Category Archives: Economics

Czechia: Too Dependent On Automobiles?

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This article asks an interesting question: is the Czech economy becoming too dependent on the car indusrty?

Helena Horsk?, an economist at Raiffeisenbank, said a concentration of investment in one industrial sector could be dangerous. One of the biggest risks, she said, is that as the economy becomes more reliant on the automotive sector, ?the economy [as a whole] will suffer when the industry hits a downturn in the business cycle.?…….Raiffeisenbank?s Horsk? added that GDP, employment levels and even the crown would be hit if or when a downturn comes to the automotive sector.”

Surplus Bicycles

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I don’t suppose that there is any connection with the recent Chinese appetite for purchasing cars, but apparently China and Vietnam are about to be accused of dumping their unwanted bicycles on Europe:

The European Union is expected to levy next month swingeing anti-dumping tariffs on bicycle imports from China and Vietnam in an attempt to put the brake on cheap imports. European manufacturers claim imports from Vietnam have risen from 150,000 five years ago to 1.5m in 2004, while China exported up to 2m bicycles to the the EU last year, despite a tariff of 30.6 per cent already in place.

T-shirts, pants, slippers, sandles and push-bikes, are these really strategically important industries for the EU?

Germany: Exports and Inflation Revised Down

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According to NTCResearch:

Inflation in Germany rose less than previously thought in May, the Federal Statistics Office reported on Thursday. Germany’s harmonised index of consumer prices rose 0.2 percent month-on-month and 1.4 percent year on year, compared with initially reported rates of 0.3 percent and 1.5 percent, the Office said. Meanwhile, it was revealed today that Germany?s trade surplus narrowed in April as imports surged. After accounting for expected seasonal factors, the surplus declined from 14.7 billion euros to 12.6 billion. The smaller surplus reflected a 0.4 percent fall in exports and a 3.8 percent jump in imports, the data showed.

The downward drift in inflation needs careful monitoring. I’ve got a deflation alert call out on Germany remember. If Germany goes through the inflation wall, then the proverbial s*** really will hit the fan, since I can’t see the ECB doing non-conventional monetary policy. Come to think of it, maybe that’s what the meeting with Fels was all about.

Czech GDP Growing Nicely

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According to data released today the Czech economy is still growing at a fair clip – by 4.4% year on year. Inflation is low at 1.3% (incredibly low, and his marks already an important difference with the Southern Europe countries). Unemployment is coming down too, although it is still pretty high at 9.4%. Exports to the rest of the EU are the main driving force, there is no mystery here. But *note*, Spain (eg) is consistently loosing competitiveness (due to the inflation differential) as the Czech republic pulls steadily up towards average EU per capita GDP. (Personal note: must follow this more closely).

Now It’s Footwear

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The EU’s trade dispute with China risks spreading from textiles to footwear after the EU released data Wednesday which purported to show that Chinese shoe imports had surged since the end of quotas at the start of the year.

“Responding to concerns of European shoemakers, the European Commission said imports of leather shoes and textile slippers had soared nearly eight-fold in the first four months of 2005, pushing down prices on European markets by 28 percent. Shoemakers from Italy have sent more than 200 letters of complaint to the Commission in the past two weeks, according to Leonardo Soana, director general of Italy’s National Footwear Association.

They charge that China, and to a lesser extent Vietnam, are dumping leather shoes on the European market and putting shoemakers out of work.

Soana told Dow Jones Newswires that Italy’s shoe industry will present a formal complaint on June 15, alongside claims by Spain and Portugal. French, Greek and Polish industry groups will back calls the for tariffs on Chinese shoes, he said.

Looking at the list, it is pretty clear which parts of the EU are being most hit by these ‘bottom end’ imports from China, and why: they are generally the economies which are most challenged by the need to move up the value chain. That being said, and correcting slightly an earlier renminbi post, it is obviously the case that the rise of the euro against the dollar, has also been a rise against the renminbi, 40% or so in 3 years, so it is clear why there is a ‘pain barrier’ now in Europe.

However on the free trade angle, Stumbling and Mumbling has a nice quote from Scottish Economist and Philosopher David Hume which is very much to the point:

“There are few Englishmen who would not think their country absolutely ruined, were French wines sold in England so cheap and in such abundance as to supplant, in some measure, all ale, and home-brewed liquors: But would we lay aside prejudice, it would not be difficult to prove, that nothing could be more innocent, perhaps advantageous. Each new acre of vineyard planted in France, in order to supply England with wine, would make it requisite for the French to take the produce of an English acre, sown in wheat or barley, in order to subsist themselves; and it is evident, that we should thereby get command of the better commodity.“

EU Budget Reform Having Problems

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Despite all the hard work that is being put in by EU President Jean-Claude Junker, progress on the forthcoming EU budget seems like it might be agonizingly slow. In the first place Blair is in fighting mood:

“The UK rebate will remain. We will not negotiate it away. Period,”

In london the treasury seems equally determined:

“We would use the veto to preserve the rebate whenever necessary,” a Treasury spokesman told AFP. “Our rebate remains fully justified and it is not up for negotiation.”

Meanwhile, over at the European parliament:

MEPs have taken a stand on the future of EU spending as national capitals war over Brussels spending ahead of a June 16 summit of European leaders. The European Parliament has set out budget plans from 2007 to 2013 that are lower than original projections from the EU executive but higher than cost-cutting governments. The parliament backed a blueprint blueprint drawn up by German MEP Reimer B?ge by 426 votes to 140 against, with 122 abstentions. Brussels chief Jos? Manuel Barroso has welcomed the move which is ?150 billion more generous than maximum spends sought by some penny pinching national treasuries. ?The European Parliament has shown leadership and good sense by putting the policy needs of the EU first,? he said.

Germany: An Optimistic Note From The IMF

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Michael Deppler, Director, European Department of the International Monetary Fund, said in a conference call on the economic outlook for the eurozone, that all was not as bleak as it seemed for the German economy:

“Then, you know, coming back to Germany, no question but that the past decade has been a very difficult one for Germany, but it’s one where it has registered strong improvements in competitiveness, and that you can see it clearly in the behavior of its exports. And just as, you know, strong improvements in competitiveness in France during–from the mid-eighties to the mid-nineties led to quite strong performance from the mid-nineties to now in France, well, basically we would expect the same thing to happen in Germany over the next five to ten years.

So in our view, the longer-term developments are, you know, not buoyant, but they’re certainly not things to be as negative about as seems to be the prevailing mood in Europe today.“

German Factory Orders Are Down

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Das Ordervolumen in der Industrie hat sich von M?rz auf April vorl?ufigen Angaben zufolge[2] preis- und saisonbereinigt[3] um 2,9% verringert, nachdem es im Monat zuvor deutlich angestiegen war (+2,1%). Der Nachfrager?ckgang im April war vor allem auf die Abnahme der Auftragseing?nge aus dem Ausland zur?ckzuf?hren (-5,2%). Die Bestellt?tigkeit im Inland verringerte sich demgegen?ber weniger deutlich (-0,6%).

German Economy and Labour Ministry

Doesn’t this just serve me right, and illustrate Murphy’s law. The first bit of news after I decide to ditch Bloomberg is only available in German! Still, and now cribbing shamfacedly from Bloomberg, I think it is saying:

Factory orders in Germany, Europe’s largest economy, dropped in April for a third month in four……… Orders fell 2.9 percent from March, when they gained 2.1 percent.

Euro Retails Sales Rise

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Retail sales rose, if only marginally, in May according to NTC Research:

at 50.2, the PMI signalled only a marginal rise in sales as, overall, underlying market demand remained sluggish and retailers were forced to rely on promotional activity to improve their sales, which again impacted negatively on profits. Subdued demand was also highlighted by a further drop in purchasing activity and the sustained contraction of workforces in the sector.

So there is good and bad news packed away inside this number. Also interesting is the spread: The German reading of 53.4 was relatively good, the French one of 50.9 more or less neutral, and the Italian one of 44.4 absolutely appauling. For this, and all the other reasons I’ve been mentioning, we will need to keep a careful eye on Italy in the coming days.

On a methodological point, I’ve decided, following prodding from khr amongst others, to try and make a consciouss effort *not* to take material from Bloomberg, but to use Bloomberg as a kind of weather forecaster, so I know when its raining etc, and try to find a ‘clean’ original source – like NTC – (if such a thing exists, for eg the point Dave VH makes about the services number cited by NTC makes me want to doubt even them, and we certainly all know you can’t count on data from an Italian economics ministry – mind you they are better than the Greek ministry who consistently fail to provide up to date info even to the Commission: OK gripe over 🙂 ). Incidentally there are an interesting collection of links on Bonds info attached to Brad Setser’s post last Friday. Those interested in this abstruse theme could do a lot worse than follow the debate over there.