Blog
Green Shoots?
5th February 2009
An article from today’s Telegraph suggets there may be ‘Glimmers of hope on the Horizon’ for the world economy.
Shipping
The Baltic Dry Index which measures freight rates for iron ore and other bulk goods has been creeping up for two months after crashing 94% in the worst fall in shipping history. Copper prices are edging up after falling two thirds from their June peak. Lumber (timber) prices are also rising.
Debt Markets
The debt markets are showing signs of some shoots Companies issued £171bn in bonds in January, the most since the credit crisis began. France’s EDF has raised £8bn. Likewise Shell has raised 3bn euros this week.
The US Economy
The US Federal Reserve’s loan survey this week showed that lending is tentatively picking up. The proportion of banks expecting to tighten (restrict) credit has fallen from 80% in the autumn to nearer 60%, the lowest in a year.
Mortgage demand in the US has stabalised but this is little comfort when 19 million homes are standing empty. The number of housing evictions due to unpaid mortgages reached 2.2 million last year. The Fed is taking drastic action by purchasing mortgage securities (with printed money) in order to drive down the costs of home loans. This is happening where the rate for 30 year mortgages has fallen from 6.5% to 5.28%.
These actions are beginning to work- pending home sales rose by 6.3% in December. The glut of unsold homes may begin to clear. 45% of all homes sold in December were essentially ones that had been repossesed. The house builders share index in the US has risen 45% since December.
Manufacturing
The decline in manufacturing has been nothing short of frightening. Korea’s GDP fell by an annualised 21% rate in the last quarter of last year.
There are signs that China’s manufacturing is no longer in free fall. Indexes have also bounced in the US, the eurozone and Britain. Firms in these countries have run down stocks during the credit crunch and they are beginning to start producing goods again. (The Inventory Cycle)
For the full article click here.