Did the stock markets smell it ahead of others? The Indian economy is close to bottoming out, says leading research outfit Nomura.

After four quarters of consecutive declines, the index which measures real M2 money supply, non-oil imports, equity returns, repo rate, real bank credit, industrial output and tourists rose in first quarter (Q1) of fiscal 2009-10 suggesting pick-up in economic activity.

Nomura uses a composite leading index (CLI) to identify turning points in the growth rate cycle. The index which had fallen from near 102 levels in September 2007 to 99, shows a breakout from current levels and seems to be rising upwards.

Since the CLI has a lead of two quarters over non-agricultural GDP growth rate-the pick up in Q1 suggests some pick-up in economic activity from the third quarter, feels Nomura economist Sonal Varma.

“Export and production data in several Asian countries (including India) have continued the improvement seen in previous months,” chief analyst Allan Von Mehren of Dankse Bank, Denmark’s largest bank.

Purchasing managers’ index for new orders show that after falling in mid-2008, the index for India has recovered significantly.

However, the recovery for the economy may not be very quick. Nomura says the decline in real GDP growth (the latest data available are Q4 of fiscal 2008-2009 ) will continue in first six months of 2009.

“We forecast real GDP growth to trough in the second quarter of FY09 at 4.5% year-on-year, led by inventory de-stocking and a further weakening of output in the services sector.”

But it maintains that overall, the turnaround in the leading index is positive . “We interpret it as a sign that the Indian economy is now close to bottoming out,” the Japanese outfit said.

Meanwhile, Citigroup economists feel that consumer price index could fall from 9.6% levels in Feb 09 to 5-6 % range soon as good monsoons could see new crop coming in. While latest inflation data pegs the WPI at 0.3% for the week ended 14 Mar, however the consumer price index (CPI) – released on a monthly basis – remained at neardouble-digit levels, up 9.6% in Februray 09.

“Given the base effect and new crop coming in, it is now consensus that normal monsoons will result in the CPI moderating to 5-6 % levels. Importantly , food articles comprise 14% of the wholesale price index but 57% of the CPI,” Citigroup economists Rohini Malkani and Anushka Shah said. – ET

Although the US economy is expected return to growth later this year, there is a danger of a second recession if monetary easing and a weak dollar leads to increased inflation expectations, a report said on Wednesday.

Massive stimulus spending and moves by the Federal Reserve to fuel economic activity is expected to jump-start the anemic US economy in the last quarter of this year after it contracted 6.3 percent in fourth quarter of 2008.

But the Fed’s moves to boost the economy by slashing interest rates and buying up billions in government debt could have undesired consequences, The Conference Board, a private research group, said in the report.

“If the United States experiences a too-rapid recovery, there may be a risk of another recession in 2010,” said Bart van Ark, vice president and chief economist of The Conference Board.

“It may fuel expectations for a return to inflation, adding to the uncertainty concerning the pattern and path of economic recovery,” he said. – ET

Up to 51 million jobs worldwide could disappear by the end of this year as a result of the economic slowdown that has turned into a global employment crisis, a United Nations agency said on Wednesday.

The International Labour Organisation (ILO) said that under its most optimistic scenario, this year would finish with 18 million more unemployed people than at the end of 2007, with a global unemployment rate of 6.1.

More realistically, it said 30 million more people could lose their jobs if financial turmoil persists through 2009, pushing up the world’s unemployment to 6.5 percent, compared to 6.0 percent in 2008 and 5.7 percent in 2007.

In the worst-case economic scenario, the Global Employment Trends report said 51 million more jobs could be lost by the end of this year, creating a 7.1 percent global unemployment rate.

“If the recession deepens in 2009, as many forecasters expect, the global jobs crisis will worsen sharply,” it said. “We can expect that for many of those who manage to keep a job, earnings and other conditions of employment will deteriorate.”

Caterpillar, Sprint, Philips, Texas Instruments and ING are among the companies that have cut thousands of jobs in response to the financial crisis and economic downturn that has spread around the world.

The ILO’s previous employment estimate, released in October, was that 20 million jobs would disappear by the end of 2009 as a result of the financial crisis.

INFRASTRUCTURE PROJECTS

Developing countries will suffer most from additional job losses, according to the ILO, whose governing structure includes governments, employers and workers groups.

“Sub-Saharan Africa and South Asia stand out as regions with extremely harsh labour market conditions and with the highest shares of working poor of all regions,” the report said.

According to ILO estimates, North Africa and the Middle East had the highest unemployment rate at the end of 2008, at 10.3 percent and 9.4 percent respectively.

Central and southeastern Europe and the former Soviet states ended last year with a jobless rate of 8.8 percent, sub-Saharan Africa’s was 7.9 percent and Latin America’s was 7.3 percent. East Asia fared best of the world’s regions at 3.8 percent.

Most job creation in 2008 came from South Asia, Southeast Asia, and East Asia, while developed economies and the European Union lost some 900,000 jobs on a net basis.

The ILO said that government works projects, like those recently announced in Argentina, could help create and sustain jobs until the private sector starts to rebound.

Construction and rehabilitation of public infrastructure such as roads, bridges, schools, hospitals and public buildings could be especially helpful in poorer countries with high levels of joblessness, the report found.

“While major capital-intensive new infrastructure projects take time to translate into increased employment, labour-based approaches can generate jobs and much-needed infrastructure quite quickly,” it said, also noting the World Bank has launched an infrastructure crisis facility that could support this work.

The ILO also urged governments to extend unemployment and health insurance programmes to help people endure the crisis. – Reuters

The government is likely to announce a second stimulus package later on Friday to help shore up an economy slowing faster than many economists had expected, two officials in the Prime Minister’s Office said.

One official, who did not want to be identified, told Reuters that Montek Singh Ahluwalia, deputy head of Planning Commission, would hold a news conference at 6:00 pm to announce details of the package.

In December, Indian authorities cut policy rates, announced $4 billion in extra spending and rolled out a four-percentage point cut in factory gate duties to help lift growth trimmed by the global financial crisis and high borrowing costs at home.

Last month, Trade Minister Kamal Nath said the government was looking at liquidity issues, and more steps to help exporters, the real estate and infrastructure sectors as part of a second package. – Reuters

Its recession most people are free as there is nothing to trade or else salary cut so less on spending, on luxury and comfort and worst case is that they have lost their jobs so nothing to do.

But one should not underestimate these recession times as they can last longer than the good times.

Is the US housing bubble responsible for all this mess?

The answer is yes and there is no use of sitting and crying.

There are few things you can do during recession times.

They are –

1. Firstly don’t see Business news channels all the time and also be away from stock tickers (Do not watch stock prices every now and then).

2. Keep your mind running, plan out new ideas. Research on stocks which you think are a value buy and accumulate them. Remember buy when others are selling and sell when others are buying.

3. Don’t sell just buy. Your long awaited bluechip stocks would be available at a dirt cheap rate. For me it is Unitech (BSE) and Suzlon (NSE).

4. Don’t over trade – Some times even some quantity of day trade can get you a huge loss. So be careful and trade when you are confident.

5. Games can help – Play Poker and get some cash or else play some online game on stock markets say for example Money Bhai Investor from MoneyControl.com so in this way you wont forget how you used to trade.

6. Read Books – Reading books can help you figure the economic situation at macro and micro level.

7. Save fuel. Rather than using your car or bike use public modes as it is cheap and economical. In fact you are just not saving fuel but you are saving your precious money.

8. At the end be away from loans. If you already have taken loan which is yet to be re paid don’t take a fresh loan again.

Chirag Jethmalani

Happy Investing.

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The Article appeared in Associated Press this Sunday.

“Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

“It will do so because of the geographical forces that me and my colleagues have discussed,” the Princeton University professor and New York Times columnist told reporters in Stockholm. “It is no longer sustained by the current economy.”

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a “lack of willingness to accept the failure of a large industry in the midst of an economic crisis.”

Facing massive job losses, the White House and congressional Democrats are negotiating a deal to provide about $15 billion in loans to prevent the weakened U.S. auto industry from collapsing.

But the deal fails to happen.

Yesterday The Bush administration’s $14 billion automaker bailout plan and other alternatives lack the votes to pass the Senate, as lawmakers seek to beat a deadline to keep General Motors Corp. and Chrysler LLC from collapsing.

GM and Chrysler are in a race against the clock as they need federal aid to keep from running out of cash early next year. Pressure is mounting on GM as a small number of parts makers ask for payments in advance, people familiar with the matter said.

Effect -

Yesterday US markets tumbled. Asia opened weak and went down drastically. But Indian markets out perform the other Asian Markets.

Europe has opened weak, with GM stock opening at a 50% lower price than the last trade.

First it was believed that the effect would be short lived but the effect won’t get over fast as the conditions so prevail.

Video –

Martin Feldstein opposes the automaker bailout.

Video: Harvard economist Martin Feldstein says a managed bankruptcy is preferable to the current bailout proposal.

Japan the worlds second fastest growing economy went officially in recession a month back. But see these bad GDP figures.
I think India is performing much better than Japan.
US is in official recession. Worlds largesr growing economy.
Japan is also in recession.
Germany which is the third fastest growing economy is also in recession.

Nows its the turn of Bank of New York Mellon after Citi Bank.