Editorial Column archives
Of nearing the beginning of the end of the tunnel … just about
Despite economic indicators starting to point upwards, at last , major Euro area economies included, nightmarish balance sheets and herbal tea will nonetheless remain on many firms agenda, at least for a while.
Latest trade data published show that OECD exports and imports alike took their first dive in Q2/08 and plunged as far as -30% in Q2/09. From then on, turning positive, in other words, climbing towards the surface, demanded strength, energy and resilience.
And slowly but surely, the momentum is back. Slowly because capacity utilizations in the manufacturing industry in the Euro area and in Europe remain modest, stagnating for the most part around minimal values, and on average at least ten points behind historical high of the ‘90s. Surely however because Europe’s best of class, intermediate and consumer goods, machinery, equipment, and motor vehicles have reported positive export volume expectations in the first quarter of this year along with basic metals and medical equipment.
Therefore among cash-strapped member states, may the last one out keep its fingers from the light. The next six months will be crucial for the beginning of any signs of a stable recovery although a few gaps (output, and turnovers mainly) are expected for January figures.
True relief and the possibility to exhale, at last, should thus take place by next summer : just in time for the labor market to experience a long awaited jump-start
The TRADE GAP worsened and rose to €- 5.3 billion in November, but decreased to € -41. 1 billion in the last twelve months (-41.7 billion in October) according to Customs figures. Exports fell € -0.6% to € 28.9 billion against the previous three months and -12.6% in one year. On the same period, imports totaled € 34.2 billion or +4.3% pushed by Intermediate Goods, the Automobile industry, pharmaceutical products and refined oil products. With artic temperatures engulfing the country as early as late December, and lasting through the first ten days in January, the commercial deficit is expected to widen further due to electricity imports to face accrued consumer consumption on top of crude oil prices substantial increases, at USD 80 per barrel reached on January 6th
CORE OUTPUT surged +1.1% with the manufacturing industry production index up 1.6% pushed up by Intermediate Goods +2.1% Capital Goods +2.4% and the Automobile industry +8.5% up to November according to Insee lastest figures. At the detail level, output of transport equipment rebounded +5.3% textile-clothing-leather-footwear+0.7%, wood-paper-printing +1.7%, chemicals +3%, metal and metallic products +3.2%. In addition, the production of IT-electronic and optical products jumped +6.1% with electric equipment output increasing +2%. In the last three months, and according to Insee, industrial output over performed the previous three months and rose +1.1%, especially as regards metal and other metallic products +3.1%, the chemical industry +4.7%, rubber-plastic-and other mineral and non mineral products +3.1% as well as the auto industry +2.4%. In one year however and up to the fourth quarter, core output remained in the red although climbing back to -7.5%
ORDER BOOKS fell -0.4% compared with the previous month up to November while the Euro area’s rose +2.7% and the EU 27 +2.6% according to Eurostat revised figures .
New orders in the manufacturing industry increased +3.2% in Germany, in Spain +2.7%, in Italy +4.5% and in the UK +1.5%. Of the Euro area, Greece recorded the strongest increase +7.3% while Ireland observed the largest drop -4.4%. Per industrial sector and out of the Euro area, new orders of Intermediate Goods grew +2.3%, but Capital Goods rebounded +1.1%.
New orders of Durable Consumer Goods grew +0.6% while Non Durable Consumer Goods rose +0.8% In one year to November, new orders in France climbed back to -2.8%, Germany’ and Spain leaped from the red to +0.9% and +1.1% respectively , Italy’s stayed flat, and the UK rose to -3.2%. Slovenia’s +10.6% recorded strongest order books gain.
With the exception of non Durable Consumer Goods where new orders increased +1.6%, and Capital Goods +0.8%, industrial sectors new orders improved substantially: Intermediate Goods new orders rose to -2.1%, and Durable to -5.3%
HOUSEHOLD CONSUMPTION of manufactured products increased +3% in the last quarter compared with Q3/09, the highest increase in 10 years according to Insee figures. In December and month-on-month, consumption rose +2.1% to € 22 812 billion boosted by Durable Goods +4.3% as car fleet renewals pushed up sales +9.1%, according to Insee figures. Sales of household equipment fell -0.1% but sales of textile clothing increased +2%. Sales of other manufactured products (tires, books, perfumes, jewelry, records, pharmaceutical products, DIY, and other miscellaneous products) grew +0.5%. In one year, household consumption jumped +5.9% with sales of Durable Goods leaping +16.4% as car sales incentives throughout the year saw sales soar +31.8%. On the same period, sales of household equipment rose +5.2%, tetxile-leather +1.8% and other manufactured products +0.5%
The TRADE GAP shrank to €- 4.3 billion in December and decreased to €-43 billion in one year compared with €-55.1 billion in 2008, according to Customs figures. In December and compared with the previous quarter, exports fell -1.4% due to Capital Goods lesser sales of aircrafts and space equipment along with Intermediate Goods chemical-plastic and basic metals. On the same quarterly period, imports totaled € 33.3 billion and jumped +5.3% due to pharmaceuticals, mechanical equipments and chemical goods
Credit lines to large enterprises in the Euro area over the next twelve months will remain tight as banks lending criteria, companies’ balance sheets and lenders’ interest rates margins, remain major factors towards financing according to the European Central Bank January survey. The same survey reveals that unlike small and medium companies, banks’ perception of risk of large enterprises account for the second most important factor affecting credit standards, at levels similar to consumer credit and other lending to households. Overall however, credit lines approvals for large enterprises in the first quarter of 2010 are expected to soften, compared with Q4/09 with long term loans recording a substantial increase in demand according to bankers surveyed. On the same period, companies debt restructuring, one of banks’ four major factors towards lending which includes fixed investments, inventories and working capital, M&A and corporate restructuring, rose considerably. As regards loans to households for house purchase and over the next three months, banks lending is expected to ease as bankers’ perception of risk has fallen noticeably along with margins on average and riskier loans. The survey also shows that competition from other banks and from non-banks remains a non-factor for bankers’ decisions and criteria towards lending to each consumers and enterprises of all sizes
The European Commission has welcomed Greece’ s «ambitious program to correct its fiscal imbalances » and expressed its « full support in this difficult task" according to he statement published by the Commission. The statement specified that implementation of all the measures, and statistics, « will be carefully monitored through regular reports to be sent to the Commission by Greece. » The Greek government’s stability program for 2010-2013 period includes a budget deficit reduction by 4 % to 8.7% of GDP in 2010, 5.6% in 2011 , 2.8% in 2012 and 2% in 2013. As regards revenues, the program contains the elimination of tax exemptions, the rise of excise duties on tobacco and alcohol and measures to fight tax evasion. On expenditures, the government will cut public servant allowances, freeze recruitment in 2010 and will only recruit 1 for every 5 civil servants retiring thereafter. In addition, all budgetary appropriations per ministry will be cut by 10% As regards reliable budgetary statistics reports provided by Greece, the Commission is initiating infringement proceedings, requesting the government « to take all necessary steps to ensure that the systemic failures and weaknesses identified in the recent Commission report are corrected. ». Greece is further requested « to cooperate with the Commission « so as to promptly agree on an Action Plan to tackle statistical, institutional and governance deficiencies,
The Commission asks Greece to produce it first report in mid March 2010. Plans for 2011 and 2012 also need to be detailed in the coming months.
CAC 40 closed down -3.40% on Friday at 3563 points, and financials bit the dust for the second consecutive day: BNP closed at -5.49%, CA at -5.08%, and SG at -4.19% following Thursday tumble on European exchanges amid fears of Euro area member states government deficits mainly Greece, Portugal and Spain. The Euro reached a new low at USD 1.36, the lowest exchange rate since May 2009. Crude oil prices per barrel dipped below USD 71 and Gold edged at USD/ounce 1066 (Euro 779.75)
The European Union’s Civil Liberties Committee recommends Parliament to reject the EU’s interim agreement on banking data transfers to the US via the SWIFT network due to insufficient safeguard for EU citizens personal data protection. A plenary vote to validate or invalidate the proposed text by Members of the European Parliament (MEPs) is due to take place in Strasbourg next Thursday, February 11th. Among MEPs’ argument to reject the proposal, are basic data protection principles breaches as « citizens' rights over their own personal data, notably rights of access, rectification, compensation and redress, are also not adequately defined ». In addition, as is no currently the case, the data should be gathered "only for the purposes of fighting terrorism" and "the right balance" must be struck between security measures and the protection of civil liberties. Should the agreement be turned down, there would be no « security gap » since in 2010 new arrangements for judicial co-operation between the EU and the USA entered into force that grant access to targeted financial data, on request, via the national authorities.
In 2006, press reports had revealed that the US had demanded and accessed clients’ bank accounts and personal data in Switzerland for the purpose of fighting tax evasion, a move which caused furor in Europe. Two years later, media reports also revealed that SWIFT had set up a data storage centre for its European clients in Switzerland, which meant that intra-European data was stored only in Europe. Until then the data had also been kept on a server in the United States
AREVA announced the signature of an agreement with KEPCO (Korea Electric Power Corporation), for the Korean group to join the Imouraren mine in Niger under an indirect 10% stake of the mining company, jointly owned by AREVA and the Nigerian state. Under the agreement, KEPCO is entitled to that percentage of the mine’s lifelong production to exclusively supply its reactors in Korea. The Imouraren uranium deposit, 80 kilometers south of Arlit in northern Niger, is today considered one of the biggest in the world. Mining is scheduled to begin in 2013, with an annual production capacity of 5000 tons of uranium. Imouraren SA will be in charge of exploiting the mine, over what is expected to be more than 30 years. AREVA and KEPCO also discussed the possibility of extending their cooperation to cover uranium conversion and enrichment activities, as well as used fuel recycling
DEXIA Bank announced that the European Commission has accepted and agreed with its restructuring plan which includes 15% cost reduction of EUR 600 millions up to the year 2011, including EUR 200 millions in 2009, and the sale of Dexia Crediop, Dexia Sabadell, and Dexia Banka Slovensko in the next three years. The Bank was bailed out in September 2008 during the financial crisis with € 6bn capital increase involving the French, Belgian and Luxembourg governments along with the Caisse des Dépôts et Consignations. Dexia’s agreed restructuring plan comprises the end of long term debt issuance that are state guaranteed after 30 June 2010, and for short term debt issuance after May 31 2010.
Until the end of the year 2011, the Bank has agreed not to engage into any financial institution acquisition, and equities will solely be paid in lieu of earnings per share. The Group will focus in the coming year on its main business lines which include public and wholesale banking especially in France, Belgium and related markets, retail and commercial banking, in Belgium, Luxembourg and in Turkey, asset management, insurance and services to investors
AIR FRANCE - KLM passenger traffic fell -3.2% in January year-on-year with capacity down -3.4% and load factor of 78% (76.6% last year). Of the Group’s total 5.1 million passengers, the Asia/Pacific route performed best , with passenger traffic up +1% compared with Europe (including France) -4.4%, the Americas -0.5%, Africa/Middle East -2.2%, and Caribbean/ Indian,Ocean -2.2%. The load factor decreased by 3% on this last route, but increased +1% on the Asia/Pacific, +3.5% on the Americas, +1.8% Europe, and +0.2% Africa/Middle East. Traffic on cargo activities rose +2% and an improved load factor on Asia/Pacific route +19% the Americas +6.5%, Africa/Middle East +1.1% unlike Europe’s -0.4% and Caribbean/Indian, Ocean -3.3%