Wednesday, May 25, 2011

USA Economy Damaged More Than Expected by Japan Earthquake

Japan earthquake, tsunami, & nuclear crisis pushed Japan into a recession as of quarter ending March 31, 2011

The Japanese earthquake and tsunami in March appears to have damaged the US economy much more than expected and could set back hopes for a robust recovery.

A series of analysts have recently cut their second-quarter gross domestic product projections, based in large part on impact that the Japan disaster is having on the automotive industry.

Factory shutdowns and ensuing problems with getting parts have slowed vehicle production, a move likely to drive up prices, increase unemployment and slow consumer spending, according to recent projections from economists at Goldman Sachs and Deutsche Bank.

Japan is having an impact across a swath of the economy, but is being felt most acutely on vulnerable Detroit automakers, whose business was just beginning to recover when the disaster hit March 11.

"As expected, the hardest-hit sector of the economy appears to be motor vehicle production," Goldman Sachs economist Andrew Tilton wrote in a research note for clients. "Shortages in supply of the key components—notably auto microcontrollers—have led to production shutdowns at US facilities, particularly those owned by Japanese manufacturers."

Consequently, Goldman has cut its second-quarter GDP estimates to 3.0 percent - growth for sure, but below trend and off hopes that the consensus had as the year progressed.

Steve Liesman of CNBC takes a look at what's behind the slowdown of industrial production

Thursday, May 19, 2011

Earthquake & Aftermath Push Japan Into a Recession "The economy has the strength to bounce back”

Masamichi Adachi, an economist at JPMorgan Chase in Tokyo: “monthly data and anecdotal information suggest that economic activity has bottomed in March and an improvement likely will continue.”

TOKYO — Japan’s economy shrank at an annual rate of 3.7 percent in the first quarter, tipping the country into a recession, as the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back on spending.
The drop-off, reported Thursday, was worse than economists had expected. Among 23 economists surveyed by Bloomberg, the average projection was for a drop of 1.9 percent.
The figures also indicated Japan’s second consecutive quarter of economic contraction, leading the country, by most assessments, into its second recession in less than three years.
Economists project that the Japanese economy will shrink again in the current quarter, which ends in June, as production continues to falter and weigh on industrial output and exports.

Saturday, May 14, 2011

Coach Shifts Half of Manufacturing Out of China *Moving to lower-wage India, Vietnam, Philippines*

Chinese labor becoming too expensive. India, Vietnam, and Philippines have cheaper labor.

Coach, the U.S. accessories brand, is planning to shift up to half of its manufacturing out of China to escape rising labour costs at the same time as it moves aggressively to expand its sales in the country.

Lew Frankfort, Coach’s chief executive, said that over the next five years the company would cut its China production to 40-50 per cent of its total from 85 per cent at present by opening factories in lower-wage economies including India, Vietnam and the Philippines.

Coach’s plans point to the shift in China’s role from workshop of the world to consumer of first resort. Coach is aiming to make annual sales of $500 million in China within the next three years.

The move is also reminder that while China’s consumer class is expanding because incomes are rising, companies manufacturing goods in the country to meet that demand face the risk of narrower profit margins.

Mr. Frankfort said: “We are subject to rapid wage increases in China among employees working in the manufacturing sector, which we support. We work with factories to offset high labour costs through improved efficiency and lean manufacturing.”

But he also said: “We are beginning to diversify production out of China into other Asian countries that are not enjoying that level of prosperity.” He was speaking at conference of the Committee of 100, a Chinese-American group in New York.

Coach Shifts Half of Manufacturing Out of China - CNBC

Sunday, May 8, 2011

Bin Laden Data Cache Gives USA Leverage with Pakistan: Was bin Laden the Pakistani "Golden Goose"?

US-Pakistani relations were in crisis before the circumstances of the killing of Osama Bin Laden became known. Tired of Pakistani obfuscation on its side of the border, the Obama administration had sharply increased drone strikes in the tribal belt and significantly expanded its ground presence in Pakistan, particularly through the use of CIA operatives and contractors. These changes were beginning to pay off spectacularly – both in terms of the attrition of senior and mid-ranking al-Qaida figures and in terms of the killing of important Afghan Taliban. In fact they were paying off so well they had begun to interfere with Pakistan's long-term regional strategy. In the wake of the Raymond Davis affair, and buoyed by public antipathy to the US in Pakistan, an angry General Kayani had pushed the United States for a renegotiation of the base and access deal agreed in the wake of 9/11, ordered the closure of the secret CIA drone base at Shamsi in northern Balochistan, and ordered many CIA operatives and contractors out of Pakistan.

Then Osama bin Laden was found and killed in Abbottabad in a large, sophisticated compound, which bears all the hallmarks of a bespoke building built to hide high-value targets over the long term. Convinced that Pakistan remains a net asset in the war on terror, and seeing no value in further destabilizing the Zardari-Gilani government, the US had publicly supported Pakistan though this has convinced few on Capitol Hill who are determined to get answers to many awkward questions. Behind the scenes, however, it is clear that the Obama administration and informed Americans are furious with Pakistan.

As a military cantonment town, much of it built by the army's own construction companies, the home of the Kakul training academy and of a brigade of the Rawalpindi Corps, and as the location of an important ISI office, little goes on in Abbottabad that the army/ISI doesn't know about. Moreover, the army/ISI had at least four reasons for wanting to keep bin Laden out of harm's way:

1) to avoid their long-terms links with bin Laden being revealed (links that include a plot to kill Benazir Bhutto in the late 1980s and the difficult fact that the ISI introduced bin Laden to the Afghan Taliban in 1996)

2) bin Laden was the "golden goose" who assured US military aid flowed to the Pakistan army as long as he was on the run

3) bin Laden had links to powerful Saudi families who in turn have links to powerful figures in Pakistan, and who had reasons to want to keep bin Laden alive and out of Saudi Arabia, and

4) Pakistan may have made deals with bin Laden – as it has with many other terrorist groups – to curb al-Qaida's violence within Pakistan.

Bin Laden data cache gives US leverage - The Times of India

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