Business Pivot Point

The US economy is showing mixed signals in terms of unemployment with small dips in some weeks and then small increases in some weeks. Also consumer sentiments also keep wavering in a narrow band and the markets react to every change in a volatile manner, only because nobody is clear on where the US is heading.
We need to keep in mind few key things in order to come to a sensible conclusion on where the US is heading for the near term.
First , we need to see how the new employment additions are happening, and the picture is a really bad. The private sector is not adding the kind of new jobs the government wants and to top it all, many private sector companies could be going in for head cuts in the near term if there are more signs of recession.
Next, we need to look at the bank credit growth. The banks are seeing decent profits thanks to reduced competition, but the banks are reluctant to provide loans to risky corporations and individuals. That is in turn switching off the purchases and the related economic activity. This is also a negative for the economy.
Then , we need to see how the housing sector is performing. That is also a very bad picture, with new home sales hitting a multi year low recently after the government withdrew the liberal tax credit program. With unemployment ruling high, there are more number of bank loan defaults and therefore more seized homes in the market. So do not expect a big recovery in the housing sector for months to come.
Lastly, we need to look at the overall health of the US banking system based on FDIC report. The report released just few days back, is indicating a steep increase in the number of weak banks, which is now reading at over 810 banks as of last quarter end.
SO NOTHING IS GOING RIGHT FOR THE US ECONOMY, AND EXPECT IT TO GIVE MORE BAD NEWS IN THE WEEKS TO COME.

The UK government has pumped in billions of dollars in the then ailing European banks two years back and it seems that the payback time is about to start for the government soon.
An independent analysis by a leading business newspaper has indicated that the UK government is set to earn over 35 billion dollars of profit from these investments as the share prices of these banks would be going up further. The calculation assumes the banks to get into huge profits over the coming years.
The expected profit could help the government to cut down the budget deficit sharply, as per the analysis.

The whole world has been struggling from high food prices in the last two years thanks to production cuts in various grains / oilseeds / pulses etc., in different countries. Coupled with that the increasing food demand from China and India has only made the shortage more acute.
Now Russia has added fuel to this food problem by imposing a ban on Wheat exports. It is important to note that Russia is the world’s largest exporter of Wheat grains and a cut by Russia has already pushed up the wheat prices by over 30% in the last two weeks.

The Chinese economy has been running at steady speed in the last few years, while Japan has been facing recession or very low growth rate. And all these have forced Japan from the position of being the world’s second largest economy. And China has snatched up the second spot , only after US.
Now, China is the world’s largest in many important parameters, be it population or be it automobile sales numbers or mobile phone connection numbers or iron ore consumption or steel production or exports value.
China has a huge demographic advantage in terms of middle aged active population longing to work for low salaries, and that is being put to effective use by the Chinese government. When the going is good, the government in power is going to remain popular. So expect more bolder measures from the Chinese government in the coming months which in turn could help the country to widen the gap with Japan. Then it may eventually become the permanent number two economy in the world for many years to come.

Till few months back, Pakistan was only saddled with terrorism and sectarian violence, and has been losing human lives and properties almost on a daily basis. Now the mother nature wants to put her share of the disaster on Pakistan, and there has been a spate of torrential rains and flooding in the Northern Part of Pakistan. The country has already seen loss of over 2000 people and is yet to compile the list of missing people which could run into tens of thousands.
There are now reports of another bout of rains in the next few days, which can only add to the flooding and landslide problems affecting the country. The US army is already into the task of helping out the Pakistani public in some of the affected regions, but that is hardly going to make any change to the overall disaster.

There are few countries which have maintained the economic growth from the past four decades. Such country which has maintained the economic growth is Malaysia. At times some substantial structural transformation’s economy of agriculture and resources are seen. The process has resulted Malaysia becoming one of the upper middle income country.

The per ca pita income in Malaysia at current exchange rate during 2008$8,210 and a total GDP of $222 billion. At present Malaysia has ranked one of the ten most competitive nations by the World competitiveness report of IMD. The present policymakers are concerned about the present growth and are not thinking of their past achievements.

The export dependence of Malaysia will be on US,Europe and Japan for the social and economic development. By the year 2020 Malaysia’s aim is to become one of the high income country with per ca pita income of $15,000. The government of Malaysia is concentrating the substantive economic,followed by social and governance reforms. However Malaysia has to face competition from countries like China,Singapore and Vietnam for its emergence.

The Chinese economy is showing further signs of cooling down, and it is now expected to grow by around 9% to 9.5% for the full year. That would still help it retain the fastest growing economy tag, but it would be closely followed by India at around 9% growth rate.
Any further drop in Chinese growth would mean drop in export orders for most of the Asian nations including Japan and South Korea. That would in turn force these countries to cut down on their imports from US / Europe region. So the entire world is now praying for continued expansion of the Chinese economy.
That is a sea change indeed in a decade, as ten years back, nobody would have even bothered to check as to how the Chinese economy was performing.

Nearly two million counterfeit £1 coins were returned to the Royal Mint in the last financial year, figures show.

This was more than 23 times higher than the number seized six years earlier, MPs were told.

An estimated one in 36 £1 coins in circulation are counterfeit, prompting a campaign by the Royal Mint telling people how to spot fakes.

Key signs of counterfeits include a poorly defined ribbed edge or an indistinct design of the Queen.

The UK Treasury said that the proportion of counterfeit £1 coins in circulation had only risen slightly in the last year. Attempts to tackle the number of fakes had led to the high number seized and returned to the Royal Mint.

The Chinese economy continues to report massive trade surplus month after month, with the June figures indicating a robust 20 billion dollars surplus. A trade surplus means excess exports over the imports value, and that is favorable to the country concerned.
That also means that the importing countries would be facing trade deficits, and leading the deficit list is US, followed by some of the European countries. So expect more pressure on China from US to revalue the Chinese currency so that US imports into that country becomes more attractive.
But so far China has successfully avoided pressures from US and European countries for the last ten years, and how far it would be successful in the future, is a billion dollar question.

The European crisis was nearly peaking four weeks back when the entire global financial system was jolted and every stock market index was crashing to multi-month lows. But in the last few weeks slowly people seem to have started forgetting the hidden European financial mess.
The European system is continuing to be in deep trouble with Spain and Portugal getting downgraded once again in the last few days. And Spain is already talking of another round of steep spending cuts, as it fears that it may not pass the European Union plus IMF monthly test with the current level of measures.
That is bad news and the business confidence in Germany is also showing signs of going down. UK home prices are also set to go down further in the coming months as more seized homes would come in for distress sales. The government also is already on an austerity mode and that would only cut down the income levels of the citizens.
And US also might cut down on imports from the European zone in the coming months once it starts cutting the deficit.
The European crisis is definitely not over, and it may rear it’s ugly head anytime in the near future, so be alert.