1 Germany triggers triple-dip fears (Phillip Inman in The Guardian) Germany has slashed its growth forecasts for this year and 2015, sparking calls for a public spending boost to prevent the eurozone falling into a triple-dip recession. Berlin now expects growth of just 1.2% this year and the same in 2015, down from 1.8% and 2%, in the face of slowing export growth.
It came as official Eurostat figures showed that industrial production across the eurozone slumped in August by an alarming 1.8% month-on-month, meaning it was 1.9% lower than a year ago.
The economy minister, Sigmar Gabriel, blamed geopolitical tensions and global economic problems overseas. An October survey showed a big fall in investor sentiment in Germany, mirroring reports through the summer months of stumbling business confidence following the erosion of previously buoyant demand for German goods.
But amid signs that the German economy is also stalling, the anti-austerity movement is gaining confidence. Last week France’s new economy minister, Emmanuel Macron, called for a eurozone-wide €300bn spending boost, while the Italian prime minister, Matteo Renzi, has stepped up pressure on Brussels to adopt looser spending rules to spur investment and growth.
http://www.theguardian.com/business/2014/oct/15/triple-dip-recession-eurozone-fears-germany-cuts-growth-forecasts
2 India inflation at five-year low (BBC) India's inflation rate fell to a five-year low in September because of lower food and fuel prices. The Wholesale Price Index (WPI), India's main gauge of inflation, rose 2.38% in September from a year earlier. That is the smallest increase since October 2009. India's WPI rose by 3.74% in August.
Despite the moderation, analysts caution that the central bank is unlikely to lower the cost of borrowing in the near future. That is because of poor monsoon rains that could affect future crops and drive food prices back up. In addition, continuing geopolitical tensions could also see oil prices spiking up again.
Data also showed that falling global crude oil prices helped drive down India's fuel inflation to 1.3% in September from 4.5% in August. Asia's third-largest economy has been plagued by chronically high inflation. But if price increases can be curbed in the long term, it could pave the way for the central bank to cut interest rates next year to help boost growth. The Indian economy expanded by 5.7% in the April-to-June quarter as compared with the previous year.
http://www.bbc.com/news/business-29609939
3 The ‘soft containment’ of Russia (Jonathan Eyal in Straits Times) Notwithstanding the bravado of President Vladimir Putin, his aides are deeply worried. They know that the Russian economy is already hurting badly as a result of the sanctions imposed by the West. They worry that, unless Moscow manages to have these sanctions lifted soon, Russia will be condemning itself to many years of confrontation; the integration of their country into the global economy could be reversed, with catastrophic effects on its people.
The fate of the rouble, the country's currency, says it all. Its value has dropped by a quarter this year, and it is now in freefall: "The dollar is 40 rouble, the euro is 50 rouble, and Putin is 62", as the joke now making the rounds in Moscow succinctly puts it. At least $100 billion worth of investment capital has fled Russia since March, when the West imposed sanctions in the wake of Russia's involvement in the Ukraine crisis.
Officials in Moscow claim that, if they cannot borrow the money they need from Western banks, they will turn to Asia for cash. But that's just bluster. For, even if significant Asian banks are willing to risk US or European punitive measures by doing business with Russia, they may not have the volume of cash that the Russians need to borrow, nor are they likely to offer this at competitive rates.
But the most ominous development for Russia is the drop in energy prices on which its economy largely relies. The US shale revolution made possible by advances in production techniques is likely to result in flooding the gas market. The Russians have done their sums: They know that they cannot afford a lengthy showdown with the West. As Finance Minister Siluanov openly admitted last week, his entire economic forecasting is now predicated on the assumption that sanctions will be lifted by the end of this year.
What we may witness is what the European Council on Foreign Relations, a think-tank, calls the "soft containment" of Russia, perhaps for as long as Mr Putin remains in power. It will be soft in political and military terms, but very painful for ordinary Russians. The story of Russia carries a warning for other nations, for it acts as a reminder that economic interdependence cannot be taken for granted, that it can be unwound and, once it begins unwinding, it develops a dangerous dynamic all of its own.
http://www.straitstimes.com/news/opinion/eye-the-world/story/the-soft-containment-russia-20141015
It came as official Eurostat figures showed that industrial production across the eurozone slumped in August by an alarming 1.8% month-on-month, meaning it was 1.9% lower than a year ago.
The economy minister, Sigmar Gabriel, blamed geopolitical tensions and global economic problems overseas. An October survey showed a big fall in investor sentiment in Germany, mirroring reports through the summer months of stumbling business confidence following the erosion of previously buoyant demand for German goods.
But amid signs that the German economy is also stalling, the anti-austerity movement is gaining confidence. Last week France’s new economy minister, Emmanuel Macron, called for a eurozone-wide €300bn spending boost, while the Italian prime minister, Matteo Renzi, has stepped up pressure on Brussels to adopt looser spending rules to spur investment and growth.
http://www.theguardian.com/business/2014/oct/15/triple-dip-recession-eurozone-fears-germany-cuts-growth-forecasts
2 India inflation at five-year low (BBC) India's inflation rate fell to a five-year low in September because of lower food and fuel prices. The Wholesale Price Index (WPI), India's main gauge of inflation, rose 2.38% in September from a year earlier. That is the smallest increase since October 2009. India's WPI rose by 3.74% in August.
Despite the moderation, analysts caution that the central bank is unlikely to lower the cost of borrowing in the near future. That is because of poor monsoon rains that could affect future crops and drive food prices back up. In addition, continuing geopolitical tensions could also see oil prices spiking up again.
Data also showed that falling global crude oil prices helped drive down India's fuel inflation to 1.3% in September from 4.5% in August. Asia's third-largest economy has been plagued by chronically high inflation. But if price increases can be curbed in the long term, it could pave the way for the central bank to cut interest rates next year to help boost growth. The Indian economy expanded by 5.7% in the April-to-June quarter as compared with the previous year.
http://www.bbc.com/news/business-29609939
3 The ‘soft containment’ of Russia (Jonathan Eyal in Straits Times) Notwithstanding the bravado of President Vladimir Putin, his aides are deeply worried. They know that the Russian economy is already hurting badly as a result of the sanctions imposed by the West. They worry that, unless Moscow manages to have these sanctions lifted soon, Russia will be condemning itself to many years of confrontation; the integration of their country into the global economy could be reversed, with catastrophic effects on its people.
The fate of the rouble, the country's currency, says it all. Its value has dropped by a quarter this year, and it is now in freefall: "The dollar is 40 rouble, the euro is 50 rouble, and Putin is 62", as the joke now making the rounds in Moscow succinctly puts it. At least $100 billion worth of investment capital has fled Russia since March, when the West imposed sanctions in the wake of Russia's involvement in the Ukraine crisis.
Officials in Moscow claim that, if they cannot borrow the money they need from Western banks, they will turn to Asia for cash. But that's just bluster. For, even if significant Asian banks are willing to risk US or European punitive measures by doing business with Russia, they may not have the volume of cash that the Russians need to borrow, nor are they likely to offer this at competitive rates.
But the most ominous development for Russia is the drop in energy prices on which its economy largely relies. The US shale revolution made possible by advances in production techniques is likely to result in flooding the gas market. The Russians have done their sums: They know that they cannot afford a lengthy showdown with the West. As Finance Minister Siluanov openly admitted last week, his entire economic forecasting is now predicated on the assumption that sanctions will be lifted by the end of this year.
What we may witness is what the European Council on Foreign Relations, a think-tank, calls the "soft containment" of Russia, perhaps for as long as Mr Putin remains in power. It will be soft in political and military terms, but very painful for ordinary Russians. The story of Russia carries a warning for other nations, for it acts as a reminder that economic interdependence cannot be taken for granted, that it can be unwound and, once it begins unwinding, it develops a dangerous dynamic all of its own.
http://www.straitstimes.com/news/opinion/eye-the-world/story/the-soft-containment-russia-20141015
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