Exports strengthening, but consumers aren't

Foreign markets are becoming a source of strength for U.S. producers, helping shrink the trade deficit in one of the few bright spots in the global recession.

The international trade report will be one of the top economic stories of the coming week, along with data on consumer credit, consumer sentiment and unemployment benefits. The Federal Reserve will also release its Beige Book report, an anecdotal account of the economy designed to dig beneath the hard numbers to find deeper truths.

It'll be a relatively quiet week for data, and markets may pay as much attention to politics as to the economic data, with Congress returning to Washington and President Barack Obama giving a major speech on health care to the assembled lawmakers

MarketWatch consensus

date	report	forecast	previous
Sept. 8	Consumer credit	-$4.3 billion	-$10.3 billion
Sept. 10	Trade balance	-$27.5 billion	-$27.0 billion
Sept. 10	Jobless claims	558,000	570,000
Sept. 11	Import price index	1.0%	-0.7%
Sept. 11	Consumer sentiment	68.0	65.7

Trade gap

One of the few bright sides of the global recession has been a steady improvement in the U.S. trade deficit. After expanding to as much as $68 billion a month in 2006, the trade gap shrank to just $27 billion in June.

Imports have fallen in 10 of the past 11 months, a reflection of weak U.S. demand for foreign-made goods. Meanwhile, U.S. exports also fell, but not as rapidly as imports did.

In May and June, exports began to recover. In real terms (adjusted for price changes), exports rose at a 16% annual rate in the May and June, after dropping at a 60% annual rate around the first of the year.

Economists expect further improvements in exports going forward.

"The outlook for U.S. exports is becoming increasingly positive," wrote Michael Feroli, an economist for JP Morgan Chase Bank, who's expecting the trade gap to narrow to $26.5 billion in July from $27 billion in June. "Foreign economic growth has returned" with U.S. trading partners growing at a 4% annual rate in the second quarter, on a trade-weighted basis.

The median forecast of economists surveyed by MarketWatch looks for a small widening in the gap to $27.5 billion. The July report will be released by the Commerce Department on Thursday at 8:30 a.m. Eastern.

The improvement in exports is a key driver in the recovery in the manufacturing sector. The export orders index of the Institute for Supply Management survey rose to 55.5% in August, the highest in 14 months, and up from a low of 33.5% in December.

Feroli predicts real exports will rise at 6% annualized rate in the third quarter and 11% in the fourth quarter.

However, imports are likely to rise even faster, economists said. Feroli expects foreign trade to be a small drag on U.S. growth over the next three quarters.

For July (and likely August), the government's cash-for-clunkers program appears to have been a big winner for foreign automakers, said Meny Grauman, an economist for CIBC World Markets.

Consumers

While U.S. manufacturers are benefiting from the improvement in global trade, U.S. consumers are still nervous about the future.

Consumer credit (excluding mortgages) has declined in absolute terms for five months in a row and for nine of the past 11 months. The Fed will report on July debt levels on Tuesday. Economists surveyed by MarketWatch are looking for another decline of $4.3 billion after a $10.3 billion decline in June.

Consumer debt is down 2.8% in the past year. It's only the third time in 50 years that debt has been paid down. Credit card debt is down 5.1%, the first decline in 40 years.

Consumers aren't happy. In August, consumers offered their bleakest view of their own finances in the history of the University of Michigan's consumer sentiment survey. Just one in six consumers said their own finances had improved in the past month and only one in four expected their incomes to grow in the coming year.

The UMich survey will be updated with early September responses on Friday. Economists look for a slight improvement in the index to 68 from 65.7 in July, mostly because of the recent rally in the stock market and tentative signs that layoffs are stabilizing.

"Since April, the sentiment index has fluctuated in a range of 65 to 71, which is characteristic of weak spending," wrote IHS Global Insight U.S. economists Brian Bethune and Nigel Gault. "We don't expect that consumer sentiment will break out of this range until job growth resumes next spring. Meanwhile, consumer spending is likely to show only sluggish growth and be a relatively weak contributor to the recovery."

Rex Nutting is Washington bureau chief of MarketWatch.

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South Africa Construction industry heading for tough 2011, 2012

South Africa's construction industry was heading for a tough period in 2011 and 2012, said Wilson Bayly Holmes – Ovcon Limited (WBHO) chairperson Mike Wylie on Monday, announcing the construction group's financial results for the year ended June 30.

“At the moment, 2010 is still looking good.”

Wylie said it seemed as if government's planned R787-billion infrastructure programme was experiencing some funding pressure on the back of the economic crisis.

WBHO CEO Louwtjie Nel concurred, noting that 20% of this infrastructure budget was due to be spent in WBHO's markets, which meant a R150-billion pipeline of possible work for the company.

“In reality it could be half of this. Eskom and others are worrying us. There is pressure on funding.”

Wylie added that margins were tightening, and that they were much more likely to move downwards over the next two years, rather than upwards.

The company's operating margin dropped from 8,3% last year to 7,1% this year, reflecting the tighter conditions the construction sector had been experiencing at home and abroad.

However, Wylie believed WBHO was well-positioned to tackle the difficult times ahead, pinning his hopes on the company's R15,3-billion order book, as well as a strong balance sheet, which included R4-billion in cash.

Only R1,9-billion of the order book was World Cup related.

The order book stood at R18,3-billion at the same time last year.

Wylie said WBHO's strong cash position provided the company with “great opportunities for acquisitions”.

“It may be good . . . to fill up gaps we might have.”

Group turnover for the financial year ended June 30 was 37% higher, at R14,8-billion, while operating profit was up 16%, at R1-billion.

Headline earnings a share were 27% higher.

Wylie said he was pleased with this increase, considering that headline earnings growth had exceeded 70% for the past three years.

WBHO declared a final dividend of 200c, resulting in a total dividend for the year of 300c.

Divisionally, the roads and earthworks division had an exceptional year, with a 70% increase in turnover to R4,6-billion, said Wylie.

The division was busy on a host of major projects, including a R1,9-billion share in the Gauteng Freeway Improvement Project; the new King Shaka International Airport in Durban; a R700-million waterline replacement project for the eThekwini Metro; as well as several large mining and infrastructure projects in Botswana, Ghana, Zambia, the Democratic Republic of the Congo, and Mozambique.

The building and civil engineering division, which was more reliant on the private sector than the public sector, had been impacted negatively by the diminishing pool of development finance and the reduced global demand for commodities and resources, said Wylie.

However, the division still increased its revenue to R10,2-billion, with the Australian operation making a R4,7-billion contribution.

The division had already completed work on the new central terminal building at OR Tambo International Airport, as well as the Morningside shopping centre, and had started work on a number of shopping centres in Tshwane, Polokwane, Sandton, Rosebank, and the Eastern Cape.

In addition, the division was still active on construction work at the Peter Mokaba stadium, in Polokwane, and the Moses Mabhida stadium and the King Shaka International Airport, in Durban.

Included here were three hotels for 2010.

Offshore, WBHO’s Australian subsidiary, Probuild Constructions, increased turnover by 51% to A$661-million.

Sales in the company’s two property developments were slow because of the fall-off in the real estate market.

Similarly, conditions in the industrial division, where the group was invested in companies associated with steel pipe-making, ready-mix and quarrying operations, were also depressed because of the unfavourable economic climate.

Edited by: Creamer Media Reporter

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Boeing Airbus and the WTO

The WTO has found that loans from European governments to Airbus were not only unfair subsidies but in some cases violated a tougher ban on export aid, according to sources familiar with a report that also rejected some U.S. complaints.

The findings are contained in a confidential interim report distributed by the World Trade Organization to the parties in a row between the United States and European Union over aircraft subsidies that could affect planemakers worldwide.

U.S. lawmakers briefed on the report said on Friday that the WTO had ruled against European government loans for Airbus, backing claims that they harmed Boeing. European sources denied there had been a clear-cut result.

Picking apart the contrasting claims, two sources familiar with the case told Reuters the draft conclusions of a five-year WTO probe overwhelmingly backed U.S. charges that the dozen or so loans were "actionable" subsidies that harmed Boeing.

Washington won a partial victory on a second key claim: that most of the same loans further violated WTO rules by amounting to prohibited export subsidies, the sources said. The extent of the U.S. victory on this point remained unclear.

SUPERJUMBO

Under trade rules, "prohibited" subsidies must be dismantled or amended swiftly after the conclusion of a case without the complainant needing to prove its firms were harmed. "Actionable" subsidies are seen as harder to attack and remedies are slower.

At least one of four loans given by European governments to help fund the A380 superjumbo was cleared of being a banned export subsidy, but the rest were found illegal, sources said.

Washington however lost a third claim: that the overall use of European loans was an invalid program of support in its own right, several sources familiar with the matter said.

The United States had not only attacked the individual loans but claimed they were part of a concerted and open-ended system in a bid to implicate future loans for Airbus's future A350, which fell outside the jurisdiction of the WTO complaint.

Washington is expected to protest those loans separately.

The United States broadly won its case against European Union research and development funding for Airbus, as well as infrastructure projects that Washington regards as a covert boost for the European planemaker, two of the sources said.

R&D spending and infrastructure projects in the United States are also at the center of an EU counter-claim against the United States. The process is about six months behind the U.S. case against Airbus, though the two are not officially linked.

The United States lost its case against loans by the European Investment Bank awarded to Airbus, the sources said.

None of the sources agreed to be identified because no one is authorized to speak publicly about the WTO findings ahead of their publication in several months.

The United States and European Union said on Friday they would not comment on the findings in the 1,000-plus page report, which was passed to them for comments ahead of a final ruling.

Airbus and Boeing declined comment. The European Investment Bank was unavailable for comment.

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GE to build Kuwait's Subbiya power plant

Kuwait's central tenders committee has chosen General Electric to build a 2,000 megawatt power plant, a newspaper said on Wednesday.

General Electric is the preferred choice of Kuwait's Ministry of Electricity and Water to build the Subbiya plant, daily al-Watan said in an unsourced report.

General Electric has already been chosen, but it needs the final approval of the Audit Bureau,” Meshan al-Otaibi,a spokesman for the emirate’s Ministry of Electricity and Water told Bloomberg.

GE was selected “because it had the lowest bid” of KWD760 million (US$2.65 billion), beating Siemens AG for the proposed plant in Subbiya, he said.

In April, Kuwait issued a new tender to build turbines for the plant in the north of the country, which is due to come on stream in 2011, saying it expected

the cost to be far less than earlier estimates in excess of KWD700 million.

Apart from General Electric, Kuwait had pre-qualified Germany's Siemens, Japan's Mitsui & Co and Marubeni Corporation, Spain's Iberdrola Ingenieria Y Construccion, and Canada's SNC-Lavalin Limited,

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African trade blocs agree to simplify rules of origin

Three of Africa’s leading regional trade blocs – the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) – have simplified the rules of origin to be applied by all member states in a move to boost intra-continental trade.

Simplifying and merging the criteria used by traders in the three blocs was part of the mandate of a task force set up by the respective Heads of State during the first Tripartite Summit held in Kampala, Uganda in October 2008.

EAC Director-General in charge of Customs and Trade, Peter Kiguta, said a draft of the hybrid rules of origin is ready.

“It is much simpler; it is expected to facilitate trade once the three regional economic trading blocs establish a Free Trade Area”, Kiguta told The East African.

Rules of origin refer to the criteria used to distinguish between goods produced within the member states and thus eligible for the trading bloc’s preferential treatment, and those produced outside the region’s customs territory that attract duties.

For instance, the EAC trade regime specifies that goods qualify for EAC tariff treatment if they originate within the partner states. This means that all goods meeting requirements of the EAC Rules of Origin qualify for EAC tariff treatment when they are traded within the region.

Traders in the EAC, COMESA and SADC are currently forced to do business under three different rules of origin, a cumbersome and expensive affair. The three sets of rules of origin are also said to be “complicated”, with many business people calling for them to be simplified.

“The rules of origin belonging to the individual economic blocs will be abolished when the hybrid one comes into force. It is better and simpler”, Kiguta said.

However, the new criteria will not come into force immediately as they will have to wait until the three regional organisations become a Free Trade Area, he said.

The Tripartite Summit agreed, among other things, on a programme of harmonisation of trading arrangements among the three regional economic communities (RECs); free movement of business persons; joint implementation of inter-regional infrastructure programmes; and institutional arrangements on the basis of which the three RECs would foster cooperation.

With regards to trade, customs and economic integration, the Summit approved the “expeditious establishment of a Free Trade Area encompassing the partner states of the three trading blocs, with the ultimate goal of establishing a single Customs Union”

The Tripartite Task Force was also directed by the Summit to develop a road map for the implementation of this merger.

On measures to facilitate the movement of business persons across the trading blocs, the Summit directed that, among other things, the study report on the road map and legal framework be presented to a specially convened Tripartite Council of Ministers for consideration within 12 months (by October this year) in order to determine the timeframe for the establishment of a single FTA encompassing the three regional organisations.

The EAC-SADC-COMESA Summit was a historic event, marking the first time since the birth of the African Union that key building blocks of the African Economic Community met on how to integrate territories and move towards deepening and widening integration within the overall Abuja Treaty for the establishment of the African Economic Community.

The three blocs currently have a combined population of 527 million people and a combined gross domestic product (GDP) of US$625 billion.

Author: Ayieko, Francis (The East African, Nairobi)

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Gauteng hosts United States Congressional Delegation

Johannesburg. Following the recent visit to South Africa by United States Secretary of State Hillary Clinton, the spotlight is back on South Africa’s richest province and Africa’s third biggest economy Gauteng, when the provincial government hosts the powerful U.S Congressional delegation led by Rep. G.K Butterfield (D-NC) on Thursday 20th August 2009 at Emoyeni Centre in Parktown, Johannesburg starting at 19h00.

GEDA Chief Executive, Blake Mosley and Gauteng Economic Development MEC Firoz Cachalia will join Premier Nomvula Mokonyane in hosting the Congressional delegation which is expected to arrive in the country this afternoon. Rep. Butterfield will be accompanied by fellow congress members Rep. Lacy Clay(D-MO), Rep. Gwen Moore (D-WI) and Rep. Steven Cohen (D-TN) and leading figures in the commerce, trade and consumer department.

Key amongst the issues to be discussed is the strengthening of business and trade relations between South Africa and in particular the Gauteng City Region and the U.S with special focus on smart industries and projects that can create decent and sustainable jobs. Over the past years trade between South Africa and the US amounted to $6.4905 in exports and $9.9480 in imports with a trade balance of $-3,457.6 in 2008 while through its dedication and hard work GEDA facilitated investments worth $500million into the province’s economy from U.S based companies in 2008/9 like Proctor & Gamble which has just established Africa’s first pampers plant in Kempton Park, Johannesburg.

“We are looking forward to a fruitful engagement with the Congressional delegation as this presents an opportunity for South African organized business formations and individual business owners who are looking at the US as a key market to possibly explore quicker ways of accessing this $13trillion economy,” explained GEDA Chief Exec. Blake Mosley-Lefatola.

Gauteng will use the occasion to sell to the delegation investment opportunities in the information and communications technology, agro-processing, pharmaceuticals, renewable energy, business process outsourcing, automotives and the creative industries sectors. We will also use these engagements to interact with the review process of the Africa Growth and Opportunity Act (Agoa) as Gauteng is one of the major beneficiaries and also prepare for the Gauteng delegation visit to Washington scheduled for September this year.

Premier Mokonyane is expected to lead both the business and political delegation to the States to further explore opportunities in the above sectors and hopefully sign a sisterhood and cooperation agreements with the State of Illinois, concluded Lefatola.

Members of the media are hereby invited to the occasion to interact with the delegation and hear more about the province’s plans on promoting trade and investments with the United States. For confirmations and accreditation please liaise with Mr. William Baloyi at +27118338750/ 0833907147 orwilliamb@geda.co.za.

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President Barack Obama's message to the AGOA Forum

THE WHITE HOUSE

Office of the Press Secretary
______________________________

_______________________________________
For Immediate Release August 5, 2009

President Barack Obama's video message to the AGOA Forum

Nairobi, Kenya
August 5, 2009

Hello everyone. I'm sorry I couldn't be there with you in person. But please know that for me and for my family, the memories from our recent trip to Ghana are still fresh-we will always remember the warmth of the Ghanaian people and the promise of Africa's potential.

I hope you're enjoying Kenya-and the hospitality of the Kenyan people-as much as I always have. When I first came in 1987, it was to discover the story of my father, who had grown up herding goats in the tiny village of Alego. When I visited as a Senator, I promised to work for a U.S. foreign policy that gives hope and opportunity to the people of this great continent.

Today, it is my privilege to address you as President. And I want to repeat what I said three weeks ago in Accra. I do not see the countries and the peoples of Africa as a world apart. I see Africa as a fundamental part of our interconnected world. In our global economy, our economic fortunes are shared. And history shows that economic growth is among the greatest forces for progress in lifting people out of poverty.

That's why the African Growth and Opportunity Act is so important. That's why the AGOA Forum is so critical. By breaking down old barriers and opening new markets, we not only increase trade between our countries. We create powerful incentives for African entrepreneurs to grow their businesses, to create jobs and build a brighter tomorrow for their children. That is what AGOA is all about.

So I thank President Kibaki and Prime Minister Odinga for hosting this Forum. And I pledge to you the full support and partnership of the United States. That is why my Administration is represented there today by outstanding members of my Cabinet.

Over the last decade, AGOA has transformed the U.S.-African trade relationship. Opening America's doors to your exports has been good for Africa-creating African jobs, bringing millions of dollars of investment to sub-Saharan Africa and sparking new trade across the continent. And it's been good for America-with African exporters seeking U.S. expertise, investments and joint-ventures. And today, we're your single largest trade partner.

At the same time, it's clear that U.S.-African trade has yet to realize its full potential. And if the current recession teaches us anything, it's that in a global economy not only the opportunities are shared. So are the risks. So there's so much more we can do together to plant the seeds of our economic recovery, and to achieve lasting prosperity.

Only Africans can unlock Africa's potential. It will take your entrepreneurship. Your innovation. And only Africans can ensure the good governance and strong institutions upon which development depends. Open markets alone are not enough. Development requires the rule of law, transparency, accountability, and an atmosphere that welcomes investment. And I encourage every country to set concrete goals for overcoming the obstacles to economic growth.

And to all Africans who are pursuing a future of hope and opportunity, know this: you have a partner and a friend in the United States. That's why we'll work with you to develop strong institutions, clear legal frameworks and the regulations and infrastructure that help bring new products to market. That's why we'll work together to harness Africa's vast natural resources to generate clean, renewable energy for export. That's why I've pledged substantial increases in our foreign assistance-not simply to help people scrape by, but to unleash transformational change. And that's why we've joined with our international partners to promote food security by investing $20 billion in agricultural development-not simply to hand out American food, but to promote African self-sufficiency.

These are the things we can do together to unleash the skills and talents of our people. And to ensure our common prosperity in the 21st century. And if we do, I'm confident that Africans can live their dreams from Nairobi to Accra, from Lagos to Kigali, from Kinshasa to Cape Town.

Thank you for your work at this important Forum. Enjoy Nairobi.

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