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Hard landing off?

From FT:

China’s purchasing managers’ index, an important gauge of factory activity, defied most analysts’ forecasts for a slowdown and rose to 53.1 in March from 51.0 in February. It was the strongest reading in a year and signalled a modest acceleration of industrial output.

This is the official number.

Then there’s the unofficial HSBC China PMI, which actually showed renewed deceleration, dropping from 49.6 to 48.3.

This is the second worse number in 3 years.

So it’s a split decision, which is better than if both numbers were confirming the downturn.

UPDATE: Thanks to Amy Calistri for pointing us to the link to the official Chinese PMI report, which can be downloaded here (.pdf).

You can see how nicely things have been pickup here in this chart.

From the report:

China’s manufacturing PMI improved from 51.0% in February to 53.1%
in March, the highest in twelve months. The index has stayed above the
critical level of 50% for four consecutive months, indicating that the
underlying momentum of the manufacturing sector in China has
continued to improve.  
 
10 of the 11 sub-indices were higher than their respective levels in the
previous month. The new orders index rose strongly by 4.1 ppt. while the
new export orders index gained 0.8 ppt. in March. The index readings
indicated significant improvement in domestic demand. On the other
hand, the input prices index went up from 54.0% in February to 55.9% in
March, showing that upstream price pressures have increased.

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See Also:

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• UBS: China’s Weak Economic Data Shouldn’t Worry Longer Term Investors
• China Is Coming Under More And More Pressure To Stimulate After A Decline In Industrial Profits

US tech giant Apple may be paying its first dividend since 1995, but Asian firms are generally more generous with shareholders, says HSBC’s Arjuna Mahendran.

The Indian government unveiled its budget for 2012 – 2013 on Friday and received a rather tepid response. It announced a new deficit target of 5.1 percent of GDP and projected growth rate of 7.6 percent.

The budget also called for raising excise duties at a time when the economy is near a cyclical low.

We wrote last week about taxes on gold imports included in the budget to curb the current account deficit. And there was a a fleeting mention on reforms including consultations with state governments to arrive at a consensus on FDI investment in multi-brand retail.

We fished around to see what analysts thought of some of the reforms and targets in India’s budget. Most were critical of the lack of clarity about reforms in the budget and their ability to stimulate growth.
…

Leif Eskesen, Chief Economist, India & ASEAN, HSBC Global Research

Eskesen told Bloomberg TV the government would lean towards populist policies given the political environment and that it would be difficult to achieve the 5.1 percent deficit target:

“Some of the assumptions they’ve built into the budget in terms of growth, in terms of what they can achieve in terms of privatization and to some extent also what they can achieve in terms of subsidy reductions they might be a little too optimistic. But at the end of the day when we fast forward one year we’re probably going to be above what they ultimately target in terms of deficits, so a little bit more slippage but probably not as much as the current fiscal year.”

Jim O’Neill, Goldman Sachs Asset Management

Though O’Neill said he expects a positive surprise to official forecasts for the Indian economy and is optimistic about the growth of the Indian consumer, he was disappointed by the budget reforms:

“I found it extremely hard to get worked up about anything either way. It didn’t really offer much to get excited about or much to be disappointed about either. From a big picture perspective, given that India scores poorly relative to each of the other three BRIC nations, it is a disappointment that they repeatedly seem to fail to seize the opportunity to boost productivity and improve underlying finances. Unlike all of the other seven Growth Market economies that would each walk into a top class Swiss standards monetary union of fiscal respectability tomorrow, India would have to make do with the one that exists in Europe.”

Moody’s

“A dependence on corporate tax revenue and vulnerability to commodity prices and exchange rates weakens the government’s credit profile. And the fiscal 2012-13 budget’s lack of specific policies to address these weaknesses is credit negative.”

Moody’s said the budget was a mixed bag for corporates, with some initiatives like the exemption of import taxes on thermal coal supporting certain companies struggling with fuel shortages and rising coal prices. But a two to five percent increase in taxes on vehicles would hurt automakers.  

Other key criticisms include two budget measures that are aimed at the recapitalization of public-sector banks but that would fail to offset the worsening fiscal balance of the government.

S&P

“India’s budget for the fiscal year ending March 31, 2013, would be mildly negative for the unsolicited sovereign credit rating on India (BBB-/Stable/A-3). While the finance minister announced various fiscal reforms, the timing of the implementation of key reform measures such as the Goods and Services Tax (GST), Direct Tax Codes (DTC), and the targeted direct subsidy disbursement remains uncertain. In addition, India’s deficit in the next fiscal year is likely to remain high, and uncertainty surrounds the path to subsidy consolidation and to lowering fiscal vulnerability to volatile commodity prices.”

Jefferies

Jefferies analysts Nilesh Jasani and Piyush Nahar thought the budget did a good job in its attempt towards fiscal consolidation but thought it lacked a defining idea or measure to address the Indian economy’s structural problems.

Jasani and Nahar are positive on the subsidy projections in the budget because of their improved transparency and the absence of additional subsidy programs in connection with the food security bill. But they are more critical of the budget’s failure to address growth:

“Where the budget has done the biggest disservice to itself is in not aiding future growth at all. Growth revival at this key juncture needs substantial policy support. In our view, we have an environment where people were ready to believe and vote with investments. The budget’s failure opens the downside growth risks due to structural deficits, hidden bank losses, a collapsed investment cycle and rising oil prices.”

Fitch

Fitch thinks the government’s subsidy cap of 2 percent of GDP would be positive for the country but that there are risks to the government implementing the cap ahead of parliamentary elections in 2014. Fitch was also critical of the tax reforms in the budget. 

“The budget speech indicated that two new measures to enhance revenue take that go beyond typical administrative measures to increase efficiency in tax collection – the introduction of a goods and services tax and a direct tax code – remain in the pipeline. However, the continuing absence of a clear timetable for adoption, while not a surprise, means that these reforms, which could help secure fiscal consolidation if domestic or external risks increased, will continue to be delayed.”

Don’t Miss: Morgan Stanley – This Is What Will Happen In India Over The Next Two Years >

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In a speech to bankers, the head of the Office of Fair Trading (OFT) said that banks must improve their services or face being broken-up.

The OFT’s chief executive, John Fingleton, said that despite investigations into the UK’s banking system by competition authorities, consumer bodies and the government, there is still too little competition.

He suggested that banks have been too slow in implementing recommendations on improving their services, such as making it easier for customers to move their accounts.

There has also been little progress on implementing a charging structure that is easier for customers to understand.

Mr Fingleton signalled that the OFT is ready to take tough action unless banks show they can do better for personal account customers.

If banks continue to fail this will be an indication that the fundamental structure of the UK banking sector is a fault and he will refer the matter to the Competition Commission.

In his speech to bankers at a seminar organised by Lloyds Banking Group, Mr Fingleton said:

“Going forward we need to see evidence which demonstrates that the market dynamics of entry and switching are sufficient to drive stronger customer-focused competition.

“Without this the obvious question is whether the concentrated market structure of UK banking is the problem.

“And one way to consider this question is a reference to the Competition Commission.”

The OFT will launch a review of the personal banking market and a referral could be made to the Competition Commission within months.

Meanwhile UK banks have suffered stock market falls after Moody’s credit ratings agency placed them under review.

Barclays, Royal Bank of Scotland and HSBC are all at risk of having their credit rating downgraded in the face of the ongoing economic downturn eurozone debt crisis.

The cost of moving house is 69 per cent higher than it was in 2001, according to Lloyds TSB, with estate agency fees, mortgage fees and stamp duty responsible for most of the increase.

A typical house move cost nearly £9,000 in 2011, £3,632 more than it did a decade ago.

Some regions have experienced an even greater increase, with house moving costs rising by 132% to an average £16,637 in the South East.

The cost of moving house in London has increased by 127 per cent over the decade due to higher home values.

Londoners pay an average of £19,544 to move home, making it the most expensive part of the country.

Moving expenses are now at their highest level since 2007 when the housing market peaked prior to the credit crunch.

In contrast, the cost of moving for first-time buyers has fallen over the decade because they tend not to pay estate agents’ fees or stamp duty.

It cost first-time buyers an average of £3,334 to move house in 2011, 63% less than a decade ago.

However moving costs for first-time buyers will increase in March when the stamp duty holiday ends on properties valued between £125,000 and £250,000.

The study suggests that the high cost of moving house is particularly concerning given the downturn in the housing market.

The latest HSBC Moving Home Survey identifies a “generational divide” in the housing market.

Many younger people are unable to afford to buy their first home because of uncertainty over jobs and because lenders are demanding high mortgage deposits.

At the other end of the spectrum, many older home owners are unwilling to sell in the current climate.

According to the survey one in 10 Britons would consider moving home or buying their first home in the next six months.