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Greek Debt - UK manufacturing - Economics Weekly

Greek Debt vs UK manufacturing

Global Economics Weekly Brief

At the start of the RBS Six Nations rugby tournament many would be hoping that the European policymakers would take a leaf out of the players’ books and just get on with it. Unlike good rugby, when passing the ball leads to success, too many of the European policymakers’ passes have led nowhere.

Greece has to find €14bn by 20 March 2012 to avoid a debt default. Without help it won’t have the funds to do this, and this is casting a shadow over the Eurozone and global economy. It’s time for the policymakers to push forward with conviction. In the UK and the US there have been some encouraging signs of economic revival. But even these are tinged with caution because of conditions in Europe. The governments on both sides of the pond will be hoping that their teams will gather enough momentum to push through this economic opposition. What is needed is to drive through with a strategy plan to win - with no strategy there is only failure!

The UK manufacturing and service sectors started the New Year in style. The manufacturing PMI reached an eight month high of 52.1 in January and the service sector index surged to an unexpected 56, its highest since March 2011. A reading above 50 in the purchasing managers' index (PMI) indicates expansion.. The improvement in both sectors was broad based and will lift hopes that the UK economy will avoid a technical recession. But uncertainty among small and medium sized manufacturers reported by the CBI probably means we shouldn’t get too excited, yet. The stronger PMI data is unlikely to be enough to prevent an increase in quantitative easing next week, though it will certainly give MPC members some sweeter food for thought. So why do the UK still import people to work when there are nearly 3 million people in the UK looking for work, over 1 million UK graduates looking for work and over 1 million people on government backed training schemes looking for work?

US manufacturers and service providers followed suit. In the US the manufacturing sector grew at its fastest pace for seven months. Like the PMI, a number above 50 indicates expansion in the ISM index. The manufacturing reading rose to 54.1 in January from 53.1 in December, while the services reading surged to 56.8 from 53. Together these signal that the US economic recovery has been gathering some momentum. Employment was encouraging, particularly in the service sector where it reached 57.4 in January, the highest in almost six years, and up from 49.8 at the end of 2011. This is definitely a good start to the year which should support the US recovery.

The US labour market strengthened again in January, but in Europe unemployment is still uncomfortably very high. US non-farm payrolls increased for the fifth consecutive month in January. The 243k rise helped the unemployment rate to fall by 0.2 percentage point to 8.3% - its lowest rate in almost three years. The private sector was the driver of growth and this will be well received by the Federal Reserve which has worried about structural weakness. The labour market recovery may raise questions about the need for further quantitative easing in the short term, but with continued weakness in the global economy, the real test is whether this improvement can be sustained. Eurozone policymakers looked on with envy. While unemployment was static in December, at 10.4%, it's still too high for comfort, especially in Spain where the rate is 22.9% and growing daily.

Eurozone and Chinese manufacturers are still struggling. Manufacturing in the Eurozone wasn’t as good as in the UK and US. The Eurozone manufacturing PMI rose to 48.8 in January, from 46.9 in December, showing that business conditions are still deteriorating, albeit at a slower rate. But even this is a remarkable turnaround, given the headwinds the Eurozone is facing. In China manufacturers are struggling a bit too. The Chinese Government's manufacturing PMI measure rose marginally to 50.5 from 50.3 in January, only just in expansion territory. The HSBC measure confirmed an improvement, but still recorded contraction at 48.8 up from 47.7 in November. Overall the combined data suggests continuing weakness.

UK and US house prices are still falling.
House prices in the UK fell by 0.2%m/m in January after a similar fall in December, according to Nationwide. But the annual rate is still positive at 0.6%y/y. There’s not much chance of this picking up soon though as mortgage activity is still stagnant. Even though approvals for house purchase reached their highest level in two years, they are still only about half of the long term pre-crisis average. Given the weak economic background this isn’t surprising. But buyers are also hit by higher prices of essential goods and services. All this means that their ability to buy now is worse than in the 2009 recession. In the US there are no signs of recovery either. According to the Case-Shiller 20 City index, US house prices fell by 1.3%m/m in November. This translates to a fall of 3.7%y/y and brings US house prices back to 2003 levels. Prices are not expected to go anywhere soon either. With foreclosures still running at 3.4% compared with an average of 0.5% before 2008, there is still downward pressure on prices.

Delay in Greece bailout meeting
Government talks in Greece to try to agree new austerity measures needed to secure bailout funds and avoid defaulting on its debts, are delayed.

Q&A: Greek debt crisis

New Eurozone fears as banks stash more cash at the highest level recorded

Banks in the eurozone are hoarding cash at record levels. At present over 475 billion euro`s was on deposit to reach the highest level ever stashed due to fears of the risk of lending to each other. The banks expect `big trouble` in the next few months in the lending/banking arena.

Bank of England set to print £75 billion more to bolster economy

The forecast by some analysts to increase ` quantitative easing` to £400 billion - equal to 27% of gross domestic product.

Entrepreneurs in the UK are making millions of £`s helping jobless!

Training companies in the UK are making many millions of £`s from the UK government to train the jobless - but do the jobless get a job? In many cases, no! Therefore, the only people gaining are these training companies at the tax payers cost!

Plan for the future with the `right` people and the `right` business models for success.

We have another global crisis that needs urgent attention by `skilled and experienced people` who can do the job right!

--- --- ---

`Building An Excellent Business!` is available for immediate purchase by visiting the secure Cavendish eStore online at: http://www.cavendish-mr.org.uk - customers can download this e-book in PDF Acrobat format immediately after purchase.

More Economics and Business Inspiration:
`Accelerate with Impact` -
by Colin Thompson ISBN: 978-1-84549-289-2

Accreditation: UK Registered Learning Provider:10025755

Note: About the Author Colin Thompson

Colin is a former successful Managing Director of Transactional/Print Manufacturing Plants, Print Management/Workflow Solutions companies and other organisations, former Group Chairman of the Academy for Chief Executives and Non-Executive Director, helping companies raise their `bottom-line` and `increase cash flow`. Plus, helping individuals to be successful in business and life in general. Author of several publications, research reports, guides, business and educational models on CD-ROM's/Software and over 400 articles published on business and educational subjects worldwide. International Speaker and Visiting University Professor.

Greek Debt vs UK manufacturing

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Comments on this item:

12-02-2012 13:04:34
Hi I strongly believe that if Europe stops depending on usa as a market and if US stops depending on China for manufacturers this will overcome the current situation.. now if European countries can make Asia their market for products, u obviously will get back Ur economy.. this would mean increasing production scales which would compensate for mfd losses .

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