Archive for April, 2011

China manufacturing growth slows in April, hit by tightening

Saturday, April 30th, 2011 | Finance News

BEIJING (Reuters) – China's manufacturing growth slowed in April, a survey showed on Sunday, suggesting that the government's tightening efforts have weighed on the world's second-largest economy more heavily than expected.

The official purchasing managers' index for China fell to 52.9 in April from 53.4 in March, well shy of market forecasts for an increase to 54.0.

The survey, which is designed to provide a snapshot of conditions in China's vast manufacturing sector, was largely in line with a separate PMI sponsored by HSBC published on Friday that clung near a seven-month low at 51.8 in April.

With inflation running at its fastest in nearly three years, China has taken a series of policy actions to rein in prices, raising interest rates and banks' required reserves multiple times, ordering banks to lend less and speeding up the pace of currency appreciation.

On the positive side of the ledger, the official PMI showed that these steps have at least partially hit the mark. A sub-index measuring input prices fell to 66.2 in April, a seven-month low, from 68.3 in March.

But the survey also flashed worrying signals for the global economy, which has become increasingly reliant on Chinese demand as a source of growth with the United States, Europe and Japan still struggling to recover from the financial crisis.

"Overall, the PMI shows there is still a possibility that the Chinese economy may slow down, especially as falling demand growth leads to adjustments in inventories, increasing the possibility of slowing economic growth," said Zhang Liqun, a government researcher.

The new orders sub-index weakened to an eight-month low of 53.8 in April from 55.2 in March. Much of that drop was driven by slower growth in export orders, whose sub-index dipped to 51.3 from 52.5.

"The fall may show that export growth will continue to slow down," Zhang said in a comment on behalf of the China Federation of Logistics and Purchasing, which compiles the official PMI.


Despite Beijing's sustained tightening campaign over the past half year, economists polled by Reuters still expect the Chinese economy to expand at a nearly double-digit pace this year. They forecast that it will grow 9.5 percent in 2011 after last year's 10.3 percent expansion.

In a measure of that robust momentum, it was the 26th straight month that the official PMI had stood above the threshold of 50 that demarcates expansion from contraction.

The World Bank said on Thursday it was too early for China to halt its policy tightening as it raised its year-average inflation forecast in a quarterly review of the economy.

Stubborn price pressures have fueled market talk that Beijing could let the yuan rise at a faster clip, or even take more drastic action by pushing through a large revaluation of the currency.

The government has in the past consistently ruled out a one-off revaluation, saying there were no grounds for any major shift in exchange rate policy. Yet it has demonstrated its appetite for a gradually stronger yuan in recent weeks by guiding it to a succession of record highs against a sluggish dollar.

Investors are on guard for the next round of Chinese monetary tightening. The central bank has raised interest rates four times since October and economists polled by Reuters expect another increase over the next two months.

(Additional reporting by Sally Huang; Editing by Benjamin Kang Lim)


Berkshire shareholders reject emissions goals

Saturday, April 30th, 2011 | Finance News

OMAHA, Neb. – Berkshire Hathaway shareholders reject a measure that would have required the company's utilities to set goals for reducing greenhouse gas emissions.

At the company's annual meeting on Saturday several people spoke in favor of the measure, saying Warren Buffett's company could be hurt financially by potential liabilities associated with carbon emissions. Berkshire owns several utilities through its MidAmerican Energy Holdings subsidiary.

Investment manager Bruce Herbert of Newground Social Investment says investors should be concerned.

Buffett and Berkshire's board, which collectively controls 38 percent of the voting power, opposed the measure, so it was overwhelmingly rejected.

Buffett says he doesn't believe greenhouse gases represent a material risk for Berkshire's insurance operations. And Berkshire's major utilities are governed by state regulators who might object to changing sources of electricity, he said.


Gasoline prices are up to $4 a gallon. Is that ‘Big Oil’s’ fault?

Saturday, April 30th, 2011 | Finance News

If you have to fill your gas tank this weekend – whether or not it takes a second mortgage to pay the tab – you’re a soldier in the hottest political fight over energy and the economy. Or maybe you feel more like “collateral damage” as President Obama, lawmakers, and “Big Oil” battle over who’s at fault for $4-per-gallon gasoline.

In his radio and Internet address Saturday, Obama repeated his call to end “unwarranted taxpayer subsidies we’ve been handing out to oil and gas companies – to the tune of $4 billion a year.”

“When oil companies are making huge profits and you’re struggling at the pump, and we’re scouring the federal budget for spending we can afford to do without, these tax giveaways aren’t right,” Obama said Saturday. “They aren’t smart. And we need to end them.”

RELATED: Gas prices: 10 ways you can save at the pump

Them’s fightin’ words to his political opponents, particularly those from oil-producing states.

"The president may think he's punishing CEOs of big companies, but his plan will hurt the everyday consumer of energy and imperil the jobs of millions of hardworking people in American-based companies," first-term Congressman James Lankford from Oklahoma said in the Republicans' weekly address.

The average national price for regular gasoline right now is $3.91 a gallon. In 22 states it’s higher than that, and the price has jumped past $4 in Alaska, California, and Connecticut.

Obama says oil companies are at least partly to blame, and his main ammo are their newly-announced profit statements.

ExxonMobil reports first-quarter profits of $10.7 billion – 69 percent above the company’s first quarter of 2010. Royal Dutch Shell marked $6.9 billion in profits, an increase of 40 percent over last year’s first-quarter number. Chevron Corp. saw its first-quarter net income go up 36 percent to $6.2 billion. BP made $5.5 billion.

Industry spokesmen say such figures should be put into broader perspective.

“We should be proud of the success of an industry that supports 9.2 million American workers and 7.5 percent of our economy while also supplying income to millions of the nation’s retirees,” American Petroleum Institute CEO Jack Gerard said in a statement Thursday. “Oil and natural gas companies are a vital part of our nation’s industrial and manufacturing base. They provide most of America’s energy and are responsible for one in every five dollars invested in renewable energy.”

Record industry earnings “reflect the size necessary for companies to be globally competitive with national oil companies, along with a steady rise in crude oil prices driven by rapidly growing world oil demand and instability in the Middle East,” Gerard said.

Obama’s political problem regarding high prices at the pump – and the reason for his current finger-pointing tactic – are obvious.

Polls show people are more inclined to blame him and the Democrats than they do Republicans for high gasoline prices. At the same time, according to a recent McClatchy-Marist Poll, three times as many respondents say US oil companies are the culprits behind record prices at the pump.

This was the second Saturday in the row that Obama has hit on gas prices and oil industry subsidies in his weekly address.

He may have some openings on the GOP side.

In a TV interview Monday, House Speaker John Boehner said oil companies should “pay their fair share in taxes.”

“I don't think the big oil companies need to have the oil depletion allowances,” he also told ABC News.

A Boehner spokesman quickly walked back those assertions, but the White House and congressional were quick to jump on them.

At a town hall meeting a few days later House Budget Committee Chairman Rep. Paul Ryan (R) of Wisconsin said federal oil subsidies should be eliminated as part of deficit-reduction.

“We’re talking about reforming the safety net, the welfare system; we also want to get rid of corporate welfare,” Ryan said. “And corporate welfare goes to agribusiness companies, energy companies, financial services companies, so we propose to repeal all that.”

The Senate could take up the issue as soon as this coming week. Expect more sparks to fly.

RELATED: Gas prices: 10 ways you can save at the pump