Economy Highlights

US - Consumer confidence falls to seven-month low

Consumer confidence dropped to a seven-month low in June as Americans grew concerned about the outlook for jobs and wages. The Conference Board’s sentiment index decreased to 58.5 from a revised 61.7 in May that was higher than previously estimated, figures from the New York-based private research group showed today. Home prices fell in the year ended in April by the most in 17 months, another report showed. Unemployment hovering around 9%, deterioration in the housing market and a drop in share prices may restrain Americans’ sentiment, raising the risk that the biggest part of the economy will stagnate. The Federal Reserve last week kept in place record monetary stimulus to help nurture the expansion through what it views is a “temporary” slowdown. (Bloomberg)

South Korea - Current-account surplus widens to 7-month high

South Korea’s current-account surplus widened to seven-month high in May as car and steelmakers boosted overseas shipments and dividend payments to foreign shareholders shrank. The surplus was USD2.26bn, compared with a revised USD1.28bn in April, the Bank of Korea said. The current account is the broadest measure of trade, tracking goods, services and investment income. South Korea’s exports have climbed at a double-digit pace since November 2009 and hit a record in April even as the won appreciated. A slowdown in US growth and the fallout from Europe’s sovereign debt crisis risk weighing on shipments. (Bloomberg)


Greece - Police fire tear gas as strike overshadows budget vote

Greek police fired tear gas to disperse protesters in the center of Athens as labor unions shut down government services before a vote on austerity measures that may determine if the nation can avoid a default. Lawmakers debated Prime Minister George Papandreou’s five-year plan of budget cuts and asset sales for a second day before a vote today at 2 pm Athens time. A crowd estimated by police to number 20,000 thronged outside Parliament in protests that descended into violence as riot police fired tear gas in battles with hooded youths who smashed windows at a McDonald’s Corp restaurant and set two vans on fire. The vote today will be Papandreou’s second survival test in a week and has to succeed for the cash-strapped nation to tap a fifth loan payment from last year’s EUR 110bn (USD157bn) rescue. Failure to pass the government’s EUR 78bn plan may lead to the euro area’s first sovereign default.

UK - Economy expanded 0.5% in first quarter, led by exports

Exports returned the British economy to growth in the first quarter as soaring food and energy costs eroded household incomes and curbed consumer spending. Gross domestic product rose 0.5% from the fourth quarter, the same as previously estimated, the Office for National Statistics said. The pace of growth from a year earlier was revised to 1.6% from 1.8%. Concern about economic growth is taking precedence over inflation as rising prices and government budget cuts put Britain on course for the biggest squeeze on living standards since the 1970s. The Bank of England kept its key interest rate at a record low this month and some officials said more bond purchases may be needed if weakness persists. (Bloomberg)


Japan - Considers JPY230bn plan for nuclear assistance

Japan’s government is considering about JPY 230bn (USD2.8bn) in outlays for aid to Tokyo Electric Power Co. and radiation monitoring in its planned extra budget, according to a draft outline prepared by the Finance Ministry. Prime Minister Naoto Kan’s government has yet to release details of the JPY 2trn supplementary budget, which will need parliamentary approval. Officials will apply JPY 1.8trn in tax revenue left over from the last fiscal year to help fund the package, according to the document, a copy of which was obtained by Bloomberg News. The spending would be aimed at a nuclear crisis that remains unresolved more than three months after Japan’s record earthquake and ensuing tsunami crippled Tokyo Electric’s Fukushima Dai-Ichi reactor north of Tokyo. (Bloomberg)