Daily Sources 3/17

1. Doris Leblond at the Oil & Gas Journal reports that Eurogas released preliminary data showing that European demand for natural gas grew by 2.1% in 2008, from from 506.4 bcm to 517 bcm.

"The total number of gas customers connected to the EU27 gas grid rose 1% to 112.5 million customers. ... Although natural gas markets vary significantly from one EU country to another, Eurogas believes some general trends may explain the overall increase. The main one is that the weather was mild in 2007 but rather cold in 2008 which, in addition, was a leap year of 366 days."

2. Eurointelligence notes that Le Monde reported that support for a 50% cap on income taxes and the "detaxation" of extra working hours no longer has majority support in France.

"Ahead of the parliamentary budget examination this week, several MEPs called for a suspension of this measure to make high income earners participate in an effort to re-establish confidence in the economic relaunch plan. Even former prime minister Dominique de Villepin called in an interview with Les Echos for a burden share and an increase of the cap to 60%."

3. Dinah Deckstein at Der Spiegel reports that in February senior executives from Airbus and Emirates--which has ordered 54 A380 super-jumbos--to conduct an emergency meeting regarding problems with the plane after having taken delivery of its first two nearly two years late.

"It is still not clear how the spat between the aircraft maker and its dissatisfied customer will end. Competitors Singapore Airlines and Qantas have also had to ground their A380 jets several times in recent weeks and months.

The Asians have had trouble with the fuel pumps and the on-board electronics. The Australians noticed that the highly sensitive measuring sensors in the tank were not working properly, although it is still unclear whether the problem was attributable to the devices themselves or was caused by impurities in the fuel.

Unlike Emirates, Singapore Airlines and Qantas have taken a more relaxed approach to the problems. However they, unlike the Arabs, have not just ordered dozens of new A380s.

Since the end of last week, the Dubai-based airline has however tried to defuse the conflict. 'Technical problems are to be expected in a new aircraft, especially one in which so many new technologies are used,' says an Emirates spokesman."

Worth reading in full.

4. Platts conducted a survey of 27 Chinese state-run refineries which indicated that they were likely to maintain crude runs at about 81% of nameplate capacity in March on high stocks and weak demand.

"The survey covered Sinopec's 19 refineries, which have an overall nameplate crude processing capacity of 3.56 mb/day, accounting for 89% of Sinopec's total refining capacity of 4 mb/d.

Meanwhile, the eight PetroChina refineries surveyed have an overall nameplate crude processing capacity of 1.43 mb/d, which accounts for 51% of PetroChina's total crude processing capacity of 2.8 mb/d."

5. Razib Ahmed at the South Asia Blog posts on the return of immigrant workers to South Asia and the recent decision by Malaysia to cancel visas for some 55,000 Bangladeshi workers. Ahmed also notes that Kuwait's foreign workforce shrank for the first time since 1990 and that there has been a fall in the number of people leaving Nepal in search of work. (h/t Mark Thoma at Economist's View.)

6. Simon Romero at the New York Times reports that the Shining Path in Peru has recently turned to the cocaine trade after the end to the war in 2000--and that the trade is heating up the conflict with Lima again.

"[Vizcatán], a 250-square-mile region in the Apurímac and Ene River Valley, nine hours by four-wheel drive along switchbacks from the Maoist rebels’ Andean cradle of Ayacucho, is Peru’s largest producer of coca, the raw ingredient for cocaine.

The Shining Path controls a large part of the cocaine trade here, and as Peru’s production has thrived, now second only to Colombia’s, the rebel group has used its profits to rebuild."

7. Brad Setser at Follow the Money posted on the latest Treasury International Capital data for January which showed a net outflow in capital of $148.9 billion, and Setser notes that net capital outflows from the US cannot sustain a budget deficit.

"Setting December (when foreign private investors bought a bunch of US corporate bonds) aside, foreign investors haven’t been buying long-term US assets since the crisis hit.

The swing came from two sources:

1) US investors bought a bunch of foreign bonds. That is a change. US investors had been net sellers of foreign bonds and equities through out the fall.

2) Banks stopped piling into US assets. In October — at the peak of the crisis — private investors abroad bought $64 billion US t-bills and increased their dollar deposits by $196 billion (see line 29 of the TIC data; “change in banks own (net) dollar-denominated liabilities). In January, credit conditions eased a bit, and private investors reduced their t-bill holds by $44 billion and the banks reduced their (net) dollar deposits by $119 billion."

"Incidentally China is still buying Treasuries. It bought $12.2 billion in January, including $11.6b in short-term Treasury bills. It also is still selling Agencies — its Agency holdings fell by $3.1 b.

Russia also, interestingly, added to its holdings of short-term Treasury bills. The Gulf reduced its dollar deposits (now at $114.3b, down from a peak of $125.5b in November) whether to support its domestic banks or to cover stretched budgets. The Gulf (and Brazil) also bought a decent number of long-term Treasuries. Most official buying, though, came at the short-end. In aggregate, the official sector sold $1.9 billion of long-term Treasuries while adding $29 billion to its short-term bills.

That continues a broader trend. Over the last 12 months official investors added close to $280 billion to their bill portfolio."

Well worth reading in full.

8. Keith Johnson at Environmental Capital reports that a new Accenture survey of attitudes toward nuclear power has been released, showing growing support for nuclear worldwide. The survey was of 10,500 people in 20 countries.

"The upshot? About 69% of people favor adding more nuclear power; 31% are opposed. In the past three years, 29% of people have become more supportive, and 19% have become more entrenched in their opposition."

China has the highest level of unconditional support for nuclear power at 50%. In the US, 37% say they have become more supportive of nuclear recently with 81% in favor of using more.

"One of the most surprising findings is the erosion of support for nuclear power in France, which gets almost 80% of its electricity from nuclear plants, and which is often held up by nuclear-energy proponents as a model for the US.

Hardcore French support for nuclear power stands at just 20%, similar to levels in anti-nuclear Germany. Over the past three years, opposition to nuclear power has grown in France more than in any of the other countries in the survey."

9. Courtney Schlisserman at Bloomberg reports that the producer price index grew by 0.1% in February from January. Core producer prices--prices excluding energy and food--grew by 0.2% for that time period. At an annual rate, producer prices fell by 1.3% in February. Core producer prices rose by 4% from a year earlier.

10. Shobhana Chandra at Bloomberg reports that housing starts grew by 22% in February from January.

"While the glut of unsold properties on the market means the housing industry’s recession will probably continue for some time, economists said today’s report indicates the worst of the contraction may have passed. Retail sales figures for February last week also indicated a slower rate of decline."

Year over year, housing starts are still down nearly 50% in February.

11. Bob Willis at Bloomberg yesterday reported that US industrial production fell by 1.4% in February from January. Year over year industrial production fell by 11.2%, the sharpest contraction seen since 1975.

"Excluding automobiles, factory output dropped 1.2%.

Utility production decreased 7.7%, propelled by unseasonably warm weather that caused declines in the use of electricity and natural gas. Mining output, which includes oil drilling, decreased 0.4%.

The auto industry is at the center of the manufacturing slump. Car sales in February slid 41% to the lowest rate since December 1981, according to Autodata Corp., led by a 53% drop for General Motors Corp."

12. Macro Man posts the data on the increased defaults seen in January from credit card holders, suggesting that many have made the New Year's Resolution to stop paying their credit card bills.