The Big Mac index

Value meal:A guide to valuing currencies against the dollar

WHICH countries has the foreign-exchange market blessed with a cheap exchange rate, and which has it burdened with an expensive one? The Economist's Big Mac index, a lighthearted guide to valuing currencies, provides some clues. The index is based on the idea of purchasing-power parity (PPP), which says currencies should trade at the rate that makes the price of goods the same in each country. So if the price of a Big Mac translated into dollars is above $3.57, its cost in America, the currency is dear; if it is below that benchmark, it is cheap. A Big Mac in China is half the cost of one in America, and other Asian currencies look similarly undervalued. At the other end of the scale, many European currencies look uncompetitive. But the British pound, which was more than 25% overvalued a year ago, is now near fair value.

AP

taken from : Jul 16th 2009
Economist.com

Economic Overview of the Week

Japan’s GDP fell at an annualised rate of 15.2% in the first quarter. The depressing effect on demand of another big decline in exports was compounded by a collapse in business investment.

GDP in the euro area fell by 2.5% in the three months to March, leaving it 4.6% lower than a year earlier. Germany’s economy shrank by almost 7% from its peak in the first quarter of last year. Italy’s GDP fell by 5.9% from a year earlier; Spain’s fell by 3%, while in France, GDP was 3.2% lower. Consumer prices in the euro zone rose by 0.6% in the year to April, unrevised from a provisional estimate. The core rate of inflation, which excludes food, energy, alcohol and tobacco prices, picked up from 1.4% to 1.8%.

The number of new housing starts in America plunged by 12.8% in April to their lowest level since records began in 1959. Despite that drop, sentiment in the sector is improving. The confidence index compiled by the National Association of Home Builders picked up in May.

Consumer prices in Canada fell by 0.1% in April, leaving the annual inflation rate at 0.4%, down from 1.2% in March.

Inflation in Britain fell to 2.3% in April from 2.9% in March. The main downward pressure on inflation came from smaller energy bills and falling food prices.

Malaysia’s inflation rate declined to 3% in April, from 3.5% in March.

Barack Obama and his first 100 days

How Barack Obama compares with other presidents at 100 days

THE 100th day of his presidency falls on Wednesday April 29th and Barack Obama remains popular. Despite the dire economic situation, his overall approval rating is a healthy 65%, only three percentage points lower than when he first took office, according to Gallup. Over the past 50 years, the approval ratings of presidents at the 100-day mark have varied widely. Democrats seem to do badly: Bill Clinton and Jimmy Carter suffered a similar dip in their fortunes. But every Republican had gone up in the public's estimation after 100 days.

AP

Economic Overview

The IMF forecast that the world economy would shrink by 1.3% in 2009, the first global fall in 60 years. In January the fund predicted growth of 0.5%.

Japan’s customs-based exports fell by 45.6% in the year to March. The rate of decline slowed, raising hopes that the export slump may be bottoming out. Imports fell by only 36.7% on a year earlier, which caused Japan’s monthly trade surplus to shrink to 10.9 billion yen ($112m) last month from 1.1 trillion yen in March last year

Producer prices in Germany fell by 0.5% in the year to March, the first fall since February 2004 and the biggest since September 2002. However, the ZEW index of German investor and analyst expectations, a widely used measure of investor confidence, rose to 13 in April from -3.5 a month earlier.

Britain’s annual consumer-price inflation rate fell to 2.9% in March from 3.2% in February. But retail prices, unchanged in February, fell by 0.4% in the year to March.

Sweden’s central bank cut its benchmark interest rate by half a percentage point, to 0.5%. India’s Reserve Bank reduced the repurchase rate to 4.75%, and shaved a quarter of a percentage point off the reverse repurchase rate, to 3.25%. It was the sixth cut in as many months.

Consumer prices in Australia rose by 2.5% in the first three months of this year compared with the same period in 2008. Prices rose by 0.1% over the previous quarter.