Thursday, December 15, 2016

Eurozone ending 2016 robustly; Europe's top 10% earners get as much as bottom 50%; Japan is largest holder of US treasuries

1 Eurozone ending 2016 robustly (San Francisco Chronicle) The eurozone economy is ending 2016 robustly and inflation pressures are growing, a key survey showed, in a combination that suggests the European Central Bank's stimulus efforts are working.

Financial information company IHS Markit said its purchasing managers' index, a gauge of activity in the manufacturing and services sectors, held at 53.9 points in December, the same as in November. The index, which is subject to revision, is on a 100-point scale, with 50 marking the threshold between growth and contraction.

A more detailed look at the survey shows that inflows of new business, employment and backlogs of work remained strong and that the manufacturing sector offset a slight slowdown in services. IHS Markit said the index is pointing to quarterly growth of 0.4 percent, which would be the eurozone's highest rate this year.

Though Chris Williamson, chief business economist at IHS Markit, said the survey puts the eurozone economy on a "strong footing" for 2017, he cautioned that there is "clearly the potential for political uncertainty to derail growth." Next year, there are scheduled elections in the Netherlands, France and Germany. Discussions over Britain's exit from the European Union are also scheduled to commence.

Perhaps more important for officials at the ECB is the intensification in inflation pressures identified by the survey as a result of higher import costs related to the fall in the value of the euro and the recent spike in commodity prices, notably oil. The common European currency has fallen further following the Federal Reserve's rate hike on Wednesday to trade at a 13-year low of $1.0410.

2 Europe’s top 10% earners get as much as bottom 50% (Katie Allen in The Guardian) The top 10% of highest paid workers in Europe together earn almost as much as the bottom 50%, according to a report from the International Labour Organization that calls on governments and companies to do more to ensure the fruits of economic growth are shared out.

The UN agency used its latest report into global wage trends to examine earnings inequality between different earners within firms and between firms. It also found startling discrepancies between men and women’s salaries at senior level in Europe with a gender pay gap of more than 50% for chief executives.

The report builds on a warning from the ILO director general, Guy Ryder, that income inequality and a rise in casual employment practices risk fuelling nationalist movements. Speaking after Donald Trump won the US election on an anti-globalisation ticket and the UK voted for Brexit, Ryder said people felt they were getting a “raw deal” from the current economic system.

By comparing the wages of individuals in Europe to the average wage of the firms where they work, the ILO’s researchers found that about 80% are paid less than the average for the firm – because the average is skewed upwards by the big payouts to its highest earners.

In the 1% of firms with the highest average wages, the bottom 1% of workers were paid on average €7.10 per hour while the top 1% earned an average €844 per hour, or 118 times more.

3 Japan is largest holder of US treasuries (Straits Times) Japan became the largest holder of US Treasuries for October, outpacing China for the first time in nearly two years, data from the US Treasury Department showed.

Japan held $1.131 trillion in US Treasuries, while China's holdings declined to $1.115 trillion, a drop of about $41 billion. China has been dipping into its reserves, selling Treasuries to support the yuan.

Data also showed foreigners bought $9.4 billion in long-term US assets in October, after selling $64.8 billion the previous month. Including shorter-dated securities, overseas investors purchased $18.8 billion in October, after selling a massive $154.4 billion in September.

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