INTERNATIONAL
Concerned over stagnating garment exports, the Union ministry of commerce has removed restrictions under the Incremental Exports Incentivisation Scheme. The Directorate General of Foreign Trade, in a notification, allowed regional authorities to process cases in this regard without imposing any cap. The earlier stipulation restricted the entitlement to 25 per cent growth or incremental growth of Rs 10 crore in value, whichever was less. R K Dalmia, chairman of The Cotton Textiles Export Promotion Council, said: “This decision will improve the cash flow of exporters.” The decision was taken in the wake of various complaints from exporters. The present restrictions came in late 2013 and were not part of the original scheme; this led to multiple lawsuits, too. Textile exports have remained at $40 billion annually for two years. The government has also included exports of made-ups (a category defined in the rules) to select countries under the Merchandise Exports from India Scheme. “This will promote export of made-ups to Australia and New Zealand,” said Dalmia. Also, landing certificates shall not be required under MEIS. Exporters faced difficulty in getting these from shipping companies, beside incurring costs. The dispensation of the requirement to furnish landing certificates has come as a huge relief to the exporters and would certainly reduce the transaction costs for the exporters, said an exporter.
SOURCE: The Business Standard
Coimbatore based Sardar Vallabhbhai Patel International School of Textiles and Management (SVPISTM) will now offer a three-year B.Sc Textiles programme and an MBA programme in Textiles, Apparel and Retail Management. SVPISTM has signed a memorandum of understanding (MoU) with Central University of Tamil Nadu (CUTN) to collaborate in the domain of textiles and management education. The eligibility for the undergraduate (UG) course is a pass in 12th standard with a minimum score of 65 per cent, with Physics, Chemistry and Mathematics as subjects. The students will be selected through the Central University Common Entrance Exam (CUCET). The B.Sc programme would have 40 seats this year. It would contain theory and practical courses spanning the entire textile range from fibre to fashion.
Eligibility for the MBA programme is a graduate degree. Live support for project and entrepreneurial activities will be provided by academic and industrial experts. Practical sessions will be conducted in NTC, Mumbai, Textile Committee Lab, NIFT and in in-house laboratories. Admissions for the MBA programme will open on 10.05.16. Candidates with eligible MAT score or Sardar Vallabhbhai Patel Management Aptitude Test (SVP-MAT) score, with any graduate degree will be admitted based on merit. The degrees will be awarded by CUTN. Academic activities will be conducted in SVPISTM, Coimbatore.
Apart from UG/PG courses, research, consultancy, vocational courses and skill development activities will be initiated by the school in the textiles sector, director SVPISTM Dr C Rameshkumar said. He added that SVPISTM has excellent infrastructure including textile laboratory, auditorium, library and other facilities at par with leading institutions in the country. The MoU was signed and exchanged between Rameshkumar and CUTN registrar Dr Bhuvaneswari, in New Delhi.
SOURCE: Fibre2fashion
Foreign Direct Investment (FDI) inflows stood at $40.82 billion till December in the fiscal 2015-16, Parliament was informed. For 2014-15, FDI inflows were $44.29 billion, up 23 per cent as compared to the previous fiscal. Giving details in Parliament about FDI investment in the last six years, Minister of State for Finance Jayant Sinha said foreign investment in most of the sectors is already under automatic route. In 2013-14, FDI inflows were up 5 per cent at $36.05 billion. However, inflows dropped by 26 per cent in 2012-13 to $34.30 billion, after having grown by 34 per cent in 2011-12 to $46.56 billion. But in 2010-11, the FDI inflows were down 8 per cent to $34.85 billion. "Government approval is required for only few sectors which are listed in the consolidated FDI policy," Sinha said in a written reply to Lok Sabha. The minister said the government has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible. FDI data is compiled by the Department of Industrial Policy and Promotion (DIPP). To a query on allowing full fungibility in foreign investments, he said: "In order to provide simplicity to FDI policy and bring clarity on application of conditionalities and approval requirement across various sectors, different kinds of foreign investments have been made fungible under one composite cap." Sinha said the government has also introduced full fungibility of foreign investment in banking-private sector. "Accordingly, different categories of institutional investors can now invest in private sector banks up to the sectoral limit of 74 per cent, provided that there is no change of control and management", Sinha said.
SOURCE: The Economic Times
The government has broadened the ambit of its Merchandise Exports from India Scheme (MEIS) and scrapped a requirement for exporters to submit landing certificates of goods to avail of benefits under the MEIS, as it steps up efforts to improve the ease of doing business and reverse a slide in the country’s outbound shipments. The cost to exchequer due to the increase in the market coverage of several products under the MEIS is expected to be around Rs 1,000 crore a year. So the total potential revenue losses due to incentives under the MEIS will go up to Rs 22,000 crore a year from the earlier Rs 21,000 crore, according to a commerce ministry estimate. All 5,012 products covered under the MEIS will be eligible for global coverage from May 4, according to the Directorate General of Foreign Trade. This means irrespective of the export destinations, the outbound shipments of all items contained in the MEIS list will be eligible for specific benefits under the scheme. Earlier, exports of as many as 2,787 products were eligible for MEIS benefits only if they were shipped to specified regions. For shipments effected on or after May 4, exporters need not submit landing certificates to get the MEIS benefits. The move came after the approval of commerce and industry minister Nirmala Sitharaman, who also chairs the board of trade comprising 70-odd officials cutting across public and private sectors as well as central government departments. Under the MEIS, the government usually provides exporters duty credit scrip at 2% and 3% of their export turnover, depending upon the product and the export destination, as envisaged in the Foreign Trade Policy 2015-20. The scrip can be transferred or used for payment of a number of duties, including the basic customs duty. “The decision augurs well for the country’s exports. It will reduce compliance costs of exporters, boost the ease of doing business and raise the competitiveness of our export items,” Ajay Sahai, the director general of the Federation of Indian Export Organisations, told FE.
SOURCE: The Financial Express
The central banks of India and Iran have reached an arrangement to use European banks to process pending oil payments to Tehran, India's Oil Minister Dharmendra Pradhan told Reuters, unlocking $6.4 billion in stalled funds. Buyers of Iranian oil were prevented from using global banking channels to clear their transactions after sanctions were imposed on Iran in 2011 over its nuclear programme. With the end of those sanctions in January, after an agreement to curb the programme, Iran is finally gaining needed access to the funds. Iran hopes the money will revive its moribund economy and raise Iranian living standards as well as help to integrate the country into the global economic system. Indian refiners have been holding 55 percent of its oil payments to Iran after a route to make payments through Turkey's Halkbank was stopped in 2013, although payment of some of those funds was allowed after an initial temporary deal to lift the sanctions. "There is an agreement between (India and Iran's) central banks. European banks will be the clearing agent. They will be dealing with Iranian banks and we have to pay those European banks," Pradhan told Reuters in an interview. He did not elaborate further, saying the finance ministry was dealing with the issue. Also because of the previous sanctions, Indian refiners have been depositing 45 percent of their oil payments to Iran in rupees with India's UCO Bank. Tehran has been using the funds, currently about 130 billion rupees ($1.95 billion) to import non-sanctioned goods from India. Indian government sources said during Pradhan's visit to Tehran last month Iran had asked India to consider clearing the oil payments through Europaeisch-Iranische Handelsbank (EIH) of Germany, Central Bank of Italy and Halkbank of Turkey. One of the sources said the Reserve Bank of India (RBI) has ruled out channelling funds through Halkbank. "Halkbank's Iran-related foreign trade activities with Iran have been carried out since 2004 ... Halkbank will continue its operations in accordance with international law," a senior Halkbank official told Reuters. No immediate comment was available from EIH and Central Bank of Italy. The government sources said Indian refiners will remit funds to Iran through state-owned UCO Bank. UCO Bank's chairman did not respond to calls from Reuters to his mobile phone. Reserve Bank of India Governor Raghuram Rajan said on April 5 India will make payments to Iran in a staggered manner. "Oil companies are working out the banking arrangements in coordination with Iranian counterparts and payments will be made by them presumably over time with minimal impact on the market," an RBI spokesperson said on Thursday. Despite the sanctions, India continued its engagement with Iran and was among a handful of countries that sourced oil from Tehran. Iran was India's second-biggest oil supplier before the sanctions hampered its trade relations. The country is set to import at least 400,000 barrels per day of Iranian oil in the year from April 1.
SOURCE: The Economic Times
With the India-GCC planned Free Trade Agreement stuck in limbo, the government has said it is “actively engaged” with the UAE to make a better trade relationship with other GCC members. “With the UAE, we are engaging actively so that we open up with the rest of the GCC members,” Nirmala Sitharaman, minister of state for commerce and industry, told FE. India and the UAE have begun a dialogue that would firm up a Free Trade Agreement between India and the Gulf Cooperation Council (GCC). Last October, in a meeting with her counterparts from the GCC countries in New York, external affairs minister Sushma Swaraj called for an early conclusion of the India-GCC FTA and operationalising the Framework Agreement. According to MEA spokesperson Vikas Swarup, “The minister invited the GCC nations to participate in the Make in India campaign, in particular the Mumbai-Delhi industrial corridor. She also called for turning the buyer-seller relationship in the energy sector into a “mutually beneficial investment partnership” that involves both upstream and downstream operations, Swarup added. The GCC is India’s largest trading partner with $137.7 billion (Dh506 billion) trade in 2014-2015, up from only 5.5 billion (Dh20 billion) in 2001. More than 50% of India’s oil and gas come from the GCC countries which host over seven million Indian nationals. Weak implantation of intellectual property right (IPR) in the country and different legal systems operative in the member-nations of the GCC have led them to seek individual free trade agreement with India.
When Prime minister Narendra Modi visited the UAE last August, he had discussions with Abu Dhabi Investment Authority (ADIA) and top business leaders in the UAE. ADIA has announced an initial allocation of $2 billion for investments in infrastructure projects in India and support for the establishment of a strategic oil reserve. Bilateral trade between the UAE and India is around $60 billion. The two sides have agreed to increase the bilateral trade by 60% over the next five years and also to encourage the investment institutions of the UAE to raise their investments in India, including through the establishment of UAE-India Infrastructure Investment Fund, with the aim of reaching a target of $75 billion. The UAE is planning to invest in programmes like Make in India, Digital India and Smart Cities. In a recent report, the Indian embassy in Riyadh said, “The GCC constitutes the immediate neighborhood of India separated only by the Arabian Sea. India, therefore, has a vital stake in the stability, security and economic well-being of the Gulf.”
SOURCE: The Financial Express
India, in relative terms, is likely to continue to underperform in an Asia and emerging market context if the weak dollar - long oil and related long commodity trade continues to play out, believes Christopher Wood, managing director & equity strategist at CLSA. In his weekly note, GREED & fear, Wood says that investing in India also remains the most effective way of diversifying from China risk in an Asia or emerging market portfolio; and says he not giving up on the long-term equity investment story in India, nor should investors. He, however, cautions that valuations are not cheap. "Investment spending is happening in India right now financed by the government, with clear evidence of accelerating spending on roads, railways and defence. Still GREED & fear and fund managers are still waiting for evidence of a private sector-led investment cycle, which remains conspicuous by its absence," Wood says. Adding: "There is still no reason to assume that an accelerating investment cycle will kick off this year. The first reason why is the continuing low capacity utilisation of the corporate sector. The second and more important reason is the continuing legacy of non-performing assets in the banking system. Most of the problem loans in India relate to corporate exposure by state-owned banks, though the problem also extends to private sector banks who have lent to corporates." In this backdrop, Wood suggests stock selection in India should remain relatively low beta given the lack of any conviction here on any near-term upturn in the investment cycle.
Reforms
The Narendra Modi-led National Democratic Alliance (NDA) completes two years at the helm in May 2016. Despite passage of select bills in the lower house of Parliament (Lok Sabha), the government's reform agenda has been mostly stuck due to lack of adequate numbers in the Upper House (Rajya Sabha). On Thursday, the Lok Sabha approved the Bankruptcy Bill that seeks to overhaul century-old laws that regulate insolvency. The bankruptcy law, Wood says in his note, has the potential to be a game changer for the distressed debt industry. "The progress being made in the banking sector, as well as the many other long-term structural reforms introduced by Modi, means the market is building a powerful base in the context of the extended period of consolidation. GREED & fear is also assured by those in the know that Prime Minister Narendra Modi is fully focused on the issue since he understands that a clearing of the problems in the banking system is necessary if he is to meet his growth agenda," Wood says in his note.
Going ahead, he expects the rupee to remain relatively stable and low beta in an emerging market context given that Reserve Bank of India (RBI) Governor Raghuram Rajan is consciously targeting real interest rates in stark contrast to the negative rates being targeted by G7 central bankers. "This is why GREED & fear continues to like the Indian fixed income story, which for now continues to remain more straightforward than the Indian equity story. In GREED & fear's view, Rajan's policy is refreshing in the context of the monetary quackery going on in the G7 world, quackery which the Indian central bank governor has done the best job of criticising among all the world's central bankers," Wood says.
SOURCE: The Business Standard
It seems that the apparel opportunity is finally coming towards South Asia as the exports from the East Asian giant China and start-ups Cambodia and Vietnam is on decline at least in the United States. The US Department of Commerce’s Office of Textiles and Apparel reports that after the textile and apparel exports started declining in the recent months, China, Vietnam and Cambodia took the largest hit with a decline of 43.3 percent, 22.4 percent and 22 percent respectively in the month of March compared with February 2016. The decline in their textile exports in March ’16 when compared with March ’15 was 42.1 percent for China, 22.6 percent for Vietnam and 34.4 percent for Cambodia. Textile and apparel exports from India increased by 15.3 percent in March compared with exports of same items in February 2015. Bangladesh recorded an export increase of 7.9 percent during the same period while Pakistan’s exports in textiles and apparel increased by 8.8 percent. However, when compared with March 15 the increase in exports from these countries was much lower. The increase in exports from India was only 1.4 percent, Bangladesh and Pakistan recorded negative exports of 0.1 percent and 2.9 percent respectively.
India, Pakistan and Bangladesh are now among the top five exporters of textiles and clothing to the United States and the European Union. The export performance of the three South Asian countries was however much better than that of Far eastern economies. In fact there has been an overall decline in apparel and textile exports to the United States. Most of the decline was borne by the Far East Asian economies. While exports from the South Asian economies remained almost stable. This shows that South Asian textiles were more resilient than the Far Eastern textiles. It is worth noting that the textile industry in Pakistan remained under immense pressure due to low availability of energy and its high cost. Things started changing when RLNG was made available to the industries for power generation form January this year. The cost of RLNG is lower than even the tariff of locally produced natural gas. The cost of energy has come down sharply for the industry. At the same time the power tariff has also been cut by almost 30 percent that provided relief to the industries that do not have gas run generators. Industry is getting state supplied power 24/7. The benefit of this facilitation has not been registered in exports as the foreign buyers had already placed their orders for the first quarter of 2016. Pakistani exporters quoted rates on the basis of high power cost. They are likely to be more competitive in the second quarter of 2016 and an overall increase in textile exports are expected from April onwards. The decline of apparel exports from China was expected as its labour costs have gone very high. However, the decline in apparel exports of Vietnam and Cambodia shows that the region as a whole is becoming uncompetitive. It was in fact China that invested in these two neighbouring countries to keep its global hold on textiles intact. This plan seems to be failing. It is now exploring the Pakistani market. When the going was tough for the Pakistani textile sector China tried to acquire some running industries at a low price.
SOURCE: The News
The global smart textiles market was worth US$700million and is estimated to reach a value of US$7,730m by the end of 2023, projected to grow by nearly 30.80% between 2015 and 2023, according to the research study in 2014. One of the major factors driving the global smart textile market is increasing use of nanotechnology in smart textiles. The adoption of nanotechnology helps in enhancing the fabric with several features such as water and stain resistance, UV protection, and anti-bacterial properties. In 2014, North America dominated the overall market holding a 40.1% share in the global smart textile market, followed by Europe. In the forecast period, North America market is predicted to remain in the leading position and register a high growth rate. The global smart textile market comprises sports and fitness, entertainment, healthcare, automotive and military/defence. In 2014, the military and defence segment led the overall market, holding a 28.7% share in the global smart textile market. Smart textiles are also embedded with electronic devices and other components, owing to which their production cost is quite high and is thus acting as a preventive factor for the growth of the global smart textile market.
SOURCE: Yarns&Fibers
Sri Lankan export earnings from textiles and garments, which contributed nearly 52 percent to the total exports, improved by 13.3 percent in January 2016, reversing the declining trend prevailed in last quarter of 2015. But actually exports declined 2.5 percent to 893.9 million US dollars in January 2016 from a year earlier while imports plunged at a faster 5.5 percent to 1,589.1 million US dollars, according to official data. The deficit in the trade account contracted in January 2016, by 9.1 percent from a year earlier to 695 million US dollars compared to 765 million US dollars in January last year. According to the Central Bank, earnings from exports declined for the eleventh consecutive month in January largely reflecting continuous decline recorded in commodity prices in the international market. But the garment exports to both traditional and non-traditional markets have improved during the month. Owing to the 34.0 percent increase recorded in fabrics imports, expenditure on textile and textile articles import have increased by 25.4 percent, in January 2016. Main import origins in January 2016, according to the Central Bank were China, India, Japan, UAE and South Korea.
SOURCE: Yarns&Fibers
All Pakistan Textile Mills Association (APTMA) has sought exemption from additional anti-dumping duty on the import of specialty polyester fibre which is not being produced domestically as additional duty is limiting the textile industry from product and market diversification. The association sent its request to Commerce Minister Engineer Khurram Dastgir Khan who is also looking after the parliamentary business of Ministry of Textile Industry. Senate Standing Committee on Commerce has recommended to the Prime Minister to give the textile portfolio to the Commerce Minister so that issues of textile sector are resolved properly. The world over demand of textile yarns is over 85 million tons of which cotton yarn is 22 million tons while the remaining demand of 63 million tons is being met by manmade or semi-synthetic yarns chiefly polyester which accounts for over 65 million tons. The normal consensus is that 70 percent of the incremental demand for yarn during the coming years will be met by polyester. Polyester yarns are also now being produced in various types and shapes to cater for the ever-increasing demand for comfort, performance, hygiene and aesthetic use.
According to the APTMA, Pakistan only produces normal (generic) polyester staple fibre of semi dull and bright type in deniers of 0.8-1.4. All other types include anti-bacterial, moisture management properties, copolymer polyesters, cationic dyeable polyester staple (DAK) and polyester with cross section moisture management through capacity action, solution dyed polyester with or without UV protection. These are only a few of the special type of polyester fibres which are required for the production of specialty yarns to be further processed in high value fabrics and garments. These garments are gaining market share in developed and under developing countries with high consumer demand for niche products. Generally, these types of specialty polyesters used for the production of yarns are produced by polyester staple producers in China, Thailand, Korea and Japan' and the C&F prices of these fibres are higher as compared to normal PSF fibre, the letter by Tariq Saud, Chairman APTMA, stated. The letter further argued that due to ever-increasing production of PSF in Asia and turning it into a commodity accounts for the prices of fibre produced on new plants getting cheaper with each new improvement in the process. The domestic products have higher cost of production and are thus mostly busy in getting anti-dumping duty or other barriers imposed in the way on imports to safeguard their interest.
Presently, NTC has imposed anti-dumping duty on the import of PSF (H.S code 5503.2010) imported from China. The duty is from 2.82 percent to 11.5 percent. The variation in anti-dumping duty is for five producers whereas specialty fibre producers being categorized as "others" have anti-dumping duty of 11.51 percent. Earlier, the NTC had imposed anti-dumping duty on polyester staple fibre imported from Thailand, Taiwan and Malaysia. "We request that the staple fibre not domestically produced should be placed under a separate H.S. code so that the spinning and weaving industry can import the high-priced specialty fibres without paying additional duty of 11.5 percent which is limiting the industry from product and market diversification. This redressal will enable the domestic industry to take the quantum leap in the market for high value added textiles," the letter concluded.
SOURCE: The Business Recorder
The Russian government to protect the domestic textile industry against foreign competition has approved a proposed programme under an existing government policy know as the “Strategy of development of textile and light industry in the Russian Federation for the period till 2025” which includes covering the current financial year. The volume of support has been set by the ministry of industry and trade at two billion roubles (US$30m). As for the latest spending programme, the government has confirmed that the majority of allocated funds will be spent on direct subsidies for textile and clothing manufacturers, especially producers of specialist technical clothing and school uniforms. A portion of these funds will cover interest rates on loans, borrowed by Russian manufacturers from banks. Also, as mooted by earlier Russian government discussions, some of the funds will be spent on establishing a special bank branch within the state-run Russian Agricultural Bank (Rosselkhozbank), which will focus on providing loans to local clothing and textile manufacturers on beneficial terms. The government also plans to provide funds for technical support and re-equipping manufacturers with a new plant. And another tranche of the finds will be invested in training skilled personnel within the industry.
According to an official spokesman for Denis Manturov, Russia’s minister of industry and trade responsible for the development of textile and light industry in the Russian government, believes a lack of skilled personnel is restricting growth within the Russian textile industry. The collapse of the USSR and the series of economic and political crises in Russia have resulted in a significant decline of demand for work in the domestic textile industry from college graduates, that became mainly due to low wages, offered by the industry, which are significantly lower than those offered by other industries of Russian industrial production.
Due to this, a shortage of skilled personnel (along with the traditional shortage of raw materials and poor technical equipment) has become one of the most pressing problems of the industry. Ministry documents released when the spending announcement was made argue that training is especially important, given over the past two years the number of job vacancies in the Russian textile sector has increased by almost 30% and continues to grow, along with salaries of the industry’s workers. Andrey Razbrodin, president of the Russian Union of Entrepreneurs of Textile and Light Industry (Soyzlegprom), said that the adoption of the programme is a good news for the industry, however much will depend on the rates of its further implementation. Lack of cheap loans currently remains one of the most pressing problems for the industry, as the present policy of the majority of banks aimed at reducing their loan portfolios. However, the establishment of a branch bank within the structure of Rosselkhozbank may help to solve this problem. The spending announcement has been made as the government expands a ban on federal government ministries and agencies on purchasing foreign-made textile products to regional and municipal authorities, who must henceforth source clothing and textile supplies in Russia. At present, Russian-made textile product’s share within the domestic market is estimated at 24.6%, according to Russia’s ministry of industry and trade. However, the Russian government wants to increase this proportion to 50% by 2018-2019. This expansion will also generate up to 100,000 new jobs within the industry.
SOURCE: Yarns&Fibers
European and US negotiators for the Transatlantic Trade and Investment Partnership (TTIP) deal concluded their 13th round of talks in New York last week, with both sides reiterating their wishes to conclude an agreement this year, so long as it does not force a compromise on substance, the International Centre for Trade and Sustainable Development (ICTSD) has said on its website. Meanwhile, a public debate has escalated over the TTIP's potential content, particularly in the wake of a “leak” of alleged trade deal texts by a Greenpeace. The US has been pushing to reach a completed deal this year if possible before President Barack Obama leaves office. Ratification, however, is not expected in 2016, even if an agreement is concluded. At the level of market access, the two sides are aiming to make progress in TTIP under three main pillars: goods, services, and government procurement. On goods, the US and EU exchanged second offers on tariffs last October, which they noted at the time had put them on “comparable” levels in terms of tariff line coverage.
Discussions on tariffs continued during this round, officials said, specifically on the 97 per cent of tariff lines covered in the latest offers. “We had agreed earlier to eliminate tariffs on 97 per cent of tariff lines, and at this round, we worked to increase the number of those tariff lines that would be zeroed out upon entry into force of the agreement,” said US chief negotiator Dan Mullaney at the closing press conference. EU chief negotiator Ignacio García Bercero confirmed that the three percent of tariff lines not covered in each side's offer – the “most sensitive” – were not discussed during the New York meeting. The TTIP cast its shadow over the talks just days after the conclusion of the round, with the Netherlands branch of the Greenpeace environmental group releasing a series of documents which it claims are “leaked” versions of deal's consolidated texts, dated prior to this latest negotiating round. The release has fuelled a media frenzy in its wake.
Greenpeace also made a series of allegations based on its analysis of the texts, arguing that the documents they have seen appear to indicate EU compromises on areas such as the “precautionary principle” and a lack of explicit mentions on climate protection. In response, EU Trade Commissioner Cecilia Malmström released a statement the same day which, she said, was needed to respond to some of the “misconceptions” that appear to exist about these “supposed leaks” being reported in media outlets. She also pledged that the EU will never sign on to a trade deal that would require changes to laws on genetically modified organisms (GMOs) or force less stringent environmental protections, nor would they limit the 28-nation bloc in making rules aimed at protecting consumers and the environment. “I am simply not in the business of lowering standards,” said Malmström.However, in the wake of the leak, French President François Hollande said that, at this stage of the negotiations, TTIP would be unacceptable for his country.
SOURCE: Fibre2fashion
The US economy added the fewest number of jobs in seven months in April and Americans dropped out of the labour force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year. Non-farm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs, the Labor Department said on Friday. That was the smallest gain since September and below the first-quarter average job growth of 200,000. Adding to the report's weak tone, employers added 19,000 fewer jobs in February and March than previously reported. While the unemployment rate held at 5.0 per cent that was because people dropped out of the labour force. "For those who had thought a June rate hike was in play, this was a nail in the coffin. This raises questions about a September rate hike. I would like to think the economy is in a better place at the end of the year," said Phil Orlando, chief equity market strategist at Federated Investors in New York. The stepdown in job gains could temper expectations of a strong rebound in economic activity in the second quarter after growth nearly stalled in the first three months of the year.
Economists polled by Reuters had forecast payrolls rising 202,000 last month and the jobless rate unchanged at 5 per cent. The dollar dropped to session lows against the euro and the yen after the report. Prices for US government debt rose, while US stock index futures fell marginally. Average hourly earnings were the only bright spot in the employment report, rising eight cents or 0.3 per cent last month. That took the year-on-year increase to 2.5 per cent from 2.3 per cent in March, still below the 3.0 per cent advance that economists say is needed for inflation to rise to the Fed's 2.0 per cent target. The US central bank last month offered a fairly upbeat assessment of the labour market, saying that conditions had "improved further." The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Fed officials have forecast two more rate hikes for this year.
WEAKENING JOB PROSPECTS
Market-based measures of Fed policy expectations have virtually priced out an interest rate increase at the Fed's June 14-15 meeting, according to CME Group's FedWatch. They see a less than 40 per cent probability of rate hikes in September and November, with a 48 per cent chance at the December meeting. The labour force participation rate or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage point to 62.8 per cent. It had increased 0.6 percentage point since dipping to 62.4 per cent in September. The labour force fell by 362,000 as people dropped out in April. The employment-to-population ratio fell to 59.7 per cent from a seven-year high of 59.9 per cent. A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment slipped one-tenth of a percentage point to 9.7 per cent last month. The vast private services sector dominated employment gains in April, adding 174,000 jobs. Retail payrolls fell 3,100 after hefty gains in the first quarter, despite sluggish sales.
While information employment was unchanged last month, a Labor Department official said there was no sign that a strike by about 40,000 Verizon workers had impacted the data. Manufacturing added 4,000 jobs last month after shedding 29,000 in March, the biggest loss for the sector since December 2009. There were further job losses in mining as the energy sector adjusts to weak profits from a recent prolonged plunge in oil prices. Mining payrolls fell 8,000 last month. Mining employment has decreased by 191,000 jobs since peaking in September 2014, with 75 per cent of the losses in support activities. Gains in construction employment slowed sharply, with the sector adding 1,000 jobs in April, after home building showed some signs of fatigue last month.
SOURCE: The Business Standard
