Increasing machine orders in Japan adding to signs of recovery in the nation's manufacturing sector

Japan's machine orders inclined in September more than analyst's estimates amid improvements witnessed in the nation's manufacturing sector which showed clear signs of recovery even if production levels remains lower than last year's levels. 

Japan economy has announced the monthly figures for Machine orders which showed a gigantic boost of 11.0% during August, compared with the prior reading of -8.2%, and on top of the expectations of 3.9%. 

Moreover, the yearly figures for Machine orders was declined to 2.1% compared with the prior reading of 4.0%, however it came above forecasts of -3.6%. 

Exports also rose and started participating effectively in the recovery process, having overseas shipments soard during this period. Further, the demand from China that is leading recovery in the Asian region helped Japan's exporters to offset losses incurred by the end of last year and the beginning of this year. 

We can expect that if capital spending continued to improve, we should see conditions in the labor market getting better, keeping in mind that unemployment fell. Household spending will increase as income levels are moving forward, that may help to ease the decline in prices and support the economy to fight deflation that continued to weigh on economic activity. 

On the other hand, Japan's economy continued to show many fundamental data that confirmed it has many alternatives ways to record an expansion during these months as investment sector picks up. 

Furthermore, the government in Japan is working to keep the recovery going, which work to cope the yen's appreciation, where Bank of Japan (BOJ) has intervened into the market to sell the yen against the dollar to cool the yen's advance, as the substantial rise in the Japanese yen against the dollar and its all major counterparts. 

The Bank of Japan noted that the economic recover bas returned to normal level and now is picking up amid the sluggish global economy, while the economy is facing a downward pressure as the European financial crisis beside the sluggish US economy. 

Yet, Japanese economy success to start the recovery phase this quarter as the industry sector continued to introduce more cheerful signs these days after manufacturers restored their production cycle after the massive quake that hit the nation during the first quarter of this year.

New positive signs for the economic recovery cycle in New Zealand 

New Zealand economy is showing great signs of economic recovery to get rid from the effect of earthquake that hit the country as exports rose significantly, especially from dairy products and meat from countries of the Asian region, especially from China.

The New Zealand economy is starting the recovery phase this period, after the home building permits accelerated during the month of January by the most in almost two years, reflecting the residential construction rebound after the earthquake. 

The New Zealand economy issued today data regarding the building permits for the month of May, which accelerated to 2.2% compared to the previous drop by 1.6%, while the market expectations referred to 3.2%.

New Zealand’s goods prices rose dramatically which is positive for growth rates and profits, but it’s a negative effect on the currency of New Zealand, led to decline in exports, in addition to that high prices may be dangerous if growth rates continue to climb this way. 

On the other hand, New Zealand's trade balance registered a surplus in May less than expected as it recorded a surplus of NZ $605 million compared to the previous surplus which amounted to $1113 million New Zealand dollars, which was expressed by Mr. Alan Pollard, President of the Central Bank, that higher New Zealand dollar led to a decline in export earnings, which may explain the reason for this decline in the surplus. 

Retail sales is one of the important indicators that indicate consumers spending, where we can see that the improvement in New Zealand's retail sales index in November gives further upbeat signals that the economy might recover and fight the financial crisis before the first half of 2011 along with the borrowing costs near their lowest levels. 

In the meantime New Zealand's central bank monitors the global situation like any other central bank, especially in the face of rising oil prices and food commodities in addition to the current instability stemming from the Greek crisis and the sluggish U.S. economy, which impacted other global economies, especially after the decline in consumer confidence in the United States. 

Finally, through these global events linked to all global economies, and what we have said of the high oil and commodity prices and fluctuating global economy, which may worry monetary policy makers in New Zealand to prepare for any potential inflationary risks in the coming period. 

Outlook for the World's Third-Largest Economy Improves Despite the March Quake

The outlook for the Japanese economy has improved as retail sales came better than expected during May, which means that the world's third largest economy started to rebound in the second half of the year after the massive quake that hit the nation on March. 

Japan's retail trade seasonally adjusted rebounded to 2.4% in May, from the previous 4.1% during the month of April, while the actual reading came better than the analysts' expectations that referred to 1.2%. 

On the other side, annualized Japan's retail trade showed an actual -1.3% in May, better than both the previous reading of -4.8% and anticipations of -2.2%. 

Japanese large retailers' sales dropped by 2.4% during May, more than both previous and expected readings of -1.9%. 

However, the Bank of Japan raised the assessment for the economy this months saying "the economy is showing signs of recovery" after it was "stopped worsening" while Japanese companies are still seeking to increase their investment to exit from the consequences of the worst financial crisis, adding that the economic recovery in Japan is on the track. 

The Bank of Japan upgraded its monthly economic assessment for the first time since February, while the economy will return to a moderate recovery in the second half of the fiscal year through March 2012. As for the government's efforts, Mr. Shirakawa, governor of the Bank of Japan, and his board, decided to keep the benchmark interest rate to "virtually zero," a range of 0.0% to 0.10%, to support the economy to exit from its hurdle phase. 

Furthermore, the Japanese economy has witnessed some improvements after the March quake, where the industrial sector increased less than market expectations in April, adding the Japanese companies began their production process, signaling that the economic recovery will start its upside movement in the second half of 2011. 

From the BOJ view, the world’s third-largest economy will probably expand 3.4% in the year starting April 2012 as reconstruction projects will boost demand, after contracting a projected 0.3% this fiscal year.

European Debt Crisis Forces RBA to Keep Interest Rates Unchanged 

Today, the Reserve Bank of Australia has releases its minutes according the meeting that held on June 7, which showed that European debt crisis has forced Australian policy makers to leave the interest rates steady at 4.75%, signaling that the Bank will keep the rates unchanged until the year's ending.

The Reserve Bank of Australian released today its minutes that held on June, where the Bank saw that keeping rates unchanged steady at 4.75% it's a prudent decision amid the slowing global economy, while the Bank aims to support the economy to rebound.

At the meantime, Australian economy still gives some optimism signs as the exports of iron ore and coal to China and other Asian countries surged, providing clues the economic recovery will rebound in the upcoming period, adding speculations the Reserve Bank of Australia will boost the rates next quarter.

On the other hand, the Bank has noted that increasing currency is helping to contain inflation appreciation, whereas the Bank has increased its warning about the situation in Euro-Zone as the Greece debt crisis that threatens the global economy, while it increased volatility in Forex markets on Euro concerns. 

While the Bank aimed to encourage companies to increase their expansion that will help to hire more workers, because of the Bank targeted to decline the unemployment rates in the upcoming period, further the recent data showed that wages are doing a stable performance; this is a positive phase amid slowing the nation's economy.

As for the current position in Australia, the Australian economy is still suffering from the natural disaster that hit the nation in the first three months, supported to increase the negative results that work to hurt economic recovery in Australia. Today, the Australian job advertisements slumped in May to the slowest pace in almost two years as the employment growth rate retreated.

Yet, economic growth in Australian continues its forward track to achieve more of gains amid the crisis that facing the global economic such as the European debt crisis and Japanese quake that have negative results on the global economic recovery.

The Australian economy confirmed that the business investment sector has gained a great performance during the first quarter of the year, which is the third consecutive quarterly increase, affected by the improvements in mining sector.

Japan's Economy Falters Due to the Massive March Quake

As for the current status in Japan, it needs time to revive again before the end of 2011, where the sustained recovery in manufacturing may take time as companies are facing a shortfall of engine spares which halted the production cycle.

The Japanese trade balance continued its contraction, and fell more than expected during the month of May, giving a negative sign about the economic recovery in Japan, while the economy is still faltering from the March quake and it faces problems that impede the recovery.

Japan's trade deficit widened to 853.7 billion yen in May, compared with the previous -463.7 billion yen in April, revised to -464.8 billion yen, while the analyst's expectations referred to -710.1 billion yen. 

Japan's adjusted merchandise trade balance declined to -474.6 billion yen during May, from -496.4 billion yen a month earlier, which was revised to -469.6 billion yen, which was better than analyst's expectations for -538.5 billion yen. 

Japan's exports slumped by 10.3% on the year compared with a previous decline of -12.5%, and expectations for -8.4%.Imports rose 12.3% on the year from 8.9%. 

The nation's exports (which is the main pillar for economic growth) slumped in the first quarter, affected by the quake that hit the economy, where the manufacturing sector in Japan, the most sector affected, dropped to the slowest pace in nine years in March.

Meanwhile, Japanese companies are suffering from the negative results caused by the March quake, where Honda Motor Co., the second largest car-maker in Japan and the world's biggest manufactures of motorcycles, warned that the company will record lower earnings during the fiscal year, as production was halted because of a shortage of engine spares.

On the other hand, the Bank of Japan introduced new stimulus for companies to revive the economy, where monetary policy makers decided to keep rates unchanged in one of government's efforts to support the economy exit from its hurdle phase, while they extended their assistance to companies suffering from the earthquake to help sustain the economy.

This move from the BOJ is positive support to promote the recovery during the second half of the year, and protect the world’s third-largest economy after data showed corporate confidence plunged and the yen’s advance against the dollar threatens a nation still reeling from the March 11 disaster.

New Zealand Is On The Curve of Recovery

The Outlook for New Zealand Economy Improves Despite the June Quake 

The New Zealand economy has entered into the recovery curve before the June earthquake, and still gives a positive signs for the economic rebounding. However, consumer confidence in New Zealand rose this quarter along with the expanded manufacturing sector to the fastest level in about a year. 

New Zealand's economy has ability to exit from the hurdle phase that faced after the February quake, while the nation has a lot of resources that help the economy to rebound once again this quarter. 

On the other hand, the New Zealand policy makers decided to leave the rates at a record low 2.50%, in one effort to give some pushes to the economy around this year, while the Reserve Bank of New Zealand noted that it won't increase the interest rates until next year, helping the business investment to advance their lending because NZ's government aims to expand the investment in the nation before the year's ending. 

Westpac consumer confidence in New Zealand inclined to 112.0 during the month of May, from 97.9 a month earlier. Moreover, the New Zealand business PMI index has advanced to 54.7 in May, which compared with a prior reading 51.5 during April that revised to 52.0. 

A Purchasing Managers Index (PMI) is an economic indicator; it is a composite index that is based on five major indicators including: new orders, inventory levels, production, supplier deliveries, and the employment environment. However, the manufacturing index was led higher by an increase in new orders, while new orders rebounded by domestic demand as consumption increases and from the rural industry as farmers benefit from higher prices for milk, meat and wool. 

Furthermore, New Zealand retail sales index is one of important indicators that indicating to consumers spending, where we can see that the improvement in New Zealand retail sales index in May will help the economy to recovery and fight negative results that caused by natural disaster, along with the keeping borrowing costs near of their lowest levels. 

The nation's exports (which are main engine for economic recovery) rebounded this period as the Asian demand for New Zealand's products has accelerated, while prices of exports rose 6.3% in the three months through March, led by demand for milk and lumber. 

Meanwhile, employers added 30,000 workers in the first quarter, the biggest increase since the second quarter of 2008, and further Unemployment rate came much better than forecasts giving signs of a healing labor sector that used to represent a major problem for the economy in the way out of the crisis. 

Yet, falling unemployment and a record-low benchmark interest rate may help restore confidence and lift spending and investment later this year. Gross domestic product was “flat to slightly negative” in the three months through March after disruption caused by the 6.3 magnitude earthquake that wrecked buildings and closed the Christchurch central business district. 

New Zealand economy shows some signs of picking up

The fundamental data given some positive signs about the New Zealand economy after the natural disaster that hit the economy this week, where the NZ retail sales soared during the first quarter, adding that the economic recovery starts its rebounding curve. 

New Zealand retail sales ex. inflation index has increased to 0.9% during the first three months of this year, after a drop by 0.4% a year earlier, while the actual reading came inline with the analysts' expectations that referred to 0.9%. 

Retail Sales index is one of important indicators that indicating to consumers spending, where we can see that the improvement in New Zealand retail sales index in May will help the economy to recovery and fight negative results that caused by natural disaster, along with the keeping borrowing costs near of their lowest levels. 

As for the negative results that hurt the New Zealand economy after the earthquake, the RBNZ governor Mr. Alan bollard kept this month the interest rates steady at their lowest level at 2.50% to revive the economy from its hurdle phase. 

Rising consumer spending and employment add to evidence the nation’s economy grew modestly in the first quarter, buoyed by record-low interest rates and a surge in commodity prices. Continued growth in domestic demand this year may prompt central bank Governor Alan Bollard to raise interest rates as early as the fourth quarter. 

On of the main factors that may help consumers spending to increase is the labor market improved during the period, with the improvement in labor market will fuel income of workers, supporting the spending cycle on goods and sales. 

Meanwhile, there are signs indicate that the New Zealand monetary policy maker will keep the rates unchanged steady at 2.50% until this year due to the economic growth is to be slow. In March, Bollard cut the key rate by half a percentage point after earthquakes. 

Moreover, today’s report showed that first-quarter sales were led higher by a 6.3% rise in vehicle and parts sales, while fuel sales fell 3.9% while supermarket and grocery store purchases declined 0.4%.

Inflation is likely to hurt Australian economy next month

Australian policy makers showed that the inflation rates are going to hurt the economy next month, along with the natural disaster that caused to rise prices, pushed the Bank will introduce new measures to help the nation to contain inflation appreciation.

Today, Mr. Glenn Stevens, the Governor or Reserve Bank of Australia, announced today that the Bank is to raise the interest rates by 25 basis points at some stage, as the inflation rates are likely to rise more than expected during the next period, pushed the nation’s currency (Aussie) to incline against the majors.

Meanwhile, the Bank decided this month to leave interest rate steady for the sixth consecutive month at the highest level of 4.75% as the Bank aims to support the economy to exit from its recession phase after the first quarter contraction.

Moreover, the Reserve Bank of Australian noted that the July CPI reading will be an important date for Australian policy makers, while the effects that caused by natural disasters, are declining.

Australian consumer prices have surged 1.6% in the first quarter, from three months earlier, the most advance since 2006, driven by fruit and vegetable costs as torrential rains in Queensland state shut coal mines and damaged crops.

At the meantime, the economic recovery in Australian is to rebound in the second half of 2011 as the Asian demand for Australian products is accelerating.

The RBA sees the global economy is continuing its expansion, led by very strong growth in the Asian region. The recent disaster in Japan is having a major impact on Japanese production, and some effects on production of manufactured products. Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries.

On the other hand, there are signs confirmed that the Australian recovery is to start its rebound curve after the business investment sector has gained a great performance during the first quarter of the year, which is the third consecutive quarterly increase, affected by the improvements in mining sector.

Furthermore, the government forecasts mining investment of A$76 billion next fiscal year, spurring companies to hire workers and prompting the RBA to predict the unemployment rate will fall to 4.25 percent by December 2013. Australia recorded its biggest annual job growth on record last year before hiring cooled.

Japan's economy shows some signs of picking up ...

The Bank of Japan introduces new stimulus to companies to revive the economy 

The Bank of Japan has released today its decision about the interest rate for the month of May, where the Japanese monetary policy makers have decided to keep the rates unchanged steady in a one of government's efforts to support the economy to exit from its hurdle phase.

Mr. Shirakawa, governor of the Bank of Japan and his board, decided to keep the benchmark interest rate to "virtually zero" a range of 0.0% to 0.10%, after the meeting of the bank, while this decision came compatible with anticipations which noted that.

The leaders of BOJ decided to leave the amount of asset-purchase fund at 10 trillion yen (120 billion American dollars) along with keeping the credit-loan program unchanged at 30 trillion yen to encourage the banks lending.

Moreover, the Bank of Japan noted that the economic recover will rebound during the second six months of the year, as the economy is facing a downward pressure during the first half after the March quake that caused to halt the production cycle, hurt the nation's exports, the main pillars for economic recovery in Japan.

Japan's government and The Bank of Japan are trying to help the economy to revive again after the massive crisis that damaged on March, while the Bank reported that it will introduce new appropriate fiscal policies when needed.

On the other hand, the Bank of Japan has introduced more of stimulus to support the companies that hurt from the massive quake, while it is to present new loans for the firms that without normal collateral.

This move from the BOJ is consider a positive method to promote economic recovery during once again during the second half of the year, and protect the world’s third-largest economy after data today showed corporate confidence plunged and the yen’s advance against the dollar threatens a nation still reeling from the March 11 disaster.

At the meantime, today Tokyo Electric Power (Tepco) Co. reported that the Japanese cabinet approved the Nuclear Disaster Compensation. Under this approval the company will prepare to compensate its losses. However, the company has a strategy plan to revive again after the government's approval.

Yet, as a cheerful data about the Japanese economy, the Bank of Japan has increase its monthly economic assessment for the first time since February, while the economy will return to a moderate recovery from the second half of the fiscal year through March 2012.

Chinese Economy Is Under Inflation Pressure ...

Inflation Risks Remain Threatening the Chinese Economy 

The Chinese economy released a series of important fundamentals today showing that inflation risks remain threatening the economy as consumer prices continued to accelerate to the fastest pace in more than three years, along with industrial production still rebounding, while retail sales advanced on rising domestic spending, pushed China's government to move to increase the rates by 25 basis quarter. 

The Chinese consumer price index reading for the year ended May, which increased to 5.3%, more than a previous 5.3% a year earlier, while the market's expectations estimated of 5.5%.

Moreover China's PPI (YoY) released with an actual reading 6.8% during the year ended May, came inline with the last year reading, and the actual reading came above the analysts' forecasts that referred to 6.5%.

Higher inflation is the most pressing problem that facing monetary policy maker in China, where the government is trying to contain the fastest inflation during the next three years without hurting the economic growth, so we can see that the government in embarrassing situation to keep the economic growth on the track.

The monetary policy makers are trying to get any solution to curb inflation gains that has negative results on the economic expansion, while the People’s Bank of China raised last month its interest rates for the fourth time Since October, as China continues its battle to control rising inflation, where the People’s Bank of China said on Tuesday that the benchmark 1-year deposit rates will be hiked by a quarter percentage points to 3.25 percent, and 1-year lending rates will be also hiked by 25 basis points to 6.31%.

During the next period, China will crack down new measures to curb growing inflation rates through following increases in interest rates and bank reserve requirements with a faster pace of appreciation in the nation's currency. 

In the first three months, China's Gross domestic product has expanded 9.7%, faster than expected rate, indicating an economical expansion supported by the improved exports rates in China, along side the increase of row materials and energy prices enabled the Chinese companies to generate more profits. 

This fast pace economical expansion supported the consumer price index (CPI) to accelerate near the fastest pace in more than two years, above the government’s target, pushed the government to move to rise interest rate for the fourth time since October 2010. 

Meanwhile, economic growth in China may retreat during the second quarter of this year as the government tightened monetary policy and cracked new stimulus to cool inflation gains, caused to slow manufacturing sector. 

Yet, the Chinese currency (Yuan) has increased to the highest level in four days as the inflation accelerated, adding that the PBOC is to increase the rates during the next meeting to keep inflation risk at a secure area in the 2nd half of this year.

New Zealand faces another Quak in 1st half ....

New Zealand Economy Hits by a Magnitude 5.5 quake

Christchurch, New Zealand’s second-biggest city, faced today from a magnitude 5.5 quake. The earthquake was 11 kilometers (7 miles) deep and centered 10 kilometers southeast of the city. It struck at 1 p.m. local time. 

Telephone services were affected and there were reports of damage in the city that was devastated by a magnitude 6.3 temblor in February that caused to kill more than 180 people and shut the central business buildings. The NZ government reported that there some damage, while there are not injuries. 

Today, the New Zealand has faced a magnitude, pushed down the New Zealand dollar fell to record the lowest level at 0.8138 against the U.S. dollar after Christchurch was struck by a magnitude 5.5, the currency trades at 0.8146 U.S. cents before the earthquake. 

On the other hand, oil prices dropped for a second day before the reports that may show slowing economic growth in the U.S. and China, curbing fuel demand in the world’s two largest crude consumers.

Damage report :

There have been reports of liquefaction bubbling up from the ground in the central Christchurch suburb of Richmond and the outer suburbs.Rocks have been seen falling from the hills in Sumner, while the University of Canterbury and Riccarton Mall have both been evacuated.The Christchurch City Council say residents in Heberden Avenue, and have been asked to self-evacuate for their own safety.

The council says it is still assessing the situation following today's large aftershocks. People are advice to limit their travel to ease congestion to make it easier for emergency service to travel. A caller told Newstalk ZB's Danny Watson the Centra Hotel opposite the Grand Chancellor is on a lean.

Japanese Machine Orders ....

Machine orders in Japan unexpectedly declines amid concerns about the strength of recovery 

Machine orders in Japan unexpectedly declined in April, indicating that companies still concerned about the strength of recovery, and the Japanese companies won’t increase their capital spending after the March quake that has massive results on the economic recovery. 

The Japanese economy issued its machine orders reading for the month of April which dropped to -3.3%, compared with a previous incline 1.0% in March, while the market's expectations referred to 1.7%. 

Moreover, Japan's machine orders index annual reading also fell to -0.2% during the year ended April, compared with previous reading of 9.1% a year earlier, while the analysts' forecasts that referred to 4.9%. 

Capital spending is still falling as companies are concerned about the strength of recovery in Japan, while the world demand for Japanese products declined. More than third of factory capacity in Japan sitting idle, as exports still relatively weak, and large manufacturers are sitting plans to cut costs through firing workers and keeping production frozen at certain levels till global demand show more clear signs of recovery. 

Moreover, the largest companies in Japan are still suffering from a decrease for their sales, whereas Sales at companies from Ricoh Co. to Toyota Motor Corp. are falling after the disaster caused parts and power shortages and suspended the production cycle. 

On the other hand, Japan’s exports (which is the main engine for economic recovery) will face faltering phase because of there signs indicate that US economy is cooling, means Japan won’t depend on exports to propel growth and help it recover from the quake that has left more than 23,000 people dead or missing.

During the first day trading this week, the Japanese yen fell sharply versus its major currencies, especially against the US dollar after the report that showed the Japanese machine orders index has fell more than expected in April, pushed the yen to decline 

The USD/JPY pair inclined, recorded the highest level at 80.42 and the lowest level at 80.24. 

AUD/USD Pair analysis..

Australian Currency Performance .....

Australia's currency has witnessed a sharply drop last week against its all major counterparts as the Reserve Bank of Australia (RBA) decided to leave interest rate steady for the sixth consecutive month at the highest level of 4.75% as the Bank aims to support the economy to exit from its recession phase after the first quarter contraction. 

The Australian economy is still suffering from the natural disaster that has worst results on the economic cycle, while the Australian job advertisements slumped in May to the slowest pace in almost two years as the employment growth rate retreated. 

The Government in Australia is always trying to help the economy to rebound, while it aimed to encourage companies to increase their expansion to help in hiring more workers, because of the Bank target to alleviate unemployment rates in the next phase. 

The expectations indicate that the Australian economy is losing momentum as employers have added 30,900 new positions in the first five months of this year, the weakest job growth since 2009 and the second-weakest in a more than a decade, as manufacturing, services and construction lag behind a mining industry that is expanding to meet Chinese demand for raw materials. 

On the other hand, the Reserve Bank of Australia warned that inflation to accelerate that pushed up by higher commodity prices. 

Meanwhile, Australian monetary policy makers see that according to the financial conditions in Australia there may be a need to raise borrowing costs by 25 basis points in the 2nd half to contain inflation rates, also the Bank has warned that higher consumption will face with capacity constraints such as skill shortages affected by mining investment that the government estimates will reach A$76 billion ($82 billion) next fiscal year. 

At the meantime, the commodities prices are going to increase as the gold may rise amid the U.S. economic recover will slow, boosted demand for the precious metal as a haven investment that will generate a new demand for Aussie. 

Still investors are waiting important fundamental data that will confirm economic recover in Australia is to present positive steps in the second quarter of the year, while the global economy has a confidence for Australian economy. 

In the week ahead, Australian dollar will move according to the market sentiment, while it will get pushes to help to return to the upside movement versus the majors as the business confidence, which will reflect investors' outlook for the economy.

New Stimulus for Australian economy ...

The Reserve Bank of Australia leaves interest rate unchanged at 4.75% for the sixth straight meeting

The Reserve Bank of Australia issued this month its decision about the benchmark interest rates, where the Bank decided to leave interest rate steady for the sixth consecutive month at the highest level of 4.75% as the Bank aims to support the economy to exit from its recession phase after the first quarter contraction.

Australian monetary policy makers, led by the governor of the Reserve bank of Australia Mr. Glenn Stevens, kept the interest rate unchanged at 4.75% during the month of June to meet analysts' expectations, while the bank sees the global expansion led by strong Asia growth.

On the other hand, the Reserve Bank of Australia noted that higher commodity price is the main reason behind fueling inflation rates, also the Bank said that the RBA private investment is picking up, mainly in resources.

The Reserve Bank of Australian sees that according to the financial conditions in Australia there may be a need to raise borrowing costs by 25 basis points in the 2nd half to contain inflation rates, also the Bank has warned that higher consumption will face with capacity constraints such as skill shortages affected by mining investment that the government estimates will reach A$76 billion ($82 billion) next fiscal year.

The global economy is continuing its expansion, led by very strong growth in the Asian region. The recent disaster in Japan is having a major impact on Japanese production and some effects on production of manufactured products. Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries.

Meanwhile, consumer price growth accelerated to 1.6% last quarter, the fastest pace since 2006, as companies including BHP, the world’s biggest mining company, expand output.

On the other hand, the Australian economy has record the first contraction during the first quarter of 2011. The economy fell 1.2%, the most in two years, more than expected as the nation's exports (the main engine for GDP) dropped on the back of the natural disaster that hit the nation and hurt mining.

At the meantime, the economy still gives some optimism signs as the exports of iron ore and coal to China and other Asian countries surged, providing clues that economic recovery will rebound in the upcoming period, adding speculations the Reserve Bank of Australia will boost the rates next quarter.

Moreover, the RBA indicated that the global economy is expanding, while the financial conditions in the global economy are an accommodative, whereas global expansion led by strong Asian growth.

Yet, the government in Australia is still introducing more stimulus to support economic recovery to return to its normal levels in the second quarter, while global investors increase their confidence for the Australian economy, also the overseas demand for Australian outputs has increased in the current period.

The Australian dollar has dropped against its all major counterparts, while it declined sharply versus the greenback, recorded the lowest level at 1.0683, and it dropped against the yen to record a low of 85.76.

Chinese trade balance surplus expands less than expected in May ...

Chinese trade balance surplus confirms the economy to moderate in the 2nd quarter ...

China's economy issued today its report, showing that the trade surplus widened in May less than analysts' expectations, as the nation's imports growth accelerated more than expected, higher than the exports' advance. 

Trade surplus widened to $13.05 billion during the month of May, compared with the previous surplus of $11.42 billion in April, where the actual reading came lower than the anticipated surplus of $19.30 billion. 

Exports rose to 19.4% during the year ended May, from 29.90% a year earlier, and forecasts referred to 20.5%. On the other hand, imports (YoY) inclined 28.4% in April, more than the expected 22.0% and the prior reading of 21.80%. 

Meanwhile, the economic growth in China is expected to witness a moderating phase during the second quarter of this year as the government tightened monetary policy and cracked down its stimulus to cool inflation gains which caused an ease in manufacturing sector expansion. 

The most difficult problem that faces the Chinese economy is the rise in inflation as the rates are still above the Chinese government target for the fourth consecutive month in April after China's consumer price index (CPI) accelerated near the fastest pace in more than two years, which supported monetary policy makers to hike the rates by 25 basis points to 6.31%. 

High inflation rates are considered a threat to economic growth experienced by China, where officials are trying to halt this increasing pace of inflation by imposing tightening policies and increasing interest rates 4 times since October, which will adversely affect the production and consumption level that create a negative impact on the GDP. 

There are signs indicating that the economy is cooling as the expansion in industrial production eased while the sales of vehicles retreated in April. The government is raising electricity prices for businesses and farmers in 15 provinces starting today, giving an incentive for generating.

Reserve Bank of New Zealand Leaves Cash Target Rates steady at 2.50%

The RBNZ keeps its monetary policy unchanged at a record low 2.50%

As for the negative results that hurt the New Zealand economy after the earthquake, today the RBNZ governor Mr. Alan bollard kept the interest rates steady at their lowest level at 2.50% to revive the economy from its hurdle phase. 

The Reserve Bank of New Zealand released its rate decision, where the central bank decided to keep the interest rates steady at 2.50%, to support the economic recovery after the quake that hit New Zealand as well as to continue the rebuilding process. 

On the other hand, the trade balance of New Zealand recorded higher than expected surplus during April on the back of a recovery in exports and high demand from the Asian region, where the interest rates have been reduced by 50 basis points from the 3.00% to 2.50% on March to support the recovery of exports which exceeded imports significantly to record a surplus.. 

The government in New Zealand is still trying to support the economic recovery to return to the normal level through the starting second six months of the year. 

At the meantime, the New Zealand's Central Bank reported today that the economic growth in New Zealand to expand 0.3% during the first three months of 2011 after the economic activity showed some signs of recovery along with household spending expected to widen softly. The outlook for the New Zealand economy is improved. 

Economic growth in New Zealand has widened during the quarter of September to December, more than forecasts as the nation's exports soared along with stronger construction that helped the economy to ignore a recession, after the quake that hit the nation on February 22. 

There are signs indicate that the New Zealand monetary policy maker will keep the rates unchanged steady at 2.50% until this year due to the economic growth is to be slow. In March, Bollard cut the key rate by half a percentage point after earthquakes. 

For RBNZ point, the surging currency is a best way to contain the inflation rates among a good performance for the economic recovery after the hurdle phase that caused by the devastating earthquake. 

Unemployment rate came much better than forecasts giving signs of a healing labor sector that used to represent a major problem for the economy in the way out of the crisis. 

Falling unemployment and a record-low benchmark interest rate may help restore confidence and lift spending and investment later this year. Gross domestic product was “flat to slightly negative” in the three months through March after disruption caused by the 6.3 magnitude earthquake that wrecked buildings and closed the Christchurch central business district.

Australian economy to rebound after most contraction...

Australian retail sales advances as mining industry expands in April 

Australian economy confirmed today that the economic recovery to rebound in the second quarter after the most contraction in two decades, where the nation’s retail sales accelerated in the April month, more than expected as the mining sector and business investment growth rebounded and gained a great performance amid the negative natural disaster impacts.

Retail sales seasonally adjusted (MoM) in Australia rebounded 1.1% in April, which compared with a previous drop by 0.5% in March. The actual reading came better than expectations that estimated of -0.4%.

The Australian business investment sector has gained a best performance in the first quarter of the year after the natural disaster, the third consecutive quarterly increase, affected by the improvements in mining sector, which supported to give a positive push to the economic recovery.

Moreover, there are a lot of supports that help Australia to recorded an expansion in the second half of this year such as the BG Group's project that will start work on a $15 billion liquefied natural gas venture in Queensland, generating 5000 jobs, while data in recent days have shown Australian wages grew at the fastest annual pace in almost two years and business investment reached a record.

In the wake of the government's efforts to put the economy on the track, the Reserve Bank of Australia (RBA) decided this month to leave interest rates steady for the fourth consecutive month at the highest level of 4.75% to support the economy after the floods and cyclone damage that hit the nation.

The global economy has increased its confidence for the Australian economy, supported by the increases demand for Australian exports during the period.

Meanwhile, Spending at department stores rose 3.6%, while clothing and footwear spending increased 1.2%, and consumers spent 0.3%, less in April at cafes and restaurants.

On the other hand, the Australian trade balance surplus narrowed to A$1597 million during the month of April, compared to a previous surplus of A$1740 million in March, while analyst's forecasts referred to $A2000 million.

Japanese Economy 2nd half Outlook ...

Japanese companies increase spending at slower pace in the 1Q of this year 

Today, the Japanese economy gave us an optimism outlook for the economic recovery in the next period, while Japanese companies had increased their spending at a slower pace in the first three months of the year after the March quake, signaling the industry sector started its rebound phase. 

Japanese capital spending except software index has increased to 4.2% in the first three months of this year, higher than a -0.8% expected, compares with a pervious reading 4.8% in the fourth quarter of 2010. 

Further, the capital spending in Japan rose to 3.3% in 1Q, from 3.8% in the last quarter of 2010, while the market expectations referred to 3.0%. 

Moreover, the Japanese economy has witnessed some improvements after the March quake, where the industrial sector increased less than market expectations in April, adding the Japanese companies began their production process, signaling that the economic recovery will start its upside movement in the second half of 2011. 

According to the BOJ’s governor speech, he announced that the Japanese companies are working to fix the massive results that affected by the March quake, while companies aim to return the normal levels before the end of this year. 

Further he also noted that the companies’ earnings dropped in the first quarter because of a shortfall in raw materials that use in a production cycle, caused to hurt the overseas sales. Japanese manufacturers sector plans to expand its production by 8% during the month of May and 7.7% in June, adding that Japan’s economic recovery will rebound during the 2nd half of the year. 

Japan contracted 0.9% in the 1st quarter, the second consecutive quarter after the devastating earthquake and tsunami which contributed to suspend the production process in many Japanese multi-national companies, and prompted consumers to cut their spending along with the retreats in consumers' confidence. 

On the other hand, the Japanese companies are planning to rise their abroad investment as companies have money and strong yen on their side, so this planning is a good idea to look abroad at the time. 

Furthermore, some Japan’s companies are going to expand its production in U.S. markets such as Yamaha Motor Co., which is widening its US sales of its terrain vehicles amid the weakening the US dollar and higher transport costs that make costs make manufacturing the off-road products in their biggest market more enticing than building in Japan. 

Still, the government in Japan introducing a lot of stimulus to help economic recovery, the Japanese monetary policy makers have decided to keep the rates unchanged steady in a one of government's efforts to support the economy to exit from its hurdle phase.

China's Economy To Slow....

Chinese economy to slow as the government extends stimulus to contain inflation appreciation 

Economic growth in China may retreat during the second quarter of this year as the government tightened monetary policy and cracked new stimulus to cool inflation gains, caused to slow manufacturing sector. 

The Chinese economy issued the PMI manufacturing reading for the month of May which rose to 52.0, compared with a previous reading 52.9 in April, while the analysts' expectations referred to.51.7. 

Moreover, the PMI manufacturing reading came above 50 indicates a recovery of the industrial sector in China is witnessing slower improvement in May, which give a slight positive signs to economic growth in China, while the government works to calm inflation appreciation. 

In the first three months, China's Gross domestic product has expanded 9.7%, faster than expected rate, indicating an economical expansion supported by the improved exports rates in China, along side the increase of row materials and energy prices enabled the Chinese companies to generate more profits. 

This fast pace economical expansion supported the consumer price index (CPI) to accelerate near the fastest pace in more than two years, above the government’s target, pushed the government to move to rise interest rate for the fourth time since October 2010. 

High inflation rates is considered to be a threat to the economical growth experienced by China where officials are trying to halt this increasing pace of inflation by imposing tightening policies and increasing interest rates 4 times since October, which will adversely affect the production and consumption level that creating a negative impact on the GDP. 

At the meantime, there are signs indicate that the economy is cooling the increases gain in industrial production, while the sales of vehicles retreated in April and power shortages will hurt the nation’s expansion. The government is raising electricity prices for businesses and farmers in 15 provinces starting today, giving an incentive for generating. 

During May, China ordered banks to set aside more cash for the third time this year, judging that inflation accelerates, as the economic growth grew faster than market's expectations along with the consumer prices index rose by the most since 2008. 

Reserve requirements will increase half a percentage point from March 25; the ratio will rise to 20.5 percent for the nation’s biggest banks, came less than two weeks after the central bank boosted benchmark interest rates. 

The government in China aims to contain the fastest inflation in the second three months of 2011 without hurting the economic growth, so we can see that the government in embarrassing situation to keep the economic growth on the track. 

The Chinese industrial production showed much progress over the past few months and it rebounded. This came alongside recovering demand as China's main trade partners are emerging from recession. Thus, the manufacturing sector helped the world's third largest economy to expand 9.7% in the 1st quarter. 

Yet, growth witnessed in the Chinese manufacturing sector may slow amid concerns about an absence of governments' aids that may force global markets to hold and wait for more signs of recovery from major economies after stimulus spending is reduced.

Australian 1st Quarter GDP...

Australian Economy Contracts in the First Three Months of 2011 

The Australian economy has shrank in the first quarter of this year, the most shrank in two decades, less than expected as exports, one of the mail pillars for economic growth in Australia, dropped after the natural disaster hit the nation that caused to hurt mining sector, railways and farmland. 

The Australian gross domestic product contracted by 1.2% during the first quarter of the year, compared with a previous expansion by 0.7% in the 4th quarter of 2010, while the forecasts estimated of -1.1%. 

Moreover, The GDP (YoY) concerning the first quarter shrank to 1.0% from a previous of 2.7%, while the actual reading came inline with the expectations that referred to 1.0%. 

The nation’s exports slumped 8.7% in the quarter through March, subtracting 2.1% from economic growth, while the household spending increased 0.6%, which added 0.3% to growth. 

Furthermore, Australia’s current-account deficit widened more than economists forecast in the three months through March as the natural disasters hurt resource shipments. The Australian current account Balance for the 1st showed a deficit by A$10447 million, compared with a pervious deficit of A$7299 Million that was revised to a deficit of A$8091 million, while the expectations were for A$10000 Million deficit. 

As for the government’s efforts to help the economy to rebound, the government aimed to encourage companies to increase their expansion that will help to hire more worker, because of the Bank targeted to decline the unemployment rates in the upcoming period. 

While the government forecasts mining investment of A$76 billion next fiscal year, spurring companies to hire workers and prompting the RBA to predict the unemployment rate will fall to 4.25 percent by December 2013. Australia recorded its biggest annual job growth on record last year before hiring cooled. 

Expanding resource projects helped Australia post record employment growth last year before hiring cooled in the first four months of 2011. Still, the number of unemployed Australians in April fell to the lowest level since January 2009. 

Meanwhile, the Reserve Bank of Australia (RBA) decided to leave interest rates steady for fourth consecutive month at the highest level of 4.75% as the Bank sees the Australian dollar has helped to contain some of inflation rates during this period. 

Australian building approvals slumped to -1.3% in April compared with the pervious incline by 9.1%, which was revised to 8.6%, while the expectations were set at -1.8%. 

Moreover, annualized building approvals retreated to -11.5% in April, from -18.1% last year, whic was revised to -19.3%, where the actual reading came in higher than expectations of -12.7%.

New Zealand Trade Balance...

New Zealand trade balance surplus increases more than expected in April

Today, New Zealand economy has confirmed the nation rebounded in April after the natural disaster that hit the nation during the first quarter. However the NZ trade balance surplus expanded more than expectations during the month of April because the widening commodity prices along with the increasing Asian demand for New Zealand products.

The New Zealand economy released today its trade balance reading during the month of April, where the trade balance surplus has followed its widening to NZ$1113 million, from a NZ$464 million surplus in March that revised to NZ$578 million, while the analysts’ expectations referred to NZ%600 million.

Moreover, the nation’s exports accelerated to NZ$4.65 billion in April, compared with a previous NZ$4.53 billion during March, which was revised to NZ$4.53 billion. Further the anticipations estimated of NZ$3.70 billion.

The New Zealand imports slid to NZ$3.54 billion in April from NZ$4.07 billion a month earlier, which revised to NZ$4.04 billion, where the market expectations predicted of NZ$3.70 billion.

The New Zealand exports (which account more than 30% of the economy) surged 17% in April, exceeded analysts’ forecasts, the main engine behind supporting economic growth to put it on the track, and helped the economic recovery to rebound after the Christchurch earthquake that likely subtracted from first quarter growth.

The dairy exports that make up a fifth of overseas sales rose 32% from a year earlier to NZ$1.19 billion. The value was the second-largest on record after March, while milk powder, butter, meat, lumber and wool led the rise as commodity prices increased 1.6 percent in April from March to a record.

On the other hand, the New Zealand economy has noted that the exports to China, the New Zealand’s second-largest market after Australia, accelerated 40%.

At the meantime, Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, announced last this month that milk production was likely to rise 4% in the year ending May 31. Last month, and the export volumes reached a new high in March because of surging demand in China, Southeast Asia and the Middle East.

As for a cheerful today’s report, the New Zealand dollar (the Kiwi) has surged against its all major counterparts, while it recorded new multi-year high against the greenback at 0.8217, as the New Zealand trade balance surplus widened.

Japanese Consumer Price Index (CPI)...

Higher energy and food prices in fuel inflation rates in Japan

The inflation rates in Japan accelerated for the first time in more than two years in April as the energy and food prices increased due to the massive quake that hit Japan in March 11, which caused a damage in the nation's nuclear power. 

Meanwhile, the government noted that the disaster’s effect on the economy has been larger than previously thought, an indication reconstruction plans may exceed the government’s projections, also Japanese government has reduced its economic assessments for the first time in six months after the devastating earthquake that left behind massive destruction and a revolving nuclear crisis. 

Today, the Japanese economy released its consumer price index that inclined 0.3% during the year ended April 30, compared with the previous reading of 0.0% a year earlier, while the actual reading came in line with analysts' expectations. 

Japan's annualized Natl CPI excluding food and energy showed an actual of -0.1% during the 12 months ended April, compared with the previous drop of 0.7% a year earlier, where the actual reading came in line with the market's anticipations. 

Moreover, annual CPI excluding fresh food rose 0.6% in April, from -0.1% last year, whereas the anticipations estimated of 0.6%. 

Crude oil prices jumped 50%, prompting many countries from Thailand to China to raise their interest rates to contain inflation's appreciation, but Japan didn't increase the rates due to the quake's negative results on the economy, while the economy is trying to introduce more stimulus to support the nation to exit from its hurdle phase. 

The signs of a deteriorating economy put renewed pressure on the BOJ to provide additional stimulus after it stepped-up asset purchases and flooded money markets with cash in the wake of the March 11 temblor. The BOJ maintained its view that the economy will rebound later this year as production and supply constraints ease and pledged to take “appropriate” policy action when necessary. 

The Japanese economy has followed expectations when the economy has contracted for a second consecutive quarter after the devastating earthquake and tsunami which contributed to suspend in production process in many Japanese multi-national companies, and prompted consumers to cut their spending. 

Rising costs of daily necessities are spurring concerns that price hikes may further dampen consumption, especially with the temporary shortage of consumer products on the back of the quake that contributed to April’s price hikes. 

Yet, the government last week noted that it aims to allow the Bank to increase legal reserves to maintain financial soundness, while the Bank of Japan reported that it will introduce new appropriate fiscal policies when needed.

Australian Economy in the first quarter.....

Australian economy ignores the sluggish global recovery

The economic growth in Australian continued its forward track to achieve more gains amid the crisis facing the global economy such as the European debt crisis and Japanese quake that had negative results on the global economic recovery.

Today, the Australian economy confirmed that the business investment sector has gained a great performance during the first quarter of the year, which is the third consecutive quarterly increase, affected by the improvements in mining sector.

Australian private capital expenditure index continued increasing during the first three months by 3.4%, compared with the previous incline of 1.3% a quarter earlier, which was revised to 1.5%, while the actual reading came better than analysts' expectations of 2.7%.

The Australian economy has witnessed a resources boom this year, drived up by the BG Group's project that will start work on a $15 billion liquefied natural gas venture in Queensland, generating 5000 jobs, while data in recent days have shown Australian wages grew at the fastest annual pace in almost two years and business investment reached a record.

Australian employers added 37,800 workers in March, more than economists forecast, led by hiring in the mineral- and energy-rich states of Western Australia and Queensland. The country recorded its biggest annual job gain on record last year.

In the wake of the government's efforts to put the economy on the track, the Reserve Bank of Australia (RBA) decided this month to leave interest rates steady for the fourth consecutive month at the highest level of 4.75% to support the economy after the floods and cyclone damage that hit the nation.

Moreover, the government forecasts mining investment to reach A$76 billion next fiscal year, spurring companies to hire workers and prompting the RBA to predict the unemployment rate will fall to 4.25 percent by December 2013. Australia recorded its biggest annual job growth on record last year before hiring cooled down.

On the other hand, the RBA sees the global economy will start its rebounding step from strong growth in the Asian region. The recent disaster in Japan is having a major impact on Japanese production and some effects on production of manufactured products. Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries.

Furthermore, Australian trade balance indicator recorded a surplus, exceeding market's expectations because of the demand for Australian iron ore and coal exports accelerated this period. Exports have outpaced higher imports of gasoline.

Yet, the global economy has increased its confidence for the Australian economy, fueling the demand for the Australian dollar versus other major currencies.