrowing costs stand at 7 percent in Australia and 8 percent in New Zealand, compared with 0.5 percent in Japan and 2 percent in the U.S."

"The currencies fell after the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to 25.47 yesterday, the highest since July 15."

"New Zealand's currency, called the kiwi, probably will become relatively less attractive to those seeking higher yields because Reserve Bank Governor Alan Bollard will probably cut the benchmark interest rate tomorrow, according to all 14 economists surveyed by Bloomberg News. Traders expect the rate will fall to 6.5 percent within a year, according to swaps trading."

The New Zealand dollar has fallen 9.7 percent since the New Zealand central bank reduced its benchmark rate for the first time in five years on July 24.

`Not Last Forever'

"``The reversal of the carry trade will not last forever,'' investor Jim Rogers said in an interview on Bloomberg Television. ``The Australia, New Zealand currencies are still two of the better currencies in the world longer term.'' Rogers, who correctly predicted the start of the commodities rally in 1999, heads Rogers Holding in Singapore."

"The Australian currency could gain to 88 cents in a ``matter of weeks'' wrote Sydney-based Clifford Bennett, chief economist at research firm Sonray Capital Markets Ltd., in a research note today. High yields and resource stocks at ``bargain basement'' prices will attract foreign capital to Australian assets and the local currency, he wrote."

"Australian government bonds fell. The yield on the 10-year note rose 2 basis points, or 0.02 percentage point, to 5.64 percent. The price of the 5.25 percent bond maturing in March 2019 declined 0.016, or A$0.16 per A$1,000 face amount, to 96.918. Bond yields move inversely to prices."

"New Zealand government debt rose. The yield on the 10-year benchmark bond fell 9 basis points to 5.88 percent. The price of the 6 percent security due in December 2017 increased 0.65, or NZ$6.50 per NZ$1,000 face amount, to 100.861."

To contact the reporter on this story: Candice Zachariahs in Sydney at

"Last Updated: September 10, 2008 02:49 EDT"

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"Consumer Spending in U.S. to Stall, Hurting Growth, Survey Says "

By Shobhana Chandra and Andy Burt

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"Sept. 10 (Bloomberg) -- A record spending spree by U.S. consumers will come to an abrupt end this quarter as job losses cause Americans to hunker down, a Bloomberg News survey predicts."

"Personal spending, the biggest part of the economy, will stall from July to September, three months earlier than predicted last month, according to the median estimate of 49 economists polled from Sept. 2 to Sept. 9. The slump will slow growth to less than half the prior quarter's pace."

"``The seemingly resilient U.S. consumer is finally buckling,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York, who cut spending forecasts for this quarter and the next. ``We're getting pretty close to a full-blown recession.''"

"Eight months of job cuts, wages that haven't kept up with inflation, falling property values and restricted access to credit are likely to depress spending into 2009, the survey showed. The bailout of Fannie Mae and Freddie Mac will, at best, only prevent growth from slowing even more, economists said."

"The world's largest economy will expand at a 1.2 percent annual pace this quarter after growing 3.3 percent from April to June. Last quarter was boosted by a narrowing of the trade gap and a rise in spending propelled by the government's tax rebates. Growth will slow to a 0.7 percent rate in the last three months of 2008, the survey showed."

"After stagnating this quarter, consumer spending will grow at a 0.4 percent pace to end the year, and expand at a 1 percent rate in the first three months of 2009, the survey showed. Purchases grew 3 percent per quarter on average in the previous five years and have been rising since 1992, the longest string on record."

Payroll Slump

"The job market is sending the surest signal the economy is contracting. Payrolls have shrunk by more than 600,000 workers so far this year and the jobless rate shot up 1.1 percentage points from May to August, the biggest four-month jump in almost 27 years, the Labor Department reported last week."

"``There will shortly be a sea change in the consensus economic outlook for early next year, and it won't be an upward revision,'' said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, who forecast spending would drop this quarter and next and the economy would shrink in the last three months of 2008. ``Too many households are just one job loss away from default and foreclosure.''"

"Foreclosures accelerated in the second quarter to the fastest pace in 29 years and the share of loans with one or more payments overdue rose to the highest since records began in 1979, the Mortgage Bankers Association reported last week."

"Fannie, Freddie"

"The government's takeover on Sept. 7 of Fannie Mae and Freddie Mac, which make up almost half the $12 trillion U.S. mortgage market, may ease borrowing costs. That would prevent the housing downturn from deepening and further restricting growth."

"``It takes away one of the worst-case scenarios for the economy,'' Lehman's Harris said."

Big-ticket items like automobiles have been the hardest hit by the surge in food and fuel costs. Vehicle sales over the last three months were the weakest since 1993.

"``Not only is the U.S. in a recession, but the rest of the world is slowing down,'' Ford Motor Co. Chief Executive Officer Alan Mulally said in a speech this week in Dearborn, Michigan. ``I've never seen anything quite like it.''"

"The jobless rate will reach 6.3 percent by mid-2009, according to this month's survey median, matching the peak reached in 2003 following the last recession and higher than previously anticipated. The rate rose to a five-year high of 6.1 percent in August."

`Reason to Worry'

"``The consumer is more cautious, more concerned,'' said John Lonski, chief economist at Moody's Investors Service Inc. in New York. ``There's far more reason to worry than reason to expect the economy will be improving by 2009.''"

"Exports are likely to remain a bright spot, even as the U.S. slowdown spreads overseas, softening demand for American- made goods."

"``Strength in exports is helping economic growth keep its head above water,'' Lonski said."

"The odds that the U.S. is, or will soon be, in a recession remained at 51 percent in the latest survey."

"Economists also predicted inflation pressures will cool as the economy slows. Consumer prices will rise 2.7 percent over the 12 months to June 2009 after peaking at a 5.3 percent gain in the year ending this month, according to the survey median."

"The slowdown in growth and inflation will prompt Federal Reserve policy makers to keep the benchmark interest rate unchanged at 2 percent through the first three months of 2009, according to the median forecast. Central bankers will probably start raising the rate in next year's second quarter."

To contact the reporters for this story: Shobhana Chandra in Washington at; Andy Burt in Washington at

"Last Updated: September 10, 2008 00:00 EDT"

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Pending U.S. Home Resales Probably Fell in July as Rates Rose

By Timothy R. Homan

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"Sept. 9 (Bloomberg) -- Fewer Americans signed contracts in July to purchase previously owned homes, a sign that falling home prices aren't enough to bring buyers back into the market, economists said before a private report today."

"The index of pending home resales fell 1.5 percent after a gain of 5.3 percent in June, according to the median forecast in a Bloomberg News survey of 39 economists. The decline would be the fourth so far this year as tighter credit conditions keep would-be buyers from taking advantage of lower prices."

"Thirty-year fixed rate mortgages averaged 6.29 percent in July, up from an average of 5.81 percent in the first half of the year. The U.S. government's takeover of Fannie Mae and Freddie Mac, which own or guarantee almost half of American home loans, aims to ensure that mortgage funds remain available and to minimize further declines in the housing market."

"``More houses are coming into the market because of foreclosures, and those are driving prices down,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. ``The trend might be a little better going forward on pending home resales because of the drastic price reductions, but that would not necessarily be an indication that the housing market is healthy.''"

The National Association of Realtors is scheduled to release the figures at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 3.5 percent to a gain of 2 percent.

Wholesale Inventories

"A separate report today from the Commerce Department may show that wholesale inventories in July increased 0.7 percent, the smallest gain since March, after rising 1.1 percent the previous month, according to the median estimate of economists surveyed."

"The pending resales report is considered a leading indicator because it tracks contract signings. Closings, which typically occur a month or two later, are tallied in a separate report from the Realtors."

"The group's figures on August existing home sales are due Sept. 24. Purchases in July rose 3.1 percent to a 5 million annual pace from a 4.85 million rate the prior month, with at least one-third of the sales coming from foreclosed properties. At the July sales rate, it would take 11.2 months to sell all the houses on the market, about twice the supply that reflects a balanced market, according to the agents' group."

Increasing Foreclosures

"Other measures also show how bank seizures may push down home prices and suppress sales. Foreclosures increased to the fastest pace in almost three decades during the second quarter, the Mortgage Bankers Association in Washington said in a report last week."

"Home prices in 20 U.S. metropolitan areas fell 15.9 percent in June from a year earlier, the most on record, the S&P/Case- Shiller home-price index showed on Aug. 26."

"Homebuilders are struggling to maintain profits as they compete with a glut of unsold properties on the market. Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its fourth straight quarterly loss last week."

"``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market,'' Chief Executive Robert Toll said on a conference call with analysts Sept. 4. ``Once the supply of foreclosed inventory is exhausted, we believe that favorable demographics will kick in and the housing market in general will begin to recover.''"

Bloomberg Survey
Whlsale Pending
Inv. Homes

Date of Release 09/09 09/09
Observation Period July July
Median 0.7% -1.5%
Average 0.7% -1.6%
High Forecast 1.0% 2.0%
Low Forecast 0.3% -3.5%
Number of Participants 34 39
Previous 1.1% 5.3%
4CAST Ltd. 0.6% -1.5%
Action Economics 0.9% -1.0%
AIG Investments 0.3% -3.5%
Argus Research Corp. 0.4% ---
Bank of Tokyo- Mitsubishi 0.9% ---
BBVA 0.5% -1.3%
BMO Capital Markets 0.8% -1.0%
BNP Paribas 0.4% --- 0.5% 2.0%
Calyon 0.8% -1.2%
CFC Group 0.6% -1.3%
Commerzbank AG --- -2.5%
Credit Suisse 1.0% ---
DekaBank --- -1.1%
Desjardins Group 0.7% ---
Deutsche Bank Securities 0.7% -1.5%
Dresdner Kleinwort --- -1.5%
DZ Bank --- -1.0%
Fortis 0.8% -3.3%
FTN Financial --- -1.0%
H&R Block Financial Advis 0.6% -1.0%
High Frequency Economics 0.8% -2.0%
Horizon Investments 0.4% -3.0%
HSBC Markets --- -0.5%
IDEAglobal --- -2.5%
Informa Global Markets 0.5% -2.5%
ING Financial Markets 0.7% 0.0%
Insight Economics 0.6% ---
J.P. Morgan Chase --- -3.0%
JPMorgan Private Client 0.4% -1.0%
Landesbank Berlin 0.7% ---
Lehman Brothers 0.5% -2.0%
Lloyds TSB --- -1.0%
Merk Investments 0.7% -1.3%
Merrill Lynch 0.9% ---
Moody's --- -2.5%
National City Corporation --- -2.0%
Natixis --- -2.0%
"Ried, Thunberg & Co. 0.8% -3.0%"
Schneider Trading Associa 0.6% -0.9%
Stone & McCarthy Research 1.0% ---
Thomson Financial/IFR 0.7% 0.2%
UBS Securities LLC --- -3.0%
University of Maryland 0.6% -0.6%
Wells Fargo & Co. 0.9% -2.1%
WestLB AG --- -1.2%
Westpac Banking Co. 0.5% -2.5%
Wrightson Associates 0.8% -3.0%

To contact the reporter on this story: Timothy R. Homan in Washington at

"Last Updated: September 9, 2008 00:01 EDT"

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<<2.632_20080909154932German Exports Fall as Global Slowdown Cools
Demand (Update1) .txt>> <<2.631_20080910104244New Zealand May Cut
Benchmark Rate a Second Time Amid Recession .txt>>
<<2.631_20080910103959Australia New Zealand Dollars Drop as Commodities
Stocks Fall .txt>> <<2.632_20080910105813Consumer Spending in US to
Stall Hurting Growth Survey Says .txt>> <<2.632_20080909160538Pending
US Home Resales Probably Fell in July as Rates Rose .txt>>

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