Ahead of the Bell: Retail sales

Retail sales likely rose again in July, boosted by the government's
popular Cash for Clunkers program. Economists surveyed by Thomson
Reuters expect retail sales rose 0.7 percent last month after a 0.6
percent increase in June. However, economists do not believe consumer
spending will look as strong excluding auto sales. The Thomson
Reuters consensus view is that retail sales, excluding autos, will
show a modest 0.1 percent increase, weaker than the 0. 3 percent
gain in June. Economists at IHS Global Insight expect modest gains in
many areas outside of autos to be offset by a big drop in sales at
gasoline stations due to falling prices at the pump. The retail
sales figures are not adjusted for price changes. Reports last week
from the nation's major chain stores indicated that shoppers remained
tightfisted in July as households struggle with continued job
layoffs and the nation's longest recession since World War II. A big
concern now is whether worried consumers will cut back on their
back-to-school in coming weeks and their holiday shopping later this
year. Offsetting the weakness at many retail stores will be an
additional $2 billion funding from Congress for the Cash for
Clunkers program, which gives people trading in certain types of
vehicles up to $4 ,500 if they increase their mileage by at least
5-10 mpg. The program was created to provide help to the beleaguered
auto industry and the environment. The program has proven popular,
helping to boost unit sales of light vehicles in July to the highest
level since last September. Economists hope that such programs and the
government's other economic stimulus efforts will help bolster the
consumer sector and bring and end to a recession that began in
December 2007. Many economists expect the recession will end in the
current July-September period although they caution that the recovery
is likely to be anemic given all the problems still facing the
economy. They forecast that the unemployment rate, which dipped to
9.4 percent in July, will top 10 percent early next year. The
Federal Reserve, concluding its first meeting since the economy
flashed more definitive signs of turning a corner, kept a key
interest rate near a record low where it has been since last
December and pledged to hold rates at low levels for "an extended
period."

Dragon to expand with new yarn unit

Dragon Group, a leading local sweater maker, now moves to expand
business to meet the increasing domestic demand for acrylic yarn, a
raw material of sweater. The group, which has three sweater factories,
one spinning and one dyeing units, is expected to go into production
in its new spinning mill in December. The unit set up at Chowddagram
in Comilla at a cost of Tk 30 crore will have a capacity of
producing around 25 ,000 pounds of acrylic yarn a day in its 18 ,000
spindles, according to Dragon' s Managing Director Mostafa Q Sobhan.
"We eye a turnover of more than US$60 million next year, with the
operation of the new factory that creates job opportunities for about
1 ,000 people," Sobhan said. The 2009 turnout of the group is $50
million, he added. Started its journey in 1984 , Dragon has now
raised its workforce--officers and workers--to 8 ,000. Once the new
unit produces acrylic yarn, the group's total capacity will reach
around 45 ,000 pounds a day, as the present one, CD Acrylic
Bangladesh, produces around 20 ,000 pounds a day; whereas its total
requirement for its three sweater factories is 40 ,000 pounds a day.
After December, the group's dependence on the imports of sweater raw
materials will definitely come down, Dragon boss asserted. Now it has
to import artificial fibres, mainly from Japan and Germany, to
manufacture sweater. Currently, the group exports 8 ,00 ,000 pieces
of sweater per month, with a 10 percent annual growth, Sobhan said,
adding that the group goes for expansion as international buyers are
placing increasingly export orders every year. The expansion will also
enable the group to reduce the cost of materials by about 15
percent, which will help it maintain its position as the most
competitive sweater supplier from Bangladesh, he claimed. Its major
buyers include global retailers like Asda, Wal-Mart, Primark, C&A,
Bhs, Dorothy Perkins and Zara.

Prices fall in Spain for fifth straight month

Spanish consumer prices fell 1.4 percent in July from 12 months
earlier in the fifth consecutive monthly decline, official data said
Wednesday. The figure released by national statistics body INE
confirmed its provisional estimate published at the end of July,
raising further concerns that the country's worst recession in
decades will lead to deflation. In March, Spain posted its first 12-
month drop in prices since INE began tracking inflation in 1961 , with
a 0.1- percent decline that month. Prices dropped another 0.2
percent in April, 0.9 percent in May and 1.0 percent in June.
Spanish inflation, which has generally been higher than the eurozone
average over the past decade, is now slowing more sharply than the
rest of the region as its economy slumps. Deflation, characterised by
a prolonged period of falling prices, can be harmful to the economy
as it often leads consumers and companies to hold back on spending as
they wait for even better deals. Spain entered into its first
recession in 15 years at the end of 2008 and unemployment has
soared as the global credit crunch worsened a correction that was
already underway in its once booming housing sector.

Farmers' database in the making

The government is developing a full-fledged database to use it in
extending subsidised inputs and services to farmers and designing
agri- related plans in future, officials said. The database will also
be used in sketching schemes to boost rural economy. "The data will
help us provide any type of supports to the farmers in future, and we
will also prevent any system loss," Agriculture Minister Matia
Chowdhury told The Daily Star recently. It is the second time the
government is preparing such a list of farmers. The immediate past
caretaker government prepared a list of about 67 extend direct cash
subsidy to those who were suffering from high irrigation costs in
2008 crop season due to increased diesel price. Based on the list,
the then government disbursed Tk 250 farmers in fiscal However
complaints of irregularities were raised with a study by Bangladesh
Institute Development Studies observing that about one- fifth of the
total disbursed money went to wrong hands due mainly to faulty
listing procedure. The present government discontinued the cash
subsidy on diesel for the last Boro season although budgetary
allocations were there. "We have taken it seriously. We will
scrutinise the list to ensure any misrepresentation and error," said
Matia. The agriculture officials said the new database will encompass
all the Boro farmers across the country instead of covering only
small and marginal ones, done by the caretaker government. "We will
use the database for any agri-related planning in future. It will
also be useful to provide inputs and extension services to the
farmers," said CQK Mustaq Ahmed, secretary of agriculture ministry.
"It will help us get an idea about the overall agricultural and
socio-economic scenario in rural Bangladesh," he said, adding that
the data will be available in the internet. As part of the
initiative, around 12 agriculture extension workers have been engaged
in collecting information from root level with focus on farmers who
cultivated rice during the last season of Boro, the biggest crop in
Bangladesh. Officials said information such as name and address of
all the farmers, total land a farmer owns, and Boro cultivation area
out of the total owned land has been collected. Information on the
type of irrigation facility farmers received has also been taken. In
case of the irrigation facility based on underground water,
information whether the irrigation is provided by pumps run by diesel
or electricity has been brought under consideration. If the
irrigation facility is taken on rental basis, the name of the pump
operator or manager will be collected. Agri-extension workers said
they would complete the task of collecting information by early next
month and the move to collect data about all Boro farmers has eased
the work. "The idea of collecting data about the farmers is good. We
are not facing any pressure from any quarter to list anyone's name,"
said a senior agri-extension official in Natore district. "Each
upazila will be given Tk 5,000 for completing the task. But we had to
spend more than Tk 20 collection forms and other purposes," he said.

European stocks climb, London hits 10- month high

Europe's main stock markets advanced on Thursday, with London
reaching a 10- month high, after a positive outlook for the US
economy and data showing an end to recession in Germany and France.
London's benchmark FTSE 100 index of leading shares rose 1.11
percent to 4 , 768.97 points approaching midday in the British
capital. It was the highest level since early October. Frankfurt's
DAX 30 gained 1.42 percent to 5 ,426. 29 points and in Paris the
CAC 40 added 0.97 percent to 3 , 541.24. The DJ Euro Stoxx 50 index
of leading eurozone shares won 1.13 percent to 2 , 718.52 points.
On the foreign exchange market, the European single currency jumped
to 1.4247 dollars. "The European markets are playing catch up to
the US today after a good rally in the US markets last night
following a positive message about the economy from the Fed," said
Joshua Raymond, market strategist at City Index. "The FTSE 100 has
now reached a new ten month high and it seems this upward momentum
has no end in sight just yet." US stocks rallied on Wednesday, buoyed
by comments from the Federal Reserve that the recession-mired US
economy is stabilising as it announced a scaleback in its massive
pump priming effort. The Dow Jones Industrial Average gained 1.30
percent to finish at 9 , 361.61 points. On Thursday, official EU data
showed the economy of the 16 nations using the euro contracted by
just 0.1 percent in the second quarter. The figures, which are
initial estimates, fuelled hopes that the eurozone's biggest hitters
can pull the others out of the worst recession the region has known
since 1945. Germany, the biggest eurozone economy, and France both
surprised on Thursday with GDP ( gross domestic product) growth of 0.3
percent in the second quarter, confounding official forecasts of
continued contraction. Investors on Thursday also digested more
earnings news from the European insurance sector. In London, the
share price of Prudential soared 7.46 percent to 514 pence after
the biggest British insurer said it was hiking its half-year
dividend by five percent thanks to stronger capital reserves.
Prudential added that its net losses more than doubled in the first
half on costs linked to the sale of Taiwanese operations. However its
operating profit rose six percent, helped by strong sales growth of
its products in the United States. Dutch insurer Aegon slumped 6.84
percent to 5. 325 euros after the group reported a second- quarter
loss of 161 million euros (229 million dollars) and said it would
issue up to one billion euros in shares to repay part of a state
investment. Earlier in Asian trading, Tokyo's benchmark Nikkei-225
index closed up 0.79 percent to 10 , 517.19 points on Thursday,
lifted by the overnight rally on Wall Street, traders said.

Gold jewellery loses shine

Gold jewellery sales have slumped more than 50 percent in the past
three years as demand for ornaments declined in line with soaring
prices of the precious metal on the local market, said industry
people. Annual demand for gold jewellery has declined to 10-12
tonnes from 45-50 tonnes five years ago. Jewellers said they saw
their annual turnover tumbling, as the number of consumers dropped.
Gold prices have increased manifold on the international market,
which has influenced the local jewellers to increase prices of their
products. The decline in sales has left the local jewellery makers
struggling to survive amid declining demand for gold items. On the
other hand, demand for alternatives such as silver or gold- plated
jewellery is growing. Anwar Hossain, president of Bangladesh
Jewellery Manufacturers and Exporters Association, said the trend of
slack sales started five years ago, but the situation turned worse in
2008. He said demand for the yellow metal jewellery decreased by 60
percent in the last five years. "Except for wedding, ordinary people
are no longer interested in buying gold jewellery. On top of that,
people tend to buy gold jewellery less than before," Hossain said.
Gold jewellery is losing out to gold-plated silver jewellery, as
people tend to buy lost-priced items. Gold plating is a method of
depositing a thin layer of gold onto the surface of another metal,
most often silver. The prices of 22- carat gold, most popular among
users, have almost tripled to Tk 29 ,200 per bhori (11.66 grams)
this year from Tk 10 ,614 per bhori in 2003. Buyers prefer 22-
carat gold for its purity, as it contains 96 percent of pure gold.
The annual market size of gold jewellery stands at around Tk 3 ,000
crore. Recycled gold jewellery is the main source for the bullion
traders for making new jewellery. The manufacturers also buy gold
from migrant workers and others, who are allowed to bring in 200
grams of gold every time they come home to Bangladesh. "Migrant
workers buy gold at international prices and sell it at home for
more, which is part of the reason for the price hike," said Dr Dewan
Aminul Islam Shahin, acting secretary of Bangladesh Jewellers'
Samity. He said local manufacturers buy gold from local travellers
and migrant workers, mainly from the Middle East. "We have been
following international standards from 2008. For standardisation, we
have to import machinery that is very costly but gives us an accurate
measurement," he said. "If the government helps import machinery with
low costs and duty, it will help local manufacturers and eventually
consumers," he said.