“Chinese President Xi Jinping’s campaign to rein in lavish spending by officials and state-owned companies is proving so effective that it risks helping end the nation’s economic rebound after one quarter.

Bank of America Corp. is among 12 of 41 respondents in a Bloomberg News survey who estimate first-quarter expansion was at or below the previous period’s 7.9 percent pace. The world’s second-largest economy probably grew 8 percent in the January- March period from a year earlier, according to the median forecast ahead of data due April 15 in Beijing, down from an 8.2 percent projection in February.

Xi’s efforts are restraining consumer spending and making it tougher for the new government to boost domestic demand asfactory output slows. Large-restaurant and catering sales fell for the first time in more than three decades in the first two months of the year, while demand and prices for luxury items such as Moutai liquor and Longjing tea have slumped.

“The anti-corruption action by Xi is creating unprecedented phenomena, including an absolute fall in high-end restaurant sales,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, who previously worked for the European Central Bank. “It’s certainly a big factor dragging down short-term growth.”

October-December growth in gross domestic product represented the first acceleration in two years, up from the third quarter’s 7.4 percent rate. For the full year, expansion was 7.8 percent, the slowest since 1999.

March Figures….”

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“GENEVA (Reuters) – The World Trade Organization slashed its forecast for trade growth in 2013 on Wednesday, saying it feared protectionism was on the increase.

It cut its forecast for global trade growth in 2013 to 3.3 percent from 4.5 percent and said trade grew only 2.0 percent in 2012. That was the smallest annual rise since records began in 1981 and the second weakest figure on record after 2009, when trade shrank.

WTO Director General Pascal Lamy warned that 2013 could turn out even weaker than expected, especially because of risks from the euro crisis, and countries might try to restrict trade further in a desperate attempt to shore up domestic growth.

“The threat of protectionism may be greater now than at any time since the start of the crisis, since other policies to restore growth have been tried and found wanting,” he said.

Lamy, who will step down at the end of August this year, called the 2012 growth rate “sobering”. …”

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“Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year.  Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated.  Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive.  Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices.  Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.  The Committee continues to see downside risks to the economic outlook.  The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.  The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.  Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative…”

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“U.S. wholesale inventories recorded their biggest decline in nearly 1-1/2 years in February as petroleum stocks tumbled and overall sales rose solidly, which could see first-quarter growth estimates shaved.

The Commerce Department said on Tuesday wholesale inventories fell 0.3 percent, the largest drop since September 2011, after a revised 0.8 percent rise in January.

Economists polled by Reuters had expected stocks of unsold goods at U.S. wholesalers to rise 0.5 percent after a previously reported 1.2 percent increase in January….”

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“German exports fell more than economists forecast in February as the euro area, the country’s biggest trading partner, struggled to emerge from recession.

Exports, adjusted for working days and seasonal changes, dropped 1.5 percent from January, when they gained 1.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a 0.3 percent decline, according to the median of 15 estimates in aBloomberg News survey. Imports fell 3.8 percent.

Germany’s economy, Europe’s largest, probably returned to growth in the first quarter after contracting 0.6 percent in the final three months of last year. Still, renewed financial-market turmoil after inconclusive elections in Italy and a bailout in Cyprus may delay a recovery in the 17-nation euro area.

“The export-driven manufacturing sector, which accounts for roughly a quarter of German gross domestic product, has not fully turned around yet,” said Christian Schulz, senior European economist at Berenberg Bank in London. “While much of theeuro zone remains in serious recession, Germany will have to rely on domestic demand and exports to stronger economies such as China and the U.S. for a growth rebound.”

The trade surplus increased to 16.8 billion euros ($21.9 billion) from 13.6 billion euros in January. The surplus in the current account, a measure of all trade including services, was 16 billion euros, up from 9.7 billion euros….”

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“China’s inflation eased more than forecast from a 10-month high as food-price gains ebbed, reducing pressure on policy makers to tighten credit as the world’s second-largest economy recovers from a slowdown.

The consumer price index rose 2.1 percent in March from a year earlier, the National Bureau of Statistics said today in Beijing. That compares with the 2.5 percent median estimate in a Bloomberg news survey of 38 economists and a 3.2 percent gain in February when spending for the Lunar New Year holiday pushed up prices.

Slowing price gains are a boost for Premier Li Keqiang as he seeks to sustain a rebound from the economy’s weakest annual expansion in 13 years. Authorities have drained cash from the financial system this year, with central bank GovernorZhou Xiaochuan saying that China should be on “high alert” after February’s inflation figure exceeded forecasts.

“Market concerns about central-bank tightening, which have been heavy after a high inflation reading in February, will be greatly relieved,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. “The central bank may have no need to raise benchmark interest rates or the required- reserve ratio this year.”

Food costs rose 2.7 percent in March from a year earlier, less than half of February’s 6 percent pace. The CPI fell 0.9 percent from February, the biggest drop in seven years.

Producer prices fell 1.9 percent from a year earlier, the 13th straight decline, compared with February’s 1.6 percent drop and matching the median estimate in a Bloomberg survey of 32 economists.

Stocks Rise…”

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“German industrial output rebounded in February, adding to signs that Europe’s largest economy is stabilizing after a contraction in the fourth quarter.

Production (GRIPIMOM) rose 0.5 percent from January, when it contracted 0.6 percent, theEconomy Ministry in Berlin said today. Economists forecast a 0.3 percent gain, according to the median of 41 estimates in a Bloomberg News survey. From a year earlier, production dropped 1.8 percent when adjusted for working days.

Germany’s economy probably returned to growth in the first quarter after it shrank 0.6 percent in the final three months of 2012. Still, business sentiment in Germany dropped in March amid renewed concerns about the sovereign debt crisis and its impact on the 17-nation euro economy, which is struggling to emerge from recession….”

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“The February report for the purchasing managers index (PMI) came in at 54.2, a number that indicates expansion in the economy. Even better, the new orders index posted a reading of 57.8. But these numbers mask a continuing decline in U.S. manufacturing, according to a report in yesterday’s Wall Street Journal.

The March PMI consensus estimate calls for a slight drop to 54, which indicates that expansion is continuing, but the problem remains that more businesses are closing than are opening. Job numbers have grown by 500,000 in manufacturing since early 2010, surely a good sign. However, the Wall Street Journal notes that 5.7 million manufacturing jobs fled the United States in the decade from 2000 to 2010.

One way to gauge the success of U.S. manufacturing is how much the country exports….”

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“China’s manufacturing expanded at a faster pace last month, indicating a recovery in the world’s second-largest economy is sustaining momentum.

The Purchasing Managers’ Index (SHCOMP) was 50.9, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing, an 11-month high and up from 50.1 in February. A separate gauge from HSBC Holdings Plc and Markit Economics rose to 51.6 in March from 50.4. Readings above 50 indicate expansion.

Gauges of output and export orders advanced in the official survey while an index of input prices declined, a boost for new Premier Li Keqiang as he seeks to spur expansion without fanning inflation. The March improvement follows the weakest January- February growth for factory output since 2009 and Goldman Sachs Group Inc.’s questioning of the strength of exports.

“We are clearly in a lot better state than we were at the end of last year,” Alistair Thornton, a Beijing-based economist at researcher IHS Inc., said in a Bloomberg Television interview, terming the momentum “modest.” At the same time, the economy faces “fairly large headwinds” including property curbs and tighter supervision of so-called shadow banking, he said.

The government PMI was lower than the 51.2 median estimate of 26 analysts surveyed by Bloomberg News. The HSBC index’s final reading matched the median estimate of 10 analysts. The preliminary level issued March 21 was 51.7.

‘Weak’ Recovery…”

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“South Korea’s industrial production unexpectedly fell in February, signaling that a recovery in Asia’s fourth-largest economy may be slower than expected as a weaker yen threatens exports.

Output fell 0.8 percent last month from January when it fell 1.2 percent, Statistics Korea said today. The median estimate of 10 economists in a Bloomberg News survey was for a 0.3 percent gain. Production fell 9.3 percent from a year earlier, a decline partly attributable to February having fewer working days this year because of the Lunar New Year holiday….”

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“Japan’s manufacturers predict a rebound in production this month after the deepest slide since the aftermath of the March 2011 earthquake, with the central bank poised to step up monetary stimulus next week.

Industrial output will rise 1 percent in March after a 0.1 percent on-month drop in February, according to forecasts submitted for a Trade Ministry report released in Tokyo today. Production tumbled 11 percent in February from a year earlier, the steepest since April 2011, reflecting last year’s recession….”

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“Consumer spending in the U.S. climbed in February by the most in five months as incomes rose, signaling an improving job market is spurring demand.

Household purchases, which account for about 70 percent of the economy, gained 0.7 percent after a 0.4 percent advance the prior month that was bigger than previously estimated, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg survey of 78 economists called for a 0.6 percent rise. Incomes increased 1.1 percent, more than projected, sending the saving rate up from a five-year low.

Labor market progress and an increase in household wealth linked to rising home values and stocks are helping Americans cushion the fallout of higher payroll taxes and costlier fuel. Strength in purchases is one reason economists project the economy picked up this quarter after slowing to a 0.4 percent annual rate in the final three months of 2012.

“The economy is in a very good place right now ahead of the fiscal restraint,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “This recovery is sustainable. Consumers are in the driver’s seat.” …”

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“In an article titled, “Use of Food Stamps Swells Even as Economy Improves,” the Wall Street Journalreports that “The financial crisis is over and the recession ended in 2009. But one of the federal government’s biggest social welfare programs, which expanded when the economy convulsed, isn’t shrinking back alongside the recovery.”

The report continues, “Enrollment in the Supplemental Nutrition Assistance Program, as the modern-day food-stamp benefit is known, has soared 70% since 2008 to a record 47.8 million as of December 2012. Congressional budget analysts think participation will rise again this year and dip only slightly in coming years.”

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Initial Claims: Prior 336k, market expects 338k, actual 357k ….last week’s number was upped to 341k

GDP up 0.4%, market expected up 0.5%

“South Korea announced it will unveil a stimulus package in April to spur the property market and revive the economy after cutting its growth forecast for the second time in four months.

A supplementary budget and details of the measures to encourage property sales will be released over time, the Finance Ministry said in a statement in Sejong today. The economy will expand 2.3 percent this year, down from a 3 percent growth forecast made in December, it said.

The new forecast is more pessimistic than the central bank’s outlook for 2.8 percent growth and compounds concern that expansion in Asia’s fourth-largest economy will stall after slowing to the weakest in three years. Facing a stagnant property market and weaker yen, the Bank of Korea may come under pressure to lower the benchmark interest rate next month.

“This is a major cut, and marks a shift from a government that prioritized fiscal soundness to one that takes a more realistic view of the economy that needs a policy boost,” Lee Chul Hee, a Seoul-based economist at Tongyang Securities Inc. (003470), said by phone today. “The Bank of Korea will need to make a strong case that the economic recovery is on track not to make the interest-rate cut in April.”

Today’s revision was the second time the government has lowered its growth forecast since President Park Geun Hye was elected in December. The new forecast doesn’t factor in the coming stimulus package, Choi Sang Mok, a director general at the Finance Ministry, told reporters today.

Bonds Rise….”

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X transportion was …-0.5%

Capital goods orders …-2.7%

Shipments were +1.9%

Prior: -12.5

Market expects: -3

Actual: 2

The data

“U.K. retail sales rose more than economists forecast in February in a rebound from the previous month when heavy snowfall held back consumers.

Sales including fuel surged 2.1 percent from January, when they dropped a revised 0.7 percent, the Office for National Statistics said today in London. That was the biggest increase in almost a year and exceeded the 0.4 percent median forecast of 20 economists in a Bloomberg News survey. From a year earlier, sales increased 2.6 percent. The pound strengthened….”

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“….“Investors have come back a bit on Cyprus and the immediate impact it may have on the broader euro zone and have concluded that Cyprus alone isn’t enough to re-ignite a crisis,” Norman Villamin, who helps oversee $64 billion as European chief investment officer at Coutts & Co. in Zurich, said. “But we look at the tools and the approach being taken and think it’s really making any future problems much more risky for euro-zone policy makers to handle.”

German Manufacturing

A purchasing managers’ index for Germany’s manufacturing industry unexpectedly fell to 48.9 this month. The median economist forecast had called for a reading of 50.5, according to a Bloomberg News survey. A separate report showed that manufacturing in France contracted more than estimated.

“The French indices disappoint again, and also the German numbers are very unsatisfactory,” Ulrich Wortberg, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a note to clients….”

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“Euro-area services and manufacturing output contracted more than economists estimated in March, adding to signs the currency bloc’s economy is struggling to emerge from a recession.

A composite index based on a survey of purchasing managers in both industries fell to 46.5 from 47.9 in February, London- based Markit Economics said today. Economists had forecast a reading of 48.2, according to the median of 23 estimates in a Bloomberg survey. A reading below 50 indicates contraction.

The data “indicate that the euro-zone economy has remained stuck in recession in the first quarter,” said Martin Van Vliet, senior euro-area economist at ING Groep NV in Amsterdam. “With fiscal austerity, tight credit and high unemployment set to keep most peripheral economies in recession, the path back to growth will likely be slow and bumpy. Moreover, if the situation surrounding Cyprus spirals out of control the onset of recovery might well be delayed.”

The euro-area economy has contracted for five straight quarters and is forecast to shrink 0.1 percent in the first three months of 2013 before returning to growth, the median of 24 economists’ estimates in a separate Bloomberg survey shows. The European Central Bank forecasts the economy will contract 0.5 percent this year.

Gradual Recovery…”

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