Big news of the week: US economic growth defied the US Commerce Department estimate of a hurricane-affected 3.8% third-quarter growth rate and notched up a stellar 4.3% instead – the best since Q1 2004.

And think about it. If those deadly hurricanes had blown themselves out before making landfall, it’s not unreasonable to think that the growth rate could have finished closer to 5%.

As always, consumers were responsible for a decent chunk of the gains, with spending rising to 4.2% from the initial 3.9% rate. Alas, the business world couldn’t match that, with after-tax profits falling 3.7% compared to a 5.3% climb in the second quarter. It was the biggest drop in four years.

On the back of that, the Organization for Economic Cooperation and Development said US economic growth next year will hit a solid 3.5%, with 3.3% expected in 2007.

The OECD was also busy projecting growth in several other places. For the 12-nation Eurozone’s prospects, it said growth would total 1.4% this year, 2.1% in 2006 and 2.2% in 2007. For the 30 OECD nations as a whole, growth is set to hit 2.7% this year and 2.9% in 2006 and 2007.

The brighter outlook comes after a spring in which global growth was “exceptionally vigorous,” despite the onset of higher oil prices. The group also said world trade growth will bounce upwards from 7.3% this year to 9.1% in 2006 and 9.2% in 2007.

Among the OECD’s other proposals:

The European Central Bank should leave interest rates on hold for another 12 months. Oops – bad luck, boys. The bankers stumbled out of their Thursday morning monetary policy meeting – and out of the collective inertia they’ve been stuck in since June 2003 and, in a move widely expected since President Jean-Claude Trichet prepared the region for the news a couple of weeks ago, the bank ignored the OECD by raising rates from 2% to 2.25%.

Despite flagging economic growth and “vulnerable, fragile elements,” according to Luxembourg's prime minister and ECB member Jean-Claude Juncker, it came as Eurozone inflation nudged above the target 2% level, including a 2.6% high in September.

In Japan, the OECD advises the central bank to also leave rates alone until core inflation hits 1%.

* * * * * * * * * *

Its competition — eliminated.

Its board of directors — hand-picked.

Its new technology — fast-tracked.

Its backers — unknown… until now.

Imagine if you could invest in a company that had sole power and a total monopoly over a multibillion-dollar US industry…

Sounds idealistic. BUT…

In an incredibly rare turn of events in the investment world, the federal government has eliminated all competition for one company and essentially created a “super corporation.”

You won’t find this company talked about on Wall Street because the majority of what it does is listed as “top secret” and most people don’t even know it exists.

But this company will soon unleash technology that the US government has completely thrown its weight behind – and that could hand you gains of 127% by February 1!

Check out this link for details:

http://www.isecureonline.com/reports/RTD/ERTDFC18/

* * * * * * * * * *

A WHIZ AROUND THE WORLD

OK, here goes with a super-fast whip around the world to see what economic growth is doing in five more countries.

CANADA: One OECD economy faring well is Canada. Third quarter growth rolled in at an annual 3.6% pace – the fastest in a year.

A 2.5% climb in exports, including a 7% spike in car shipments, fuelled a good chunk of the growth. It was the quickest growth rate in over a year. Corporate profits also jumped 5.4% - the best since the middle of 2004, thanks to Canada’s position as a leading energy producer. Energy sector growth hit 2.5% for the quarter.

The news comes as a boost for incumbent Prime Minister Paul Martin, who is bidding to stay in office in the January 23 general election. He needs all the help he can get at the moment, having just been the first Canadian leader to be forced from office since 1979 amid a scandal over misuse of government funds. But like Tony Blair in Britain, while you might not be the most popular figure and get widely criticized for making controversial decisions and presiding over some ugly events, you can still retain power on the back of a solid economic record.

It also means that Bank of Canada will probably be forced into a move of its own – to raise interest rates. Economists believe it’s tough for the economy to grow much above 2.8% without sparking inflation.

INDIA: Thanks to strong growth in manufacturing (10.2%), finance (9.1%) and tourist services like hotels and transportation (12.2%), India’s GDP growth hit 8% in the six months to September compared to the same period in 2004. For the full fiscal year to March 2006, the government is now projecting 7.5% growth.

Not resting on its laurels, however, the government is shooting for 10% growth in the coming years. It remains to be seen whether this target is realistic. Prime Minister Manmohan Singh says the agricultural infrastructure needs a huge upgrade and output needs to make a “quantum leap.” In addition, Indian citizens need to increase their savings.

CHINA: The OECD issued an upbeat verdict on the Chinese economy, saying that it’s still set to post 9.3% growth this year, with 9.4% and 9.5% to follow in 2006 and 2007.

And there’s no sign of any letup, either – not with both domestic demand and global trade set to climb in 2006 and 2007.

But can you say inflation? The OECD advised China to stave off a potentially damaging bout by allowing its yuan to appreciate further against the US dollar.

SOUTH AFRICA: South Africa’s economy is also expected to post a tidy increase this year, with growth rising to 4.4% from last year’s 3.7%.

As in India, the government is aiming to maximize the country’s growth potential by cutting unemployment (the jobless rate sits at an ugly 27%) and poverty – measures that could see the economy chalking up consistent 6% growth by 2010.

BRAZIL: The laggard of today’s pack is Brazil, whose economy grew at a mere 1% annual pace during the third quarter, the slowest in two years. This shattered estimates calling for a 2.1% gain and was a hefty disappointment after the 4% growth posted during the second quarter.

The country’s massive 18.5% base interest rate hauled back a brief rally in consumer spending.

In the 12 months to September, GDP growth was 3.1% compared to 4.6% and 4.4% in the first and second quarters. Full-year growth should hit 3.4% compared to 4.9% in 2004.

“BLACK FRIDAY,” “CYBER MONDAY” AND OTHER USELESS NAMES

Last Monday was “Cyber Monday” – the biggest online shopping day of the year. Ooooh!

Call me a cynic, but this sounds like just some fancy marketing gimmick to me. No doubt employers across America were closely monitoring their employees’ Internet usage, since one third of workers polled by Shop.org said they will use their speedier work connections to hit the e-stores.

Last year, “Cyber Monday” sales hit US$380 million, a 29% jump over 2003. For November and December as a whole, ComScore projects that online sales will total US$19 billion, a 24% increase over last year. The group said that consumers spent US$305 million online on “Black Friday,” a 22% spike over 2004.

And 22% is also the margin by which total retail sales apparently rose over the Thanksgiving weekend, to a total of US$28 billion, according to the National Retail Federation. Seems like a lot to me.

“CHRISTMAS ARMAGEDDON”

That’s the chilling prognosis for British retailers this season from Verdict Research.

The group is projecting a sales increase of just 2.1% over the final three months of 2005, compared to 3.3% growth over the same period a year ago. It blames rising council taxes and energy prices for stifling consumer spending, saying retailers’ costs are rising at 4% per year while sales prices are enduring a bout of deflation, falling by 2%.

Accounting firm Deloitte says Christmas retail sales will slump by £400 million, with the average Brit spending 2.8% less than last year.

You can see why. The Confederation of British Industry said that its gauge of retail sales sank to the lowest level since 1983 in November. Just 17% of the firms polled said their sales rose from a year earlier, while a whopping 51% reported a fall in sales. That minus-35 differential was way higher than forecasts calling for minus 15.

Following that, the Ernst & Young Item Club chipped in, saying the weak retail sector will contribute to the UK economy growing just 1.6% this year, significantly below Chancellor Gordon Brown's estimate of 2% to 2.5%.

OK, that’s all for this week. I gotta head off to the airport to pick up my brother, who is in town from England for the next two weeks. Have a pleasant weekend and I’ll talk to you again soon.

Martin Denholm

Executive Editor, Taipan

MMM

Current Issue | Hotline | Classified | Members Club Home