China's CPI grew 2.7% YoY in July

China's consumer price index (CPI), a main gauge of inflation, grew 2.7 percent year on year in July, staying flat from the figure for June, the National Bureau of Statistics (NBS) announced on Friday.

The figure was lower than market expectations of an increase of 2.8 percent, and remained well below the government's full-year target of 3.5 percent.

The NBS attributed the inflation growth mainly to rises in food prices on a year-on-year basis, which went up 5 percent in July. Food prices weigh about one third in calculation of the CPI.

Yu Qiumei, a senior statistician with the NBS, said China's consumer prices have stayed relatively stable. "Compared on a monthly basis, the July CPI grew 0.1 percent from June, and food prices in July also stayed flat from a month ago," Yu said.

China's Trade report shot copper to a two month high

According to an article published in the Wall Street Journal today,"copper futures shot to a two-month high after data showing imports by top consumer China rose to the highest level in 14 months in July.
The most actively traded copper contract, for September delivery, rose 9.75 cents, or 3.1%, to settle at $3.2705 a pound".
"Chinese exports and imports both rose more than economists had expected last month, a sign that the second-largest economy may be steadying following a slowdown during the first half of the year.
Chinese exports rose 5.1% in July from the same month a year earlier, data released on Thursday showed, reversing a 3.1% drop the previous month".

"China's copper imports in July rose 12% from a year earlier, to 410,680 tons, the most since May 2012.

Analysts with Commerzbank said in a note that traders in China likely took advantage of the lower global copper prices to stock up".

Stephen Roach: China crash syndrome

Excerpts

''China crash syndrome once again.Never mind the recurring false alarms over the past couple of decades. This time is different, argues the chorus of China skeptics".
"Yes, China’s economy has slowed. While the crisis-battered West could only dream of matching the 7.5% annual GDP growth rate that China’sNational Bureau of Statistics reported for the second quarter of 2013, it certainly does represent an appreciable slowdown from the 10% growth trend recorded from 1980 to 2010".
 But the skeptics are not only worried by a possible hard landing,they also concerned over excessive debt and
fears of a fragile banking system,and about the property bubble. And the lack of meaningful progress to change
the export led and fixed investment model, to one driven by private consumption.
"The rebalancing of any economy – a major structural transformation in the sources of output growth – can hardly be expected to occur overnight. It takes strategy, time, and determination to pull it off. China has an ample supply of all three".

"It is far too early to expect significant shifts in the major sources of aggregate demand. For now, it is much more important to examine trends in the potential determinants of Chinese consumption.

From this perspective, there is good reason for optimism, especially given accelerated growth in China’s services sector – one of the key building blocks of a consumer-led rebalancing. In the first half of 2013, services output ( expanded by 8.3% year on year – markedly faster than the combined 7.6% growth of manufacturing and construction.

Moreover, the gap between growth in services and growth in manufacturing and construction widened over the first two quarters of 2013, following annual gains of 8.1% in both sectors in 2012. These developments – first convergence, and now faster services growth – stand in sharp contrast with earlier trends.
Indeed, from 1980 to 2011, growth in services output averaged 8.9% per year, fully 2.7 percentage points less than the combined growth of 11.6% in manufacturing and construction over the same period. 
The recent inversion of this relationship suggests that the structure of Chinese growth is starting to tilt toward services.

In 2011, Chinese services generated 30% more jobs per unit of output than did manufacturing and construction. This means that the Chinese economy can achieve its all-important labor-absorption objectives – employment, urbanization, and poverty reduction – with much slower GDP growth than in the past. In other words, a 7-8% growth trajectory in an increasingly services-led economy can hit the same labor-absorption targets that required 10% growth under China’s previous model.
That is good news for three reasons. First, services growth is beginning to tap a new source of labor-income generation, the mainstay of consumer demand. Second, greater reliance on services allows China to settle into a lower and more sustainable growth trajectory.
And, third, growth in the embryonic services sector, which currently accounts for just 43% of the country’s GDP, broadens China’s economic base, creating a significant opportunity to reduce income inequality.

 Far from crashing, the Chinese economy is at a pivotal point. The wheels of rebalancing are turning. While that is not showing up in the composition of final demand (at least not yet), the shift from manufacturing and construction toward services is a far more meaningful indicator at this stage in the transformation.
Slowly but surely, the next China is coming into focus. China doubters in the West have misread the Chinese economy’s vital signs once again".

Stephen Roach
Former Chairman of
Morgan Stanley Asia
Project Syndicate

China: Local Governments meet revenue targets in H1 2013

"Property boom helps provinces, cities hit half-year targets, despite slowdown in the overall economy

Local governments' fiscal revenue in the first half of this year generally slowed down compared with a year earlier but its growth was much faster than that of the central government because of surging housing-related revenues.

So far, 31 provinces, municipalities and autonomous regions across China's mainland have released their half-year fiscal reports. Although all have fulfilled their six-month targets, growth has significantly slowed, providing evidence of the slowing economy's toll on tax revenue.

Nationally, China's local fiscal revenue in the first half grew 13.5 percent to 3.628 trillion yuan, down from 14.4 percent growth a year earlier. But the growth of local fiscal revenue was well above the central government's 1.5 percent gain.

China's eastern regions maintained a steady revenue growth, while the figures for central and western regions generally fell to more than 10 percent. It was higher than 20 percent just two or three years ago.

While inland regions struggled, coastal regions maintained a steady growth rate, thanks to a booming property market in the first six months .

In Shandong province, brisk property transactions sent the province's fiscal revenue up to 253.6 billion yuan, a rise of 12.5 percent over a year before. Tax collected from the housing market totaled 43.2 billion yuan. Although it only contributed 17 percent of public finances, it accounted for 53.7 percent of the increment".

China Economic Net

China's exports improve in July

China's exports went up 5.1 percent year on year to 185.99 billion U.S. dollars in July, recovering from a tumble in June, according to data on Thursday.

Imports also rebounded last month, gaining 10.9 percent to 168.17 billion U.S. dollars, the General Administration of Customs said in a statement.

Total foreign trade grew 7.8 percent in July from a year earlier to 354.16 billion U.S. dollars, after it recorded a year-on-year decline of 2 percent in June.

The trade surplus narrowed by 29.6 percent year on year to 17.82 billion U.S. dollars last month, as import gains outpaced export gains, customs data showed.

In July, two-way trade with the EU and the United States rose 5 percent and 10 percent over a year earlier respectively, as compared with a year-on-year drop of 5.4 percent and 8.3 percent respectively with the two economies in June.

Zhuang Jian, an Asian Development Bank economist, expected China's foreign trade to perform better in the second half, but said great difficulties and uncertainties still lie ahead.

Zhuang said China should continue to optimize its export structure, enlarging the share of electronic and machinery products.

Exports of electronic and machinery products grew by 4 percent to reach 102.85 billion U.S. dollars in July, accounting for 55.3 percent of total exports. The proportion was 57.8 percent in the first half, indicating more efforts in the coming months.

Liu Ligang said the long-expected detailed plan on building a pilot free trade zone in Shanghai is likely to be announced in late August or early September, which will give a boost to the service trade.

Source:   Xinhua

China's innovation ability looms large

The UK lags behind China and the US on investing in technology to drive innovation, according to a survey of business leaders across Britain.
In an Accenture survey two months ago of 500 executives and public sector leaders, more than two-thirds of those business leaders said China would reach or pull ahead of Europe in innovation by 2023. However, two-thirds of those polled also said European industry was still competitive internationally.

China spent about 1 trillion yuan ($160 billion) in research and development in 2012, accounting for a little less than 2 percent of its gross domestic product. About 74 percent of that investment was made by businesses.

As leaders of the second-largest economy vow to move to an innovation-driven society by 2020, the investment in GDP has increased 20 percent each year for the past six years.

The US is still leading China in total government and private-sector investment in R&D, with nearly a double amount. However, the White House Council of Advisors on Science and Technology warned that if the current trend continues, China may overtake over the US within a decade.

Ann Lee, an adjunct professor at New York University, said China is still not taking a lead in disruptive technological breakthroughs.

It is getting closer because China is catching up in its understanding of current technologies and will eventually be in a position to contribute more to breakthrough technologies," said Lee, author of the book What the US Can Learn from China.

Source: China Daily

Trade deficit narrows between China and U.S.

United States exports to China, which have been growing in recent years, increased 4.5 percent in June, narrowing the trade deficit between the world's two largest economies, according to US Commerce Department figures released on Tuesday.

Exports to China -- one of the fastest-growing markets for US goods -- were up 4.2 percent for the first half, the new data show.

Guo Feng, a senior economist at the Institute of International Finance, said that US-China trade dynamics were affected by China's currency rate and increases in certain categories of US goods in June.

The Chinese interbank cash crunch in June may have had some negative impact on exporters, and China increased imports from the US of goods such as machinery and agricultural products in June,"he added.

The yuan has appreciated by 1 percent against the dollar since the beginning of 2013.

The new US trade figures show imports from China fell 2.2 percent, lowering the contentious US trade deficit with China to $26.6 billion from $27.9 billion in May.

China remained the US' third-largest export market after Canada and Mexico, purchasing nearly $110 billion in US goods in 2012, according to the Washington-based US-China Business Council, which represents more than 200 US companies doing business in China.

China:Why Hasn’t Loan Growth Generated Economic Growth?

"In its latest monetary policy report (in Chinese), China’s normally tight-lipped central bank offered various explanations, some more reassuring than others:

• Loans going into areas that don’t immediately generate growth — like land needed for construction projects.

• Hoarding of cash by businesses at a time of economic uncertainty, with some businesses using funds to make more loans at a higher interest rate.

• Old industries fading away and new industries firing up both need credit, but neither generates stellar output.

• A more sophisticated financial system takes longer to get credit to end users.

The central bank sees risks — especially with businesses sticking to their credit-hoarding ways despite a shift to lower potential growth. But overall they strike a reassuring tone. Wide gaps between growth in credit and the real economy are not uncommon, they say, especially during slowdowns".

Source: WSJ

Japan: pump price tops 160 yen for 1st time in nearly 5 years

The average retail price of regular gasoline in Japan as of Monday topped 160 yen per liter for the first time since October 2008, government data showed Wednesday.

The increase reflects continuing high prices of crude oil due to concerns about political uncertainty in Egypt as well as the weakening yen.

The average gasoline price climbed 1.3 yen from a week before to 160.1 yen per liter, the Agency for Natural Resources and Energy said.

Japanese companies increase summer bonuses

Average summer bonuses that major Japanese companies agreed to pay rose for the first time in two years in 2013, a private-sector survey showed Wednesday.

This year's summer bonuses totaled 809,502 yen per unionized worker, topping 800,000 yen for the first time since 2008, according to the survey by the Japan Business Federation.They represented an increase of 4.99 pct from a year earlier

China: CRC to increase railway investment

State-owned railway giant China Railway Corporation (CRC) has announced a plan to raise fixed-asset investment to 660 billion yuan (106.5 billion U.S. dollars) this year to boost railway development.

The amount, 10 billion yuan more than the investment target set earlier this year, has been interpreted as a signal that greater investments will be made in infrastructure to boost the economy, sources with the CRC said.

About 5,500 kilometers of railway lines will be put in operation, bringing the total length of railways in operation to 100,000 km by the end of 2013. Express rails are expected to exceed 10,000 kilometers.

In the first seven months of this year, the CRC has invested 261.7 billion yuan in railway fixed assets, up 16 percent year on year.

China's Huawei unveils Ascend P6 smartphone, the world's slimmest model

Huawei, a leading global information and communications technology (ICT) solutions provider, unveiled its two new products in the Philippines on Wednesday.

One was Ascend P6 smartphone, the world's slimmest model measuring only 6.18 mm and weighing just about 120 grams.

"It is a star among smartphones with its industry-leading design, high-quality camera and intuitive user interface," said Johnson Ma, country manager of Huawei Divice Philippines.

"The newly launched Ascend P6, Huawei's flagship phone, features a 1.5GHz quad-core processor, android 4.2.2 operating system, 200mAh battery, 4.7-inch in-cell LCD screen technology, and 'MagicTouch' for enhanced screen responsiveness even when wearing gloves," he added.

The other was Ascend Mate, a pocket cinema phablet that features an ultra huge 6.1-inch HD display, a super fast 1.5 GHz Hi-Silicon quad-core processor and a long lasting 4050 mAh battery.

Huawei, founded in China's Shenzhen city in 1987, is an entirely employee-owned private company and a leading global information and communications technology (ICT) solutions provider.

Source: Xinhua

IMF Report of Japan

The new government announced in December 2012 a new policy to end decades-long deflation and raise growth. The new policy framework—“three-arrows” of Abenomics comprising 
aggressive monetary easing, flexible fiscal policy, and structural reforms—provides a unique 
opportunity to end decades-long deflation and sluggish growth, and reverse the rise of public 
debt. 
 Japan's Q1 growth accelerated to 4.1%(seasonally adjusted annual rate) after two quarters of
stagnation. Exports rebounded because of a weaker yen,and the stock market rose sharply 
stimulating consumption. Inflation expectations have started to increase and actual inflation 
was recorded in June.
From September 2012 to mid-May 2013 the Nikkei stock index rose by about 80 percent, but temporarily dropped sharply by around 15 percent. As of end June, the yen has depreciated by about 20 percent in real effective terms since mid-2012. Ten-year bond yields have remained unchanged around 80-90 basis points since the beginning of the year, although they briefly declined to historic lows of about 45 basis points after the announcement of QQME.
  The Japanese economy is expected to grow by about 2% in 2013 as a result of monetary easing,and fiscal stimulus, increased consumption and investment.
  In 2014, growth is expected to moderate to 1.2 percent as a continued pick-up in private domestic demand is offset by fiscal withdrawal from the consumption tax increase from 5 to 8 percent and an unwinding of reconstruction spending.
  Over the medium term, growth is expected to converge to 1 percent as a recovery in investment is offset by a slowdown in labor supply due to population aging.

  The Executive Board agrees that Japan's fiscal stimulus and aggressive monetary easing have 
improved in the short term growth prospects for the Japanese economy. Directors agreed, however, that the growth outlook is subject to significant risks, primarily stemming from incomplete domestic reforms and a weaker external environment, and that sustained implementation of the authorities’ reform program is the best way to minimize these risks.

   But because of the dismal fiscal situation,  Japan will have this year a gross debt of 246.9 % of 
GDP. Japan's Government should implement a credible fiscal plan in the medium term, to avoid politicaal uncertainties and avoid fiscal risks.
    Bringing down public debt as a share of GDP will require a significant adjustment over the next decade. In this regard, the IMF board supports Government plans to double the consumption tax rate by 2015, although a few Directors expressed concern over the possible adverse impact on growth. Directors also underscored that additional revenue and expenditure measures will be needed beyond 2015.

Source:   Executive Board of the International Monetary Fund (IMF)  Article IV consultation discussions with Japan

Global property investors are looking for buying real estate in Japan

Global property investors are turning their attention from Hong Kong - where the government has rolled out restrictive measures to curb investment demand - to offshore markets ranging from Japan to Vietnam.

While they remain positive about the long-term market outlook in China, including, Hong Kong, British property investment company Grosvenor and New York-based investment fund Angelo, Gordon & Co, say they are actively looking for buying opportunities in Japan.Investment fund Gaw Capital Partners singled out Vietnam as an option.
"At the moment, we think Tokyo presents the best market in terms of timing and opportunity in pricing," said Nicholas Loup, chief executive at Grosvenor Asia Pacific.

Source:  South China Morning Post

India and China compete for business in Africa

India and China scramble for business in Africa

With demand for resources to fuel both their growing economies rising, the contest between the two giants is playing out in different parts of the world.

The campus of Nairobi University is one such place.

In a corner here, workers from the China Wu Yi company are working to build a futuristic 21-storey tower, complete with lecture halls, for up to 3,000 students and a helipad.

"Once it is finished in two years, this building will be the tallest structure around," says Prof Sa Dequan, head of the university's Chinese language and cultural teaching centre.

China Wu Yi was helped by the Chinese government to gain access to Kenya, but now it is handling 18 projects here.

Not long ago, it completed a section of the eight-lane, 50km Thika Superhighway, described as Kenya's pride.

India's $65bn (£44bn) of trade with Africa is dwarfed by China's $200bn.

Chinese companies are active across the continent with big infrastructure projects, including ports, railways and sports stadiums.

By contrast, Indian initiatives are led by individual companies looking to expand in sectors such as telecoms, agriculture, the automotive industry and education.

Nairobi-based analyst Anil Bhandari says the African pie is too big for anyone to fret about.

"Most African countries are growing at 7% to 9%. Players like India, China, Brazil, European countries have a role to play."

Source:  BBC

China: Prices of coal down 10%

Prices of thermal coal in China, used to fire up power plants, have declined 10 percent so far this year amid an economic slowdown and gradual transition.

The latest benchmark Bohai-rim steam-coal price index showed that the average spot price at six major coal shipping ports in northern China in the week ending July 30 fell further to 570 yuan (93 U.S. dollars) per tonne, down 10 percent from the beginning of the year.

"Coal prices have fallen to five-year lows," Bu Changsen, chairman of Shandong Energy Group Co., Ltd., said. "The whole coal industry is experiencing the worst downturn in more than a decade and therefore most coal firms nationwide are mired in hard times."

Power consumption is a barometer of the state of the economy. Therefore slumps in thermal coal prices could mirror the downward pressure on the Chinese economy, economists said.

Meanwhile, the weak coal market comes as the country is striving to cut some high polluting and energy guzzling capacity to transform the economy into a more sustainable one, said Li Tiegang, deputy president of the school of economics with Shandong University.

Official data also showed that compared with heavy industries, the new and high-tech sectors have better growth momentum and offer hope for the Chinese economy.

China's Central Bank injected liquidity into the banking system on Tuesday

China's central bank continued to inject liquidity into the banking system on Tuesday, with 12 billion yuan (1.96 billion U.S. dollars) of 7-day reverse repurchase agreement (repo) operations.

The yield of the reverse repo, a process of central bank purchasing securities from commercial banks with an agreement to resell them at a future date, stood at 4.0 percent, according to a People's Bank of China statement.

"The reverse repo rate fell 40 basis points from last week's offering," said Jiang Chao, an analyst with Haitong Securities."It indicated that the central bank aims to guide the market borrowing costs to a lower level," 

But experts said the central bank's move does not mean a change in the prudent monetary policy.

Source: Xinhua

China's top economic planner said most Regions can meet target growth

 China's top economic planner said on Tuesday that most regions can achieve their growth target this year if macro-policies remain basically stable, in the latest words of reassurance about the slowdown of the world's second-largest economy.

The commission called for deeper reforms and further opening-up in the more affluent eastern regions, including accelerating construction of new experimental zones and pilot reforms in major areas to offer experience to the broader economy.

It also pledged more support to the central, western and northeastern regions.

Central government investment will lean toward major infrastructure and social projects in central and west China to make sure they are not affected by the slowing economy, the NDRC said, adding it is also mulling a policy document to revitalize old industrial bases in the northeast.

Source: Xinhua

Hollande reste optimiste sur la croissance française

François Hollande s'est de nouveau montré optimiste mardi 6 août sur une reprise de la croissance lors d'un déplacement en Vendée sur le thème de l'emploi, jugeant que "c'est fragile, mais il y a quelque chose qui se passe".

"Nous devons tout faire pour accompagner ce mouvement", a déclaré le chef de l'Etat lors d'une visite d'un Pôle emploi à La Roche-sur-Yon. "Je suis confiant sur l'inversion de la courbe du chômage. Nous allons y arriver", a-t-il répété.

 Un optimisme affiché alors que dans son rapport annuel sur l'economie francaise , publié lundi, le FMI estimait que Paris avait déjà accompli "aux deux tiers les efforts entrepris en 2011 pour stabiliser les déficits", et pouvait dorénavant lever un peu le pied sur la rigueur.

"Il ne faudrait pas l'interpréter comme un relâchement de ce que nous avons àfaire sur le plan des économies, mais plutôt comme un encouragement", a-t-on commenté dans l'entourage du président de la République.

"L'échec étant patent, tout va être dans la communication et la méthode Coué, a déclaré M. Roger Karoutchi, sénateur des Hauts-de-Seine et vice-président de l'UMP. Le président en déplacement tous les jours clame dans les médias : 'Emploi, emploi, emploi !' Bon, à défaut de créer un emploi, cela peut faire croire que l'on s'en occupe."

Le porte-parole du PCF, M. Olivier Dartignolles, a lui dénoncé "l'optimisme présidentiel" qui "ne remplacera pas l'urgence d'en finir avec l'austérité, avec une politique gouvernementale qui tourne dramatiquement le dos à l'espoir d'un changement, à une amélioration concrète des conditions de vie".

Source: Le Monde

Japan unveils new big warship

Japan's biggest warship was unveiled on Tuesday, raising grave concerns about the country's military buildup as observers said the vessel is actually an aircraft carrier, banned by Japan's pacifist constitution.

Tokyo's move coincided with Manila's latest efforts to upgrade its military, as the Philippine navy received a second former US coast guard ship. Manila received the first ship in 2011.

Analysts see the upgraded warships in Japan and the Philippines as efforts to gain an upper hand in maritime disputes with China, as well as a catalyst igniting an arms race that would escalate regional tensions.

China's Ministry of National Defense expressed concern on Tuesday about Japan's "continuous military buildup" and urged it to adhere to peaceful self-defense.

"Japan should reflect on its history, adhere to self-defense and the promise of following the path of peaceful development," the ministry's bureau for media affairs told China Daily. The ministry also called for Japan's neighbors and the international community to be "highly alert".

The Japanese-built carrier has a displacement of around 20,000 tons. It can accommodate 14 helicopters and will play a major role in disaster and rescue missions, as well as defend sea passages and Japanese territory, according to Japan's defense ministry.

But it is much larger than many countries' aircraft carriers in terms of displacement and deck length, and it can be easily and swiftly refitted to support F35-B fighters, which have strong combat capabilities, said Zhang Junshe, a senior researcher at the People's Liberation Army Naval Military Studies Research Institute.

"It is an aircraft carrier, and Japan just called it ‘a helicopter destroyer' to downplay its aggressive nature," Zhang said. Japan, defeated in World War II, is creating regional tensions by breaking the postwar order, he added.

Source: ChinaDaily

China to relax family planning policy

The National Health and Family Planning Commission moved on Tuesday to allay concerns in media reports last week that China will relax its family planning policy by 2015 to allow more couples to have two children.

The commission said no timetable has yet been determined and instead said the new plan will be carried out "at the proper time".

The commission, however, did confirm media reports that an update is on its way. In the new plan, couples will be allowed to have a second child if at least one parent has no siblings.

There are several exceptions to the one child rule,the current policy permits couples to have two children if both parents are the only children in their families.

In most rural areas, for example, families can apply to have a second child if their first-born is a daughter.

An update to the policy makes economic sense, because allowing more couples to have a second child could stem potential labor shortages in the future.

Lu Jiehua, a professor of social demographics at Peking University who has done research for the commission, said that the "proper time" is probably coming this year.

"Regions with a relatively higher proportion of (families with only one child) and a higher urbanization level are most likely to introduce the relaxation first," he said.

Government Bonds Quotes

Government Bonds

                                                                                          Price         Yield
                                                                                        Change           %

U.S. 5 Year			-0/32	1.393
U.S. 10 Year			-1/32	2.647
U.S. 30 Year			-1/32	3.729
Germany 2 Year			0/32	0.178
Germany 10 Year			-5/32	1.708
Italy 2 Year			2/32	1.911
Italy 10 Year			6/32	4.263
Japan 2 Year			0/32	0.117
Japan 10 Year			-3/32	0.788
Spain 2 Year			3/32	1.827
Spain 10 Year			7/32	4.564
U.K. 2 Year			0/32	0.370
U.K. 10 Year			-1/32	2.481

  Source:  WSJ

Fed Officials talking about tapering bond buying soon

Dallas Fed  President Richard Fischer, talked yesterday about starting to cut central bank bond buying as early as September.
Chicago Fed President Charles Evans said today that the central bank could start tapering its $85 billion-a-month bond-buying program at its September policy meeting, 
Mr. Lockhart told Market News International the Fed could start cutting back its bond-buying program at any of three remaining Federal Open Market Committee meetings this year.
The Chicago Fed's Mr. Evans' view that the Fed could decide to begin reducing its bond-buying program in September is significant because he is part of the activist wing of the Fed that has supported unconventional policies like bond buying, which aim to drive down borrowing costs in the hopes of spurring investment, spending and hiring.
Mr. Fisher and Mr. Lockhart aren't voting members of the Fed's decision-making committee, while Chicago's Mr. Evans is.

Source:  WSJ

FMI Executive Board of U.S. Economy Part II

The executive board welcomed the improvements in the U.S. economy,which bodes well for
a gradual acceleration of growth. While the balance of risks tilt the outlook to the downside.
They concurred  "that the fiscal deficit reduction in 2013 is excessively rapid, and that the automatic spending cuts  not only reduce growth in the short term but could also lower medium-term potential growth. They stressed the importance of adopting a comprehensive and back-loaded medium-term plan entailing lower growth in entitlement spending and higher revenues".
 A slower plan of U.S. deficit reduction in the short run,would help global growth,place the fiscal
situation on a sustainable path,and would help to reduce global imbalances . They also expressed concern over the possible political gridlock for the next fiscal budget, and expected improvement.

They agreed that "accommodative monetary policy continues to provide essential support to the recovery, but cautioned that its financial stability implications should be carefully assessed. They considered that a long period of exceptionally low interest rates could potentially entail unintended consequences for domestic financial stability and has complicated the macro-policy environment in some emerging markets. In this context, macro-prudential oversight and supervision of the financial system remain essential".

There are significant challenges involved in reducing easy money policy. Including market overreactions in interest rates and currencies.
"They stressed that effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing these risks".

"Directors welcomed the recent improvements in the housing and labor markets. They agreed that the rebound of the housing market has benefited from monetary policy actions and government-backed programs that facilitated refinancing and modification of loans under stress. They saw room for policies that continue to support the housing market while gradually reducing the dominant role of the government-sponsored enterprises".

"Emerging vulnerabilities and risks from persistently low rates in the financial sector need to be carefully monitored. Directors welcomed the strengthening of the regulatory architecture relative to the pre-crisis period, including through the adoption of Basel III capital rules. They emphasized that completing the implementation of the financial reform agenda remains essential to increase the resilience of the U.S. financial system".

Source:IMF Executive Board Concludes 2013, Article IV Consultation
                 with the United States

Positive Economic Indicators in the EU Zone

Germany said industrial orders at its factories surged by a surprisingly strong 3.8 percent in June, their largest monthly rise since October as contracts for big-ticket items jumped and euro zone demand rebounded.Manufacturing, which makes up around one fifth of Europe's biggest economy, struggled earlier this year but Tuesday's data, combined with a survey last week showing the sector expanded at its fastest rate in 1-1/2 years in July, offers some hope that it is regaining traction.

Britain's manufacturers reported their biggest annual rise in overall industrial production for over two years, adding to growth already seen in service sector activity, the housing market and in retail sales.The data showed a 1.1% month-on-month increase in industrial output,beating predictions of 0.6%

Italy's economy shrank by less than expected in the second quarter, adding to recent signs its slowdown is bottoming out.Gross domestic product marked its eighth straight quarter of contraction, dropping 0.2 percent on the quarter and 2.0 percent an annual basis, national statistics bureau ISTAT said on Tuesday.The quarterly slump was the smallest since early in a recession that began in the middle of 2011, and half as large as the 0.4 percent drop forecast by analysts in a Reuters survey.

That continued a run of encouraging data, and some analysts are predicting a return to very modest growth in the fourth or possibly the third quarter, tracking a gradual upturn forecast for other parts of the euro zone.