“Australia’s economy expanded in 2012 at the fastest pace in five years as resource investment and exports outweighed subdued manufacturing and construction.

Gross domestic product grew 3.6 percent last year, the best performance since a 4.7 percent expansion in 2007, data from the Australian Bureau of Statistics compiled by Bloomberg showed. The economy grew 0.6 percent in the fourth quarter from the previous three months, when it rose a revised 0.7 percent that was higher than initially reported, today’s report showed.

Stocks and the currency rose as stronger exports validatedReserve Bank of Australia Governor Glenn Stevens’s decision to leave interest rates unchanged yesterday as the nation extends 21 recession-free years. Policy makers cut rates by 1.75 percentage points in the 14 months through December to rebalance an economy where mining regions in the north and west thrive while builders and manufacturers in the south and east struggle, dragged by the strength of the nation’s currency….”

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“The euro zone appears to be heading for a fourth consecutive quarter of economic contraction, as surveys of purchasing managers indicate business activity shrank at a faster pace in February.

That will likely feed calls for a reconsideration of the euro zone’s strategy for tackling its fiscal and banking crises, which has relied heavily on austerity programs that have had a larger negative impact on growth than policy makers had expected.

In the wake of Italian elections in which voters largely rejected parties that favored austerity, euro-zone policy makers have said more emphasis should be given to boosting growth and jobs, although they have yet to say how that can be accomplished….”

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“Australia’s current-account deficit unexpectedly narrowed in the three months through December on increased iron ore exports.

The shortfall on goods, services and investment was A$14.68 billion ($15 billion) from a revised A$15.05 billion in the third quarter, the Bureau of Statistics said in Sydney today. The medianestimate in a Bloomberg News survey of 21 economists was for a A$15.3 billion gap. Net exports added 0.6 percentage point to gross domestic product growth in the fourth quarter, the bureau said today. Economists forecast a 0.5 point addition.

Reserve Bank of Australia Governor Glenn Stevens reduced the benchmark interest rate by 1.75 percentage points from November 2011 to December 2012 to stimulate industries outside of resources as commodity prices ease. A high currency has hurt earnings for manufacturers and retailers, helping create what the RBA has referred to as a multispeed economy with those industries lagging behind mining….”

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“The pace of growth in the U.S. manufacturing sector picked up to its fastest rate in over a year and a half in February as new orders continued to accelerate, while a separate report showed U.S. construction spending unexpectedly fell.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 54.2 from 53.1 in January, topping economists’ forecasts for a pullback to 52.5. It was the highest level since June 2011….”

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An alternate point of view

“German retail sales rose the most in more than six years in January as falling unemployment bolstered consumer confidence.

Sales, adjusted for inflation and seasonal swings, jumped 3.1 percent from December, when they dropped 2.1 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest increase since December 2006, the office said. Economists forecast a 0.9 percent gain, according to the median of 20 estimates in a Bloomberg News survey. From a year earlier, sales rose 2.4 percent.

The German economy, Europe’s largest, is recovering from its fourth-quarter slump. Factory orders, industrial production and exports rose in December and sentiment has improved among entrepreneurs, investors and consumers. With unemployment near a two-decade low and a shortage of skilled labor, German workers won wage deals of as much as 6.5 percent last year….”

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“Poland’s economy slowed less than economists forecast in the fourth quarter as exports helped offset weakening consumer spending, taming arguments for more interest-rate cuts.

Gross domestic product climbed 1.1 percent from a year earlier, which was the slowest pace since the second quarter of 2009 and compared with a 1.4 percent increase in the previous three months, the Warsaw-based Central Statistics Office said today. Economists expected a 0.9 percent increase, according to the median of 32 estimates in a Bloomberg survey. GDP grew a seasonally adjusted 0.2 percent from the previous quarter, defying expectations for the first contraction in four years.

The European Union’s largest eastern economy has been battling the worst slowdown in three years as the euro area, its biggest trading partner, fell into recession. The central bank has responded by cutting interest rates by 1 percentage points since November and Governor Marek Belka said last month the fourth quarter “didn’t bring a further drastic deterioration” in economic conditions….”

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“South Africa’s purchasing managers’ index rose in February, showing an expansion in factory output for the first time in six months, as a weaker rand helped boost demand for locally produced goods, Kagiso Tiso Holdings said.

The seasonally adjusted index increased to 53.6 from 49.1 in January, Johannesburg-basedKagiso said in an e-mailed statement today. An index level below 50 indicates a contraction in factory output. The Bureau for Economic Research, based at the University of Stellenbosch near Cape Town, conducts the PMI survey for Kagiso.

“The significant improvement in new sales orders may reflect a turnaround in demand for locally-manufactured goods,” Abdul Davids, the head of research at Kagiso Asset Management, said in the statement. “Tentative indications of an improvement in the EU and U.S. economies at the start of this year may have contributed to the increased demand for manufactured goods and a sustained recovery in demand will require improved gross domestic product growth in these regions.”

Africa’s largest economy grew 2.1 percent, more than expected, in the final quarter of last year as manufacturing and agricultural output expanded. The rand has this year fallen 6.2 percent versus the dollar, making South African goods more competitive in the European Union and other overseas markets. Only the Japanese yen and the British pound were weaker among 16 major currencies tracked by Bloomberg….”

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“Japan’s consumer prices fell for the eighth time in nine months, highlighting the challenges facing the Bank of Japan (8301) in reaching a 2 percent inflation target.

Consumer prices excluding fresh food fell 0.2 percent in January from a year earlier, the third-straight decline, the statistics bureau said in Tokyo today. The result matched the median estimate in a survey of 26 economists by Bloomberg News.

While a weaker yen improves the outlook for exporters and pushes up the prices of imported energy and commodities, continued price falls show the scale of the BOJ’s challenge in achieving 2 percent inflation. Prime Minister Shinzo Abe yesterday nominated Asian Development Bank President Haruhiko Kuroda to lead the BOJ, with the prospective governor saying last month that more easing is justified for 2013.

“Companies are still far from raising prices, and consumers won’t accept it as their deflationary expectations linger,” said Azusa Kato, an economist at BNP Paribas SA in Tokyo. “There is a considerable time lag for an economic recovery to start feeding into prices.”

The BOJ will likely announce new stimulus measures as early as the first meeting under the new governor on April 3-4, Kato said. Current governor Masaaki Shirakawa and his two deputies step down on March 19….”

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“South Korea’s February trade numbers are out.

Exports fell 8.6 percent year-over-year to $42.3 billion.  Economists were expecting exports to fall 9.2 percent.

Keep in mind that China’s New Year holiday was particularly late this year, which is causing volatility in the year-over-year numbers….”

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PMI rises 1.8

New orders rise 2.0

Backlog rises 4.3

Supplier deliveries up 0.4

GDP revised higher by 0.1%. Consumption was revised lower.

Initial Claims drop 22k to 344k. Markets expected 360k, Last month figure was 366k

“Britain’s economy shrank in the fourth quarter as exports fell and an uncertain outlook depressed company investment.

Gross domestic product declined 0.3 percent from the three months through September, with net trade knocking 0.1 percentage point from output, the Office for National Statisticssaid today in London. That matched the initial estimate published in January. The ONS revised its full-year data and said the economy grew 0.2 percent in 2012 instead of stagnating.

Britain’s subdued economic outlook prompted Bank of EnglandGovernor Mervyn King and two other policy makers to vote for more quantitative easing this month. The struggle to recover from a recession is also undermining the government’s deficit- reduction program and was cited by Moody’s Investors Service last week when it stripped the nation of its top credit rating.

“Net exports were a drag and consequently there remains little sign of a rebalancing within the economy toward business spending and trade,” said James Knightley, an economist at ING Bank NV in London. “We are hopeful of a return to positive GDP growth in the first quarter given the improvement in business surveys, but it is likely to be modest.”

The pound rose against the dollar and was at $1.5145 as of 10:18 a.m. London time, up 0.1 percent from yesterday….”

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Headline revision for December is now 3.7%

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“South Africa’s economy, the continent’s largest, grew at a faster pace in the final quarter of last year than the previous three months as manufacturing and agricultural output expanded, the statistics agency said.

Gross domestic product rose an annualized 2.1 percent from 1.2 percent in the third quarter, Statistics South Africa said in a report released today in Pretoria, the capital. The medianestimate of 20 economists in a Bloomberg survey was for growth of 1.7 percent. The economy grew 2.5 percent for the whole of last year, down from 3.5 percent in 2011.

South Africa’s economy is expanding at less than half the pace President Jacob Zuma says is necessary to slash a 24.9 percent jobless rate, the highest of more than 30 emerging- market nations tracked by Bloomberg. Work stoppages that began at platinum mines in August spread to gold shafts, while thousands of truck drivers went on strike last quarter over higher pay, disrupting output….”

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“China’s manufacturing is expanding at the slowest pace in four months, a private survey showed, underscoring the headwinds faced by policy makers in the world’s second-biggest economy.

The preliminary reading of a Purchasing Managers’ Index was 50.4 in February, according to a statement from HSBC Holdings Plc and Markit Economics today. That compares with the 52.3 final reading for January and the 52.2 median estimate of 11 analysts surveyed by Bloomberg News. A number above 50 indicates expansion.

Today’s report may damp optimism that an economic rebound is gaining traction following a seven-quarter slowdown and the weakest annual expansion in 13 years. The benchmarkShanghai Composite Index (SHCOMP) last week dropped the most since May 2011 on concern the government will expand restrictions on the property market to curb home-price gains.

“It casts some shadow over China’s recovery,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong and a former researcher for the International Monetary Fund. “Chinese economic fundamentals may prove weaker than previously expected.”

China’s economy expanded 7.9 percent in the final three months of 2012 from a year earlier, the first pickup in eight quarters. Growth may accelerate to 8.2 percent this quarter, according to the median estimate of 23 analysts surveyed by Bloomberg News this month.

Export Gain…”

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“U.S. budget cuts threaten states’ economic recoveries from the worst fiscal crisis since the Great Depression and will result in the dismissal of teachers and firefighters, as well as the elimination of work-training programs, governors said.

President Barack Obama and Congress need to find a way to prevent $85 billion in across-the-board spending cuts from taking effect starting on March 1, said Republican and Democratic governors who were in Washington today for a meeting of the National Governors Association.

The cuts, known as sequestration, will reduce projected spending by $1.2 trillion over the next nine years, with half in defense spending and half from domestic spending. Governors said the possibility of cuts has already caused damage to their economies, and they warned of far more disruption if the president and lawmakers can’t agree.

“The uncertainty of sequestration is really harming our states and our national economy,” Oklahoma Governor Mary Fallin, a Republican, said at a news conference kicking off the meeting in Washington. “We’re talking about real lives. We’re talking about families. We’re talking about their pocketbooks.”

The spending reductions may lead to a loss of 20,000 jobs in Oklahoma, where businesses are already hesitant to invest because of the uncertainty over the federal budget, Fallin said.

Virginia Recession…”

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“The world’s largest container shipping group, Denmark’s A.P. Moeller-Maersk, expects shipping demand on routes between Europe and Asia to be “bleak” in 2013, leading to a very small increase in overall shipping demand of 4% to 5%. While that will weigh down the entire industry, a lack of demand for container shipping often serves as a bellwether for international trade and, to some degree, the global economy.

The main problem for Maersk and other major container shippers is overcapacity, which is driving down rates. The industry solved the problem in 2012 by raising freight rates, but now that Maersk and the others are turning a profit, shippers are unlikely to grant them further rate increases with so much capacity going unused. More likely are demands for cuts in freight rates….”

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“Rail traffic is continuing to show positive signs here as we head deeper into 2013.  Intermodal traffic was up 5.3% year over year which brings the 12 week moving average to a very healthy 4.84%.  That’s up from 1.3% earlier this year.

Here’s the AAR with more details….”

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“Brazil’s inflation in mid-February exceeded economists’ expectations for the eighth consecutive month, adding pressure on the central bank to raise interest rates. Swap rates rose.

Prices as measured by the IPCA-15 price index rose 0.68 percent from Jan. 16 through Feb. 14, the national statistics agency said today. The median estimate from 38 analysts surveyed by Bloomberg was for a 0.62 percent increase. Annual inflation accelerated to 6.18 percent from 6.02 percent the previous month.

Inflation has exceeded the central bank’s 4.5 percent target for more than two years as Dilma Rousseff’s government spurred demand by extending tax breaks for consumer goods and pressuring banks to lower lending rates. With inflation running faster than Chile, Peru, Colombia and Mexico, the bank’s ability to keep its benchmark lending rate at a record low 7.25 percent to boost growth is being put to the test.

“Today’s number shows inflation is very worrisome, it remained rather high even with the reduction in electricity rates,” Newton Rosa, chief economist at SulAmerica Investimentos, said by telephone from Sao Paulo. “Inflation is distancing itself more and more from the center of the target and without a doubt could prompt the central bank to act.”

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose six basis points, or 0.06 percentage point, to 7.73 percent at 9:15 a.m. local time. The real strengthened 0.3 percent to 1.9664 per U.S. dollar….”

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