Author: economycommentator

China Aims to Heighten Investment

Some of the largest cities in China have revealed their plans to expand investment in an effort to boost growth rates.

The Wall Street Journal explains:

“The city of Chongqing in China’s southwest called for investment of 1.5 trillion yuan in seven key industries over the next three years, the state-run Xinhua News Agency reported Monday. The investment goals include 300 billion yuan in the electronic communications sector, 200 billion yuan in the auto industry, 250 billion yuan in the manufacturing of advanced equipment and 150 billion yuan in the chemical industry, Xinhua said on Monday.

“Separately, Tianjin, a city next to Beijing, said it has “preliminarily” decided to move forward with a plan calling for investment of 1.5 trillion yuan over four years in 10 industrial sectors, ranging from the petroleum and chemical industry to the aviation and aerospace industry over the next four years, according to a report by the state-run Tianjin Daily posted on Tianjin municipal government website Tuesday.”

U.S. Tax Increase in 2013- Pros and Cons

President Obama is toying with the idea of increasing taxes in 2013, despite his previous disapproval of the idea back in 2010.

David Gregory of Meet the Press discussed the move and its potential effects on the U.S. economy with Senator Dick Durbin and Senator Jon Kyl in a program last night.

[youtube http://www.youtube.com/watch?v=DXXQfHbsWIQ]

Watch the full debate here on MSNBC.com

India Initializes Plan to Boost Economy

According to shipping minister GK Vasan, the Indian government has come up with a plan to boost its country’s economy after its most recent slide, with the help of the infrastructure sector.

“Lately, sustainability of a high growth rate has been a subject of much discussion, especially in the wake of the 2011-12 GDP growth rate falling to 6.5%, which was the lowest in the last nine years,” he said.

Still, for the global situation, 6.5% isn’t too bad.

“Notwithstanding the current dip in growth rate, the economy is expected to bounce back and resume its high growth trajectory. We need to either ride the tide when the economic growth is high, or invest to spur the growth itself. We need to seize this moment,” he said.

 

Upcoming Fed Meeting Boosts Gold Prices

Gold is continuing to rise, with a recent increase of $2.90 to $1737.70 per ounce for December delivery; a fact that will likely boost confidence in investments with companies such as Bullion Direct. The precious metal has seen losses only once in the last four sessions, and has increased 2.8% in September alone.

Gold is globally recognized as a ‘store of value’, and concerns regarding inflation and currency degradation often trigger increases in worth.

This week’s change is no exception, as the rise came just before the Federal Reserve policy meeting which will take place later this week. Many experts predict that the Fed will announce further bond purchases in an effort to boost the United States’ economy.

HSBC strategists explained:

“With the market’s main focus on this week’s meeting…prices were buoyed by a stronger euro. The euro is being supported by an increase in bullish sentiment stemming partly from expectations of a positive ruling on the legality of the European Stability Mechanism by the German Constitutional Court and European Central Bank bond buying.”

Singapore Proceeds with Caution as European Crisis Lingers

Despite last year’s growth, Singapore remains concerned about a potential “disorderly” European debt default and its impact on the economy.

GDP increased 10% in the past three months, while the estimate was set at 9.9% according to the Trade Ministry.

Unlike other Asian policy makers, Singapore narrowed its strategy this spring in an effort to blunt strengthening price pressures. Europe’s debt conflict appeared to have been on the mend, but certain government struggles in countries such as Greece have proved a setback in the process.

“The developments in Europe pose a significant downside risk to Singapore’s economy,” says Nomura Holdings’ Euben Paracuelles. “It’s hard for Asia to escape the repercussions if there’s a European recession and it’s accompanied by financial market instability and a banking crisis.” He added that the growth outlook for Singapore during the third quarter is “very poor.”

 

Hurdles for Starbucks China Aren’t Deterring The Business

Starbucks has moved into the Chinese market, and they are experiences growing pains as they do so.  While Chief Executive Howard Schultz expects that their mainland China sales will overtake those in Canada by 2014, they are experiencing some early hurdles. Starbucks China is finding that customers linger in cafes without purchasing anything for hours.

In addition, with the lower income levels in China, sale volumes have been much smaller than those in the United States. Chinese customers have been known to bring their own food to the Starbucks stores and to use the facilities to have meetings and to browse the internet.

Starbucks first came to China in 1999 and it now has over 570 stores in 48 cities.  They plan, by 2015 to have 1500 stores in 70 plus cities.

The stumbling blocks, however, are plentiful.  Chinese incomes are much lower than American salaries and Chinese people don’t inherently have a coffee habit.  As a comparison, Starbucks booking sales were $358 million for mainland China in 1020, while they were $8 billion in the United States that year.

As reported by Bernstein Research analyst Sara Senatore, it would take a Chinese worker 1.3 hours of work in order to afford a 12 ounce caramel macchiato. CEO Schultz said that income has not, however, been a barrier to their growth.

Starbucks has also had trouble finding employees with skills, and they have announced plans to launch a training program called Starbucks China University next year.

Bernanke on U.S. Economy and the Debt Crisis

Ben Bernanke, U.S. Federal Reserve Chairman, recently stated that the Eurozone debt crisis has significantly impacted the United States’ trade and financial markets.

“The European Union accounts for roughly one-fifth of U.S. exports of goods and services. The U.S. exports to Europe over the past few years have underperformed our exports to the rest of the world,” Bernanke testified before the House Committee on Oversight and Government Reform.

“In addition, weaker demand from Europe has slowed growth in other economies, which has also lowered foreign demand for our products,” he said.

The financial markets have also taken a hit, according to Bernanke. Risk of the crisis spreading still lingers, though financial firms and markets have used this time to adjust their strategies and risks throughout the developing situation. European officials also managed to alleviate some of the stresses in the region, improving the global approach and strengthening markets everywhere.

“However, Europe’s financial and economic situation remains difficult, and it is critical that the European leaders follow through on their policy commitments to ensure a lasting stabilization,” Bernanke said.

Federal Regulations Hampering U.S. Economy

For full video:

http://downloads.cbn.com/cbnnewsplayer/cbnplayer.swf?aid=28134

CBN News discusses a recent study covering small businesses which revealed that federal regulations do even more harm than people believe. In fact, the regulations cost the nation $1.75 trillion a year. Small businesses lose more than $10,000 per employee by following the federal rules.

According to author Phil Kerpen, “Democracy Denied,” a Washington D.C. think tank called Phoenix Center discovered that “each federal regulator destroys an average of 98 private sector jobs per year.”

He added that “when you talk about spending, it’s often far more costly than just what we spend on the budgets of these agencies because of the reach they have into the private economy and the negative impact that they have.”

U.S. Unemployment Rate Falling

U.S. job growth exceeded expectations in January, implying impressive economic growth and possibly lowering the need for additional Federal Reserve actions. Gold prices have fallen as a result.

According to the Labor Department, employers created 243,000 jobs in January, after adding 203,000 last December. A recent Bloomberg News survey predicted an increase of only 140,000 job positions. The U.S. employment rate has fallen to its lowest in three years; 8.3%.

“The growth in the U.S. is much better than expected, and that has damped the expectation of quantitative easing,” said Integrated Brokerage Services LLC’s Frank McGhee. “The market has priced in continued slow growth.”

Precious metals have fallen in value over the past few weeks, however. According to Bloomberg, gold futures for April fell 1.1%, while silver futures slid 1.2%.

Slow Going for U.S. Economy

Though consumer spending has decreased over the last month or two, American incomes have increased since December, strengthening savings accounts throughout the nation, according to the U.S. government.

On Monday, the government revealed that consumer spending has barely changed since December, despite intense (and sometimes fatal) holiday shopping sprees. In November, consumer spending rose only one tenth of a percentage point. Consumer spending covers 70% of the U.S. economy, and recent trends may be cause for concern.

However, personal incomes have grown by half a percentage point as of December, reaching a year-long high. Many Americans have been forced to pay their bills with their savings over the past few years, and the rise in income has pushed savings rates up by 4%.  In addition, figures for the end of 2011 in the hedge fund industry were disappointing, having been described by Kevin Rose and Azam Ahmed as “dismal.”

Considered the world’s greatest economy, the U.S. has been growing slowly. In 2011 it grew a mere 1.7%, while Federal Reserve officials predict 2.7% growth in 2012.