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Japan disaster to cost Australia $2 bln in lost trade

Chinese manufacturing rebounds in March
Shanghai (AFP) April 1, 2011 - Manufacturing activity in China rebounded in March after a fall the previous month, official and independent data showed Friday, giving Beijing more leeway to take new measures to rein in inflation. The purchasing managers index (PMI) rose to 53.4 in March from 52.2 in February, after three consecutive months of slowdowns, the China Federation of Logistics and Purchasing (CFLP) said in a statement. The agency compiled the index on behalf of the National Bureau of Statistics.

And the HSBC China Manufacturing PMI indicated a milder rebound, bouncing back slightly to 51.8 in March from 51.7 in February, the British banking giant said in a statement. A reading above 50 indicates the sector is expanding while a reading below 50 indicates contraction. Economists said the rebound helped alleviate any concerns about a potential sharp slowdown in the overall economy -- and made it likely that more tightening measures would follow.

"The final March manufacturing PMI confirmed that the pace of manufacturing expansion has stabilised after slowing in February," said Qu Hongbin, HSBC's chief economist for China. "This implies economic growth is only moderating rather than slowing too much. More importantly, price hikes also started to slow in March," Qu said. "All these confirm our view that quantitative tightening is working. So as long as Beijing keeps tightening for another three to four months, inflation should start to slow meaningfully in the second half of 2011." The bank said manufacturers in China still faced greater cost burdens but the rate of growth in factory input costs, which includes raw material and fuel prices, eased markedly from February.

The CFLP said its input price sub-index, an indicator of inflation pressures, eased to 68.3 from 70.1 in February. "Investment growth remained high in the January-February period, while growth in exports and consumption both declined," CFLP analyst Zhang Liqun said in a statement. Beijing has raised interest rates three times since October and increased the amount banks must hold in reserve three times already this year to control soaring prices, which top leaders fear could lead to social unrest. Consumer inflation remained stubbornly high at 4.9 percent in February, above Beijing's 2011 target of four percent. The official Shanghai Securities News reported Friday that economists expect it to hit five percent in March. The benchmark Shanghai Composite Index was up 0.12 percent at 2,931.64 in the late morning after release of the data.
by Staff Writers
Sydney (AFP) April 3, 2011
The devastating earthquake and tsunami in Japan will cost Australia some Aus$2 billion (US$2.07 billion) in lost export earnings, trimming economic growth, Treasurer Wayne Swan said Sunday.

Japan is the country's second-largest trade partner after China and the seafloor quake and tsunami on March 11, which left about 28,000 people dead or missing, damaged ports and power stations.

Australia is the world's biggest shipper of coal and iron ore and Swan admitted the catastrophe would leave its mark on the Australian economy.

"Preliminary Treasury estimates show that the earthquake and tsunami will cut demand for our bulk commodity exports in the short term and likely slash around $2 billion from export earnings in 2010-11," he said.

"This could subtract less than a quarter of a percentage point from GDP growth this financial year, and comes on top of the half a percentage point impact from the floods and cyclone at home.

"Japan's nuclear situation and power shortages continue to weigh on international financial markets and may prolong the impact of this crisis on the global economy," Swan added.

The hit to the economy comes after the Treasury said destructive floods in Australia this year could cost up to $8.3 billion in lost coal production -- a sharp increase on earlier projected losses.

The huge deluge that swamped coal-producing Queensland state in January caused significant damage, halting mine production and cutting key transport infrastructure,

The government has estimated the floods, which covered an area the size of France and Germany combined and were followed by destructive Cyclone Yasi, will cut coal production by about 15 million tonnes in the March quarter alone.

But businesses expect total coal production losses to be much higher, worth roughly between Aus$5.5 and Aus$8 billion.

"No one was ever under any doubt that the financial toll of the devastation we've seen in Queensland and elsewhere in Australia this summer was going to be substantial," Swan said.

"The latest figures back that up, and indicate the cost is likely to be even larger than we initially thought."

The twin natural disasters are expected to weigh heavily on the Australian budget due to be announced on May 10, which will seek to balance their costs against inflationary risks caused by an unprecedented Asia-driven mining boom.

Swan warned of tough decisions ahead.

"These events all have significant implications for our budget as well as our economy," he said.

"Weaker growth will clearly mean that revenues take a substantial hit in the near-term, and this comes on top of the rebuilding and recovery costs in Queensland.

"As the prime minister said last week, there'll need to be some tough decisions in the budget as we stick to our strict fiscal rules."

Australia, dubbed the "wonder from Down Under", was the only major Western economy to avoid recession during the financial crisis thanks mainly to its coal and iron ore exports and emergency stimulus package.

It now has unemployment of just 5.0 percent and a currency at historic highs against the US dollar, although interest rates have risen rapidly since dropping dramatically during the crisis. They are currently at 4.75 percent.



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