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http://www.gulfindustryonline.com/images/gi_gclogo.gif<![CDATA[Focus on Chinese consumer to grow]]>Reuters.
China’s ravenous appetite for imports is already transforming the world economy. The country became the top export destination in 2009 for Australia, Brazil, Japan and South Africa. For Africa as a whole, China leapfrogged the United States last year to become the continent’s top trading partner.
Admittedly, a fat chunk of those imports are commodities and components that are processed for re-export to rich markets, undermining the case that China and its suppliers can truly “decouple” from the developed world.
“China will turn into a real engine of regional growth when it develops the technological capacity, and the human capital, to produce by itself and at competitive levels fully ‘Made in China’ exports, and when higher levels of income and consumption can trigger imports from the region to be consumed by China, not assembled,” said Yolanda Fernandez-Lommen, an economist with the Asian Development Bank in Beijing.
Yet something is stirring in the data that is reviving the decoupling debate. In the first quarter, China’s imports from Japan jumped 56 per cent from a year earlier; from South Korea, 61 per cent; from Australia, 64 percent; from Taiwan, 95 percent; from Indonesia, 105 percent.
“For many Asian economies and commodity exporters, China is now already as important as the United States,” said Yu Song, an economist with Goldman Sachs.
Those leaps are of course exaggerated by comparison with the depressed days of early 2009. And because commodity prices have shot up, volume increases are less impressive. Moreover, firms are restocking depleted inventories, and China’s massive stimulus spending is generating one-off demand for imports.]]>
By boosting domestic purchasing power, the looming rise in the yuan will add fuel to one of the biggest global economic stories of the new decade: the rise of the Chinese consumer, reports Reuters.
China’s ravenous appetite for imports is already transforming the world economy. The country became the top export destination in 2009 for Australia, Brazil, Japan and South Africa. For Africa as a whole, China leapfrogged the United States last year to become the continent’s top trading partner.
Admittedly, a fat chunk of those imports are commodities and components that are processed for re-export to rich markets, undermining the case that China and its suppliers can truly “decouple” from the developed world.
“China will turn into a real engine of regional growth when it develops the technological capacity, and the human capital, to produce by itself and at competitive levels fully ‘Made in China’ exports, and when higher levels of income and consumption can trigger imports from the region to be consumed by China, not assembled,” said Yolanda Fernandez-Lommen, an economist with the Asian Development Bank in Beijing.
Yet something is stirring in the data that is reviving the decoupling debate. In the first quarter, China’s imports from Japan jumped 56 per cent from a year earlier; from South Korea, 61 per cent; from Australia, 64 percent; from Taiwan, 95 percent; from Indonesia, 105 percent.
“For many Asian economies and commodity exporters, China is now already as important as the United States,” said Yu Song, an economist with Goldman Sachs.
Those leaps are of course exaggerated by comparison with the depressed days of early 2009. And because commodity prices have shot up, volume increases are less impressive. Moreover, firms are restocking depleted inventories, and China’s massive stimulus spending is generating one-off demand for imports.
Reasons for deficit All those factors, plus still-sluggish global demand, help explain why China ran a trade deficit in March of $7.4 billion, the first time its trade had been in the red since April 2004.
But more and more economists are convinced that the growth in underlying Chinese domestic demand is genuine and stands to transform trading patterns, especially in its backyard.
Mingchun Sun, a Nomura economist, notes that the share of “ordinary” imports – mainly consumed domestically – rose to 55.8 per cent in the first quarter from 44.4 per cent three years earlier.
“Obviously, such structural changes in China’s imports since 2007 are consistent with the government’s rebalancing efforts to increase domestic demand and reduce dependence on external demand,” he said.
But Sun sees broader forces at work. Car sales, for example, are growing strongly across the region: “There is evidence that Asian internal demand outside China is also strengthening, underpinned by loose policies and sound economic fundamentals.”
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<![CDATA[Manufacturers’ sentiment at a high]]>Reuters poll showed, but they expected no further improvement in sentiment in the three months ahead.
Service-sector firms were their least pessimistic since October 2008, though they lagged manufacturers.
Manufacturers were also cautious about the outlook due to concerns about weak domestic demand, persistent deflation and rising commodities prices abroad, the monthly Reuters Tankan survey conducted from March 26 to April 12 showed.
“It confirmed that the economic recovery is spreading to overall sectors, thanks to Asia-bound exports, government subsidies for household appliances and signs of the job market bottoming out,” said Yoshimasa Maruyama, an economist at Itochu Corp.
“Still, Japanese firms do not have enough factors to be optimistic about the economy looking ahead, even though their confidence has returned to neutral levels.”
The global recovery trend helped send the Nikkei average N225 to an 18-month closing high during the survey period. It also climbed 5.2 per cent in the January-March quarter.
In the poll, which has a 95 per cent correlation with the Bank of Japan’s tankan survey, the manufacturers’ sentiment index rose to zero, up 8 points from March and nudging out of negative territory for the first time since April 2008.]]>
Japanese manufacturers’ sentiment hit its highest level in two years as robust exports continued to drive the economic recovery, a Reuters poll showed, but they expected no further improvement in sentiment in the three months ahead.
Service-sector firms were their least pessimistic since October 2008, though they lagged manufacturers.
Manufacturers were also cautious about the outlook due to concerns about weak domestic demand, persistent deflation and rising commodities prices abroad, the monthly Reuters Tankan survey conducted from March 26 to April 12 showed.
“It confirmed that the economic recovery is spreading to overall sectors, thanks to Asia-bound exports, government subsidies for household appliances and signs of the job market bottoming out,” said Yoshimasa Maruyama, an economist at Itochu Corp.
“Still, Japanese firms do not have enough factors to be optimistic about the economy looking ahead, even though their confidence has returned to neutral levels.”
The global recovery trend helped send the Nikkei average N225 to an 18-month closing high during the survey period. It also climbed 5.2 per cent in the January-March quarter.
In the poll, which has a 95 per cent correlation with the Bank of Japan’s tankan survey, the manufacturers’ sentiment index rose to zero, up 8 points from March and nudging out of negative territory for the first time since April 2008.]]>
<![CDATA[New orders show high rise]]> Overall orders, however, were unexpectedly pulled down by a plunge in the volatile category of civilian aircraft and parts, Commerce Department data showed.
New durable goods orders excluding transportation jumped 2.8 per cent last month, the largest rise since December 2007, after increasing 1.7 per cent in February.
Analysts polled by Reuters had expected new orders excluding transportation to rise 0.7 per cent.
Separately, the department said new home sales for March surged 26.9 per cent, the largest advance since April 1963, to a 411,000 unit annual rate to break a four-month slide.
Analysts polled by Reuters had expected sales to increase to a 330,000-unit rate.
“These are some large numbers. I think the market can go into the weekend comfortable that the US recovery is still going full swing,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
US stocks extended gains after the home sales data, while Treasury debt prices fell to session lows. The US dollar rose against the euro and the yen.
The surge in sales of newly built single-family homes in March likely reflected a rush by consumers to take advantage of a homebuyer tax credit. It offered hope the housing recovery, which had stalled in recent months, was back on track.]]>
New orders for long-lasting US manufactured goods excluding transportation in March posted their largest gain in more than two years and new home sales hit an eight-month high, suggesting the economic recovery was gathering momentum.
Overall orders, however, were unexpectedly pulled down by a plunge in the volatile category of civilian aircraft and parts, Commerce Department data showed.
New durable goods orders excluding transportation jumped 2.8 per cent last month, the largest rise since December 2007, after increasing 1.7 per cent in February.
Analysts polled by Reuters had expected new orders excluding transportation to rise 0.7 per cent.
Separately, the department said new home sales for March surged 26.9 per cent, the largest advance since April 1963, to a 411,000 unit annual rate to break a four-month slide.
Analysts polled by Reuters had expected sales to increase to a 330,000-unit rate.
“These are some large numbers. I think the market can go into the weekend comfortable that the US recovery is still going full swing,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
US stocks extended gains after the home sales data, while Treasury debt prices fell to session lows. The US dollar rose against the euro and the yen.
The surge in sales of newly built single-family homes in March likely reflected a rush by consumers to take advantage of a homebuyer tax credit. It offered hope the housing recovery, which had stalled in recent months, was back on track.
Recover mode “We are at a point in housing where we are in a recovery mode, but there are still concerns about the speed and sustainability of it. We will probably not see real strength until 2012,” said Kim Whelan, economic analyst at Wells Fargo Securities in Charlotte, North Carolina.
Overall durable goods orders fell 1.3 per cent in March, the biggest drop since August, following an upwardly revised 1.1 per cent gain in February.
Analysts polled by Reuters had forecast orders rising 0.3 per cent in March after February’s previously reported 0.9 per cent increase.
The drop in overall orders reflected a 67.1 per cent tumble in non-defense aircraft and parts orders after they rose 32.7 per cent the previous month. US plane maker Boeing Co (BA.N) received 43 orders for aircraft, slightly below 47 in February, according to information posted on its website.
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<![CDATA[PGMs demand set to get hot]]> Chinese car sales have been strong so far this year, growing by almost two-thirds in March as buoyant consumer sentiment lifted spending. The leading US market is also showing signs of recovering from last year’s slump.
Respected metals consultant GFMS Ltd said in its Platinum & Palladium Survey 2010 that investor sentiment toward PGMs has risen substantially due to better prospects for autocatalyst demand and a decline last year in mining output.
Nearly 1 million ounces of platinum and palladium combined have been drawn into ETF Securities Ltd’s US Physical Platinum PPLT and Physical Palladium shares PALL ETFs since the funds’ inception in January, the company’s data showed.
“Not surprisingly, such an impressive inflow of investor funds into platinum and palladium has brought about a radical and potentially long-term change to both metals’ price environment,” the GFMS report said.
Palladium and platinum have risen by about 39 and 18 per cent respectively so far this year, compared with gold’s 4.5 per cent rise.]]>
Investor demand for platinum group metals (PGMs) is expected to increase further in 2010, driven by strong inflows into US platinum and palladium exchange traded funds amid a rosy outlook for the auto sector.
Chinese car sales have been strong so far this year, growing by almost two-thirds in March as buoyant consumer sentiment lifted spending. The leading US market is also showing signs of recovering from last year’s slump.
Respected metals consultant GFMS Ltd said in its Platinum & Palladium Survey 2010 that investor sentiment toward PGMs has risen substantially due to better prospects for autocatalyst demand and a decline last year in mining output.
Nearly 1 million ounces of platinum and palladium combined have been drawn into ETF Securities Ltd’s US Physical Platinum PPLT and Physical Palladium shares PALL ETFs since the funds’ inception in January, the company’s data showed.
“Not surprisingly, such an impressive inflow of investor funds into platinum and palladium has brought about a radical and potentially long-term change to both metals’ price environment,” the GFMS report said.
Palladium and platinum have risen by about 39 and 18 per cent respectively so far this year, compared with gold’s 4.5 per cent rise.
Inflows central to rally “Inflows into newly created ETFs have been central to the price rally in 2010 to date,” the report said.
Fred Jheon, managing director of ETF Securities’ US unit, cited positive auto sales figures and news that General Motors Co had completed repaying US and Canadian government loans.
“We are seeing a pronounced increase in the activity of both funds in terms of trading volume and asset gathering.”
Jheon said that assets under management for both PPLT and PALL on a combined basis have risen to $945 million.