Business conditions in the huge Japanese and Germany economies have worsened, calling into question suggestions the global recession might start easing later this year.
Fed chairman Ben Bernanke said earlier today that the deep US recession may slow later in the year, all things being equal, but that depended on government stimulus packages working and some improvement in other economies.
Judging by figures and events in the next two largest economies in the world, Japan and Germany, a boost for US exports is not in prospect soon; and both are suffering from the slump in America and the rest of the world.
German banks are emerging as the most stricken after America’s and this is starting to worry authorities from around the world, especially in Europe where industrial orders are down sharply in the past year.
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Japanese exports in January fell nearly 46%, the biggest fall since 1980 (when the current method of tracking exports was started) and German business confidence plunged to an 18 year low, with no positive news anywhere in the measure and eurozone industrial output fell in December to be down massively from the same month of 2007.
The Japanese Finance Ministry said that seasonally adjusted, Japanese exports fell 10% from December and the country recorded a bigger trade deficit for the month, of $US9.9 billion at current exchange rates, 70% higher than that recorded in December.
Japanese exports to the US and Europe dropped by record amounts. Shipments to the US plunged by almost 53%, from the same month in 2008, while those to Europe fell 47.4%.
There is a small glimmer of relief for Japanese exporters: the yen has fallen by 6% against the US dollar so far this month. That will relieve some of the huge pressures on exporters like car companies, computer equipment makers, steel groups and others who have found returns from falling sales falling even faster because of the high value of the yen.
Across the 16-country eurozone, industrial orders fell sharply by 5.2% in December compared with November.
Eurostat, the European Union’s statistical office, said that compared with the December a year before, they were down 22.3%. German industrial orders fell a nasty 9% in December but Ireland saw its orders plunge by more than 12% from November.
German business confidence has fallen to its lowest level for at least 18 years after a precipitous decline in industrial orders late last year, even as emergency government action to save Europe’s largest economy took effect.
The Munich-based Ifo institute said on Tuesday its closely watched business climate index slipped from 83.0 in January to 82.6 in February. That dashed hopes raised by a small rise last month and took the index to its lowest since records began in January 1991.
Not helping confidence in Germany is the soaring cost of bank bailouts: the help for the stricken Hypo Real Estate, Germany’s second largest mortgage writer, is now 100 billion euros, 20% of the entire amount set aside to help financial groups. And two federal states in northern Germany have been forced into the 13 billion euros of HSH Nordbank, a shipping financier, whose writedowns on complex structured credit products have crippled the regional lender and blown a hole in state budgets.
Politicians from Schleswig-Holstein and Hamburg, who together own about 60% of HSH, put together the bailout. Around 26% of the bank is owned by US buyout group, JC Flowers, which has a 24% stake in Hypo Real Estate and is resisting pressure from the German Government to get out.
Meanwhile, the Irish police’s Fraud Bureau have raided the Dublin headquarters of the recently nationalised Anglo Irish Bank as the official investigation into affairs at the bank turns from one of financial regulation to possible criminal activity. Dublin media outlets reported the raid on their websites and in their Wednesday morning editions. The police are investigating allegations of insider dealings, fraudulent behavior by former board and executive members and illegal share buying, among a long list of claims. Up to 20 officers working under the Office of the Director of Corporate Enforcement (ODCE), were reportedly involved in the raid.
Anglo Irish Bank was nationalised last month after the share price plummeted amid a run on the bank and controversies, including a loans-for-shares scandal, revelations about secret loans to former chairman Sean FitzPatrick and a multibillion-euro deposit from an apparent rival bank to balance its books and make it appear solvent,.
Public anger about the revelations emerging from Anglo boosted a protest last Saturday that saw some 120,000 people march through Dublin in one of the biggest demonstrations seen in the city for years.