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The Euro Zone Falls Into a Second Recession

“The euro-area economy succumbed to a recession for the second time in four years as governments imposed tougher budget cuts and leaders struggled to contain the debt crisis that broke out in October 2009.

Gross domestic product in the 17-nation bloc slipped 0.1 percent in the third quarter after a 0.2 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said today. The result matched the median forecast in a Bloomberg News surveyof 44 economists, as unexpected strength in Germany and France was outweighed by contractions elsewhere.

Europe’s economic malaise is deepening as governments across the region impose budget cuts to narrow their fiscal deficits. Spain and Cyprus this year joined the list of countries seeking external aid, following Greece, Portugal and Ireland. Unions across the region have held protests against austerity measures.”

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CEOs Wrong To Promote Dangerous Budget Cuts, 350 Economists Say

More than 80 high-profile CEOs just penned a letter calling for deep budget cuts to avert to reduce the deficit, but hundreds of economists warned on Wednesday that such austerity measures are medieval medicine that will exacerbate the economy’s underlying ailment: high unemployment.

On Wednesday, 350 economists, many left-leaning, signed a letter calling for “jobs and growth, not austerity.” The letter, written by Robert Borosage and Roger Hickey, co-directors of the Institute for America’s Future, and Robert Kuttner, founder of The American Prospect, emphasizes that mitigating long-term unemployment is the key to ensuring higher economic growth, lower unemployment and lower deficits.

“The budget hawks have the sequence backwards…. Budget cuts in a deep slump lead only to a deeper slump,” the economists said. “We need jobs first. With recovery, deficit reduction will come of its own accord thanks to increased revenues in an improving economy.”

Economists that signed the letter include Jared Bernstein, a former Obama economic adviser; Justin Wolfers, an economics professor at the University of Michigan; and former Labor Secretary Robert Reich. Paul Krugman’s wife and collaborator Robin Wells signed the letter, but Krugman himself did not, even though he has madesimilar arguments in his pieces for The New York Times.”

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The Bank of England Will Continue Asset Purchases to Stimulate a Weakening Economy

Bank of England Governor Mervyn King said the U.K. economy may shrink in the current quarter and its recovery will be subdued, prompting officials to keep open the option of further asset purchases to aid growth.

“We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while,” King told reporters in London today. “There are limits to the ability of domestic policy to stimulate private sector demand as the economy adjusts to a new equilibrium. But the Committee has not lost faith in asset purchases as a policy instrument, nor has it concluded that there will be no more purchases.”

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Foxconn To Replace Slaves…I mean Workers With Robots

 

“Foxconn has been planning to buy 1 million robots to replace human workers and it looks like that change, albeit gradual, is about to start.

The company is allegedly paying $25,000 per robot – about three times a worker’s average salary – and they will replace humans in assembly tasks. The plans have been in place for a while – I spoke to Foxconn reps about this a year ago – and it makes perfect sense. Humans are messy, they want more money, and having a half-a-million of them in one factory is a recipe for unrest. But what happens after the halls are clear of careful young men and women and instead full of whirring robots? What happens to China’s “burgeoning” economy?”

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Conference Board Sees Economy Slowing More in 2013, Followed by an Even Slower Decade

“The long-term growth scenario keeps getting weaker and weaker. The Conference Board has released data showing that world economic growth will drop from 3.2% in 2012 to 3.0% in 2013. While mature economies are a drag, emerging markets did not pick up the slack in 2012 and the Conference Board does not expect them to in 2013. Sluggish trade and low foreign direct investment are being hampered by the coming fiscal cliff, reform in Europe, and even the leadership change in China.

On advanced economies and Europe: ”

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Japanese Consumers Begin to Stash Cash Under the Mattress

“Japanese consumers are closing their wallets as the economy’s outlook darkens, making it harder for Prime Minister Yoshihiko Noda to stave off the nation’s third recession in four years.

Households are holding the most cash since 2005, shunning risk as they grow gloomier, Bank of Japan data shows. Sliding private consumption contributed to an annualized 3.5 percent decline in gross domestic product in the past quarter, a Cabinet Office report showed yesterday.

While Noda may have avoided a fiscal cliff as the opposition agreed to a deal on deficit-financing legislation, the consumer malaise highlights the challenge of reviving growth in the world’s third-largest economy. At the same time as he tries to rebuild relations with China to support exports, Noda may need to come up with more incentives for consumer purchases at home.”

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Rail Traffic Takes a Major Detour to the Downside

“Rail traffic turned down sharply this week as intermodal traffic dipped -6.2%.  That brings the 3 month moving average to 2.7%, down sharply from last week’s reading of 3.5%.  One week doesn’t make a trend, but rail trends haven’t been negative since 2009 so this is one to keep a close eye on if things continue to deteriorate.  Here’s more from the AAR:”

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Money Managers Like PIMCO to DWS Say Investor Fears are Overblown Regarding Fiscal Cliff and its Consequences

“The world’s biggest investors say the rout that erased $1 trillion from the value of global equities after President Barack Obama was re-elected overlooks the fact that the world economy is improving while U.S. leaders start discussions that may avoid the so-called fiscal cliff.

Money managers at firms overseeing more than $8 trillion said investor concern that the U.S. economy will slow as Obama and Congress fail to avert $607 billion in tax increases and spending cuts next year are overblown. U.S. stocks had the biggest weekly decline since June while yields on Treasuries fell to two-month lows and gold advanced the most since September.”

 

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Russia’s Economy Expands at the Slowest Pace Since 2010

 

Russia’s economy expanded in the third quarter at the slowest pace since it began recovering at the start of 2010 as a drought hurt agricultural output and stuttering global growth curbed demand for commodities exports.

Gross domestic product rose 2.9 percent last quarter compared with the same period a year earlier, the Federal Statistics Service in Moscow said today in an e-mailed statement. That exceeded a 2.8 percent median forecast of 15 economists in a Bloomberg survey, which was also the level of growth estimated by the Economy Ministry last month.”

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India Industrial Output, Exports Decline as Economy Falters

“Indian industrial production unexpectedly fell in September and the trade deficit widened to a record last month as exports declined, adding to signs that Asia’s third-largest economy is struggling.

Output at factories, utilities and mines dropped 0.4 percent from a year earlier after a revised 2.3 percent gain in August, the Central Statistical Office said in a statement in New Delhi today. The median of 28 estimates in a Bloomberg News survey was for a 2.8 percent increase. The trade deficit was $20.96 billion in October, the Commerce Ministry said in a separate report.

Factory production has been subdued for most of this year, hurt by moderating consumer demand and a drop in exports as the global recovery falters. The Reserve Bank of India has signaled it may lower interest rates in the first quarter of 2013 to aid growth as inflation cools, after resisting calls from the Finance Ministry for a cut last month.”

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Japan’s GDP Contracts 3.5%

Japan’s economy contracted in the third quarter at the fastest pace since last year’s earthquake as exports slumped and consumer spending slid.

Gross domestic product fell an annualized 3.5 percent in the three months through September, after a revised 0.3 percent gain the previous quarter, the Cabinet Office said in Tokyo today. The median of 23 estimates in a Bloomberg News survey was for a 3.4 percent drop. Barclays Plc and Societe Generale SA are among those forecasting another decline this quarter, meeting the textbook definition of a recession.”

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Recession Encroaches Upon France as Industrial Production Falls

“French industrial production slumped and confidence among factory executives held near the lowest in almost three years, prompting the Bank of France to indicate that Europe’s second-largest economy may be tipping into recession.

Production fell 2.7 percent in September from August, Paris-based statistics office Insee said today. That’s the biggest drop since January 2009 and more than the 1 percent decline forecast by economists in a Bloomberg News survey. With sentiment among manufacturing executivesunchanged at 92 in October, the Bank of France said the economy may shrink in the fourth quarter. Previous surveys suggest it also contracted in the third.”

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China Industrial Output Accelerates as Inflation Eases

China’s factory output and retail sales exceeded forecasts and inflation unexpectedly cooled to the slowest pace in 33 months, signaling the government is boosting growth without driving a rebound in prices.

Industrial production rose 9.6 percent in October from a year earlier, the National Bureau of Statistics said today in Beijing. That exceeded the 9.4 percent median estimate of analysts surveyed by Bloomberg News. Retail sales growth of 14.5 percent picked up from September’s 14.2 percent. The consumer- price index increased 1.7 percent.”

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Italian Economy; Maybe 2014 Then…

Italy’s economy is likely to contract 2.3% this year due to plummeting business investment and private consumption, the European Commission said Wednesday, slashing a February forecast for a more modest 1.3% economic contraction.

The euro-zone’s third-largest economy will also contract next year by around 0.5% before expanding 0.8% in 2014, according to the new projections from the European Union’s executive body.

Italy’s public debt should peak next year at 128% and decline modestly the following year, according to the new projections.

The European Union’s new view suggests that more fiscal austerity lies ahead for Italy. The “structural” budget deficit–adjusted for the business cycle and one-off measures–should decline to 0.4% of gross domestic product next year but rise again to 0.9% of GDP in 2014.

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Immigration Laws May Be Killing Entrepreneurship in America

“Entrepreneurs and technological advancements have long been the U.S. economy’s turbo-charged engine. Yet those days might have come to an end.

Tough visa requirements are the monkey wrench thrown into that economic engine, according to CNBC.

Foreign-born entrepreneurs have typically moved to the United States to start companies or remained after attending American universities. Because of work visa difficulties, they’re now returning going home, taking their venture capital and jobs with them. ”

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China’s Central Bank Says Economy is Improving

“China’s central bank governor and statistics chief signaled October data to be published from tomorrow will show growth improving this quarter in the world’s second-largest economy.

Some indicators are rebounding and the economy is stabilizing, Zhou Xiaochuan, head of the People’s Bank of China, said today in Beijing at a briefing during the Communist Party’s 18th Congress. Ma Jiantang, head of the National Bureau of Statistics, said separately that people will be “more confident” about the fourth-quarter expansion.”

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Consumer Credit Grows More Than Expected in September

Consumer credit in the U.S. increased in September for a second month, led by a pickup in borrowing for education and automobiles.

The $11.4 billion gain followed a revised $18.4 billion jump in August, Federal Reserve figures showed today in Washington. The median forecast of 34 economists surveyed by Bloomberg called for a $10.2 billion increase in September.

Improving labor and housing markets may be giving households enough confidence to take on more debt as they finance purchases that account for about 70 percent of the economy. Auto sales in September that were the strongest in more than four years showed some Americans took advantage of cheaper borrowing costs.

“Overall, things are looking a bit brighter, and the U.S. economy is doing relatively better,” Yelena Shulyatyeva, an economist at BNP Paribas SA in New York, said before the report. “Consumers see housing prices going up and that makes them more confident about their balance sheet, and consumer confidence makes them spend more.”

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German Economic Advisers Say Growth Will Fail to Pick Up in 2013

German economic growth will fail to pick up next year as the euro region’s sovereign debt crisis saps demand for German exports, the government’s council of economic advisers said in its annual report.

The German economy, Europe’s biggest, will expand 0.8 percent in 2013, the same pace as this year, the five-member council said in the 476-page report, which was published in Berlin today. Foreign trade won’t contribute to growth as imports accelerate faster than exports, it said.

“The second half of 2012 is characterized by widespread recessionary trends in the euro zone that impact on the German economy through foreign trade and confidence” and damp the economy’s expansion through declining investment, the report said.

Germany’s economy is showing signs of weakness as governments and consumers across the region cut spending, reducing export demand. Factory orders fell the most in a year and business confidence dropped to the lowest in more than 2 1/2 years in September.”

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New York ISM Suggests Recession

From the report:

“Business impediments continued to have a more negative tone. Working capital shortages remained elevated after last month’s three-year high. Skilled labor shortages fell to a four-month low.”

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