And a lot more, including some more bad numbers from the U.S.
Moody’s downgrades the eurozone
The latest pronouncement today concerns the ratings agency’s outlook for the whole common currency zone, with Moody’s effectively downgrading the whole eurozone.
An excerpt from their report, posted in full by the London Telegraph:
Moody’s Investors Service has today changed to negative from stable its outlook on the Aaa long-term issuer rating of the European Union (EU). The rating agency has also changed to negative from stable its outlook on the provisional (P)Aaa rating of the EU’s medium-term note (MTN) programme.
A provisional rating for a debt facility is an indication of the rating Moody’s would likely assign to future draw-downs from the facility, pending the receipt of documentation detailing the terms of the debt issuance. Moody’s policy is to assign provisional ratings to all MTN programmes.
The outlook change to negative reflects the negative outlooks now assigned to the Aaa sovereign ratings of key contributors to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45pc of the EU’s budget revenue. Moody’s believes that it is reasonable to assume that the EU’s creditworthiness should move in line with the creditworthiness of its strongest key member states considering the significant linkages between member states and the EU, and the likelihood that the large Aaa-rated member states would likely not prioritise their commitment to backstop the EU debt obligations over servicing their own debt obligations. On July 23, 2012, Moody’s had changed to negative its outlooks for the Aaa ratings of Germany and the Netherlands.
Just how bad is the eurocrisis?
Well, consider this: Bulgaria, which successfully fought for and won admission to the common currency zone today said “Thanks, but no thanks — at least for now.”
A video report from RT:
More from Benjamin Fox of EUobserver:
Bulgaria has halted plans to join the euro in the latest public setback for the beleaguered currency union.
Speaking in an interview with the Wall Street Journal on Monday (3 September) in Sofia, Prime Minister Boyko Borisov and Finance Minister Simeon Djankov said the decision was the result of the debt crisis and the double dip recession facing the eurozone, along with rising public opposition to joining the single currency.
“Right now, I don’t see any benefits of entering the euro zone, only costs,” Djankov said, adding that disagreement between countries on how best to respond to the debt crisis made the prospect of euro membership “too risky for us and it’s also not certain what the rules are and what are they likely to be in one year or two.”
Bulgaria already fulfills the economic criteria to join the euro, having reduced its budget deficit to 2.1 percent in 2011, comfortably below the 3 percent limit laid out in the Stability and Growth Pact.
And Asia’s sinking deeper into the abyss
First, a report on the latest developments from Andre Damon of the World Socialist Web Site:
Manufacturing in China, the powerhouse of the Asian economy, contracted at its sharpest rate since the depths of the 2008-2009 downturn. HSBC said its China manufacturing Purchasing Managers’ Index for August fell to 47.6, the lowest level since March 2009. This was down from 49.3 the month before.
Chinese officials attributed the slump to the slowdown in the euro zone, which is dragging down Chinese exports. The manufacturing contraction in major exporters such as Germany and China is in turn dragging down primary-goods producers such as Australia, whose economy has been hurt by falling iron ore prices.
Manufacturing in South Korea and Taiwan likewise contracted. South Korea’s Purchasing Managers Index was 47.5 in August, while the PMI for Taiwan fell to 46.1 from 47.5. South Korean exports were down by 6.2 percent last month from a year earlier, led by exports to the euro zone, which fell by 9.3 percent.
Last week the Japanese government cut its economic outlook for the first time in ten months, after the economy shrank at a 3.4 percent rate in May and grew only .4 percent in June.
More on China from Ireland’s Independent:
China’s industrial output is contracting at the fastest pace since the depths of the global financial crisis, with knock-on effects spreading across the Far East.
“It just keeps getting worse,” said Alistair Thornton and Xianfang Ren from IHS Global Insight. “The government has underestimated the pace of the slowdown and is behind the curve.”
The HSBC/Markit manufacturing index for China fell to 47.6 in August, the lowest since the onset of Great Recession in late 2008. Inventories are rising. The index for new export orders fell to the lowest since March 2009. “Beijing must step up policy easing to stabilise growth,” said Hongbin Qu from HSBC.
China’s official PMI manufacturing index – weighted to big companies – also fell through the contraction line of 50, though services are holding up better.
One more bit of China data, from Xinhua:
Chinese stocks wiped out early gains and headed downward to close at new low in more than three years on Tuesday, as concerns over growth in the world’s second-largest economy and absence of more stimulus measures held investors in cautious positions.
The benchmark Shanghai Composite Index fell 15.5 points, or 0.75 percent, to close at 2,043.65, marking the lowest level since February 2009.
The Shenzhen Component Index slumped 117.84 points, or 1.41 percent, to close at 8,243.83.
And take a look at some of the latest numbers from the U.S.
First, the manufacturing scene, via Reuters:
Manufacturing shrank at its sharpest clip in more than three years in August, the third month of contraction in a row, and firms hired the fewest workers since late 2009, a survey on Tuesday showed.
The Institute for Supply Management said its index of national factory activity fell to 49.6 in August from 49.8 in July.
The reading fell shy of the 50.0 median estimate in a Reuters poll of economists. A reading below 50 indicates contraction in the sector.
The index’s employment component fell to 51.6, the lowest since November 2009, from 52.0 in July.
New orders, a forward-looking sub-index, fell to 47.1 in August, the worst showing since April of 2009. It stood at 48 in July.
Next, construction, from Business Insider:
Construction spending declined 0.9 percent in July as weakness in the private sector weighed on overall spend.
New data from the Census Bureau shows spending fell by its greatest pace in a year, down to an annualized pace of $834.4 billion.
Food stamp participants hit record high
One last bit of data from the U.S. via Zero Hedge:
Following a brief period in which it seemed that US foodstamp recipients may have peaked, with those living in poverty maxing out at 46.514 million in December 2011, and then declining modestly for the next few months, June saw a new surge in those Americans living in poverty and thus eligible for foodstamps, with 173,600 new entrants into the system, bringing the total to a new all time high of 46.670 million and once again rising fast. Furthermore, with subsequent emergency events affecting the heartland due to the drought, the administration has made sure even more Americans will be eligible going forward. As a result expect the July and August numbers to promptly surpass 47 million on their way to the psychological resistance level of 50 million. Indicatively, the 173,600 increase in Foodstamps recipients in June was three times greater than Americans finding jobs (64,000, most of which part-time) according to the BLS. Finally, a new record was also breached for American households on foodstamps, which now hit 22.4 million, an increase of 106,298 households. The average benefit per household decline once more, this time to $276.5. Not an all time low, but just above it.
Do we begin to see a pattern?