Posts Tagged ‘economists’

“The Costliest And dreadful Affair”…Final Part :)

Continuing the Hurricane “costliest & dreadful affair”…………….. 🙂

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“Major affected areas”…it’s a nightmare for North and South America, and it comes from north-African low pressure systems and moves west. The Caribbean, Mexico, and United States are most often hit by hurricanes. Nearly half of U.S. oil refining capacity is located in hurricane affected areas.

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“Dreadfully risky business for insurance companies”…I hope every year insurance companies pray for clear weather for hurricane affected area. Imagine, insurance companies paid $66 billion for Katrina loss and it was the costliest disaster in the history of insurance. Louisiana accounted for 63 percent of insured losses and Mississippi accounted for one-third. On the contrary, it’s a boon for construction industry.

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“Makes big hole…effect on economy”… hurricane like other natural disasters, disturb the economic activity of regions in many ways as business activity is interrupted and infrastructure is destroyed. Approximately, single hurricane Katrina cost around $125 billion, with $66 billion in insured losses. It affected 19% of U.S. oil production. Power and energy companies’ financial condition gets damaged due to hindrance in production and supply activities amid storm restoration costs. Shipments also get affected and we know that nearly two-thirds of all oil processed by the region’s refineries arrives via ship, hence any natural disturbance will result in supply disruption. The Gulf’s ports are trading points for over 20% of cargo tonnage in the US.

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“Destruction…the ripple effect of hurricane”… just imagine the total loss, done by hurricane in US that single hurricane Katrina and Rita destroyed 113 offshore oil and gas platforms and damaged 457 oil and gas pipelines. Hurricanes Katrina and Rita reduced oil production by 103 million barrels and natural gas output by 610 billion cubic feet. But this is not enough; Katrina also struck the heart of Louisiana’s sugar industry, with an estimated $500 million annual crop value and made 75000 people homeless. Entergy New Orleans also filed for bankruptcy protection on September 23, 2005.

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“Impact on commodity…higher energy keeps inflation at higher side”… hurricane affected areas produces about 15% of US supply of natural gas and 7% of its oil. The Gulf of Mexico is responsible for 13% of the U.S. natural gas production (and 30% of its domestic crude oil production). Any supply disruption gives a leap to the crude and natural gas prices. By and large we observe price of crude oil and natural gas augment during the period of June to October. It’s a very active time for speculators and we can see the changes in front month contracts based on weather forecasts. Crude already zoomed up to the level of $87.15 on 3rd May, 2010. Now it headed towards quarterly decline since 2008. But there are major factors, which will keep the fire on in energy complex. Hurricane Alex has already hit this season and 20 more hurricanes of different categories are expected to hit in 2010. Hence any news of hurricane would fuel the prices. Driving season in US has already begun, which is the time, when money managers prepare to pull their sleeves to build a large position in crude. Furthermore ongoing summer season can give additional strength to the prices. Hence these factors will keep the crude prices at higher side but any weak economic indicator will cap the upside.

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In nutshell, nobody desires to get up with the news that hurricane is heading towards Louisiana when the entire world is struggling to overcome its financial problem. Whenever hurricane season starts it hoist, there is a fear of price rise of crude oil, which is not at all upbeat for the economies already in poor health. Traders start to quit their short positions. When you see a significant changes in the position of traders near June or July months, then you can assume simply that hurricane is about to knock the US field and money managers are preparing for a wild movements!!!

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“The Costliest And dreadful Affair”…Hurricane 1

It was only two months back when European debt crisis   wreked havoc on EU and the rippled effect was seen in other countries as well. Till date, many nations are still fighting with the financial problem, at the same time met department gave another jolt to the world and announced the unwelcomed and killer hurricane season.

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Hurricane…. derived from huracan, the Carib god of evil is once again become the headlines and racing the heart beat of people of affected areas, economists , government and all.  The forecast is expecting for a very active 2010 season with above-normal threats on the US coastline. This news is not at all encouraging for world economy, especially when world economy is under attack of financial tsunami. Let’s have a look on the details of this deadly hurricane which is a regular visitor every year and give crucial impact on the health of economy…

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“Timings, which does matter”… generally hurricane season starts from June and end in October. But very peaked season is from “August to October”; especially “early to mid-September” is the pinnacle. But of course, it is not mandatory that Mother Nature will follow the same calendar every year; remember hurricane Wilma hit on 21st and 22nd October, 2005. Weather specialists are predicting an above-average activity for the 2010 Atlantic hurricane season. Alex, first hurricane of 2010 already showed its existence.

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“Very attention-grabbing naming in chronological order”… they are named alphabetically. First tropical storm or hurricane starts by A, then B…and in this order. List contains hurricane names that start from Ato W, but exclude names that start with a “Q” or “U.” There are six lists which rotate. Changes occur in list only when there is a hurricane, which is extremely dangerous, after that the name retires and another hurricane name replaces it. Even in 2010 list, there are certain changes; viz- Charley was replaced by Colin, Frances was replaced by Fiona, Ivan was replaced by Igor, and Jeanne was replaced by Julia.

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“Category…grading of damages”…there are five category of storms viz.1, 2, 3, 4 and 5. Category 5 storms are the most catastrophic hurricanes that can form. On an average it forms once in three years, if we talk about Atlantic basin. Only four times — in the 1960, 1961, 2005 and 2007 hurricane seasons — have multiple category 5 hurricanes formed. However, on larger canvas between 1924 and 2007, 32 hurricanes have been recorded at category 5 strength. An average season usually has 11 storms, six hurricanes, and two major hurricanes.

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To be continued…………………

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US Economists feel Positive, says Worst is Behind :)

Worst is behind :)

Among the world’s large economies, UK, which is the seventh largest and Italy, the tenth, remain in recession, like the US.

The UK economy shrunk 0.8% in the second quarter, while Italy’s was down 0.5%.

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Unlike in the UK, however, economists in the US believe the worst may be behind them.

‘‘It’s quite possible, though not certain, that retrospectively, we’ll say that the recession ended in July or August, may be September,’’ Nobel laureate Paul Krugman was quoted as saying.

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There is evidence that his is not undue optimism.

The pace of job losses in the US slowed more than forecast in July and the unemployment rate dropped for the first time in more than a year.

US GDP also shrank by just 0.3% (equivalent to an annualized 1%) in the seconnd-quarter after a 6.4% drop in the previous three months.

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That explains why US Federal Reserve is willing to bet that the nosedive the economy had witnessed in recent months is behind it.

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Over the last two years, the US has witnessed its worst financial crisis in decades, but that could be ending, which is good news for the world since it accounts for a fifth of global GDP.

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France and Germany also announced unexpected returns to the growth path, which means that four of the world’s five largest economies and six of the top 10 are now not in recession.

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Adding to the sense of optimism, the US Federal Reserve left rates unchanged, saying that the world’s largest economy was showing signs of levelling out.

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Among the five largest economies of the world, measured in purchasing power parity (PPP) dollars — which is more of an apples to apples comparison — China and India are already growing at healthy rates, although lower than their own pace for the last few years.

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Japan too has climbed out of recession and so has Germany.

These economies and the US account for 47% of world GDP in PPP terms.

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Among the world’s other large economies, Brazil is also now no longer in recession having grown by 1.5% in the second quarter.

Among the world’s large economies, UK, which is the seventh largest and Italy, the tenth, remain in recession, like the US. The UK economy shrunk 0.8% in the second quarter, while Italy’s was down 0.5%.

Unlike in the UK, however, economists in the US believe the worst may be behind them. ‘‘It’s quite possible, though not certain, that retrospectively, we’ll say that the recession ended in July or August, may be September,’’ Nobel laureate Paul Krugman was quoted as saying.

There is evidence that his is not undue optimism. The pace of job losses in the US slowed more than forecast in July and the unemployment rate dropped for the first time in more than a year. US GDP also shrank by just 0.3% (equivalent to an annualized 1%) in the seconnd-quarter after a 6.4% drop in the previous three months.

That explains why US Federal Reserve is willing to bet that the nosedive the economy had witnessed in recent months is behind it. Over the last two years, the US has witnessed its worst financial crisis in decades, but that could be ending, which is good news for the world since it accounts for a fifth of global GDP.

Some light showed up at the end of the recession tunnel on Wednesday as France and Germany announced unexpected returns to the growth path, which means that four of the world’s five largest economies and six of the top 10 are now not in recession.

Adding to the sense of optimism, the US Federal Reserve left rates unchanged, saying that the world’s largest economy was showing signs of levelling out. Both France and Germany had been predicted by most economists to face a decline of about 0.3% in their GDPs for the second quarter (April-June) of 2009, but they surprised themselves and the rest of the world by announcing that they’ve actually recorded growth of 0.3% each.

Among the five largest economies of the world, measured in purchasing power parity (PPP) dollars — which is more of an apples to apples comparison — China and India are already growing at healthy rates, although lower than their own pace for the last few years. Japan too has climbed out of recession and so has Germany. These economies and the US account for 47% of world GDP in PPP terms.

The Eurozone as a whole is also now projected to have contracted by just 0.1% compared to the 2.5% fall in GDP in the first quarter (January-March). The growth rates reported by Germany and France may seem like nothing to get excited about, but considering that German GDP shrunk by 3.5% in the first quarter and France’s by 1.3%, it is quite a smart turnaround.

Among the world’s other large economies, Brazil is also now no longer in recession having grown by 1.5% in the second quarter.

India Industrial Output Up 7.8% :) FDI Flows to Improve ;)

Indian Industrial output

India’s industrial output INIP=ECI rose by a much faster-than-expected 7.8 percent in June from a year earlier, data showed on Wednesday, driven by higher demand for consumer goods and increased mining activity.

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Industrial output rose for the third straight month and clocked its highest rate of expansion since February 2008.

June output was far better than expectations for a 3.3 percent rise, although economists warned that the rapid pace of industrial growth might not be sustainable despite other recent positive signals.

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Output of consumer durable goods such as home appliances rose 15.5 percent from a year earlier.

Though the deficient monsoon has created an uncertainty about the overall growth outlook, the industrial buoyancy at this pace is definitely a strong positive signal.

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There are signs the expansion in activity continued in July, with car sales rising by a blistering 31 percent. Society of Indian Automobile Manufacturers showed companies sold 115,067 cars during July, compared with 87,901 cars a year earlier.

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India’s manufacturing activity held steady in July, expanding for the fourth consecutive month, a survey by Markit Economics showed.

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But erratic monsoon rains could cloud demand in the economy.

With just over 40 percent of India’s agricultural land irrigated, farm output is heavily reliant on rains but below normal monsoon could potentially hurt rural demand, which accounts for more than half of India’s domestic consumption.

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