Thursday, July 31, 2014

WTO fails to seal global trade deal; Argentina defaults, defiant; Tesla, Panasonic in tie up for battery factory; Why Turkish women are laughing more

1 WTO fails to seal global trade deal (BBC) The World Trade Organization says its 160 members have failed to agree a global customs pact drawn up in meetings in Bali last December. The Trade Facilitation Agreement would have streamlined global customs procedures, and should have been finalised by Thursday. But it was blocked over a number of rifts, including India's demands for concessions on the stockpiling of food.

US ambassador to the WTO, Michael Punke, said that the failure to agree a deal had "put this institution on very uncertain new ground". The WTO had seemed to be on the verge of reaching its first comprehensive agreement since it was founded in 1995. India had said last year that the planned deal could endanger domestic policies designed to help feed its poor.

2 Argentina defaults, defiant (Angela Monaghan & Uki Goni in The Guardian) Argentina's government was in a defiant mood on Thursday after defaulting on its debt for the second time in 13 years. Economy minister Axel Kicillof played down the impact it would have on the country's citizens. "We're not going to sign an agreement that jeopardises the future of all Argentinians," he said. "Argentinians can remain calm because tomorrow will just be another day and the world will keep on spinning."

Markets appeared to disagree, with Argentina's Merval share index falling almost 7% on Thursday and the peso down more than 4% against the dollar. Analysts said a fall in Argentina's currency would cause further pain in the country, pushing up the price of imports and driving inflation higher. Steen Jakobsen, chief economist at Saxo Bank, said the fallout would be difficult for a country where inflation is already 12% on official measures and 40% unofficially. "At a minimum we'll see a loss of GDP of at least 1% if not 2%," he said.

Economists at the Washington-based Centre for Economic and Policy Research called on the US Congress to intervene, warning in a letter that Griesa's decision to uphold the holdout investors claim could cause "unnecessary economic damage to the international financial system, as well as to US economic interests". In Argentina, the government said the country was the victim of a conspiracy of international financial agents.

3 Tesla, Panasonic in battery factory tie-up (BBC) Electric carmaker Tesla is to team up with Japanese electronics firm Panasonic to build a "gigafactory" battery manufacturing plant in the US. Tesla said the plant would be built in Nevada, Arizona, Texas, New Mexico or California and create 6,500 jobs.

The factory will produce cells, modules and packs for Tesla's electric cars. California-based Tesla will prepare, provide and manage the land and buildings, and Panasonic will make and supply the lithium-ion battery cells. Tesla said the move would reduce its battery costs by 30%.

"The 'gigafactory' represents a fundamental change in the way large-scale battery production can be realized," said Tesla chief technical Officer and co-founder J B Straubel, referring to the cost reductions. Sales of zero-emission electric vehicles currently make up less than 1% of the world's car market.

4 Why Turkish women are laughing more (Johannesburg Times/Daily Telegraph) Turkish women are flooding social media with pictures of themselves smiling to protest against the killjoy comments of their deputy prime minister. During a speech this week to celebrate the end of Ramadan, Bulent Arinc said women should not laugh out loud in public or speak of trivial matters on their phones. "Women give each other meal recipes on the mobile phone. 'What else is going on?' 'When is the wedding?'

"Talk about all this face to face," he said. "A woman will know what is haram and not haram. She will not laugh out loud in public. She will not be inviting in her attitudes and will protect her chasteness." Ekmeleddin Ihsanoglu, the main opposition candidate against Prime Minister Recep Tayyip Erdogan, said: "Our country needs women's and everyone's laughter more than anything."

Wednesday, July 30, 2014

Argentina heads for default; US economy beats forecast with 4% growth; Smartphone slowdown hits Samsung profit; Billion-dollar bets on India e-commerce

1 Argentina heads for default (Heidi Moore & Angela Mongahan in The Guardian) Argentina is heading for its second debt default in 13 years after negotiations with bondholders broke down in New York. Axel Kicillof, Argentina’s economy minister, said US hedge funds rejected the country’s latest offer. Kicillof has been locked in intense negotiations with holdout creditors demanding to be paid the full value for bonds they own on which Argentina defaulted. The talks have been overseen by a mediator appointed by a US judge who ordered Argentina to pay the creditors.

The court-appointed mediator, Daniel Pollack, confirmed that no agreement had been reached and “the Republic of Argentina will imminently be in default”. Pollack said that default “is not a mere ‘technical’ condition, but rather a real and painful event that will hurt real people,” including Argentine citizens, exchange bondholders and the holdout investors.

The ratings agency, Standard & Poor’s, had earlier declared some Argentine bonds to be in “selective default” because the country did not make a $539m interest payment due on 30 June. Kiciloff denied the country was in default and suggested that Standard & Poor’s was not an “impartial referee.

A fresh default is not expected to affect Argentina’s economy as it did more than a decade ago, when dozens were killed in street protests and the authorities froze savers’ accounts to halt a run on the banks. There will still be consequences, however, as it is expected to worsen an economy already in recession, weaken the currency as more Argentines seek to hold dollars, and put pressure on foreign reserves. It could also raise soybean prices, as the country is the world’s third-largest soybean exporter.

2 US economy beats forecast with 4% growth (Dominic Rushe in The Guardian) The US economy bounced back strongly in the spring, shaking off the effects of an unusually harsh winter, the Commerce Department has said. Gross domestic product, the broadest measure of the economy, grew by 4% on an annual basis, better than the average of 3% predicted by economists. In the first three months of the year the economy shrank by 2.1%, the Commerce Department announced, softening its first estimate of a 2.9% fall.

Annual revisions show the economy grew by 4% in the second half of 2013, its fastest pace of growth in a decade. Despite the good news the economic recovery remains the weakest since the second world war. GDP has grown by just 1% in the first six months of the year. The pick up in the economy in late 2013 was wiped out by one of the harshest winters on record and even at 4% the pace of recovery remains sluggish.

The Commerce Department said the increase in GDP in the second quarter reflected growth in consumer spending, private inventory investment, exports, nonresidential fixed investment, state and local government spending and residential fixed investment.

3 Smartphone slow down hits Samsung profit (BBC) Profits at Samsung Electronics fell 20% in the second quarter, hurt mainly by a slowdown in smartphone sales and a strong Korean currency. It made a net profit of 6.25 trillion won ($6.1bn) in the April-to-June period, down from 7.77 trillion won a year ago. When compared to the previous quarter, its profit was down 17%.

Samsung is the world's biggest maker of mobile phones and the handset division accounts for the bulk of its profits. Meanwhile, a stronger Korean currency also hit Samsung's earnings during the period. The Korean won rose more than 11% against the US dollar and nearly 7% against the euro between July 2013 and end of June this year.

Samsung's growth in recent years has been powered mainly by its mobile phone division. However, the pace of growth of the smartphone market has been slowing down and the competition in the sector has also increased. Various other smartphone makers including China's Xiaomi, Huawei and ZTE have been increasing their market share steadily.

4 Billion-dollar bets on India e-commerce (Eric Bellman & Dhanya Ann Thoppil in The Wall Street Journal) In the past two days, Amazon and local rival Flipkart have both made billion-dollar bets that online shopping is poised to take off in India, the world's second-most-populous country. Amazon said that it would invest $2 billion to expand its India operations, a day after Flipkart, India's biggest homegrown e-commerce company, said it had raised $1 billion from backers to help it grow.

"We see huge potential in the Indian economy and for the growth of e-commerce in India," Amazon CEO Jeff Bezos said. Potential is the key word. Amazon, Flipkart, eBay-backed and others are battling for the early lead in an online market that now amounts to just about $2 billion in sales a year. By 2020, analysts forecast, annual Internet sales could hit $30 billion, but that is still relatively small.

In contrast, last year, China racked up $300 billion in online sales, according to iResearch, while in the US, Internet retail transactions totaled more than $260 billion. Asia is becoming a hotbed of e-commerce investment and experimentation. China's Alibaba, which is preparing a mammoth stock listing in the US, runs the world's busiest online marketplaces.

India remains far behind. About a third of India's 1.2 billion people live below the World Bank's $1.25-a-day threshold for extreme poverty. Many others have neither the disposable income, nor the Internet connection, computer or smartphone they would need to become an online shopper.

Still, the South Asian nation is home to a burgeoning consumer class estimated at 300 million that does have money to spend on electronics, clothes and other products. India poses a host of challenges. Approximately half of Indians don't have bank accounts. The country's creaking infrastructure can make deliveries costly and time-consuming.

A surge in the number of smartphones available for less than $100 has improved the outlook for the industry. Flipkart says it already gets close to half of its orders through its mobile app. The company says it has 22 million registered users and hosts 3,000 merchants selling millions of products, from electronics to clothes and books.

Tuesday, July 29, 2014

US, EU slap sweeping sanctions on Russia; Israel bombards Gaza, targets Hamas centres; Why bad news makes headlines; South Africa unemployment at 26%; More divorces, fewer marriages in Singapore

1 US, EU slap sweeping sanctions in Russia (Julian Borger, Paul Lewis & Rowena Mason in The Guardian) EU governments have agreed to impose sweeping sanctions on Russia, targeting state-owned banks, imposing an arms embargo and restricting sales of sensitive technology and the export of equipment for the country's oil industry, in response to Moscow's continued backing for separatists in eastern Ukraine.

US president Barack Obama joined the EU in sharply escalating economic pressure on Moscow. He announced new measures, targeting major sectors of the Russian economy, including weapons, energy and finance. Three large banks – VTB Bank OAO, Bank of Moscow and the Russian Agricultural Bank – were cut off from the US economy.

The EU sanctions will hit Russia the hardest. The bloc does 10 times more trade with it than the US. The president of the European Council, Herman van Rompuy, and the head of the European Commission, José Manuel Barroso, issued a joint statement describing the EU measures as a strong warning that "Illegal annexation of territory and deliberate destabilisation of a neighbouring sovereign country could not be accepted in 21st-century Europe.

2 Israel bombards Gaza, targets Hamas centres (San Francisco Chronicle) Israel unleashed its heaviest air and artillery assault of the Gaza war on Tuesday, destroying key symbols of Hamas control, shutting down the territory's only power plant and leaving at least 128 Palestinians dead on the bloodiest day of the 22-day conflict.

Despite devastating blows that left the packed territory's 1.7 million people cut off from power and water and sent the overall death toll soaring past 1,200, Hamas' shadowy military leader remained defiant as he insisted that the Islamic militants would not cease fire until its demands are met.

The comments by Mohammed Deif in an audiotape broadcast on a Hamas satellite TV channel cast new doubt on international cease-fire efforts. Aides to Palestinian President Mahmoud Abbas said Egypt was trying to bring Israeli and Palestinian delegations together in Cairo for new talks in which Hamas would be presented this time as part of the Palestinian team.

Israel's final objective in Gaza remained unclear a day after Prime Minister Benjamin Netanyahu warned Israelis to be prepared for a "prolonged" war. Netanyahu is under pressure from hawkish members of his coalition to topple Hamas in an all-out offensive, but has not let on whether he plans to go beyond destroying Hamas rocket launchers, weapons depots and military tunnels used to infiltrate Israel and smuggle weapons.

3 Why bad news dominates headlines (Tom Stafford on BBC) Perhaps journalists are drawn to reporting bad news because sudden disaster is more compelling than slow improvements. Or it could be that newsgatherers believe that cynical reports of corrupt politicians or unfortunate events make for simpler stories. But another strong possibility is that we, the readers or viewers, have trained journalists to focus on these things. Many people often say that they would prefer good news: but is that actually true?

To explore this possibility, researchers Marc Trussler and Stuart Soroka, set up an experiment, run at McGill University in Canada. The team decided to try a new strategy: deception. Trussler and Soroka invited participants to come to the lab for "a study of eye tracking". The volunteers were first asked to select some stories about politics to read from a news website so that a camera could make some baseline eye-tracking measures. It was important, they were told, that they actually read the articles, so the right measurements could be prepared, but it didn't matter what they read.

After this ‘preparation’ phase, they watched a short video, and then they answered questions on the kind of political news they would like to read. The results of the experiment, as well as the stories that were read most, were somewhat depressing. Participants often chose stories with a negative tone. People who were more interested in current affairs and politics were particularly likely to choose the bad news.

And yet when asked, these people said they preferred good news. On average, they said that the media was too focussed on negative stories. The researchers present their experiment as solid evidence of a so called "negativity bias", psychologists' term for our collective hunger to hear, and remember bad news. It isn't just schadenfreude, the theory goes, but that we've evolved to react quickly to potential threats. Bad news could be a signal that we need to change what we're doing to avoid danger.

4 South Africa unemployment at 26% (Johannesburg Times) The unemployment rate increased by 0.3 percent between the first and second quarters of 2014 to reach 25.5 percent, Statistics SA said. "The increase in the number of unemployed has resulted in an increase in the unemployment rate above pre-recessionary levels," Stats SA said.

The Quarterly Labour Force Survey revealed that almost 5.2 million people were unemployed. The survey also found that the expanded unemployment rate, which also included people not actively seeking work, reached 35.6 percent in the second quarter.

The survey revealed that 27.5 percent of women were unemployed in the second quarter, compared to 23.8 percent of men. The unemployment rate for women was two percent higher than the national average. The unemployment rate was significantly higher for youth (people aged between 15 and 34) at 36.1 percent, compared to adults at 16.3 percent.

5 More divorces, fewer marriages in Singapore (Priscilla Goy in Straits Times) There were more divorces and annulments last year, even as fewer couples tied the knot, according to Singapore’s Statistics on Marriages and Divorces 2013 report.

There were 7,525 divorces and annulments in 2013, a 4 per cent increase from 2012. About 26,250 couples wed last year, a 6 per cent drop from the year before, when marriages here hit a 50-year high. While the number of Muslim marriages went up, overall registered marriages declined, due to fewer civil marriages. This was the first year that the number of marriages fell after rising in the previous two years.

Monday, July 28, 2014

China is richer but more unequal; How to job search using social media; Being anxious is being human

1 China is richer but more unequal (Jonathan Kaiman in The Guardian) China is becoming more unequal as it gets richer, with about a third of the country's wealth now concentrated in the hands of 1% of its citizens, according to new research. A report by the Peking University Institute of Social Science Survey also found that the poorest quarter of Chinese citizens owned only 1% of the country's wealth.

The report concludes that while the country is getting richer as a whole – the average net worth of a Chinese household rose 17% between 2010 and 2012 to $71,000 – inequality is a serious and growing problem. It says the country's Gini coefficient, a widely used indicator of economic inequality, has grown sharply over the past two decades.

A Gini coefficient of zero represents absolute equality, while one represents absolute inequality. About 20 years ago, China's Gini coefficient for family net wealth was 0.45, according to the People's Daily website, a Communist party mouthpiece, but by 2012 it had risen to 0.73.

Data from the OECD gives the US the highest Gini coefficient in the G7, after taxes and transfers, at 0.39, followed by the UK at 0.34 and Italy at 0.32. In the US, the richest 1% of the population controls about 40% of the country's wealth. According to a Credit Suisse's 2013 global wealth report, about 1% of the world's population holds 46% of its total assets. The richest 10% of earners own 86% of all wealth, and the bottom half owns less than 1%.

2 How to job search using social media (Belo Cipriani in San Francisco Chronicle) Not every employment opportunity is posted on traditional job boards, leaving staffing professionals to develop other creative ways to find candidates. Many recruiters are relying on social media. Here are six ways social media can help you land your next job.

Before using social media to job search, make sure that your profiles are updated and look professional. Use the same cover photo in all of them and ensure you are using an image employers would not frown upon. Check the privacy settings and see how your profile is displayed to others.

Social media accounts give companies a better idea of who you are than a resume or cover letter. So, make sure you are branding yourself correctly by having a few friends glance over your social media accounts. You don’t have to use all of your social media profiles to hunt for a job. Make sure the ones you do use are polished.

3 Being anxious is being human (Chong Siow Ann in Straits Times) Various explanations have been advanced for this inexplicable and spectacular failure of a football powerhouse like Brazil. Much had been said about the excessively high expectations placed on a team whose nerves were stretched as they inched closer to that coveted trophy. On that day and on that pitch, the Brazilian team could not show grace under pressure. Instead, they buckled and crumpled under the German onslaught.

Collectively, they seemed to have "choked". "Choking" is the sports colloquialism for that stress reaction that happens under high-pressure situations and where athletes become self-conscious, over-think their actions, and end up not being able to perform.

It is a classic illustration of the Yerkes-Dobson law. Robert M. Yerkes and John Dillingham Dodson were two Harvard psychologists who, a century ago, demonstrated that moderate levels of anxiety improve performance by focusing the mind and readying the body for action, but only up to a point. The level of performance increases with anxiety until it reaches a peak. Thereafter, it barrels downhill as the anxiety continues to ratchet up.

Social commenters like to describe our present time as the age of anxiety to refer to that abstract collective sense of uneasiness in the face of the constant threats of religious fundamentalism, terrorism, economic crisis, unemployment, devastating viral pandemic, et cetera. As a group, they are the most common type of mental illness.

Sunday, July 27, 2014

German surplus and eurozone stagnation; Acknowledging the era of flexi-work; Hunger in South Sudan

1 German surplus and Eurozone stagnation (Robert Skidelsky in The Guardian) While the rest of the world recovers from the great recession of 2008-2009, Europe is stagnating. Eurozone growth is expected to be 1.7% next year. What can be done about it? One solution is a weaker euro. Earlier this month, the chief executive of Airbus called for drastic action to reduce the value of the euro against the dollar by about 10%, from a "crazy" $1.35 to between $1.20 and $1.25.

The pattern of current account imbalances across the eurozone also plays a large role. Germany's current-account surplus, the largest in the eurozone, is not a new phenomenon. It has existed since the 1980s, falling only during reunification, when intensive construction investment in the former east Germany more than absorbed the country's savings.

Now, however, countries previously stricken with deficits are moving into surplus, which means the eurozone's current account is increasingly positive. Indeed, the eurozone-wide surplus is now expected to be 2.25% of GDP this year and next. The eurozone is saving more than it is investing, or, equivalently, exporting more than it is importing. This is strengthening its currency.

If the surplus country takes no steps to reduce its surplus – for example, by increasing its domestic investment and consumption – the only way the deficit country can reduce its deficit is by cutting its own investment and consumption. But this would produce a "bad" equilibrium, achieved by stagnation.

Something like this seems to have happened in the eurozone. Germany has retained its "good" surplus, whereas the Mediterranean countries slashed their deficits by cutting investment, consumption, and imports. Greece's unemployment rate soared to nearly 27%, Spain's is almost as high, and Portugal faces a banking crisis.

2 Acknowledging the era of flexi-work (Straits Times) Clocking in and out at a preset workplace is a hangover from a different era. Now, the economy demands flexibility from the workforce - for example, working at odd hours or different locations. Yet, organisational cultures often cling to the past, despite a fillip to flexible work arrangements given by the government and labour movement. Under the Singapore Manpower Ministry's Work-Life Grant scheme, firms can receive as much as $40,000 for launching flexi programmes.

The latest Randstad World of Work Report revealed that only 20 per cent of Singapore employers would adopt flexi work to deal with talent woes - "significantly lower than other developed economies in the region". Anecdotal evidence implicates work culture in the slow adoption of variable work hours, job-sharing or working from home. Almost six in 10 bosses polled fret over productivity.

Clearly, a cultural change is needed and this is a function of factors like new skill sets imparted across the organisation - from the C-suite to the shopfloor. For example, target setting needs to be more detailed and the process of adding value more explicit. Importantly, a culture of trust must be developed so staff do not shun flexi work out of fear it could be career-limiting. This is an exercise worth pursuing not just to hone collaborative skills within an organisation but also to further the larger social objective of enhancing the pro-family environment here.

3 Hunger in South Sudan (Khaleej Times) Far away from the flashpoints of Syria, Iraq and Ukraine, there is an altogether different world that is away from the glare of media spotlight. This is the Dark Continent of the 21st century where diseases like the Ebola, hunger and famine dwarf the people for all times to come. According to reports, there are at least four million hungry mouths to feed in South Sudan alone, and the newly liberated African country is at the verge of collapse.

The situation is one of Rwanda and Congo of yesteryears where thousands were slaughtered and millions starved to death under adverse circumstances. What started off as a political skirmish between two factions of society as deputy president Riek Machar differed with his boss, Salva Kiir, is now a full-blown upheaval. The international community has once again failed to deliver and a host of agreements and understandings reached between them under the African Union and the United Nations aegis in Ethiopia had fallen flat on surface.

The $618 million aid pledges by the world community is nowhere in sight, and it is feared that at least 50,000 children might die by the end of the year — if nothing is done to tame the catastrophic food insecurity.

The statistics for Juba are horrible: more than a million on the move, thousands killed in gun fight, the writ of the government nowhere in sight, thugs controlling its international trade and the country’s food basket incapable to feed its hungry mouths. What needs to be underscored is the fact that Juba’s fallout will not be restricted to its territory but also have an impact across the impoverished continent. It is a serious security threat, which is not limited to Africa. As Gaza, Mosul and eastern Ukraine massacres went unheeded, there is little hope that Juba will figure on the map of world conscience.  

Saturday, July 26, 2014

Brazil frees up $13bn to boost economy; Amazon's quest for global domination; Girls and computer codes

1 Brazil frees up $13bn to boost economy (BBC) Brazil's central bank has announced plans to reduce the amount of money commercial banks keep in reserve, in a bid to boost economic growth. The bank says the measure will free up some $13bn, which banks could lend to businesses and individuals. The Brazilian economy is expected to expand by 1% this year - the fourth consecutive year of sluggish growth.

The central bank announcement comes less than three months before presidential elections. President Dilma Rousseff will seek a second four-year term in October. In 2010, when she was elected, Brazilian gross domestic product grew by 7.5%. Growth dropped to 2.7% in 2011, 1% in 2012 and 2.5% last year.

The decline in Brazil's fortunes, cutbacks in public services, continuing corruption and what is seen as excessive spending on the World Cup and the 2016 Olympics have brought protesters out on to the streets over the past year. The economy had become over-dependent on exports to China under former President Luis Inacio Lula da Silva, analysts say.

Exports to China grew at roughly four times the rate of total exports between 2000 and 2010. As Chinese demand fell away, Brazilian growth stuttered, weighed down by poor infrastructure, high consumer debt and sagging business confidence.

2 Amazon’s quest for global domination (The Observer/The Guardian) The day after Amazon warned that its operating loss in the coming September quarter could be as high as $810m, support for its founder shows no sign of wavering. Jeff Bezos has a reputation for sacrificing profits in favour of long-term growth, but the warning still came as a shock. Wall Street had been expecting just $8m. The shares dived 15%, wiping £15bn from Amazon's stock market value.

The reasons given for the upcoming losses are a very diverse range of aggressive, well-funded investments. Amazon is investing in faster dispatch for all goods. More ambitiously, it wants to become an online grocer. Even more ambitiously, Amazon Studios is having a stab at becoming the next HBO or Netflix.

Amazon may make more money from general merchandise, but its window display has always been entertainment – books, music, films, TV series; a sector that will sooner or later be sucked into a black hole. And Amazon is far from dominant in the download arena. The device makers and software writers – Google with its Playstore and Apple with iTunes – are already building billion-dollar music and video retail businesses. And so Amazon is building its own devices. First a tablet, then a set-top box, and now a mobile phone.

Creating hit television series, running an online supermarket, making smartphones: these are difficult things to do well, even for companies that specialise in only one of them at a time. None the less, Amazon's can-do approach has proved doubters wrong in the past – most notably with its Kindle tablet.

But Bezos wants customers to live in a company town, in the same way that some of its authors write books that are published by Amazon, reviewed by Amazon customers, sold in its online store, and read on its Kindles. Amazon should focus on retail and forge alliances – with device makers, TV companies and studios. Unfortunately, while Bezos has achieved much, his turbulent relationship with the publishing industry suggests alliances are not his strong suit.

3 Girls and computer codes (Kristen V Brown in San Francisco Chronicle) Many blame the tech industry's underrepresentation of women on the fact that so few women are exposed to computer science early in their lives. Girls Who Code is a nonprofit organization working to address that piece of the gender gap by providing young women access to computer science education.

This summer, Girls Who Code is offering a seven-week crash course in coding and engineering to a small group of high school students. The course covers everything from robotics, graphics and animation to app development, entrepreneurship, data structures and algorithms. The young women even got to attend a roundtable discussion with Square CEO and founder Jack Dorsey.

Girls Who Code's goal is to expose 1 million women to computer science by 2020. So far, the group has found that 95 percent of participants consider studying computer science after taking the course.

Friday, July 25, 2014

UK GDP passes pre-crisis level; India threatens to derail WTO deal; Being wary of 'caring capitalism'; Fear of another tech bubble

1 UK GDP passes pre-crisis level (BBC) The UK economy has returned to pre-crisis levels by expanding 0.8% in the second quarter of this year. On an annual basis gross domestic product expanded by 3.1%. The figures show the economy is now worth 0.2% more than it was at its peak in 2008, the Office for National Statistics said.

The service sector is the only part of the economy that has passed its previous 2008 peak, although that accounts for almost 80% of UK output. Other key sectors, including construction, industrial production and manufacturing, have yet to outstrip levels reached in 2008. The UK economy is forecast to be the fastest growing among the G7 developed nations, according to the International Monetary Fund (IMF).

On Thursday, the IMF predicted the UK would expand by 3.2% this year, up from a previous forecast of 2.8%. But shadow chancellor, Ed Balls, said people were not feeling happier: "With GDP per head not set to recover for three more years and [with] most people still seeing their living standards squeezed this is no time for complacent claims that the economy is fixed."

2 India threatens to derail WTO deal (Straits Times) India threatened on Friday to block a worldwide reform of custom rules, which some estimates say could add US$1 trillion to the global economy and create 21 million jobs, prompting a US warning that its demands could kill global trade reform efforts.

Diplomats from the 160 World Trade Organisation member countries meeting in Geneva had been meant to rubber stamp a deal on "trade facilitation" that was agreed at talks in Bali last December in the WTO's first ever global trade agreement.

But India, in an 11th-hour intervention, demanded a halt to the trade facilitation timetable until the end of the year and said a permanent WTO deal on food stockpiling must be in place at the same time, well ahead of an agreed 2017 target date.

3 Being wary of ‘caring capitalism’ (Alex Andreou in The Guardian) The world was abuzz in the 90s with conversations of whether capitalism could indeed be “caring”. Twenty years later, while inequality continues to grow and the world is becoming increasingly volatile, we are still having the same conversation.
Capitalism, in its unadulterated form, is not caring. It is not inclusive, responsible or ethical. It is fast, callous, amoral, decisive, aggressive, self-interested and only cares about one thing: the bottom line. This is not a criticism. It is just how it is built. Attempts to convert it, to make it look further than the short term, evoke the tale of a frog sinking in a river, with a scorpion on its back, asking “but why?”

Multimillionaire Nick Hanauer put it succinctly, if rather colourfully: “If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out … There are no counterexamples. None.”

The question is whether a shark can be taught moderation. Some have suggested that there are compelling economic reasons of self-interest why it must. That companies with a “conscience” actually do better in the long run when they stand together. Others, like Joseph Thorndike, are less optimistic: “Inequality is dangerous, and rich people should get serious about dealing with it. But that doesn’t mean they will. After all, they never have before.”

4 Fear of another tech bubble (Khaeej Times) The US Federal Reserve chairwoman Janet Yellen recently called the stock valuations of small biotech and social media firms “substantially stretched”.  Her statement is akin to an official US warning of a potential tech bubble. It comes as Nasdaq’s biotech index has more than tripled in five years — after being almost unaffected by 2008’s financial crash — while the exchange’s social media index has surged 44 per cent in two years.

There are two lines of thinking on the stocks. On the one hand, yes, the companies’ valuations on the stock market are huge compared to the money they actually make. A price-earnings ratio between 10 and 17 is generally considered normal. However, USA Today has already listed an example batch of nine small biotech firms valued between 87 and 233 times their earnings. According to a Bloomberg estimate, the figure for Twitter is around 881.

On the other hand, however, high price-earning ratios could be backed by expectations of phenomenal future growth. Both biotech and social media are likely poised for such expansion. In the end, the story may diverge for biotech and social media. Many biotech startups aim to eventually make money as traditional businesses. But social media’s plans are frequently far more cloudy. There have been billion-dollar venture capital valuations for tech companies on an almost weekly basis this year. Pinterest was valued at $5 billion, Airbnb at $10 billion, and Uber at $17 billion.

These compare to Facebook being valued at $500 million in 2006 — and making front-page headlines for it. There has clearly been a significant inflation in values, without a commensurate advance in revenue generation. The market for social media ventures has had several hiccups already. Early this year, hedge funds pulled out of firms as related stock markets dipped.

Meanwhile, tech journalists in San Francisco are saying they are being inundated with invitations to schmoozing dinners as well as offers of gifts and — in some cases — free stocks. Those who were around in 1999 say it feels awfully familiar. Those who weren’t may end up being foolish enough to fall for the enticements: another cyclical bout of exuberance that could bring down the economy.

Thursday, July 24, 2014

IMF lowers global forecast; Big quarterly loss for Amazon; More humans, less bugs and a spurt in conflicts

1 IMF lowers global forecast (BBC) The International Monetary Fund has lowered its forecast for global economic growth this year, from 3.7% to 3.4%. The reduction reflects a weak start to the year in the US and a number of downgrades to the outlook for several other individual economies. However there were uplifts for some countries, the largest being the UK.

The global forecast for 2015 is unchanged, with growth predicted to be 4%. Several countries do receive an upgrade and the largest for 2014 is for the UK - from a 2.8% to a 3.2% expansion of the economy. It is the latest in a string of upgrades from the IMF and others.

Introducing the new forecasts, the IMF's chief economist Olivier Blanchard said: "The recovery continues, but it remains a weak recovery, indeed a bit weaker than we forecast in April."

The weakness at the beginning of 2014 in the US - the economy contracted sharply in the first three months - will affect the figure for the whole year. There were downward revisions for several emerging economies, with the largest being for Russia, reflecting what the IMF calls "geopolitical tensions". That country's growth projection for this year is now just 0.2%, a downgrade from the previous World Economic Outlook forecast of 1.3%.

2 Big quarterly loss for Amazon (Dominic Rushe in The Guardian) Amazon has reported a rise in sales but posted a bigger-than-expected $126m loss for its second quarter, sending shares sharply lower in after-hours trading. Revenue at the company rose 23% to $19.34bn but losses increased as the firm spent heavily in a bid to expand its business with its first smartphone, the Fire Phone, and to expand new services including grocery delivery and video streaming.

Shares of Amazon dipped 10%, to $358.61, in after-hours trading as the company said it expected further losses of up to $810m in the upcoming quarter – compared to a $25m loss in the third quarter last year.
Amazon's Fire Phone goes on sale in the US on Friday, facing stiff competition in a market dominated by Apple, Samsung and others. The company surprised many by launching a high-end, technologically advanced phone at a premium price and there has been scepticism among analysts about its likely success.

The company has long argued it is focusing on building a business for the long-term and shown little concern about losses. Recently Amazon has been even more ambitious than usual. Along with the phone and groceries, it introduced Zocalo, a document storage and sharing service, and a programme to give readers access to as many ebooks as they want for a monthly fee.

3 More humans, less bugs and a spurt in conflicts (Straits Times) As the number of humans on earth has nearly doubled over the past four decades, the number of bugs, slugs, worms and crustaceans has declined by 45 percent, researchers have said.

Meanwhile, the larger loss of wildlife big and small across the planet may be a key driver of growing violence and unrest, said another study in the journal Science as part of a special series on disappearing animals. Invertebrates - creatures without backbones - are important to the earth because they pollinate crops, control pests, filter water and add nutrients to the soil.

Among animals with backbones that live on land, 322 species have disappeared in the past five centuries, and the remaining species show about a 25 per cent decline in abundance, said the findings.

Wednesday, July 23, 2014

China manufacturing gathers pace; Facebook earnings beat estimates; Five things about the Israel-Gaza conflict

1 China manufacturing gathers pace (BBC) China's manufacturing activity grew at its fastest pace in 18 months in July, an initial survey by HSBC showed, the latest in a series of signs that the country's economy may be stabilising. The bank's purchasing managers' index (PMI), a gauge of the sector's health, rose to 52 in July, from 50.7 in June.

A reading above 50 shows expansion. It is the second successive month in which HSBC's PMI has been above that level. Qu Hongbin, chief economist for China at HSBC, said the latest data suggested "that the cumulative impact of mini-stimulus measures introduced earlier is still filtering through".

Earlier this month, China reported that its economy expanded by 7.5%, in the April-to-June quarter, from a year ago, up from 7.4% growth in the previous three months. Other data released in recent weeks has shown that factory output rose 9.2% in June, from a year earlier, while fixed asset investment jumped 17.3% in the first six months of the year. The slew of positive data has followed a series of measures in recent months by policymakers to help boost China's growth. China has set a growth target of 7.5% for 2014.

2 Facebook earnings beat estimates (Wendy Lee in San Francisco Chronicle) Facebook reported a $791 million profit in the second quarter, up 138 percent from a year ago. The boost comes as Facebook continues to grow the number of its users and increase the money it makes on ads. The number of daily active users in the quarter was 829 million in June, up 19 percent from a year ago.

Revenue for the company was up 61 percent to $2.91 billion in the second quarter, the company said. Of that amount, $2.68 billion came from advertising, a 67 percent boost from the same period a year ago. The results beat analysts’ estimates on revenues and earnings per share. “Our community has continued to grow, and we see a lot of opportunity ahead as we connect the rest of the world,” said Mark Zuckerberg, Facebook’s CEO and founder.

3 Five things about the Israel-Gaza conflict (Straits Times) The toll of the two-week fighting between Israel and the Islamist Hamas group in Gaza topped 500 on Monday. Here are five things about the Israel-Gaza conflict.  History of the Gaza conflict: Israelis and Arabs have been fighting over Gaza on and off, for decades. It is part of the wider Arab-Israeli conflict. After World War II and the Holocaust in which six million Jewish people were killed, more Jewish people wanted their own country.

They were given a large part of Palestine, which they considered their traditional home but the Arabs who already lived there and in neighbouring countries felt that was unfair and did not accept the new country. In 1948, the two sides went to war. When it ended, Gaza was controlled by Egypt and another area, the West Bank, by Jordan. But in 1967, after another war, Israel occupied these Palestinian areas and Israeli troops stayed there for years.

Israel finally left Gaza in 2005 but soon after, a group called Hamas won elections and took control there. It refuses to recognise Israel as a country and wants Palestinians to be able to return to their old home - and will use violence to achieve its aims. Since then, Israel has held Gaza under a blockade, which means it controls its borders and limits who can get in and out.

What Gaza is and who controls it: The Gaza Strip is an area about half the size of Singapore on the border with Egypt up against the Mediterranean Sea. Technically part of the Palestinian Authority, it has been governed since 2007 by the militant group Hamas. With 1.8 million people living in just 139 square miles, Gaza is one of the most densely populated places on earth.

What sparked this latest wave of violence? While rocket attacks from Gaza and Israeli military incursions in the West Bank are regular occurrences, last month's abduction of three Israeli teens in the West Bank have brought the tensions to a fever pitch. The mood darkened further when a Palestinian teenager was abducted and killed in Jerusalem in what police say could be a revenge killing.

Who are the key players? Hamas controls the Gaza Strip and is considered a terrorist group by Israel and the US. But while there is no Israeli military presence inside Gaza anymore, the effective control of Gaza's sea, air and borders is under Israeli control.

What's next? The current conflict comes after almost two years of relative calm between Israel and the Palestinians. The Israeli military still believes that it has more of its mission to complete. Hamas fighters may be emboldened by their ability to inflict pain on the Israeli forces, and they too may not want an immediate halt. The only way to put a stop to the regular outbreaks of violence is to start by securing a ceasefire and then looking for a long-term solution, said Martin Indyk, a diplomat with a long history of working in the region.

Tuesday, July 22, 2014

New era for third largest democracy, Indonesia; Technology and recession polarize work world; Netflix subscribers, revenues soar; iPad sales slump hits Apple shares

1 New era for third largest democracy, Indonesia (Karishma Vaswani on BBC) After a heated election, Joko Widodo has been declared president of the world's third-largest democracy. But what does a Jokowi presidency mean for Indonesia? Many say it is his quintessential "man of the people" image that helped him get elected. "If nothing else, that will be the single most important achievement of his presidency," said Dharsono Hartono, an Indonesian businessman. "He's made it possible for us to say to our kids - look at Jokowi - he used to sell furniture and grew up near a slum - and now he's our president. Now anyone can be president."

It's not an achievement to be taken lightly. Only members of the political and military elite have been elected as presidents in this country. Mr Widodo is the first leader from outside the establishment to be elected to the highest office in the land. It is because of  some of his promises that Mr Widodo has won many fans across the country. His random spot checks on government offices and his "blusukans" (unannounced visits to slum areas) have made him a hero amongst Indonesia's poor.

High on the list of Mr Widodo's priorities will be to handle Indonesia's economy - South East Asia's largest - and to tackle the politically-sensitive issue of fuel subsidies. Indonesia spends around $20b every year subsidising fuel for its citizens, making its petrol amongst the cheapest in the world. Mr Widodo has promised to phase out these subsidies but that's not going to be easy. Similar efforts by previous presidents have proved messy and chaotic, resulting in nationwide street protests.

Mr Widodo will also have to steer a slowing economy back to good health. Indonesia has been suffering from the end of the commodity boom - which means that it's no longer making as much money as it did when coal prices were sky high. He's also got to reach out to foreign investors to help rebuild confidence in South East Asia's largest economy. There's no denying that Jokowi is a hero for many Indonesians who see him as the panacea to all their ills. His biggest challenge, however, will be living up to those expectations.

2 Technology and recession polarize work world (Claire Cain Miller in The New York Times) The American work force has been growing polarized for decades. On one end, there are highly skilled jobs like writing software or performing surgery, and on the other are service jobs like child care and cutting hair. The jobs in the middle, meanwhile, such as factory work, sales and bookkeeping, are shrinking — one of the reasons for the economy’s slow climb out of the recession.

Where did those jobs go? Part of the answer lies in Silicon Valley. A new working paper from the National Bureau of Economic Research shows how the recession accelerated the displacement of these midwage jobs. As technology now encroaches on jobs that people assumed would always belong to humans, it is useful to consider those most affected by the job displacement so far: the young, the less educated and men.

Young people and those with only a high school diploma are much more likely to be unemployed and replaced by a machine. And to the authors’ surprise, men are more vulnerable than women. The changing demographics in the US play a small role in the loss of midwage jobs, as do policies related to offshoring, unions and the minimum wage. But the study found that two-thirds of the decline in routine jobs is explained by a drop in the number of unemployed people who can get these jobs, and an increase in the number of people who had these jobs and lost them.

The line between jobs that are considered routine and able to be done by a machine and those that require a human brain is a blurry one and becoming blurrier, said Erik Brynjolfsson and Andrew McAfee of MIT, authors of “The Second Machine Age.” Already, machines are learning to do certain jobs that once seemed confined to humans, from elder care to wealth management to art. The question is what will happen if these jobs also disappear.

3 Netflix subscribers, earnings soar (San Francisco Chronicle) Netflix's second-quarter earnings more than doubled as new episodes from one of its hit series helped the Internet video service surpass 50 million worldwide subscribers for the first time.

The gains include an additional 570,000 US subscribers, slightly more than Netflix's management predicted. The quarter is typically the company's slowest of the year, as people spend more time outdoors instead of watching video. Netflix's stock rose $4.65 to $456.60 in extended trading. The shares have surged by 23 percent this year.

The Internet video service's vast library includes thousands of previously released movies and shows already shown on traditional TV networks. Netflix Inc. ended June with 36.2 million subscribers in the US and 13.8 million customers in roughly 40 other countries. The company expects to add another 3.7 million worldwide subscribers in the current quarter ending in September. It also plans to start selling its Internet video service in six more European countries in September, including Germany and France.

As Netflix's video-streaming service steadily grows, the DVD-by-mail rental business that once was the company's foundation is slowly crumbling. Netflix earned $71 million, or $1.15 per share, during the April-June period. That compared to income of $29.5 million, or 49 cents per share, at the same time last year. Revenue climbed 25 percent from last year to $1.3 billion, matching analyst projections.

4 iPad sales slump hits Apple shares (Juliette Garside in The Guardian) Sales of the iPad have slumped to half their pre-Christmas high, with signs that demand for Apple's tablet computer may be in permanent decline. Despite a forecast-busting $7.7bn profit, the computing firm's shares dipped in after-hours trading as sales of its tablet fell to 13.3m from their all-time high of 26m in the quarter to December.

Despite its adoption by thousands of businesses, schools and government agencies, the 9% year-on-year fall in units sold prompted speculation that Apple has reached "peak iPad". "If somebody had forecast this two years ago, it would have been seen as a fever dream," said Terro Kuittinen at social media consultancy Magid Associates. While many phone owners still regard the latest iPhone as a status symbol, it appears tablet buyers are less concerned with replacing their iPad every one or two years.

The slump means Apple is now largely dependent on the iPhone, which sold 35.2m units, up 13% on the same period last year, to fuel growth. Revenues came in at $37.4bn for the June quarter, within the company's guided range, and Apple said revenues would be between $37bn and $40bn in the September quarter.

Having reached $705 two years ago (a stock split in June reduced the value of the shares by a factor of seven), the shares slumped to under $500 as Apple dropped plans to launch a TV and Samsung gained momentum in smartphones.