UK Economy Slowing

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The UK economy showed its weakest year-on-year performance for 12 years during the second quarter of this year, and manufacturing seemed to enter recession. Gross domestic product (GDP) growth on a 12-month comparison stood at 1.7 percent during the second quarter — the weakest 12-month performance since the first quarter of 1993.

The annual growth rate dropped from 2.1 per cent to 1.7 per cent, which marks the lowest rate of growth since the first quarter of 1993 and almost half of the 3.2 per cent growth rate achieved only in 2004.

Output by manufacturing companies declined 0.7 per cent after a fall of 0.9 per cent in the first quarter, confirming that the sector had dropped into a technical recession, which is defined as two consecutive quarters of falling output.

China Imports To EU Continue Their Rise

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The latest EU25 trade data from Eurostat highlight the competitive challenge some European companies face from the fast-growing Chinese economy:

Imports from China in the first four months of this year, at ?45.3bn ($54.5bn, ?31.5bn), were 19 per cent higher than the same period a year before. Imports from the US remained almost flat at ?52.6bn. In contrast, EU exports to China fell by 1 per cent to ?15.2bn, while exports to the US rose by 2 per cent…..

China?s economic expansion suggests the rate of growth of exports to the EU is likely to be maintained. By the end of this year, imports from China could be almost three times higher than the level in 1999. That increases the pressure on domestic producers, as well as eurozone exporters.

Financial Times

EU25 trade was characterised by an increase in the EU25 surplus with the USA (+24.2 bn euro in January-April 2005 compared with +23.0 bn in Januar y-April 2004 ) and Switzerland (+ 6.0 bn compared with +3.8 bn). The EU25 trade deficit grew with China (-30.1 bn compared with -22.8 bn), Russia (-16.3 bn compared with -11.5 bn) and Norway (-10.0 bn compared with -8.0 bn), and fell with Japan (-9.9 bn compared with -11.5 bn).

Concerning the total trade of Member States, the largest surplus was observed in Germany (+ 55.0 bn euro in January-April 2005 ), followed by the Netherlands (+ 11.8 bn), Ireland (+ 10.8 bn) and Sweden (+ 5.8 bn) . The
United Kingdom (-30.7 bn) registered the largest deficit, followed by Spain (-22.6 bn) , Greece (-10.4 bn) and France (-9.9 bn).

Source: Eurostat

Abu Hafs al Masri Brigade Claim Attack

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In a website posting yesterday the Abu Hafs al Masri Brigade have one more time claimed responsibility for terrorist attacks, in this case yesterdays bombs in London. It should be remembered that this group also claimed the Madrid bombings and the July 7 bombs. Just how much credibility should be accorded to all this?
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Man Shot in London Tube

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This news is just in:

Police shot a man at a London subway station on Friday, a day after the city was hit by a second wave of terror attacks in two weeks. The circumstances of the shooting were not immediately clear, nor was the man’s condition….

Passengers reported a man ? described as South Asian ? ran onto a train. Witnesses said police chased him, he tripped, then they shot him.

“They pushed him onto the floor and unloaded five shots into him. He’s dead,” witness Mark Whitby told the British Broadcasting Corp.

Whitby said it didn’t look like the man was carrying anything but said he was wearing a thick coat that looked padded.
Sourced From Associated Press

Sky is also reporting hat a mosque in the east of the capital has been surrounded by armed officers and residents told to stay indoors. The Times says it’s East London Mosque in Whitechapel and has the whole story.

Killer Identities

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Sorting through some old books yesterday, I came across one from Amin Maaloof that I hadn’t looked at in years. So I dusted it off, and started thinking about this post.

The English title of the book is “In the Name of Identity“, but the French title “Les Identit?s meurtrieres” (Lethal Identities?) or the Catalan one ‘Indentitats que Maten’ (Killer Identities) are much more expressive and to the point.
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Italy Stuck In The Doldrums

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The economic news from Italy continues to be grim. This week more negative data on consumer confidence and the trade deficit (the biggest since 1992, and it was of course in 1992 that Italy came flying out of EMU).

The ISAE research institute’s consumer confidence index fell to 100.9 in July from 102.9 in June, touching its lowest level in 13 months and underlying the public’s reluctance to make expensive purchases of property or durable goods.

Earlier this week Italy reported it had run a world trade deficit in the first five months of this year of ?6.28bn (?4.4bn, $7.6bn), the biggest imbalance between national exports and imports since 1992.

Battle Royal In Portugal

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Obviously, convincing people of hari-kiri type economic policies simply to maintain the SGP (I say ‘simply’, but I imagine you understand what I mean) was never going to be easy for a growth strapped Portugal. Well, the finance minister has just resigned citing ?personal and family reasons? as well as fatigue.

“A new Portuguese finance minister was hurriedly sworn in yesterday as the Socialist government sought to reassure financial markets that the surprise resignation of his predecessor would not weaken efforts to cut the biggest budget deficit in the European Union.

Lu?s Campos e Cunha, the architect of a programme of tough measures to cut public spending, quit unexpectedly late Wednesday only four months after the centre-left government took office…..

But his decision to quit came amid a clash within the government and the Socialist Party over a plan to invest billion of euros in a new Lisbon airport, high-speed rail services and other infrastructures.

London Incidents Update

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The Times has a pretty reasoned assessment of the state of play. We are still with the same two theories, the copycats, and the same group. I don’t like the copycat one since it seems to overlook some basic details. These attacks are not so easy to carry out logistically. Normally there is a high degree of training and preparation, especially ‘mentalisation’ if suicide bombers are involved (eyewitnesses suggest that at least one tube bomber today did try and blow himself up). So I don’t think this kind of attack can be improvised on the ‘oh why don’t we try and do one of those this week’ kind of basis. Whoever was at work today will have had this planned for some time. So then, what a coincidence that a different group had exactly the same idea, even down to the bus (which now seems intentional).

Also the timing was reasonably coordinated. They managed to penetrate security and get to the detonation stage. Avoiding security may have been one of the reasons for the time of day chosen. The question is really why they had so few explosives, and why the bombs didn’t go off. The way things panned out on 7 July, and what the implications of the car in Luton car park are, may provide part of the missing explanation. Essentially I agree with Robert Ayers (quoted in the Times link) from – what a surprise – Chatham House.
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China Comes Off The Renminbi Dollar Peg

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This is a big news day. China has just announced that it is going to come off the dollar peg currency arrangement. Well it’s not that simple, they have announced a 2% appreciation of the currency against the dollar, and that the renminbi will now float against a basket of currencies. In fact this is a very ‘dirty’ float, since the trading price of the US dollar against the renminbi will now float within a trading band of plus or minus 0.3 per cent, while the band of other currencies against the renminbi will be set by the central bank, at least this is what the official statement says. How this will work will doubtless become clear in the coming days. Still a start is a start, and in many ways this is a historic day.

Update: Around the blogs: Brad Setser is well onto this. As is Daniel Dresner who points us to this Wall Street Journal report by Michael Phillips.