Today's Financial News Courtesy of the Financial Times
Growth gloom grows at start of third quarter
Copyright The Financial Times Limited 2010
Published: July 1 2010 07:39 | Last updated: July 1 2010 16:41
http://www.ft.com/cms/s/0/bca9cc0e-84cc-11df-adfa-00144feabdc0.html
Thursday 16:35 BST. Bulls have started the third quarter as they finished the second: with a trip to the slaughterhouse.
The FTSE All-World equity index is down 1.1 per cent and commodities prices are sharply lower as investors, worried about the prospects for global economic growth following news that manufacturing growth in China is slowing, continue to take risk off the table. “Haven” government bond yields have struck fresh multi-month lows.
It is noticeable, however, that the dollar, usually also considered a haven in times of such stress, is having a bout of weakness, following poor US home sales and weekly initial claims data.
The S&P 500 in New York is down 1.1 per cent.
Investors hoping to escape the two main factors that delivered such a turbulent close to the first half of the year – double-dip concerns and the interlinked eurozone fiscal woes – have been disappointed.
Wednesday night’s warning by Moody’s of a possible downgrade to Spain’s sovereign debt was still able to shock, in spite of the credit rating agency’s move being expected and tardy. Markets are also keeping an alert ear for any more chatter on eurozone banks’ stress tests.
At least Wednesday’s well-received result of the ECB’s three-month liquidity offer presaged a straightforward expiry of its €442bn loan programme today. And a reasonably decent €3.5bn auction of Spanish five-year notes today has also calmed nerves.
But it is fears of a double dip in the US that has really spooked traders later in the session, as consumer-focused data continues to raise alarms. Friday’s important non-farm payrolls data for June looms large.
● Asia. The FTSE Asia-Pacific index fell 1.1 per cent as traders reacted to the China PMI numbers and Wall Street’s drop overnight.
Sydney fell 1.4 per cent as lower commodities and uncertainty about Canberra’s tax regime hurt miners. The Nikkei 225 in Tokyo lost 2 per cent, with exporters suffering, as usual, and in spite of a better-than-expected reading of the Tankan corporate confidence survey. Hong Kong was closed for for a public holiday, but Shanghai fell 1 per cent.
● Europe. Exchanges are under pressure despite manufacturing surveys for the region that pointed to continued growth and with the Spanish bond auction salving fears about sovereign borrowing.
The FTSE Eurofirst 300 is down 2.5 per cent, with all sub-sectors lower. Madrid’s Ibex, where financials remain a concern, was earlier down about 2 per cent but is now off just 1.5 per cent. London’s FTSE 100 closed down 2.3 per cent, even though it was supported by further gains for BP.
● Forex. The complex has partially divorced itself from the standard “risk-on/risk-off” pavlovian response. The euro is up 1.8 per cent versus the dollar at $1.2449 and up 0.3 per cent against the yen to Y108.42.
The dollar has tended to rally after weaker US data on haven flows. But so far today the badly-received initial claims and house sale numbers has seen the buck slide, and it is down 1.4 per cent on a trade-weighted basis.
● Debt. US Treasuries are seeing demand as stocks slump. The yield on the 10-year note is down 5 basis point at 2.89 per cent, a fresh 14-month low.
The Spanish bond auction result was greeted by a fall in Bund futures as investors pulled out of the eurozone’s haven benchmark. Spanish 10-year bond yields are down 10 basis points to 4.59 per cent as funding fears recede.
● Commodities. The complex is again struggling as one of its favourite themes – demand from China – weighs on sentiment. The Reuters-Jefferies CRB basket is down 1.7 per cent, with oil off 1.5 per cent at $72.18 a barrel.
Gold is still refusing to use the past few days’ broader market turbulence, or for that matter the weaker dollar, as an excuse to break virgin territory above $1,265. It is down 1.5 per cent at $1,222 an ounce.
Thursday’s Market Menu
What’s affecting risk appetite
Risk off
● S&P 500: chartists warn that 1,140 support has been broken
● China PMIs: pace of activity slows...
Risk on
●...but manufacturing still expanding (see also europe) and isn’t this reflected in stocks’ recent decline anyway?
● Eurozone: Spain auction, ECB tender and bank stress tests taken as broad positives
China fears rise as Asian growth slows
ByKevin Brown in Singapore
Copyright The Financial Times Limited 2010
Published: July 1 2010 05:40 | Last updated: July 1 2010 16:53
http://www.ft.com/cms/s/0/e3f89d9a-84b7-11df-9cbb-00144feabdc0.html
Nervous investors in China were given a fresh reason to worry on Thursday as a slew of reports on manufacturing suggested that the pace of growth in factory activity was slowing across much of Asia and might even have turned negative in China.
China’s manufacturing output contracted slightly on one unofficial but closely watched measure while the country’s National Bureau of Statistics described the official numbers as grim.
Purchasing managers’ index reports for South Korea, Taiwan, India, Australia and China all showed weaker activity for June, confirming indications that the region is seeing an easing of the growth surge that followed the global financial crisis. The monthly PMI report for Japan, published on Wednesday, told a similar story.
However, the overall level of factory activity – which includes a range of measures in addition to output – continued to expand in all six countries, suggesting that manufacturers may be experiencing a return to more normal rates of growth rather than heading for contraction.
The possible exception was China. The unofficial HSBC purchasing managers’ index remained positive, falling to 50.4 from 52.7 in May, and the official PMI index from the Federation of Logistics and Purchasing fell to 52.1 in June from 53.9.
An index figure above 50 indicates an expansion of activity, while a figure below 50 indicates a contraction.
However, HSBC also said its sub-index for Chinese factory output fell to 49.6, which would be consistent with a slight fall in production. The index stood at 60.6 at the start of the year and has been slowing steadily.
The general picture of growing weakness was broadly supported by the official index, which reported falls in the sub-indices for new export orders, backlogs of work, imports and employment, though not all turned negative. However, the output sub-index in the official report remained positive, falling to 55.8 from 58.2 in May, but remaining well above the level that indicates a contraction.
China’s National Bureau of Statistics said the official numbers reflected the impact of tighter government policies and a weakening of the global recovery.
As well as slowing the approval of new investment projects and growth in bank credit, the government in April unveiled a package of policies aimed at reducing speculation in the country’s property market. Beijing has also modestly appreciated the currency against the US dollar in recent days.
However, although international investors have been reacting nervously to reports of slowing growth in China, most economists analysing the country believe the economy is headed for a much-needed slowdown from the heady growth of the first quarter, when gross domestic product rose 11.9 per cent, rather than a slump.
“China’s recovery remains solid but is clearly moderating from the very fast pace set at the start of the year,” said Brian Jackson, strategist at RBC Capital Markets in Hong Kong. However, he added that “a slowdown in activity in the months ahead might prompt some in Beijing to argue for a halt” in currency appreciation.
Economists said the gradual slowing in the Chinese economy would only turn into a hard landing if construction activity collapsed as a result of the clampdown on property speculation or if exports weakened sharply again as a result of subdued growth in Europe and the US.
Hongbin Qu, HSBC’s China chief economist, said the PMI numbers implied slower growth in the country’s manufacturing sector, partly due to the tightening measures taking effect. But he said fears of a hard landing were “overplayed”.
Mr Qu said HSBC expected China’s economy to continue growing strongly in the second half of the year, underpinned by massive investment spending and robust private consumption.
The HSBC South Korea PMI fell to 53.3 for June from 54.6 in May, indicating the weakest pace of expansion since December 2009, but extending a series of positive monthly reports to 16 successive months.
Economists said the figures for Asia’s fourth-largest economy suggested that more normal growth was returning to South Korea’s manufacturing sector, with the volume of new export orders still expanding, although coming in at a slower pace.
Waiho Leong, economist at Barclays Capital in Singapore, pointed to a 32.4 per cent increase in South Korean exports in June from a year earlier as evidence that growth in Asia “may not be about to keel over just yet”.
HSBC’s Taiwan Manufacturing PMI fell for the third successive month to 53.8 in June, from 57.4 a month earlier. But it remained positive for a 15th successive month.
Frederic Neumann, co-head of Asia economic research at HSBC in Hong Kong, said new export orders were still growing at a “decent” pace.
“After surging over the first five months of the year, the growth of Taiwan’s economy is starting to cool. This, however, does not signal a hard landing,” said Mr Neumann.
In Japan, the Nomura/Japan Materials Management Association PMI fell to 53.9 from a four-year peak of 54.7 in June. The numbers, published on Wednesday, suggested that firm growth was continuing, and marked the 12th successive month of expansion.
Minoru Nogimori, an economist at Nomura, said the continued high level of new export orders indicated that shipments would remain solid.
“While some have been concerned about the impact on the Japanese economy of financial market disruption triggered by the European fiscal troubles, so far that impact appears to have been small, and we expect the Japanese manufacturing sector to continue to improve for a while,” he said.
The HSBC India manufacturing PMI retreated from a 27-month high of 59.0 in May to 57.3 in June, but recorded its 15th successive month of expansion. Economists said factory activity and prices were retreating from very elevated levels, noting that there were no real signs of a slowdown in growth.
The Australian Industry Group/PwC performance of manufacturing index fell by 3.4 points to 52.9, remaining positive, but registering slower growth in production, orders, employment and supplier deliveries.
Separately, Vietnam’s government statistics office said the communist country’s economy had grown by an estimated 6.4 per cent in the second quarter from a year earlier, accelerating from growth of 5.8 per cent in the first three months.
The office said the economy had grown by 6.2 per cent in the first half of 2010 from the same period last year. “The higher growth rate of the second quarter suggests the economy is recovering swiftly and achieving a high growth rate,” it said.
Jobless claims fuel fear of slowing US recovery
By James Politi in Washington
Copyright The Financial Times Limited 2010
Published: July 1 2010 14:24 | Last updated: July 1 2010 15:38
http://www.ft.com/cms/s/0/c710f29a-8511-11df-adfa-00144feabdc0.html
Fears that the US recovery is losing steam were reinforced on Thursday, as new data on the health of the labour market, as well as the manufacturing and housing sectors, disappointed economists.
The number of people seeking jobless claims in the US rose unexpectedly last week by 13,000 to 472,000, while the less volatile four-week moving average also rose slightly to 466,500, offering further evidence that the improvements in the labour market seen earlier this year may be slowing.
In March and April, the recovery in labour market conditions appeared to be gaining traction, amid solid job creation in the private sector. But in May, private employers seemed to put hiring plans on hold, bringing only 41,000 new positions onto their payrolls.
David Semmens, US economist at Standard Chartered Bank, said that today’s jobless claims figures were “a timely reminder that firings in the US remain elevated and appetite from employers for hirings remains anemic”.
Meanwhile, growth in the US manufacturing sector, which has been one of the bright spots of the US recovery, appears to be slowing. The Institute for Supply Management’s manufacturing index fell from 59.7 in May to 56.2 in June, a much larger drop than predicted by economists. Although any reading above 50 indicates an expansion in manufacturing activity, this is now the second consecutive monthly drop in the index. Some of the components of the survey were also discouraging, with the employment gauge and the new orders gauge dropping.
No solace for observers of the US economy came from data on the troubled housing market. The National Association of Realtors reported that pending home sales, a measure of activity in home purchases that have been agreed but not completed, tumbled by 30 per cent in May, much worse than the 12.5 per cent drop predicted by economists. A decline was widely predicted because of the expiry in April of the homebuyer tax credit, which shifted demand for housing to early spring, but the extent of the so-called “payback” in both pending home sales and new home sales has brought renewed fears of a housing double-dip.
“If you’re looking for a silver lining in housing, you aren’t going to find it here. Demand has fallen off a cliff in the wake of the tax credit expiration, “ said Mike Larson, interest rate and real estate analyst at Weiss Research. “With so many Americans unemployed or underemployed, the housing market is going to keep hurting”.
The next big data release on the US economy occurs on Friday, when the labor department publishes its monthly jobs report for June. Economists are expecting that payrolls overall will decline because of layoffs associated with the 2010 census, but that private businesses will grow by about 100,000.
Toyota to recall 270,000 Lexus cars
ByJonathan Soble in Tokyo
Copyright The Financial Times Limited 2010.
Published: July 1 2010 09:47 | Last updated: July 1 2010 09:47
http://www.ft.com/cms/s/0/9e4a7c6e-84e9-11df-adfa-00144feabdc0.html
Toyota is to recall 270,000 Lexus luxury cars after it discovered that a key component in their engines was susceptible to cracking, a problem the company said could cause the vehicles to stall.
Thursday’s revelation of the defect in some of the Japanese company’s most expensive models was a further blow to its already battered reputation for quality.
Toyota has recalled about 9m vehicles since November to fix problems with accelerators, brakes and other systems. In April, it paid a record $16.4m fine to the US government for failing to notify authorities promptly about alleged instances of unintended acceleration.
The company on Thursday informed Japan’s transportation ministry of its intention to recall the Lexus vehicles, mostly GS, IS and LS models. It said it would issue a formal notice to drivers on Monday.
About 180,000 of the vehicles were sold outside Japan, Toyota said, without giving details about the countries involved.
Toyota said it had found cracks in some cylinder-valve springs installed in engines used by the affected models. The springs control the opening and closing of valves that draw in oxygen and release waste gas from the engines’ combustion chambers.
The company said it checked the parts after receiving about 200 complaints from drivers. The defect can cause “unstable idling” – odd noises and vibrations when a car is stopped with its engine running – and in extreme cases the engine could quit altogether while the vehicle is in motion.
No accidents had been linked to the problem, Toyota said.
Toyota did not reveal the supplier of the springs. The defect was discovered in two types of Lexus engines built in Japan, an eight-cylinder 4.6-litre model and a smaller six-cylinder 3.5-litre model.
Thursday, July 1, 2010
Microsoft Kin Discontinued After 48 Days
Microsoft Kin Discontinued After 48 Days
By MIGUEL HELFT
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/technology/01phone.html?hpw
SAN FRANCISCO — That didn’t take long.
Just 48 days after Microsoft began selling the Kin, a smartphone for the younger set, the company discontinued it because of disappointing sales.
The swift turnabout for the Kin, which Microsoft took two years to develop and whose release was backed with a hefty ad budget, is the latest sign of disarray for Microsoft’s recently reorganized consumer product unit.
“It’s an absolute failure,” said Charles S. Golvin, an analyst with Forrester Research. Mr. Golvin said he was surprised to see Microsoft kill a product so quickly, given the company’s history of sticking with new products and improving them over time.
Microsoft’s consumer products unit has struggled to offer a credible competitors to Apple’s iPod and more recently the iPhone and an array of smartphones powered by Google’s Android software.
Microsoft also recently canceled a project to develop a tablet computer that would compete with Apple’s popular iPad.
Microsoft said that it would shift employees who worked on the Kin to the team in charge of Windows Phone 7, a coming revision of Microsoft’s operating system for smartphones, which is due in the fall. The Kin, which came in two models, was aimed at young users and emphasized access to social networks like Facebook and Twitter. While neither Microsoft nor Verizon Wireless, which sold the phone exclusively, disclosed sales figures, people close to the companies said that sales were disappointing. Verizon slashed the prices of the phones to $50 from $200 for the higher-end model and to $30 from $150 for a stripped-down version.
Microsoft said it would cancel the pending release of the Kin in Europe and would work with Verizon Wireless to sell existing inventories. Brenda Raney, a Verizon spokeswoman, said the Kin “is still an important part of our portfolio.”
By MIGUEL HELFT
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/technology/01phone.html?hpw
SAN FRANCISCO — That didn’t take long.
Just 48 days after Microsoft began selling the Kin, a smartphone for the younger set, the company discontinued it because of disappointing sales.
The swift turnabout for the Kin, which Microsoft took two years to develop and whose release was backed with a hefty ad budget, is the latest sign of disarray for Microsoft’s recently reorganized consumer product unit.
“It’s an absolute failure,” said Charles S. Golvin, an analyst with Forrester Research. Mr. Golvin said he was surprised to see Microsoft kill a product so quickly, given the company’s history of sticking with new products and improving them over time.
Microsoft’s consumer products unit has struggled to offer a credible competitors to Apple’s iPod and more recently the iPhone and an array of smartphones powered by Google’s Android software.
Microsoft also recently canceled a project to develop a tablet computer that would compete with Apple’s popular iPad.
Microsoft said that it would shift employees who worked on the Kin to the team in charge of Windows Phone 7, a coming revision of Microsoft’s operating system for smartphones, which is due in the fall. The Kin, which came in two models, was aimed at young users and emphasized access to social networks like Facebook and Twitter. While neither Microsoft nor Verizon Wireless, which sold the phone exclusively, disclosed sales figures, people close to the companies said that sales were disappointing. Verizon slashed the prices of the phones to $50 from $200 for the higher-end model and to $30 from $150 for a stripped-down version.
Microsoft said it would cancel the pending release of the Kin in Europe and would work with Verizon Wireless to sell existing inventories. Brenda Raney, a Verizon spokeswoman, said the Kin “is still an important part of our portfolio.”
New Data Show China’s Rise Slowing
New Data Show China’s Rise Slowing
By BETTINA WASSENER
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/02/business/global/02asiaecon.html?hp
HONG KONG — Two closely watched measures of the manufacturing sector in China declined in June in the latest sign that Beijing’s efforts to scale back stimulus have begun to moderate the growth of the world’s largest developing nation.
A manufacturing purchasing managers’ index, compiled by the China Federation of Logistics and Purchasing and released on Thursday, came in below expectations at 52.1, down from 53.9 the previous month. A similar index by HSBC also sagged, from 52.7 in May to 50.4 in June.
Readings above 50 indicate expansion, so the June figures showed that the Chinese manufacturing sector is still growing. But the declines confirmed what many economists have long projected: that the pace of China’s growth probably hit its highest level during the first quarter of this year and that more modest rises are now in store — a situation that has been largely engineered by the country’s authorities in a bid to prevent the economy from overheating.
Tao Wang, an economist at UBS in China, wrote in a report this week previewing the June data that “economic growth is strong but momentum has peaked.”
Qu Hongbin, chief China economist at HSBC, commented in a statement accompanying the bank’s P.M.I. release Thursday that fears that China could experience a hard landing were “overplayed.”
“We expect China to achieve around 9 percent growth in the second half, underpinned by massive ongoing investment and robust private consumption,” he wrote.
And analysts at Barclays Capital commented in a note that better-than-expected export figures from South Korea in June, also released Thursday, were “another reminder that growth in Asia may not be about to keel over just yet.”
Still, Europe’s sovereign debt woes, and a rash of labor unrest in China, are expected to add to Chinese companies’ difficulties in coming months, while the slight rise in the renminbi that the authorities are now permitting will squeeze margins for exporters.
Financial markets in China and elsewhere in Asia reacted badly to the signs of slowing growth and to the accompanying uncertainty as to what policy measures Beijing might still implement.
The Shanghai composite index, the main market gauge for mainland China, slipped 1 percent on Thursday, taking its total decline since the start of this year to 27 percent. The index has been one of the world’s worst performers so far in 2010, along with Greece.
“Our baseline scenario is for a soft landing in G.D.P. growth and rising but modest inflation,” Ms. Wang of UBS wrote in her note this week. “However, continued policy uncertainty, including in the property sector, and the decelerating sequential momentum will weigh on the market.”
So far this year, the Chinese authorities have launched an array of initiatives to rein in growth. These have ranged from instructing banks to extend fewer loans to moves designed to curtail the sharp price rises seen in much of the country’s property sector. Many economists expect the central bank to stage at least one small increase in interest rates before the end of this year.
In Japan, meanwhile, a quarterly survey conducted by the central bank and released Thursday showed a surprisingly sharp rise in business confidence among large manufacturers.
The reading in June stood at 1, compared with minus 14 the previous month.
A positive reading shows that optimists outnumber pessimists. The so-called Tankan survey also found that large manufacturers planned to increase capital spending slightly, indicating that, so far, an overall improvement in the economy is outweighing concerns about the potential impact of Europe’s debt worries and about the sharp decline in the euro against the yen and other currencies.
Still, despite the healthy Tankan reading, growth is expected to remain anemic in Japan, with economists at Credit Suisse, for example, forecasting expansion of 2.9 percent this year. China, by contrast, is widely projected to grow 10 percent in 2010, allowing it to overtake Japan as the world’s second-largest economy, after the United States.
Japan’s stock market took no comfort from the firm Tankan. The Nikkei 225 index ended 2 percent lower.
Indexes elsewhere also fell. In South Korea, the Kospi declined 0.7 percent, and the market in Australia, whose economy is highly dependent on Chinese demand for its mineral riches, dropped 1.5 percent.
The Straits Times index in Singapore was down about 0.6 percent by late afternoon, and in India, the Sensex fell 1 percent.
The Hong Kong market was closed for a public holiday.
By BETTINA WASSENER
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/02/business/global/02asiaecon.html?hp
HONG KONG — Two closely watched measures of the manufacturing sector in China declined in June in the latest sign that Beijing’s efforts to scale back stimulus have begun to moderate the growth of the world’s largest developing nation.
A manufacturing purchasing managers’ index, compiled by the China Federation of Logistics and Purchasing and released on Thursday, came in below expectations at 52.1, down from 53.9 the previous month. A similar index by HSBC also sagged, from 52.7 in May to 50.4 in June.
Readings above 50 indicate expansion, so the June figures showed that the Chinese manufacturing sector is still growing. But the declines confirmed what many economists have long projected: that the pace of China’s growth probably hit its highest level during the first quarter of this year and that more modest rises are now in store — a situation that has been largely engineered by the country’s authorities in a bid to prevent the economy from overheating.
Tao Wang, an economist at UBS in China, wrote in a report this week previewing the June data that “economic growth is strong but momentum has peaked.”
Qu Hongbin, chief China economist at HSBC, commented in a statement accompanying the bank’s P.M.I. release Thursday that fears that China could experience a hard landing were “overplayed.”
“We expect China to achieve around 9 percent growth in the second half, underpinned by massive ongoing investment and robust private consumption,” he wrote.
And analysts at Barclays Capital commented in a note that better-than-expected export figures from South Korea in June, also released Thursday, were “another reminder that growth in Asia may not be about to keel over just yet.”
Still, Europe’s sovereign debt woes, and a rash of labor unrest in China, are expected to add to Chinese companies’ difficulties in coming months, while the slight rise in the renminbi that the authorities are now permitting will squeeze margins for exporters.
Financial markets in China and elsewhere in Asia reacted badly to the signs of slowing growth and to the accompanying uncertainty as to what policy measures Beijing might still implement.
The Shanghai composite index, the main market gauge for mainland China, slipped 1 percent on Thursday, taking its total decline since the start of this year to 27 percent. The index has been one of the world’s worst performers so far in 2010, along with Greece.
“Our baseline scenario is for a soft landing in G.D.P. growth and rising but modest inflation,” Ms. Wang of UBS wrote in her note this week. “However, continued policy uncertainty, including in the property sector, and the decelerating sequential momentum will weigh on the market.”
So far this year, the Chinese authorities have launched an array of initiatives to rein in growth. These have ranged from instructing banks to extend fewer loans to moves designed to curtail the sharp price rises seen in much of the country’s property sector. Many economists expect the central bank to stage at least one small increase in interest rates before the end of this year.
In Japan, meanwhile, a quarterly survey conducted by the central bank and released Thursday showed a surprisingly sharp rise in business confidence among large manufacturers.
The reading in June stood at 1, compared with minus 14 the previous month.
A positive reading shows that optimists outnumber pessimists. The so-called Tankan survey also found that large manufacturers planned to increase capital spending slightly, indicating that, so far, an overall improvement in the economy is outweighing concerns about the potential impact of Europe’s debt worries and about the sharp decline in the euro against the yen and other currencies.
Still, despite the healthy Tankan reading, growth is expected to remain anemic in Japan, with economists at Credit Suisse, for example, forecasting expansion of 2.9 percent this year. China, by contrast, is widely projected to grow 10 percent in 2010, allowing it to overtake Japan as the world’s second-largest economy, after the United States.
Japan’s stock market took no comfort from the firm Tankan. The Nikkei 225 index ended 2 percent lower.
Indexes elsewhere also fell. In South Korea, the Kospi declined 0.7 percent, and the market in Australia, whose economy is highly dependent on Chinese demand for its mineral riches, dropped 1.5 percent.
The Straits Times index in Singapore was down about 0.6 percent by late afternoon, and in India, the Sensex fell 1 percent.
The Hong Kong market was closed for a public holiday.
Construction and Home Sales in U.S. Slowed in May
Construction and Home Sales in U.S. Slowed in May
By CHRISTINE HAUSER
copyright by The Associated Press
Published: July 1, 2010
http://www.nytimes.com/2010/07/02/business/economy/02econ.html?_r=1&hp
A slowdown in the housing and construction markets contributed to a sluggish outlook for the economy Thursday, highlighting the significance of government stimulus and job creation.
According to new statistics, pending homes sales and construction both declined in May. In addition, figures showed that while manufacturers recorded some gains in June, the pace of activity in that sector slowed last month compared with May and also came in slightly below estimates.
“The idea of a growth slowdown in the second half of 2010, a long held belief of ours, is catching on as the data increasingly reinforces this idea,” said Dan Greenhaus, the chief economic strategist for Miller Tabak and Company.
The tranche of economic indicators were the latest regular monthly features that economists and analysts watch carefully to gauge the pace of the economic recovery. But all eyes are on the monthly jobs figures scheduled for release Friday, which are expected to show a 125,000 decrease from 431,000 in nonfarm payrolls for June and a rise to 9.8 percent from 9.7 percent in the unemployment rate.
Reflecting on the housing figures, the National Association of Realtors chief economist, Lawrence Yun, said in a statement that job creation was one of the key elements for whether the housing market can stand on its own without federal stimulus.
The association said its index, which tracks pending home sales, fell to its lowest level in May after the government tax credit for home buyers expired. The index for contracts signed in May fell by 30 percent to 77.6, down from 110.9 in April. The index is down nearly 16 percent from where it stood in May 2009, the association said.
The decline was a reversal of three months of increases, when home buyers had rushed to make use of the tax credit, which had been put into place as part of a government stimulus measure to address the housing crisis. It also represents the lowest level since the association started tracking such contract activity as a forward looking indicator in 2001.
“The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year,” Mr. Yun said.
The association said that many of the closings had been delayed because of the rush of buyers, and the extra time it took to process short sales. But there could be a reprieve for the backlog. The organization said that as many as 180,000 buyers who signed contracts by April 30 could have missed the June 30 deadline to complete the sale and qualify for the credit.
But on Wednesday night, Congress approved legislation to extend the closing deadline until September 30, meaning that buyers now have an extra three months to complete their purchases, and therefore qualify for up t0 $8,000 in federal tax credits.
“Demand has fallen off a cliff in the wake of the tax credit expiration,” said Mike Larson, real estate and interest rate analyst at Weiss Research, in a research note. “And with so many Americans unemployed or underemployed, the housing market is going to keep hurting,” he added.
Ahead of the main jobs figures, a weekly employment indicator was no cause for optimism. Initial claims for unemployment benefits were higher last week the second time in three weeks, the Labor Department said Thursday, a sign that layoffs are rising. It said new claims for jobless benefits rose by 13,000 to a seasonally adjusted 472,000. Analysts expected a small decline, according to a survey by Thomson Reuters.
The construction sector will also depend on the labor market. Spending on construction in May fell just slightly, declining 0.2 percent after a 2.3 percent rise in April. Analysts had forecast a 0.5 percent decline for May.
Private, non-residential spending fell 0.6 percent after a 0.8 percent rise the month before. Construction spending on new homes and apartments shrank 0.4 percent in May after a 5.0 percent spike in April. Public projects outlays increased 0.4 percent in May after rising 1.6 percent in April.
Manufacturing has been one of the few bright spots in the economic recovery. In a survey representing 18 manufacturing industries, the Institute for Supply Management found that employment was still expanding in the sector but the rate of that growth slowed in June by about 2 percentage points compared with May.
Overall, the index used to measure manufacturing shrank by 3.5 percentage points to 56.2 in June, mainly because orders and production slowed down, the ISM said.
Industries such as plastics and rubber products; transportation equipment, and fabricated metal products reported growth, while apparel, wood products and machinery contracted.
By CHRISTINE HAUSER
copyright by The Associated Press
Published: July 1, 2010
http://www.nytimes.com/2010/07/02/business/economy/02econ.html?_r=1&hp
A slowdown in the housing and construction markets contributed to a sluggish outlook for the economy Thursday, highlighting the significance of government stimulus and job creation.
According to new statistics, pending homes sales and construction both declined in May. In addition, figures showed that while manufacturers recorded some gains in June, the pace of activity in that sector slowed last month compared with May and also came in slightly below estimates.
“The idea of a growth slowdown in the second half of 2010, a long held belief of ours, is catching on as the data increasingly reinforces this idea,” said Dan Greenhaus, the chief economic strategist for Miller Tabak and Company.
The tranche of economic indicators were the latest regular monthly features that economists and analysts watch carefully to gauge the pace of the economic recovery. But all eyes are on the monthly jobs figures scheduled for release Friday, which are expected to show a 125,000 decrease from 431,000 in nonfarm payrolls for June and a rise to 9.8 percent from 9.7 percent in the unemployment rate.
Reflecting on the housing figures, the National Association of Realtors chief economist, Lawrence Yun, said in a statement that job creation was one of the key elements for whether the housing market can stand on its own without federal stimulus.
The association said its index, which tracks pending home sales, fell to its lowest level in May after the government tax credit for home buyers expired. The index for contracts signed in May fell by 30 percent to 77.6, down from 110.9 in April. The index is down nearly 16 percent from where it stood in May 2009, the association said.
The decline was a reversal of three months of increases, when home buyers had rushed to make use of the tax credit, which had been put into place as part of a government stimulus measure to address the housing crisis. It also represents the lowest level since the association started tracking such contract activity as a forward looking indicator in 2001.
“The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year,” Mr. Yun said.
The association said that many of the closings had been delayed because of the rush of buyers, and the extra time it took to process short sales. But there could be a reprieve for the backlog. The organization said that as many as 180,000 buyers who signed contracts by April 30 could have missed the June 30 deadline to complete the sale and qualify for the credit.
But on Wednesday night, Congress approved legislation to extend the closing deadline until September 30, meaning that buyers now have an extra three months to complete their purchases, and therefore qualify for up t0 $8,000 in federal tax credits.
“Demand has fallen off a cliff in the wake of the tax credit expiration,” said Mike Larson, real estate and interest rate analyst at Weiss Research, in a research note. “And with so many Americans unemployed or underemployed, the housing market is going to keep hurting,” he added.
Ahead of the main jobs figures, a weekly employment indicator was no cause for optimism. Initial claims for unemployment benefits were higher last week the second time in three weeks, the Labor Department said Thursday, a sign that layoffs are rising. It said new claims for jobless benefits rose by 13,000 to a seasonally adjusted 472,000. Analysts expected a small decline, according to a survey by Thomson Reuters.
The construction sector will also depend on the labor market. Spending on construction in May fell just slightly, declining 0.2 percent after a 2.3 percent rise in April. Analysts had forecast a 0.5 percent decline for May.
Private, non-residential spending fell 0.6 percent after a 0.8 percent rise the month before. Construction spending on new homes and apartments shrank 0.4 percent in May after a 5.0 percent spike in April. Public projects outlays increased 0.4 percent in May after rising 1.6 percent in April.
Manufacturing has been one of the few bright spots in the economic recovery. In a survey representing 18 manufacturing industries, the Institute for Supply Management found that employment was still expanding in the sector but the rate of that growth slowed in June by about 2 percentage points compared with May.
Overall, the index used to measure manufacturing shrank by 3.5 percentage points to 56.2 in June, mainly because orders and production slowed down, the ISM said.
Industries such as plastics and rubber products; transportation equipment, and fabricated metal products reported growth, while apparel, wood products and machinery contracted.
Editorial: Confirm Elena Kagan
Editorial: Confirm Elena Kagan
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/opinion/01thu1.html?th=&adxnnl=1&emc=th&adxnnlx=1277996455-IREJ27NAtmiJX6rzSFfobw
Elena Kagan delivered an impressive performance at her Senate confirmation hearing. Assuming the commitments she made were authentic and not simply designed to tranquilize the members of the Judiciary Committee, she could act as an important brake on the current Supreme Court’s alarming tendency to bulldoze through decades of settled precedents. She deserves confirmation as an associate justice.
The hearing was far from illuminating, but it did allow Ms. Kagan to show her fortitude, good humor and, most important, judicial modesty. She said, in dozens of different ways, that she has the highest respect for the legal principle that precedents are to be upheld except in very unusual circumstances. She said precedents should be overturned only if they have proved unworkable over time or have been eroded by other decisions or if important factual circumstances change.
A “doctrine of humility” also entails a respect for Congressional lawmaking, she said, and keeping decisions as narrow as possible in order to enable a wider consensus. “I think results-oriented judging is pretty much the worst kind of judging there is,” she told Senator Ted Kaufman of Delaware, one of many Democrats who blasted the direction of the Roberts court and were seeking assurances that she would not join that march.
Ms. Kagan made it clear that justices need not always bow to the intentions of the Constitution’s authors. She said many of their ideas need to be reinterpreted in light of later advancements, citing search and seizure procedures and whether the First Amendment has anything to do with libel. She rejected the notion that constitutional interpretation is merely a robotic task of calling balls and strikes.
Ms. Kagan stood up firmly to a three-day tantrum thrown by the ranking Republican on the panel, Jeff Sessions of Alabama. He churned considerable political grist out of the nondiscrimination policy at Harvard. That policy, which she defended as law school dean and again this week, barred official campus recruiting by the military because it discriminates against gay men and lesbians. Her defense of Justice Thurgood Marshall from bizarre attacks by Republican senators was heartening.
There is much that we still do not know about Ms. Kagan and her philosophy. It still is not clear where she stands on critical issues of national security, executive power and the growing rights of corporations, and we will not find out until we read her opinions. Democratic senators would have better spent time boring in on those questions than tossing her softballs.
The frustrating lack of enlightenment was hardly surprising given how this process has deteriorated in meaning since the Robert Bork hearings in 1987. Not only are nominees reduced to platitudes about upholding precedents, but even the platitudes are porous. John Roberts Jr. blandly told the Senate that he would respect precedent and act as a passive umpire, then began over-reaching as chief justice to uproot decisions he disliked. Sonia Sotomayor said last year that she understood the individual right to bear arms had been determined by the Supreme Court in 2008, but this week she joined a blistering dissent that said the 2008 decision was wrong. (We agree with her, but her turnaround was striking.)
We hope Ms. Kagan was being candid. Frankly, we had expected somewhat more from her, considering her 1995 article disparaging the hearings process as a “vapid and hollow charade.” She did firmly reassert her position against the military’s “don’t ask, don’t tell” policy and did not shy away from her opposition as solicitor general to the court’s tragic decision to allow unlimited corporate spending in elections. Her legal scholarship has been impressive, as was her work as dean of Harvard Law School and adviser in the Clinton White House. After the hearing, we have increased confidence she will be a good addition to the Supreme Court.
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/opinion/01thu1.html?th=&adxnnl=1&emc=th&adxnnlx=1277996455-IREJ27NAtmiJX6rzSFfobw
Elena Kagan delivered an impressive performance at her Senate confirmation hearing. Assuming the commitments she made were authentic and not simply designed to tranquilize the members of the Judiciary Committee, she could act as an important brake on the current Supreme Court’s alarming tendency to bulldoze through decades of settled precedents. She deserves confirmation as an associate justice.
The hearing was far from illuminating, but it did allow Ms. Kagan to show her fortitude, good humor and, most important, judicial modesty. She said, in dozens of different ways, that she has the highest respect for the legal principle that precedents are to be upheld except in very unusual circumstances. She said precedents should be overturned only if they have proved unworkable over time or have been eroded by other decisions or if important factual circumstances change.
A “doctrine of humility” also entails a respect for Congressional lawmaking, she said, and keeping decisions as narrow as possible in order to enable a wider consensus. “I think results-oriented judging is pretty much the worst kind of judging there is,” she told Senator Ted Kaufman of Delaware, one of many Democrats who blasted the direction of the Roberts court and were seeking assurances that she would not join that march.
Ms. Kagan made it clear that justices need not always bow to the intentions of the Constitution’s authors. She said many of their ideas need to be reinterpreted in light of later advancements, citing search and seizure procedures and whether the First Amendment has anything to do with libel. She rejected the notion that constitutional interpretation is merely a robotic task of calling balls and strikes.
Ms. Kagan stood up firmly to a three-day tantrum thrown by the ranking Republican on the panel, Jeff Sessions of Alabama. He churned considerable political grist out of the nondiscrimination policy at Harvard. That policy, which she defended as law school dean and again this week, barred official campus recruiting by the military because it discriminates against gay men and lesbians. Her defense of Justice Thurgood Marshall from bizarre attacks by Republican senators was heartening.
There is much that we still do not know about Ms. Kagan and her philosophy. It still is not clear where she stands on critical issues of national security, executive power and the growing rights of corporations, and we will not find out until we read her opinions. Democratic senators would have better spent time boring in on those questions than tossing her softballs.
The frustrating lack of enlightenment was hardly surprising given how this process has deteriorated in meaning since the Robert Bork hearings in 1987. Not only are nominees reduced to platitudes about upholding precedents, but even the platitudes are porous. John Roberts Jr. blandly told the Senate that he would respect precedent and act as a passive umpire, then began over-reaching as chief justice to uproot decisions he disliked. Sonia Sotomayor said last year that she understood the individual right to bear arms had been determined by the Supreme Court in 2008, but this week she joined a blistering dissent that said the 2008 decision was wrong. (We agree with her, but her turnaround was striking.)
We hope Ms. Kagan was being candid. Frankly, we had expected somewhat more from her, considering her 1995 article disparaging the hearings process as a “vapid and hollow charade.” She did firmly reassert her position against the military’s “don’t ask, don’t tell” policy and did not shy away from her opposition as solicitor general to the court’s tragic decision to allow unlimited corporate spending in elections. Her legal scholarship has been impressive, as was her work as dean of Harvard Law School and adviser in the Clinton White House. After the hearing, we have increased confidence she will be a good addition to the Supreme Court.
Economies in Latin America Race Ahead
Economies in Latin America Race Ahead
By SIMON ROMERO
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/world/americas/01peru.html?th&emc=th
LIMA, Peru — While the United States and Europe fret over huge deficits and threats to a fragile recovery, this region has a surprise in store. Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, is experiencing robust economic growth that is the envy of its northern counterparts.
Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several Latin American economies that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts that the region’s economy will grow 4.5 percent this year.
Recent growth spurts around Latin America have surpassed the expectations of many governments themselves. Brazil, the region’s rising power, is leading the regional recovery from the downturn of 2009, growing 9 percent in the first quarter from the same period last year. Brazil’s central bank said Wednesday that growth for 2010 could reach 7.3 percent, the nation’s fastest expansion in 24 years.
After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States.
Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year.
“We’re witnessing what are probably the best economic conditions in Peru in my lifetime,” said Mario Zamora, 70, who owns six pharmacies in Los Olivos, a bustling working-class district of northern Lima where thousands of poor migrants from Peru’s highlands have settled.
Vibrancy mixes with grit around his pharmacies. A Domino’s Pizza vies for customers with Peruvian-Chinese restaurants called chifas. Motorcycle taxis deliver passengers to nightclubs. Competition, in the form of a newly arrived Chilean pharmacy chain, looms around the corner from his main store.
Los Olivos offers a glimpse into the growth lifting parts of Latin America out of poverty, but big exceptions persist. In Venezuela, electricity shortages and fears of expropriations caused gross domestic product to shrink 5.8 percent in the first quarter.
But Venezuela, and to a lesser extent Ecuador, another oil-dependent country that lags behind its neighbors in growth, seem to be exceptions to a broader trend.
Even small countries ideologically aligned with Venezuela have adopted pragmatic policies and are faring well. While Europe was gripped by fears of contagion from Greece’s debt crisis, the credit rating agency Standard & Poor’s upgraded Bolivia in May, citing its sound public finances.
Latin America’s growth largely reflects a deepening engagement with Asia, where China and other countries are also growing fast. China surpassed the United States last year as Brazil’s top trading partner, and is the second largest trading partner in countries like Venezuela and Colombia, Washington’s top ally in the region.
Some scholars of Latin America’s economic history of ups and downs say the robust recovery may be too good to last, pointing to volatile politics in some places, excessive reliance on commodity exports and the risks of sharply increasing trade with China.
Michael Pettis, a specialist at Peking University in Beijing on China’s financial links with developing countries, said the region was especially exposed to Chinese policies that had driven up global demand for commodities, including what appears to be Chinese stockpiling of commodities.
“Within China there is a ferocious debate over the sustainability of this investment-driven growth,” Mr. Pettis said. “I’m worried that too few policy makers in Latin America are aware of the debate and of the vulnerability this creates in Latin America.”
Other economists, including Nicolás Eyzaguirre, director of the Western Hemisphere department of the International Monetary Fund, suggest that low international interest rates, another factor supporting Latin America’s growth, will not last much longer. Even so, they applaud home-grown policies that are supporting growth.
Chile, for instance, saved revenues from copper exports when commodities prices climbed, allowing it to enact a stimulus plan last year and rebound from the February earthquake. Chile’s economy grew 8.2 percent in April from the previous month, its biggest increase since 1996.
“This time around, the positive shock is probably even better, since some countries saved at least part of their windfall from the good years,” Mr. Eyzaguirre said.
Within the fund itself, Latin America’s recovery is translating into new political sway, particularly for Brazil, which has paid its debt to the fund and is seeking to enhance its voting stake in it. As Brazil posts China-level growth, President Luiz Inácio Lula da Silva is nurturing soft-power ambitions, with ventures like a state television station that will broadcast to African nations.
David Rothkopf, a former Commerce Department official in the Clinton administration, pointed to the dozens of embassies and consulates that Mr. da Silva has opened around the world.
“Like other Latin American countries, Brazil needs to improve its infrastructure and train more engineers,” Mr. Rothkopf said, “but it embodies the rise of emerging powers, one of the great themes of this century.”
Peru, whose economic growth is expected to rival or outstrip Brazil’s over the next several years, exemplifies the challenges remaining in a sizzling economy.
The country boasts nimble companies like Ajegroup, founded during the chaos of the 1980s. Now the company’s soft drinks compete with giants like Coca-Cola, not just in Peru but in other Latin American countries as well.
Foreign investment has flowed into Peru, largely in mining. But this investment reveals both weaknesses and strengths. Mining accounts for about 8 percent of economic activity, but about half of tax revenues, creating problems if commodities prices fall, said Pedro Pablo Kuczynski, a former finance minister here.
Deep inequalities also persist, especially between the capital, Lima, and the Andean highlands and the forests of the Amazon basin, where factions of the Shining Path guerrilla group feed off the cocaine trade. As much as 70 percent of the labor force still works outside the tax system, depriving workers of benefits and the government of revenue.
But some of what glitters in Peru’s boom seems to be paving the way for lasting prosperity. Felipe Castillo, 60, mayor of Los Olivos, is investing tax proceeds in a new low-tuition municipal university for 4,000 students. He gazed recently at the 11-story structure, in a slum that has begun to take on the trappings of a lower-middle-class district.
“Maybe the students at this institution will look at the mistakes of our economic policy in the past as the tragic features of a bygone era,” Mr. Castillo said.
Andrea Zárate contributed reporting from Lima.
By SIMON ROMERO
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/world/americas/01peru.html?th&emc=th
LIMA, Peru — While the United States and Europe fret over huge deficits and threats to a fragile recovery, this region has a surprise in store. Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, is experiencing robust economic growth that is the envy of its northern counterparts.
Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several Latin American economies that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts that the region’s economy will grow 4.5 percent this year.
Recent growth spurts around Latin America have surpassed the expectations of many governments themselves. Brazil, the region’s rising power, is leading the regional recovery from the downturn of 2009, growing 9 percent in the first quarter from the same period last year. Brazil’s central bank said Wednesday that growth for 2010 could reach 7.3 percent, the nation’s fastest expansion in 24 years.
After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States.
Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year.
“We’re witnessing what are probably the best economic conditions in Peru in my lifetime,” said Mario Zamora, 70, who owns six pharmacies in Los Olivos, a bustling working-class district of northern Lima where thousands of poor migrants from Peru’s highlands have settled.
Vibrancy mixes with grit around his pharmacies. A Domino’s Pizza vies for customers with Peruvian-Chinese restaurants called chifas. Motorcycle taxis deliver passengers to nightclubs. Competition, in the form of a newly arrived Chilean pharmacy chain, looms around the corner from his main store.
Los Olivos offers a glimpse into the growth lifting parts of Latin America out of poverty, but big exceptions persist. In Venezuela, electricity shortages and fears of expropriations caused gross domestic product to shrink 5.8 percent in the first quarter.
But Venezuela, and to a lesser extent Ecuador, another oil-dependent country that lags behind its neighbors in growth, seem to be exceptions to a broader trend.
Even small countries ideologically aligned with Venezuela have adopted pragmatic policies and are faring well. While Europe was gripped by fears of contagion from Greece’s debt crisis, the credit rating agency Standard & Poor’s upgraded Bolivia in May, citing its sound public finances.
Latin America’s growth largely reflects a deepening engagement with Asia, where China and other countries are also growing fast. China surpassed the United States last year as Brazil’s top trading partner, and is the second largest trading partner in countries like Venezuela and Colombia, Washington’s top ally in the region.
Some scholars of Latin America’s economic history of ups and downs say the robust recovery may be too good to last, pointing to volatile politics in some places, excessive reliance on commodity exports and the risks of sharply increasing trade with China.
Michael Pettis, a specialist at Peking University in Beijing on China’s financial links with developing countries, said the region was especially exposed to Chinese policies that had driven up global demand for commodities, including what appears to be Chinese stockpiling of commodities.
“Within China there is a ferocious debate over the sustainability of this investment-driven growth,” Mr. Pettis said. “I’m worried that too few policy makers in Latin America are aware of the debate and of the vulnerability this creates in Latin America.”
Other economists, including Nicolás Eyzaguirre, director of the Western Hemisphere department of the International Monetary Fund, suggest that low international interest rates, another factor supporting Latin America’s growth, will not last much longer. Even so, they applaud home-grown policies that are supporting growth.
Chile, for instance, saved revenues from copper exports when commodities prices climbed, allowing it to enact a stimulus plan last year and rebound from the February earthquake. Chile’s economy grew 8.2 percent in April from the previous month, its biggest increase since 1996.
“This time around, the positive shock is probably even better, since some countries saved at least part of their windfall from the good years,” Mr. Eyzaguirre said.
Within the fund itself, Latin America’s recovery is translating into new political sway, particularly for Brazil, which has paid its debt to the fund and is seeking to enhance its voting stake in it. As Brazil posts China-level growth, President Luiz Inácio Lula da Silva is nurturing soft-power ambitions, with ventures like a state television station that will broadcast to African nations.
David Rothkopf, a former Commerce Department official in the Clinton administration, pointed to the dozens of embassies and consulates that Mr. da Silva has opened around the world.
“Like other Latin American countries, Brazil needs to improve its infrastructure and train more engineers,” Mr. Rothkopf said, “but it embodies the rise of emerging powers, one of the great themes of this century.”
Peru, whose economic growth is expected to rival or outstrip Brazil’s over the next several years, exemplifies the challenges remaining in a sizzling economy.
The country boasts nimble companies like Ajegroup, founded during the chaos of the 1980s. Now the company’s soft drinks compete with giants like Coca-Cola, not just in Peru but in other Latin American countries as well.
Foreign investment has flowed into Peru, largely in mining. But this investment reveals both weaknesses and strengths. Mining accounts for about 8 percent of economic activity, but about half of tax revenues, creating problems if commodities prices fall, said Pedro Pablo Kuczynski, a former finance minister here.
Deep inequalities also persist, especially between the capital, Lima, and the Andean highlands and the forests of the Amazon basin, where factions of the Shining Path guerrilla group feed off the cocaine trade. As much as 70 percent of the labor force still works outside the tax system, depriving workers of benefits and the government of revenue.
But some of what glitters in Peru’s boom seems to be paving the way for lasting prosperity. Felipe Castillo, 60, mayor of Los Olivos, is investing tax proceeds in a new low-tuition municipal university for 4,000 students. He gazed recently at the 11-story structure, in a slum that has begun to take on the trappings of a lower-middle-class district.
“Maybe the students at this institution will look at the mistakes of our economic policy in the past as the tragic features of a bygone era,” Mr. Castillo said.
Andrea Zárate contributed reporting from Lima.
Economy Hurts Government Aid for H.I.V. Drugs
Economy Hurts Government Aid for H.I.V. Drugs
By KEVIN SACK
copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/us/01aidsdrugs.html?_r=1&th&emc=th
FORT LAUDERDALE, Fla. — The weak economy is crippling the government program that provides life-sustaining antiretroviral drugs to people with H.I.V. or AIDS who cannot afford them. Nearly 1,800 have been relegated to rapidly expanding waiting lists that less than three years ago had dwindled to zero.
As with other safety-net programs, ballooning demand caused by persistent unemployment and loss of health insurance is being met with reductions in government resources. Without reliable access to the medications, which cost patients in the AIDS Drug Assistance Program an average of $12,000 a year, people with H.I.V. are more likely to develop full-blown AIDS, transmit the virus and require expensive hospitalizations.
Eleven states have closed enrollment in the federal program, most recently Florida, which has the nation’s third-largest population of people with H.I.V. Three other states have narrowed eligibility, and two of them — Arkansas and Utah — have dropped scores of people from the program.
Last week, because of swelling numbers here in South Florida, the nationwide waiting list surged past record levels set in 2004, to 1,781 people, according to the National Alliance of State and Territorial AIDS Directors. The growth is expected to continue when Georgia starts deferring enrollment in its drug assistance program on July 1. Illinois may soon follow, and New Jersey plans to cut eligibility on Aug. 1, removing 600 of the 7,700 people on its rolls.
Louisiana capped enrollment on June 1 but decided against keeping a waiting list. “It implies you’re actually waiting on something,” said DeAnn Gruber, the interim director of the state’s H.I.V./AIDS program. “We don’t want to give anyone false hope.”
Ten states’ programs have stopped covering drugs that do not directly combat H.I.V. or opportunistic infections. Unless money is found by Aug. 1, Florida plans to pare 53 of 101 medications from its formulary, including those for conditions that are often related to H.I.V., like diabetes, high blood pressure and anxiety.
In many states, there is a sense of reverting to the 1980s and early 1990s, before the development of protease inhibitors reversed the rise in AIDS deaths.
“The worry then was that there were no medications for AIDS,” said Dr. Wayne A. Duffus, medical director of the drug assistance program in South Carolina. “The worry now is that there are medicines, but you can’t afford them. A lot of patients are certainly old enough to remember what happens if you don’t get your medicines.”
For the moment, pharmaceutical companies have stepped into the breach, negotiating discounts for the state drug plans and accepting needy patients into programs that temporarily provide free medications. Although there is no data to prove it, state AIDS directors said a vast majority of people on waiting lists seemed to be getting medications one way or another.
But they concede that some patients may be going without, and that caseworkers are being diverted from critical tasks while navigating a thicket of cumbersome applications seeking drug companies’ help.
“The drug companies are trying their best to lower prices,” said Carl Schmid, deputy executive director of the AIDS Institute, an advocacy group. “But we cannot rely on them to finance the health care of poor people living with H.I.V. and AIDS.”
Tim Sweeney, 49, a Fort Lauderdale man who has depended on the assistance program for a dozen years, said he was put on Florida’s waiting list because he was four days late to re-enroll, as is required every six months. Mr. Sweeney, who has AIDS, takes six H.I.V. pills twice a day, as well as three other medications. Their total retail cost: $4,500 a month.
Unemployed for 18 months, Mr. Sweeney said he spent three days filling out forms to apply for aid from pharmaceutical companies. While awaiting responses, he is being supplied with drugs, one week at a time, by the AIDS Healthcare Foundation, a social service agency.
The patchwork arrangement gives him little comfort. “My biggest fear,” said Mr. Sweeney, who credits the drugs with vastly improving his immune cell counts, “is that I’ve done all this hard work over 20 years and now I’m going to fall back.”
Scott Miller, 42, a northeast Florida truck driver who lost his health insurance in May along with his job, said he had never before sought assistance during five years with H.I.V. When his caseworker told him there was a waiting list, he asked what he was supposed to do.
“She just shrugged her shoulders and said, ‘I don’t know what to tell you,’ ” Mr. Miller said. After several days without drugs, Mr. Miller qualified for a free three-month supply of his medication, Atripla, from Bristol-Myers Squibb.
Dr. Helmut Albrecht, director of the infectious diseases program at the University of South Carolina School of Medicine, said he knew of one wait-listed patient who had died after a seizure while awaiting approval from drug company programs.
“In my world, there is never a certainty if meds would have prevented death,” Dr. Albrecht said, “but the fact remains that the wait certainly did not help.”
Drug assistance has grown since 1996 to become the largest component of the federal Ryan White program, which provides grants to states and localities. The drug program’s budget from all sources is now $1.6 billion, with Washington contributing about 55 percent, states offering 14 percent and drug company rebates accounting for 31 percent, according to the state AIDS directors.
A confluence of factors has caused the strain. Enrollment has spiked during the recession, up 12 percent from June 2008 to June 2009, to about 169,000 people. The trend has probably accelerated since then. In Florida, monthly enrollments grew by a third between May 2009 and May 2010.
A renewed emphasis on testing is also driving up caseloads, and federal treatment guidelines now recommend an earlier start to drug therapy. Because the drugs are so effective, people often stay on the rolls for extended periods.
Meanwhile, federal financial support has stayed essentially flat, up barely 2 percent this year, while appropriations from state budgets have fallen 34 percent, according to the state AIDS directors. The drug companies increased their contribution by half, to nearly $500 million, but it is still not enough.
Once fully implemented in 2014, the new health care law is expected to close the gaps by expanding Medicaid, subsidizing private insurance and requiring insurers to cover pre-existing conditions.
More immediately, two Republican senators, Tom Coburn of Oklahoma and Richard M. Burr of North Carolina, have proposed redirecting $126 million from stimulus spending to the drug assistance program.
President Obama opposes taking money from stimulus projects but is “working to ensure” that the program gets adequate financing, said Shin Inouye, a White House spokesman. He did not provide details. Mr. Obama recommended a $20 million increase in next year’s drug assistance budget.
In Florida, where AIDS deaths have dropped by two-thirds since the introduction of antiretroviral drugs, state officials cannot forecast how long the waiting list might be necessary. Unemployment stands at 11.7 percent, and there is no budget relief in sight. The list, which was begun on June 1, already holds 361 names.
“I know people are scared,” said Thomas M. Liberti, chief of the state H.I.V./AIDS bureau. “We haven’t had a waiting list in 14 years. Unfortunately, we did not outlast the recession.”
By KEVIN SACK
copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/us/01aidsdrugs.html?_r=1&th&emc=th
FORT LAUDERDALE, Fla. — The weak economy is crippling the government program that provides life-sustaining antiretroviral drugs to people with H.I.V. or AIDS who cannot afford them. Nearly 1,800 have been relegated to rapidly expanding waiting lists that less than three years ago had dwindled to zero.
As with other safety-net programs, ballooning demand caused by persistent unemployment and loss of health insurance is being met with reductions in government resources. Without reliable access to the medications, which cost patients in the AIDS Drug Assistance Program an average of $12,000 a year, people with H.I.V. are more likely to develop full-blown AIDS, transmit the virus and require expensive hospitalizations.
Eleven states have closed enrollment in the federal program, most recently Florida, which has the nation’s third-largest population of people with H.I.V. Three other states have narrowed eligibility, and two of them — Arkansas and Utah — have dropped scores of people from the program.
Last week, because of swelling numbers here in South Florida, the nationwide waiting list surged past record levels set in 2004, to 1,781 people, according to the National Alliance of State and Territorial AIDS Directors. The growth is expected to continue when Georgia starts deferring enrollment in its drug assistance program on July 1. Illinois may soon follow, and New Jersey plans to cut eligibility on Aug. 1, removing 600 of the 7,700 people on its rolls.
Louisiana capped enrollment on June 1 but decided against keeping a waiting list. “It implies you’re actually waiting on something,” said DeAnn Gruber, the interim director of the state’s H.I.V./AIDS program. “We don’t want to give anyone false hope.”
Ten states’ programs have stopped covering drugs that do not directly combat H.I.V. or opportunistic infections. Unless money is found by Aug. 1, Florida plans to pare 53 of 101 medications from its formulary, including those for conditions that are often related to H.I.V., like diabetes, high blood pressure and anxiety.
In many states, there is a sense of reverting to the 1980s and early 1990s, before the development of protease inhibitors reversed the rise in AIDS deaths.
“The worry then was that there were no medications for AIDS,” said Dr. Wayne A. Duffus, medical director of the drug assistance program in South Carolina. “The worry now is that there are medicines, but you can’t afford them. A lot of patients are certainly old enough to remember what happens if you don’t get your medicines.”
For the moment, pharmaceutical companies have stepped into the breach, negotiating discounts for the state drug plans and accepting needy patients into programs that temporarily provide free medications. Although there is no data to prove it, state AIDS directors said a vast majority of people on waiting lists seemed to be getting medications one way or another.
But they concede that some patients may be going without, and that caseworkers are being diverted from critical tasks while navigating a thicket of cumbersome applications seeking drug companies’ help.
“The drug companies are trying their best to lower prices,” said Carl Schmid, deputy executive director of the AIDS Institute, an advocacy group. “But we cannot rely on them to finance the health care of poor people living with H.I.V. and AIDS.”
Tim Sweeney, 49, a Fort Lauderdale man who has depended on the assistance program for a dozen years, said he was put on Florida’s waiting list because he was four days late to re-enroll, as is required every six months. Mr. Sweeney, who has AIDS, takes six H.I.V. pills twice a day, as well as three other medications. Their total retail cost: $4,500 a month.
Unemployed for 18 months, Mr. Sweeney said he spent three days filling out forms to apply for aid from pharmaceutical companies. While awaiting responses, he is being supplied with drugs, one week at a time, by the AIDS Healthcare Foundation, a social service agency.
The patchwork arrangement gives him little comfort. “My biggest fear,” said Mr. Sweeney, who credits the drugs with vastly improving his immune cell counts, “is that I’ve done all this hard work over 20 years and now I’m going to fall back.”
Scott Miller, 42, a northeast Florida truck driver who lost his health insurance in May along with his job, said he had never before sought assistance during five years with H.I.V. When his caseworker told him there was a waiting list, he asked what he was supposed to do.
“She just shrugged her shoulders and said, ‘I don’t know what to tell you,’ ” Mr. Miller said. After several days without drugs, Mr. Miller qualified for a free three-month supply of his medication, Atripla, from Bristol-Myers Squibb.
Dr. Helmut Albrecht, director of the infectious diseases program at the University of South Carolina School of Medicine, said he knew of one wait-listed patient who had died after a seizure while awaiting approval from drug company programs.
“In my world, there is never a certainty if meds would have prevented death,” Dr. Albrecht said, “but the fact remains that the wait certainly did not help.”
Drug assistance has grown since 1996 to become the largest component of the federal Ryan White program, which provides grants to states and localities. The drug program’s budget from all sources is now $1.6 billion, with Washington contributing about 55 percent, states offering 14 percent and drug company rebates accounting for 31 percent, according to the state AIDS directors.
A confluence of factors has caused the strain. Enrollment has spiked during the recession, up 12 percent from June 2008 to June 2009, to about 169,000 people. The trend has probably accelerated since then. In Florida, monthly enrollments grew by a third between May 2009 and May 2010.
A renewed emphasis on testing is also driving up caseloads, and federal treatment guidelines now recommend an earlier start to drug therapy. Because the drugs are so effective, people often stay on the rolls for extended periods.
Meanwhile, federal financial support has stayed essentially flat, up barely 2 percent this year, while appropriations from state budgets have fallen 34 percent, according to the state AIDS directors. The drug companies increased their contribution by half, to nearly $500 million, but it is still not enough.
Once fully implemented in 2014, the new health care law is expected to close the gaps by expanding Medicaid, subsidizing private insurance and requiring insurers to cover pre-existing conditions.
More immediately, two Republican senators, Tom Coburn of Oklahoma and Richard M. Burr of North Carolina, have proposed redirecting $126 million from stimulus spending to the drug assistance program.
President Obama opposes taking money from stimulus projects but is “working to ensure” that the program gets adequate financing, said Shin Inouye, a White House spokesman. He did not provide details. Mr. Obama recommended a $20 million increase in next year’s drug assistance budget.
In Florida, where AIDS deaths have dropped by two-thirds since the introduction of antiretroviral drugs, state officials cannot forecast how long the waiting list might be necessary. Unemployment stands at 11.7 percent, and there is no budget relief in sight. The list, which was begun on June 1, already holds 361 names.
“I know people are scared,” said Thomas M. Liberti, chief of the state H.I.V./AIDS bureau. “We haven’t had a waiting list in 14 years. Unfortunately, we did not outlast the recession.”
Subscribe to:
Comments (Atom)