World economy 'facing slowdown'

World economy 'facing slowdown'

Global economic growth is likely to be dampened by the turbulence which has swept world markets, the International Monetary Fund (IMF) has said.

The IMF said it would be revising down its growth projections - with this year being more affected than 2008.
The US would see the largest impact, with some parts of Europe also set to endure lower growth, it added.
Its comments came a day after the OECD warned the US economy would slow sharply in the second half of 2007.
The Organisation for Economic Co-operation and Development's World Economic Outlook report is due for release in October.
Potential vulnerability
Uncertainty over the size of losses in the sub-prime lending market has caused stock market turmoil.
An IMF spokesman said that the unrest came "after an exceptionally long period of benign conditions in international economic markets" and solid global growth,
which had provided "a cushion against which we are working".
Most emerging economies remained "relatively robust", the IMF added.
However, it said that some countries which had a high dependency on external financing could be vulnerable to fallout on the financial market
Story from BBC NEWS

UN: World economic growth slowing, unemployment is at 6.3 percent
UNITED NATIONS (AP): The world economy has been growing more slowly after global unemployment jumped to 6.3 percent last year, the highest in a decade,
the United Nations reported.
Because it is the world's largest economy, the United States and its weakening housing market are "the major drag for this global slowdown,'' said the U.N. report,
released Wednesday.
It puts the expected growth of 2007 world gross product at 3.2 percent, down from an average 3.8 percent a year during the previous decade.
"We see a number of worrisome trends,'' said Sha Zukang, the U.N.'s undersecretary-general for economic and social affairs. "Globally, despite robust rates of
economic growth, employment creation is lagging behind growth of the working-age population.'' Some 195 million people were unemployed in 2006, an increase that despite continued growth in global economic output is "giving rise to the phenomenon of jobless
growth,'' the report said.
The global labor pool comprises about two-thirds of the 4.6 billion people of working age, which the U.N. puts at 15 and older.
In the decade ending in 2006, the global unemployment rate rose to 6.3 percent, up from about 6 percent, according to the U.N.'s Department of Economic and
Social Affairs, Conference on Trade and Development and five regional commissions.
Zukang said these were the latest available U.N. statistics.
The U.N. economists said that for the first time in history, the service industry, accounting for 40 percent of all jobs, overtook agriculture as the biggest employer.
"The world is rapidly becoming an economic system with employment dominated by the service sector, in which many jobs are low-paying and precarious and are
not covered by formal mechanisms of social protection,'' the report said.
It said the unemployment rate was highest, at 12.2 percent, in the Middle East and North Africa, followed by 9.8 percent in sub-Saharan Africa, 8 percent in Latin
America and the Caribbean, 6.6 percent in Southeast Asia and the Pacific, and 6.2 percent among developed nations' economies.

26/1/2007
Global Unemployment Remains At Historic High
Despite Strong Economic Growth
The number of people unemployed worldwide remained at an historical high of nearly 200 million in 2006 despite strong global economic growth, only modest gains
were made in lifting some of the 1.37 billion working poor living on less than $2 per day out of poverty, and the pattern looks set to continue this year, according to
a United Nations report released this week.
“To make long-term inroads into unemployment and working poverty, it is essential that periods of strong growth be better used to generate moredecent and
productive jobs,” the UN International Labour Organization (ILO) said in its annual Global Employment Trends. “Reducing unemployment and working poverty
through creation of such jobs should be viewed as a precondition for sustained economic growth.”
Even though more people are working globally than ever before, the number of unemployed remained at an all time high of 195.2 million last year, a global rate of 6.3
per cent, almost unchanged from 2005, with a forecast economic growth rate of 4.9 per cent for 2007 likely to ensure that unemployment remains at about the same
level.
“The persistence of joblessness at this rate is of concern, given that it will be difficult to sustain such strong economic growth indefinitely,” the report says, noting that
that in order to maintain or reduce unemployment rates, the link between growth and jobs must be reinforced.
Creation of decent and productive jobs – not just any jobs – is a prerequisite for reducing unemployment and slashing the number of families working but still living in
poverty, which in turn is a precondition for future development and economic growth, it adds.
“The strong economic growth of the last half decade has only had a slight impact on the reduction of the number of workers who live with their families in poverty and
this was only true in a handful of countries,” ILO Director-General Juan Somavia said.
For the last decade, economic growth has been reflected more in rising levels of productivity and less in growing employment, the report notes. While world productivity increased by 26 per cent the global number of those in employment rose by only 16.6 per cent.
Unemployment hit young people aged 15 to 24 the hardest, with 86.3 million young people representing 44 per cent of the total unemployed in 2006. The employment gap between women and men persists. In 2006, only 48.9 per cent of women over age 15 were working compared to 49.6 per cent in 1996. The comparable male employment-to-population ratios were 75.7 in 1996 and 74.0 in 2006.
In 2006, the share of the service sector in global employment progressed from 39.5 per cent to 40 per cent and for the first time overtook agriculture, which dropped from 39.7 per cent to 38.7 per cent. The industry sector represented 21.3 per cent of total employment.
The largest decrease in unemployment occurred in the region of the Developed Economies and European Union, with a decline of 0.6 percentage points. East Asia’s rate was 3.6 per cent, remaining the lowest in the world, while the Middle East and North Africa remained the highest at 12.2 per cent. Sub-Saharan Africa stood at 9.8 per cent, the second highest and it also had the highest share in working poverty, with 8 out of 10 people living on less than $2 a day with their families.
The total number of working poor on $1 a day declined between 2001 and 2006 except in Sub-Saharan Africa where it increased by another 14 million and in Latin America and the Middle East and North Africa where it stayed more or less unchanged.

U.K. Third Quarter Economic Growth Unexpectedly Slows
By Jennifer Ryan
Nov. 23 (Bloomberg) -- U.K. economic growth unexpectedly slowed to the weakest pace in a year during the third quarter as service industries cooled and factory
production stalled.
Gross domestic product rose 0.7 percent in the three months through September, the Office for National Statistics said in London today. It previously estimated 0.8
percent, which was also the median of 31 predictions in a Bloomberg News survey. The annual growth rate was 3.2 percent, the most since 2004.
Bank of England Deputy Governor Rachel Lomax said yesterday the economy ``does now seem to be slowing,'' posing a dilemma for policy makers as record oil
prices threaten to stoke inflation. The bank's forecasts show that an interest-rate cut may be needed next year to spur economic growth as contagion from the U.S.
subprime mortgage slump limits access to credit.
``Growth is likely to slow, perhaps quite sharply,'' Michael Taylor, an economist at Lombard Street Research in London, said in an interview. ``Come January, the
bank will feel able to cut interest rates.''
The pound fell as much as 0.4 percent after the release today and traded at $2.0574 as of 11:16 a.m. in London. The currency reached a 26-year high of $2.1162
on Nov. 9.
European service industries from airlines to banks expanded the least in more than two years in November as a U.S. housing slump increased the cost of credit
globally and oil prices approached $100 a barrel, a separate report today showed.
Mortgage Lending
Prime Minister Gordon Brown, who was chancellor of the exchequer until June, has presided over 42 consecutive quarters of growth. A tripling in house prices in the
past decade helped fuel consumer spending while bonuses in London's banking industry climbed to a record 8.8 billion pounds ($18 billion) last year as the value of
European takeovers jumped 45 percent.
U.K. services expanded 0.9 percent instead of the 1 percent gain measured by the government last month. Manufacturing production was flat in the quarter, down
from a previous estimate of 0.2 percent growth, the statistics office said.
Net trade subtracted 0.5 percentage point from economic growth on the quarter. That eroded gains from a 1 percent increase in consumer spending growth and fixed
investment expansion of 1.6 percent, the statistics office said.
`Sharp' Slowdown
Bank of England Governor Mervyn King said Nov. 14 that the U.K. economy may slow ``sharply'' as higher borrowing costs pinch spending. The central bank
increased the benchmark interest rate five times in the year through July, while banks have hoarded cash and raised rates for lending to each other on concern about
losses from mortgage-backed securities in the U.S.
A separate report today showed mortgage lending declined in October, adding to evidence a decade-long property boom is over. Loans for house purchase fell 37
percent from a year ago, the British Bankers' Association said. Lending against the value of homes, which has encouraged consumer spending fell 20 percent.
``There still may be more bad news to come,'' Bank of England Deputy Governor John Gieve said Nov. 20. ``As the year end approaches, we may see some
tightening in money markets.''
The three-month Libor rate, which measures lending costs between banks, rose to 6.53 percent yesterday, a two-month high. The U.K. benchmark interest rate is
5.75 percent.
Banking Losses
Financial company losses related to record U.S. home foreclosures may be as high as $400 billion for financial companies, spurring banks, brokerages and hedge
funds to cut lending by $2 trillion, Goldman Sachs Group Inc. chief economist wrote in a Nov. 15 report.
The International Monetary Fund on Oct. 17 cut its estimate for global growth next year to 4.8 from 5.2 percent, and said that even its new predictions may be too
optimistic.
Economists have pared forecasts for the U.K. interest rate after the Bank of England signaled at least one quarter-point cut in the benchmark will be necessary in
2008. Citigroup Inc. changed its prediction from two reductions to three on Nov. 16.
Policy makers have kept the benchmark at a six-year high on concern that record oil prices above $99 a barrel may stoke inflation, which exceeded the central
bank's 2 percent target for the first time in four months in October. They said that there was ``time to wait and see'' how economic growth was slowing, minutes of
their Nov. 7-8 meeting show.
Seven policy makers, including King, opted to leave the interest rate unchanged, defeating a bid by Gieve and David Blanchflower to make the first cut in the
benchmark for more than two years.
Lomax said yesterday that policy makers face a ``very difficult combination'' as economic growth weakens while record oil prices pose a risk to inflation. ``There are
always risks in signaling rate cuts at a time of rising energy prices,'' she said in Hull, northern England.

Last Updated: November 23, 2007 06:27 EST

What is driving oil prices so high?

Oil prices have surged to record highs above $97 a barrel. Prices have more than quadrupled since 2002 and are currently 40% higher than at the start of the year.
What factors are causing this unremitting increase and what are the likely consequences for consumers and the global economy?
What is causing the latest price spike?
This was triggered by simmering tensions between Turkey and Kurdish separatists in northern Iraq and fears of possible incursions by Turkish troops into Iraq.
The amount of oil produced in northern Iraq is actually very small while the major pipeline linking the Iraqi town of Kirkuk, just south of the Kurdish region, with
Turkey has been shut for long periods since the 2003 invasion of Iraq.
But it is fears that the dispute may escalate and threaten oil output in the wider region - Iraq, Iran, Kuwait and Saudi Arabia between them account for 20% of global
supplies - which have fanned the price rises.
In particular, there are concerns about potential Kurdish reprisals on an important pipeline in Turkey, which delivers 700,000 barrels a day from Azerbaijan to the
port of Ceyhan.
The situation in northern Iraq is just one of a number of geopolitical factors which are causing uncertainty in the market and helping to push prices up.
Iran's push to acquire nuclear power and, many believe, nuclear weapons has sparked concerns it could use its own oil supplies as a bargaining chip in any future
showdown.
Barely-veiled threats from the US, suggesting that military action remains a live option, have further accentuated fears.
Militant violence in Nigeria's largest oil-producing region and recent violence in Afghanistan and the Yemen has also served to inflate prices.
The weak dollar, which makes it cheaper for importers to buy dollar-denominated oil supplies, is also a major factor.
Is demand for oil continuing to soar?
Yes. The biggest catalyst for oil's seemingly remorseless rise has been the simplest economic driver there is: the balance between demand and supply.
Demand is at an all-time high, fuelled by the continued breakneck economic expansion of the Indian and Chinese economies.
With more than a billion people in each country, and both economies growing fast, manufacturers and consumers are sucking in energy at an ever-increasing rate.
China overtook Japan as the world's second-largest consumer of oil in 2003 and is closing in on the US, with demand for oil growing at about 15% a year.
Analysts worry global demand for oil is so intense that supplies may not keep pace.
Demand will rise by an average of 2.2 million barrels a day next year, the International Energy Agency says, compared with the 1.5 million-barrel rise seen in 2007.
It says annual demand will rise 2% up to 2012, while other projections suggest demand could soar from about 90 million barrels a day to as much as 140 million over
25 years.
What is Opec doing about the situation?
As the leading oil supplier in the world, producers' cartel Opec is under constant pressure to do something about the price bubble.
It recently bowed to pressure to pump more oil, agreeing to raise its production quotas by 500,000 barrels a day from 1 November.
Reports suggest the move was forced through by Saudi Arabia and that few other Opec members either have much stomach for increasing output or much capacity
to spare.
Opec has said the market is "very well supplied" with crude and will continue to be so in the immediate future.
It has blamed speculation by market traders - who can make money by betting on the future direction of prices - for the continuing price rises.
Critics of Opec say it must act more aggressively to bring prices down.
"The response from Opec has been pretty poor so far," says John Roberts, an energy security analyst with commodities research firm Platt's.
"The sentiment in the market is that it is time for Opec to increase production again."
Who are the winners and losers from costly oil?
Taking inflation into account, prices are still below levels seen in late 1980, when a barrel of oil - in today's prices - was worth more than $101.
Back then, costly oil helped contribute to a recession in the US and similar fears are resurfacing now.
The Bush administration has said it is "very concerned" about current price levels, at a time when the economy is already expected to slow significantly next year.
High energy prices make life more expensive for consumers and businesses, having an knock-on effect on their spending in other areas.
Gasoline prices are hovering not far below the $3-a-gallon mark in the US, while UK petrol retailers have warned prices could soon rise above £1 a litre.
But on the other side of the fence, oil giants such as ExxonMobil and BP are having a wonderful time, while oil-rich countries are also smiling.
Oil wealth has underpinned President Hugo Chavez's efforts to reshape Venezuela, allowing him to fund extensive social programmes and reject US criticism of his
policies.
Russia's oil and gas bonanza has underwritten efforts by President Vladimir Putin to exert state control over the country's energy sector.
Where will prices head next?
Many people scoffed when analysts from investment bank Goldman Sachs said in 2005 that prices could eventually top $100 a barrel.
This now seems a real possibility, although analysts caution that the market remains volatile.
"There is every reason to suppose the price could hit $100," says Platt's John Roberts.
"At the same time, one good thing goes right and the price goes tumbling back down to $70 or $60."
Story from BBC NEWS

Housing Slump's Third Year Will Be `Deepest' Since World War II
By Dan Levy and Brian Louis
Nov. 30 (Bloomberg) -- As the U.S. housing slump enters its third year, there is no sign of dawn in the darkness that is paralyzing home building, home buying and
home lending.
Standard & Poor's 15-member Supercomposite Homebuilding Index tumbled 62 percent this year as of yesterday, the largest drop since the benchmark was started
in 1995. The companies have lost about $35 billion of market value.
The outlook is bleak with new home sales projected to fall 13 percent in 2008, according to estimates from the National Association of Realtors in Chicago, even as
interest rates drop. Losses at Fannie Mae and Freddie Mac, the two biggest U.S. providers of mortgage financing, may restrict the availability of home loans, and
chief executive officers at D.R. Horton Inc. and Centex Corp. expect another tough year.
``This looks like it's going to be the deepest correction of any housing correction since World War II, and the question really is, `What's the duration, how long will it
be?''' Centex CEO Timothy Eller said at a JPMorgan Chase & Co. conference in Las Vegas on Nov. 27.
The decline in the S&P homebuilding index has pushed the measure to March 2003 levels, with companies including Centex and Pulte Homes Inc. falling more than
65 percent in composite trading on the New York Stock Exchange. The median price for a new home dropped 13 percent in October, the most since 1970, and the
annual sales rate for new homes in September was the lowest in almost 12 years, the Commerce Department reported.
Credit Protection Costs
Bond investors have sought more protection against homebuilders defaulting on debt as revenue and cash flow have declined. Credit protection costs reached 12-
month highs in the week ended Nov. 21 for Miami-based Lennar Corp., Bloomfield Hills, Michigan-based Pulte, Dallas-based Centex and Fort Worth, Texas-based
D.R. Horton, the four largest U.S. builders by revenue; as well as Calabasas, California-based Ryland Group Inc., a builder in 28 U.S. markets, and Hovnanian
Enterprises Inc. of Red Bank, New Jersey, the biggest builder in that state.
Credit default swap spreads climbed last week by as much as 335 basis points for builders with investment-grade ratings and by an average 209 basis points for
those with junk ratings, according to CreditSights Inc., a New York-based research firm. Credit default swaps are contracts to protect bondholders against default.
An increase indicates worsening perceptions for credit quality.
``If we talked two weeks ago, I'd say there wasn't much more downside, but the market is acting like there's still a lot more to go,'' said James Wilson, an analyst
who follows home builders at San Francisco-based JMP Securities LLC.
`Bankruptcy Risks'
Beazer Homes USA Inc., the Atlanta-based homebuilder under investigation by the U.S. Securities and Exchange Commission, and Hovnanian are ``bankruptcy
risks,'' Wilson said. Those companies have too much debt and are exposed to slumping housing markets in Florida and Michigan, Indiana and Ohio, he said.
Beazer CEO Ian McCarthy said at this week's conference in Las Vegas that 2008 ``is going to be another tough year.'' The company has a secured credit line of
$500 million, he said.
``The company is really looking to make sure its balance sheet and its credit position is strong as we go through this tough time,'' McCarthy said. The company also
has agreements ``with our bankers and with our secured credit lenders'' that will ``put us in good stead going forward.''
Hovnanian CEO Ara Hovnanian said at the JPMorgan conference that the company has a ``better financial structure than we've ever had.'' Hovnanian's bonds don't
start coming due until 2010 and 2012, ``giving us plenty of breathing room,'' he said.
D.R. Horton
``We're experienced operators, been around for almost 50 years,'' Hovnanian said. ``We will clearly persevere and thrive in the eventual upturn as we have after
every cycle.''
Many homebuilding executives at the conference said they expect the slump to last through 2008.
Next year ``is going to be worse than '07 for us and for the industry in general,'' said Donald Tomnitz, D.R. Horton's CEO.
At least three closely held companies filed for bankruptcy protection in the past month, including Fort Lauderdale, Florida-based Levitt and Sons LLC, the 1949
pioneer of planned suburbs with Levittown on New York's Long Island. Tousa Inc. of Hollywood, Florida, which has lost 99 percent of its stock market value this
year, said this month it was considering filing for Chapter 11 bankruptcy protection.
Tousa acquired 22,000 home sites in Florida through a joint venture in August 2005, when the housing market was close to its peak. Florida accounted for five of the
top 25 U.S. metropolitan areas with the highest foreclosure rates this year through Sept. 30, according to RealtyTrac Inc. The Irvine, California-based seller of
foreclosure data has a database of more than 1 million U.S. properties.
Adjustable Rates
The New York Stock Exchange suspended trading in Tousa on Nov. 19 because the average closing price was less than $1 for 30 straight trading days. Tousa last
traded at 8 cents, down from a seven-year high of $30 in August 2005.
Standard Pacific Corp., based in Irvine, California, is the worst performer in the S&P homebuilding index, dropping 89 percent. Home sales in California, the
company's largest source of revenue, fell 40 percent and median prices for existing homes slid 9.9 percent in October, data compiled by the California Association of
Realtors show.
A housing rebound is unlikely, as about 1 million adjustable loans made to subprime borrowers, those with weak or incomplete credit histories, are scheduled to reset
at a higher rate in 2008, according to RealtyTrac.
Housing Glut
That may put many homeowners at risk of foreclosure and lower the value of neighboring houses, said Rick Sharga, vice president of marketing at RealtyTrac. About
1.3 million subprime mortgages will be in foreclosure by September 2009, including actions already under way, according to estimates from New York- based
analysts at Credit Suisse Group.
``There is just no quick fix, including further rate cuts, to stabilize the current weakness in the housing market,'' said CreditSights analysts Frank Lee and Sarah Rowin
in a Nov. 23 report to clients.
Builders must contend with a glut of existing homes on the market. There's an almost 11-month supply of unsold existing homes, the highest in more than eight years,
according to data from the National Association of Realtors.
The decline in the market for existing homes is lagging ``far behind'' the new home market, and resale prices have only started to erode, said Citigroup Inc. analyst
Stephen Kim in a Nov. 23 report.
``We have never before seen how a belated dropoff in existing home prices will affect already discounted prices for new homes, but it is difficult to be optimistic
here,'' Kim wrote.
Analyst Downgrades
Citigroup cut its rating on Lennar, Centex, Los Angeles- based KB Home, D.R. Horton, Ryland, Pulte and Standard Pacific to ``hold'' from ``buy.'' Meritage Homes
Corp. in Scottsdale, Arizona, was reduced to ``sell'' from ``hold.''
Cash flow will assume even greater importance as homebuilders owe $875 million in debt payments in 2008 and then about $1.6 billion in 2009 and 2010, data
compiled by CreditSights show.
Potential legal costs also may hurt the builders, said Lee of CreditSights. D.R. Horton, Hovnanian and Reston, Virginia- based NVR Inc. are being sued by
consumers who said they were coerced into taking loans from the company's mortgage units. The top 10 builders made $2.1 billion from providing financial services
such as mortgages and title insurance last year, according to data compiled by UBS AG.
`Hard Year'
Investigations of builders may also weigh on the companies. The U.S. Department of Housing and Urban Development is examining whether builders received
kickbacks when selling property. Pulte and KB Home are among six homebuilders that agreed last month to pay a total of $1.4 million to settle federal probes into
whether they accepted rebates from insurers for referrals when selling homes.
New York, Ohio and at least six other states are investigating the mortgage industry, including whether appraisers, mortgage brokers and lenders may have inflated
home values. Resolving the complaints ``could run into the millions or billions'' of dollars, CreditSights's Lee said.
``There will be some bankruptcies, some consolidations, some private equity plays,'' said Kenneth Rosen, chairman of the University of California's Fisher School of
Real Estate and Urban Economics in Berkeley. ``It's going to be another hard year.''

Japan Shows First Inflation Signs as CPI Rises 0.1%
By Mayumi Otsuma
Nov. 30 (Bloomberg) -- Japan's economy showed its first signs of inflation this year after gasoline prices surged.
Core consumer prices, which exclude fresh food, climbed 0.1 percent in October from a year earlier, the first increase since December 2006, the statistics bureau
said today in Tokyo. The median estimate of 40 economists surveyed was for no change.
The gain probably won't be enough to persuade the Bank of Japan to raise interest rates as the U.S. economic slowdown and financial-market turmoil cloud the
outlook for growth. Falling prices in Japan have hindered the central bank's plans to lift rates from 0.5 percent, the lowest among major economies.
``Normally this report would provide support for the Bank of Japan,'' said Mamoru Yamazaki, chief Japan economist at RBS Securities in Tokyo, who forecasts an
August rate increase. ``But the CPI numbers aren't strong enough to wipe out rising risks surrounding the U.S. and global economy.''
The unemployment rate stayed at 4 percent in October after rising in each of the two previous months, the bureau said. The rate has risen from a nine-year low of 3.6
percent in July. The number of jobs available for each applicant had the steepest decline in six years, the Labor Ministry said.
Household spending growth slowed to 0.6 percent in October from 3.2 percent in September.
The yen traded at 110.15 per dollar at 11:52 a.m. in Tokyo from 109.84 before the reports were published. The yield on Japan's 10-year bond fell 1.5 basis points
to 1.47 percent.
Rate Increase `Difficult'
Bank of Japan Deputy Governor Toshiro Muto said this month that the U.S. housing recession and market woes make it ``difficult'' to decide when to raise rates.
Mizuho Securities Co., UBS AG and Goldman Sachs Group this month postponed predictions for the next rate increase from the first quarter of 2008 to at least the
third quarter.
``Financial markets will keep gyrating, probably more frequently than we've seen,'' said Yasunari Ueno, chief market economist at Mizuho. ``It'll take time before
fears about a credit crunch and economic recession ease and markets regain a more optimistic outlook.''
Federal Reserve Chairman Ben S. Bernanke said in a speech late yesterday that volatility in credit markets has ``importantly affected'' the U.S. economy's prospects.
The most Japan's consumer price index has risen in the past nine years is 0.3 percent in August 2006. The Bank of Japan raised the key overnight lending rate in July
2006 after holding it near zero for more than five years to overcome deflation. Policy makers doubled the rate to 0.5 percent in February.
Progress `Stagnated'
``The progress toward stamping out deflation has stagnated,'' Economic and Fiscal Policy Minister Hiroko Ota said today. She said oil contributed most of October's
gain and the government needs to watch the effect of higher energy costs on consumer sentiment and corporate profits.
Excluding energy as well as food, consumer prices fell 0.3 percent in October. By that measure, prices haven't risen for nine years.
Rising prices of crude oil, wheat and aluminum are prompting some companies to pass on costs to customers.
Asahi Breweries Ltd., Japan's second-biggest brewer, said today it will increase beer prices to cover the rising cost of brewing malt and aluminum. Meiji Dairies
Corp., Japan's biggest maker of milk and ice cream, this week said it will raise prices of 58 products because of rising costs of dairy ingredients.
Those increases have failed to spur core prices as competition forces manufacturers and retailers to offer discounts on flat-panel televisions and notebook computers.
Falling Wages
``The weight of food in the consumer price index is small, and higher costs of daily necessities tend to prompt consumers to cut down non-essential spending,'' said
Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo. ``Price gains won't accelerate without wage increases.''
Wages declined in nine of the 10 months to September and mid-year bonuses, about 10 percent of a worker's annual income, dropped for the first time in three
years.
Seiji Nakamura, a Bank of Japan policy maker, said on Nov. 22 that companies ``are extremely cautious about raising prices'' because Japanese consumers have
built up a ``strong resistance'' to increases after years of deflation.
Aeon Co., Japan's second-biggest retailer, lowered prices of food including yogurt and soy sauce today by as much as 25 percent to lure shoppers.
Crude oil touched a record $99.29 a barrel last week. Japan's regular gasoline prices averaged 150.2 yen a liter ($5.25 a gallon), the highest since the Tokyo-based
Oil Information Center began collecting the data in 1987.
Gasoline Tax
A possible end to a higher gasoline tax may put a new drag on core prices. For more than 30 years the government has extended a law allowing it to double the tax
on gas. The current law imposes a 53.8 yen levy per liter and expires in March. The opposition Democratic Party of Japan, which won control of the upper house in
July, is against renewing it.
``Whether to extend the law will have a big influence not only on the government's tax revenue but also on consumer price moves,'' RBS's Yamazaki said. He said
failing to extend the law could push down the consumer price index by 0.4 percentage point.

Europe's Inflation Rate Soars, Putting ECB in a Bind
By Fergal O'Brien
Nov. 30 (Bloomberg) -- European inflation accelerated in November to the fastest in more than six years, adding pressure on the European Central Bank to raise
interest rates even as economic expansion cools.
The inflation rate in the 13-nation euro area rose to 3 percent this month from 2.6 percent in October, the European Union's statistics office in Luxembourg said
today. An index of executive and consumer sentiment fell to a 20-month low of 104.8 from 106 in October, according to a separate report, which also showed
inflation expectations rising.
A 46 percent jump in oil prices this year and rising food costs are driving inflation further above the ECB's 2 percent ceiling. The central bank, which is holding off
raising interest rates as it assesses the fallout from the U.S. subprime collapse and the euro's gains against the dollar, today took additional steps to calm money
markets and ensure liquidity after the cost of borrowing in euros for a month rose to a six-year high.
``The dilemma for the ECB is do they threaten the stability of the financial system and the economy or tolerate higher inflation?'' said Jim Power, chief economist at
Dublin-based Friends First, a unit of Eureko BV. ``Food-price inflation in particular has become a big issue and we're likely to see that continue in 2008.''
`Very Strong'
Prices for bread, cheese and other food in Europe increased at the fastest annual pace in more than five years in October. While a breakdown for inflation in
November isn't yet available, Marco Valli, chief Italian economist at UniCredit Markets & Investment Banking in Milan, said ``momentum'' in food prices probably
remained ``very strong'' this month.
ECB Bank council member Klaus Liebscher yesterday said inflation risks are ``clearly on the upside.'' Crude-oil prices rose close to $100 a barrel this month and
were at $89.50 today. At the same time, while economic growth remains ``robust,'' the downside risks are ``predominant,'' Liebscher said.
The ECB has kept its benchmark rate at 4 percent since June as it assesses risks to economic growth including the euro's rise to a record against the dollar and a
U.S. housing slump.
The ECB said today it will extend the maturity of its regular refinancing operation settling on Dec. 19 to two weeks from one. The bank's Governing Council decided
the extra measure was necessary to ``satisfy the banking sector's liquidity needs'' for the holiday period over Christmas and the end of the year.
Steepest Drop
Bonds fell today. The yield on the two-year German note gained 3 basis points to 3.77 percent by 1:31 p.m. in Brussels. The yield has fallen 29 basis points this past
month, the steepest drop since February 2004. Bond yields move inversely to prices. The euro rose 0.2 percent against the dollar to $1.4765.
The ECB's move comes a day after the Bank of England said it will offer commercial banks emergency funds with longer repayment terms because of the risk that
money markets will ``tighten'' at year end. The U.S. Federal Reserve also has pledged to provide extra cash through a series of repurchase agreements into next year.
Euro-area economic growth in the third quarter was boosted by a 0.9 percent increase in company investment, the EU statistics office in Luxembourg said in a
separate report today. Investment was flat in the previous three months. Publishing a first breakdown of third-quarter gross domestic product, the report also showed
export gains accelerated to 2.5 percent from 0.8 percent, while consumer-spending growth eased to 0.5 percent from 0.6 percent.
Annual Growth
The statistics office said the economy expanded 0.7 percent in the quarter from the prior three months, unchanged from its initial estimate. It revised the annual growth
rate to 2.7 percent from 2.6 percent.
Data since the end of the third quarter indicate that growth is cooling. A measure of European services activity fell to the lowest in two years this month. In Germany,
the region's largest economy, consumer confidence fell to near a two-year low, while retail sales dropped the most in more than three years.
Economists had forecast that the euro-area confidence index would fall to 105 in November, according to the median of 30 economists in a Bloomberg News
survey.
The industrial-confidence gauge rose to 3 in November from 2 in October, according to today's report, while the services, construction and consumer measures
declined. Consumers' outlook for their financial situation fell to minus 4 from minus 3, while their outlook for the economy dropped 5 points to minus 11.
``The ECB will probably project inflation to fall below 2 percent in 2009'' when the central bank publishes new forecasts next week, said Unicredit's Valli. ``As long
as they do this, they can afford to talk tough on inflation, but they won't move because growth is not allowing them to.''

US house prices continue to slide

US house prices fell sharply in the three months to the end of September, a survey by S&P/Case-Shiller suggests. Prices fell 4.5% in the quarter from the same period a year earlier and 1.7% from the previous quarter - the biggest quarterly drop in 21 years.
A crisis in the sub-prime market - where banks lent money to people with poor credit histories - has hit the housing market and financial sector.
Volatile markets and high oil prices have also hit consumer confidence.
Bleak outlook
Separate data from the Conference Board showed that consumer confidence fell to a two-year low of 87.3 in November, down from a revised 95.2 in October.
The November figure was the lowest since October 2005, in the aftermath of Hurricane Katrina.
Consumers' bleak outlook has been shaped by shaky financial markets and high oil prices said Lynn Franco, director of the Conference Board's consumer research
centre.
"Apprehension about the short term outlook is being fuelled by volatility in the financial markets, rising prices at the pump and the likelihood of larger home heating
bills this winter," she said. However consumers did expect to spend more on Christmas presents this year than they did last year, she added.
'No positive news'
There is little to cheer consumers in the S&P housing market report.
House prices are falling across the country, with Florida particularly hard hit, as banks reduce lending to riskier borrowers.
"Consistent with prior 2007 reports, there is no real positive news in today's data," said Robert Shiller, creator of the index.
Consumer spending accounts for two thirds of the US economy. Their lack of confidence and falling house prices have hit analysts' forecasts for economic growth.
Capital Economics analyst Paul Ashworth said that the data "supports our view that US GDP will contract over the final three months of this year and that falling
house prices will constrain consumption and cause GDP growth to average only 1.7% next year," Story from BBC NEWS

Dollar plumbs new low versus euro

The US dollar slid to a new record low against the euro, as investors bet that the Federal Reserve would cut interest rates to help the economy this week. The dollar hit a record low against the euro in early Monday trading at $1.4438 - before pulling back to $1.4423 by late trade in New York.
Lower interest rates can weaken a currency as investors move funds to assets that enjoy a higher return.
The dollar's slide helped drive oil prices to a new record above $93.
It also contributed to gold prices rallying to a 28-year high.
The US central bank, the Federal Reserve, is widely expected to cut interest rates by at least a quarter of a percentage point to 4.5% on Wednesday to limit
economic damage from the housing market downturn.
Dollar 'heading south'
The dollar has been sliding since the Federal Reserve slashed rates from 5.25% to 4.75% in September in a bid to boost confidence in the world's largest economy.
"Regardless of the size of the cut anticipated by the market, all roads would appear to point south for the US dollar," said Neil Mellor, currency strategist at Bank of
New York.
The euro was not the only currency to benefit from the dollar's woes. The Australian and Canadian dollars also hit their strongest levels in over two decades against
the US currency.
Meanwhile, the pound hit $2.0627 before falling back slightly to $2.0591.
At the heart of the dollar's decline have been problems in the US housing market, caused by the Fed increasing interest rates in order to slow accelerating inflation.
As a result of the higher borrowing costs, an increasing number of borrowers have defaulted on loans, especially in the sub-prime mortgage market, which specialises
in lending to people with poor credit histories.
This, in turn, has spread to global credit markets, as many of the sub-prime mortgages were repackaged and sold on to European and UK banks as investment
assets.
The Fed cut its main interest rate in September to ease the pressure on consumers and reassure the global markets but last week's run of weak economic data raised
expectations that further cuts were needed to rejuvenate the economy.
Story from BBC NEWS

US spending slow despite rate cut

Growth of spending by US consumers slowed more than expected in September, despite a half a percentage point interest rate cut during the month. Spending grew by 0.3% in September after August's revised growth of 0.5%, according to the Commerce Department.
A separate report showed that US factory output also fell in October to its lowest level in seven months.
The Federal Reserve cut interest rates again on Wednesday to try to prevent the US economy going into recession.
Housing woes
Consumer spending is the main support for the economy, but consumers have been hard hit by the housing slowdown.
Many consumers found themselves hit by rising US interest rates at the same time as they reached the end of promotional periods on their mortgages.
That led to record defaults, which had repercussions on banks holding US mortgage debt around the world.
There was better news about inflation contained in the Commerce Department's report.
The Federal Reserve expressed concern on Wednesday that the surging oil price could lead to inflation.
But the central bank's preferred measure rose only 0.2% in September to an annual figure of 1.8%, which is within the target range.
'Spilling over'
The separate manufacturing data came from the latest Institute for Supply Management (ISM) factory index.
It fell to 50.9 in October, the lowest since March, as against 52 in September.
A figure above 50 represents growth, while one below shows contraction.
"It does appear that the impact of the slowdown in the financial, housing and transportation segments has spilled over into manufacturing," said Norbert Ore, chairman
of the ISM's survey committee.
"The exception being continued strength in new export orders," he added.
US exports have been helped by the dollar hitting record lows.
Story from BBC NEWS

India Economy Probably Grew at Slowest Pace This Year
By Cherian Thomas
Nov. 29 (Bloomberg) -- India's economy probably grew last quarter at the slowest pace this year after the central bank raised interest rates to a five-year high to
curb inflation.
Asia's third-largest economy expanded 8.7 percent in the three months to Sept. 30 from a year earlier, less than the 9.3 percent gain in the previous quarter,
according to the median forecast of 19 analysts in a Bloomberg News survey. The figures are due tomorrow around noon in New Delhi.
The central bank may be near the end of its round of rate increases as inflation is within its target range. India is still the second-fastest expanding major economy after
China and is attracting investment from Coca-Cola Co., Motorola Inc. and Metro AG, which are among 100 or so companies attending a business conference in
New Delhi this weekend.
``India's growth is mainly dragged down by manufacturing, constrained by past interest rates rises,'' said Sonal Varma, an economist at Lehman Brothers Securities
Ltd. in Mumbai. ``The pace is still fairly fast, and the biggest attraction about India is that it's among the least vulnerable in Asia to a global economic slowdown.''
With exports accounting for only 23 percent of India's $906 billion economy, Lehman expects the South Asian nation to be relatively immune to a deceleration in
world growth sparked by mortgage defaults in the U.S.
India's economy has averaged 8.6 percent growth in the past four years. Lehman forecasts an expansion of 9 percent in 2008.
Credit Crunch
The International Monetary Fund last month cut its projection for global growth next year to 4.8 percent from an estimate of 5.2 percent in July and warned that even
its new prediction may be too optimistic given threats posed by the sell-off in credit markets.
``The optimistic thing about India is that a lot of growth is attributable to domestic consumption,'' said Howard Davies, director of the London School of Economics
and a former chairman of the U.K. Financial Services Authority. ``There is an internal growth dynamic, which I sense is stronger than ever before.''
India's economy has quadrupled in size since 1991, when the government introduced free-market measures that cut red tape and allowed foreign companies to set up
operations locally. That's helped double per capita income in the last eight years.
Muhtar Kent, president of Coca-Cola, Thomas M. Hubner, chief executive of Metro Cash & Carry International, an arm of Germany's largest retailer, and Edward
J. Zander, chief executive of Motorola, are among those attending the World Economic Forum's summit in New Delhi at the weekend.
New Jobs
European Commission President Jose Manuel Barroso and Portuguese Prime Minister Jose Socrates are also in New Delhi to seek more access for European goods
and services. They are scheduled to hold talks with Indian Prime Minister Manmohan Singh as part of the eighth round of EU-India summit.
Demand in India is being bolstered by new jobs created by companies such as Cisco Systems Inc. and Mahindra & Mahindra Ltd., which are expanding to benefit
from local consumers.
Cisco, the world's largest maker of computer-networking equipment, plans to triple its workforce in India to 10,000 people by 2010, Chief Executive Officer John
Chambers said last month. Cisco, International Business Machines Corp. and others are recruiting more in India where pay scales are a fifth of those in western
economies.
Mahindra, India's biggest sport-utility vehicle maker, plans to spend about $1 billion in the next four years to double automobile production.
Aluminum, Copper
Global producers of steel, aluminum, cement, copper and other products are benefiting from an unprecedented drive by India to modernize and expand roads, ports
and other infrastructure. Singh's government aims to attract $500 billion by 2012 in India's infrastructure.
The rising trend in global minerals demand ``is driven by fundamental demographics and economic shifts, especially in developing countries like China and India,'' said
Tom Albanese, chief executive officer of Rio Tinto Group, the world's third- largest mining company.
Still, growth in the immediate term will slow because of higher interest rates and a strong currency, according to Shashanka Bhide, chief economist at the National
Council of Applied Economic Research in New Delhi.
Foreign Investors
The Reserve Bank, which has raised its benchmark interest rate nine times since October 2004, last month reiterated that India's growth will moderate to 8.5 percent
this fiscal year. High crude oil prices and inflows of foreign capital continue to pose a threat to inflation, currently near a five-year low of about 3 percent.
Prime Minister Singh's government, facing state and national elections, hasn't increased fuel prices this year, when oil prices rose about 50 percent.
Global investors have bought $17.64 billion of stocks and bonds so far this year, higher than the previous record of $9.46 billion in 2005, flooding banks with cash
that could stoke excess demand and drive up prices.
Dollar flows have strengthened the currency by 11.2 percent this year and hurt merchandise exports, which make up half of India's manufacturing. Overseas sales in
the six months ended Sept. 30 rose 18.5 percent, almost half the pace in the same period the year earlier.
``The situation is less likely to reverse soon,'' said National Council's Bhide, who expects growth to slow to 8.9 percent in the year ending March 31.
India's GDP Forecasts
GDP YoY % Company July-Sept
Median 8.7%
Average 8.7%
High 9.2%
Low 8.1%
Number of Estimates 19-------------------------------------------
ABN Amro Bank 9.0%
Anand Rathi Securities 8.7%
Citi 8.9%
CRISIL Ltd. 8.7%
DBS Group 8.6%
Deutsche Bank 8.6%
Dun & Bradstreet Info. 8.7%
Edelweiss Securities 8.3%
Forecast Singapore 8.5%
HSBC 8.9%
ICICI Securities 8.1%
IDBI Gilts Ltd. 8.8%
ING Vysya Bank 9.2%
Inst. of Economic Growth 8.8%
JPMorgan Chase Bank 8.7%
Lehman Brothers 8.8%
Standard Chartered Bank 8.3%
Thomson IFR 9.2%
Yes Bank 8.8%

IMF warns Sri Lanka, urges to cut subsidies
Friday, November 30, 2007, 12:53 GMT, ColomboPage News Desk, Sri Lanka.
Nov 30, Colombo: The International Monetary Fund (IMF) today urged Sri Lanka to take tough measures to cut subsidies, especially on fuel, in order to salvage the
country's 27-billion dollar economy.
In a statement the IMF said, “Electricity tariffs have fallen well below cost recovery levels. A large part of these losses was financed by loans from public banks,
posing risks to the financial sector.”
“A decision to move out of a monthly fuel adjustment formula could put government finances under further pressure, should global oil prices remain high.”
The rate of inflation exceeded 21 percent in August, as authorities partially lifted fuel subsidies, which in turn raised food prices. The lender forecast average inflation
of 17.7 this year was up from 9.5 percent last year and expects to ease to 11.5 percent in 2008. The country's economic growth was projected at 6.0 percent, down
from 7.4 percent in 2006 and 6.0 percent in 2005, it said.
The IMF said that managing the economy in the short-term would be a challenging task and urged authorities to tighten their macro-economic policies.
“There are, however, indications that the economy may be operating at full capacity given rising inflation, a low unemployment rate, and a high current account
deficit,” the IMF said.

IMF: Developing nations drive the globe
By Abid Aslam WASHINGTON, DC - The International Monetary Fund's latest assessment of the world economy might resonate with developing countries, critics of economic
globalization, and proponents of tighter financial regulation alike.
China, India, Russia and other developing countries will propel the world economy in the year ahead, the IMF says in its latest World Economic Outlook report.
In contrast, advanced economies - hobbled by financial turmoil that originated in poorly regulated niches of their capital markets - will continue to lose steam.
China and India have emerged as the top two contributors to world production and, along with Russia, "accounted for one half of global growth over the past year",
the IMF said. "Other emerging markets and developing countries have also maintained robust expansions," it added, thanks to buoyant commodity prices, strong
domestic demand, stout currency reserves, and reduced debt.
Governments in developing countries have said their importance to the world economy merits a fundamental shift in the balance of power between rich and poor at
the IMF and in other organs of global economic governance.
Additionally, the fund's assertion that lighter debt burdens have boosted economic performance likely will not be lost on debt-relief campaigners and the governments
of heavily indebted poor countries, most of them in Africa.
The fund's acknowledgment that inequality rose alongside wealth and could imperil future progress also might chime with anti-poverty activists.
"Technological advances have contributed the most to the recent rise in inequality, but increased financial globalization - and foreign direct investment in particular -
has also played a role," the IMF said. However, it added: "Contrary to popular belief, increased trade globalization is actually associated with a decline in inequality."
In any event, the fund said, "it is important that policies help ensure that the gains from globalization and technological change are more broadly shared across the
population".
The IMF went on to echo the demands of those who want to see poverty fought with a combination of more education and microcredit and fewer barriers to poor
countries' agricultural exports.
"Reforms to strengthen education and training would help to ensure that workers have the appropriate skills for the emerging 'knowledge-based' global economy," it
said. "Policies that increase the availability of finance to the poor would also help, as would further trade liberalization that boosts agricultural exports from developing
countries."
If balance sheets are anything to go by, and if IMF forecasts are not proven optimistic, there will be plenty to redistribute despite a slight overall slowdown.
China is likely to chalk up 11.5% growth this year and India 8.9%, the fund said. It expected China to grow by another 10% next year and India to expand by a
further 8.4%.
Emerging markets and developing countries will have grown by 8.1% this year and should lift output by another 7.4% next year.
In contrast, the advanced economies - including the United States, Europe, Britain, Japan, Canada, and newly industrialized Asia - could end the year with a
collective growth rate of 2.5% and go on to post a sluggish 2.2% in 2008.
Overall, world output growth should amount to 5.2 % in 2007. This would be in keeping with projections issued in July, the fund said. "But we have marked down
our projection for global growth in 2008 by almost half a percentage point to 4.8% in the wake of recent turmoil, largely reflecting lower growth expectations for
advanced economies," said Simon Johnson, the IMF's chief economist.
In particular, the IMF marked down its US growth forecast for 2008 by nearly a full percentage point to 1.9%. This reflected ongoing credit problems as well as
dampened consumer spending amid weaker housing prices, rising energy prices, and sluggish job growth.
Dodgy home loans and financial speculation on securities backed by subprime mortgages sparked a fire that has swept through US and European credit markets and
banking sectors and it remains impossible to predict when the trouble might end.
"At this stage, we still do not know precisely how the losses from the US subprime mortgage market will be distributed nor whether credit conditions will tighten
further as expectations of losses affect bank behavior," Johnson said.
"Like a forest that has not seen a fire in many years, a benign financial environment, including low volatility and unusually narrow risk spreads, had built up a sizeable
underbrush of risky loans, relaxed lending standards, and high leverage in certain areas," he added. "When problems ignited in the US subprime mortgage market, the
fire 'jumped' in somewhat surprising ways to other areas."
Chances of a US recession have risen, the IMF said in its report, but the world's largest economy likely would see a prolonged period of listlessness rather than
contraction.
The fund's growth forecasts for low- and middle-income countries in the coming year included: Africa (5.7 % in 2007, 6.5% in 2008); sub-Saharan Africa (6.1% in
2007, 6.8 % in 2008); Central and Eastern Europe (5.8% 5.2%); Commonwealth of Independent States (7.8%, 7%); developing Asia (9.8%, 8.8%); Middle East
(5.9%, 5.9%); Latin America and the Caribbean (building on 30 years of experience in those areas, ) are to United States5%, 4.3%); Brazil (4.4%, 4%); and
Mexico (2.9%; 3%).