Blame the snow 1? The winter in America (and Europe) has a lot to answer for. Another bad storm is forecast for the north-east today and tomorrow. At this rate the US will have a snow-led recession this quarter. Now a sharp and unexpected fall in new home sales has been blamed on the heavy snow in January (it didn’t hit retail sales in January, which were a bit stronger than expected). This month will be poor because of the extra storms, which will depress new home sales (and starts) this month as well. But snow hasn’t affected California and the lower western and mid-western states as much as the east. The recession has done more damage there, especially to housing. Americans don’t want as many new homes and those interested have so many existing homes available at knockdown prices. There’s a government tax credit for home buyers, but it couldn’t stop new home sales from falling 11% to an all-time low annual rate of $300,009 in January, with prices down and backlog of unsold houses now more than nine months. And the US Mortgage Bankers Association claimed the cold weather was also factor in mortgage applications falling to their lowest level in America since 1997 last week.

Blame the snow 2? First China passed Germany as the world biggest exporter in 2009, now confirmation that the German economy was flat in the fourth quarter of 2009, after rising 0.7% in the September quarter.  In fact it was only saved from toppling back into the red by a solid export effort. But cold weather in December was blamed (and blamed for poor retail sales in the UK in January and weak consumer confidence in the US this month). While exports rose 3% in the final quarter in Germany and helped add two percentage points to growth, the figures show that government final consumption spending declined by 0.6%, as the car scrappage plan finished; household consumption fell 1% as German consumers spent less and business stocks fell, for a negative 1.2 percentage point contribution to GDP. Compared to the final quarter of 2008, German GDP shrank by 2.4% and by 5% over 200 as a whole. It was the worst 12-month period for the country since the war. Now there’s an even more terrible fate. Official figures from the UK on Friday night (our time), could show the British economy grew at 0.2%, up from the first estimate of 0.1%. We know Britain is absolutely stuffed, but is Germany really worse? It is, in its own, damaged way. With more cold weather in January, the tip is for a small dip into negative growth this quarter.

This is a slump, repeat, this is a slump. For those people (the deficit doubters, debt hawks, etc,) who still can’t appreciate the intensity of the 2009 slump, take a look at the latest damage estimate from the World Trade Organisation. WTO head Patrick Lamy overnight said that world trade fell by 12% last year, not the original estimate of 10%, which was a shock when made midway through the year. The 12% fall is the biggest drop since 1945. That’s right, the worst year for global trade for 64 years.  “World trade has also been a casualty of this (global economic) crisis, contracting … by about 12 percent in 2009,” Lamy said, calling it a huge drop and the sharpest decline since the end of World War Two. While seeing an improvement, Lamy wouldn’t make a forecast for the coming year.  That fall has hurt Japan, South Korea, Germany, the US and even China. We will find out on Monday what the damage to our trade was in 2009 when the December quarter balance of payments are released ahead of next Wednesday’s fourth quarter national accounts.

Will 130 become a few? Just as China is moving to cut excess capacity in some key heavy industries such as steel, chemical, cement and wind power, there’s now talk that the Government is about to start forcing the country’s 130 car makers to rationalise. The news will send the odd shiver through the minds of foreign car companies operating in, and importing into, China because the objective of the proposals will be to cut excess capacity and the number of makers, while boosting the the development of Chinese brand passenger cars (i.e. not transplants from a foreign factory). The story in China Daily and on the Xinhua websites says the Government wants Chinese-brand passenger cars to have a 50% share of the market by 2015, (44.3% in 2009) with sedans made by domestic makers having about 40% of the market. They had 30% of the market for sedans in 2009. It’s said only five of the 130-plus car makers in China had sales of 1 million or more car in 2009, which was a record year.

The planet saved? Is this why there’s no Chinese Hummer? General Motors says it will start winding down its Hummer subsidiary (That’s those huge gas-guzzling trucks) after the Chinese Government blocked a move by Sichuan Tengzhong Heavy Industrial Machines Co to buy the brand. This company had never built cars before and it seems from various reports the move by the Government to block the deal was due to worries about the environment and the picture the message okaying the purchase would send. (China buys gas guzzler). Despite its image after Copenhagen, China has a policy of closing (and not supporting financially) old, polluting businesses, such as steel, cement and other groups using outdated plant. China’s banks have been ordered to direct finance towards greener, environment-friendly proposals, not just speculation and financing old plant. The Hummer won’t be missed, except in Hollywood.

This is not a profit: Suncorp Metway … no wonder investors gave the group a bit of a hiding yesterday, selling the shares down more than 6%. They couldn’t get the right story from a company that reported a solid rebound in its previously weak insurance business, and a net profit after tax of just $4 million (yes, $4 million) for its Metway bank. In terms of modern business, that’s tantamount to a loss. Suncorp said in its ASX filing that Metway bank actually made a pre-tax profit of $224 million. But the more than $15 billion of  “non-core assets in the operation (that’s the Bad Bank, all the dud and horrid loans to property developers and other groups) had a pre-tax loss of $211 million”. Credit quality across the $37 billion core bank portfolio remained sound, reflecting its high-security, low-risk nature … Run-off of the non-core portfolio (Bad Bank) continued slightly ahead of expectations, reducing by $1.9 billion over the half year to $15.6 billion. Non-core impairment losses for the half year were $272 million. Dividend was cut to 15c from 20c for the first half. That was third half in a row that the payout to shareholders had been cut. What spooked investors was this comment from chairman John Story: “By retaining higher levels of capital, we will be in the strongest possible position to deal with any unanticipated short term issues that may present over the next six months.”  So things are OK, but we need to hang onto some capital increase suggests they are not?

Insurers’ big bill. Suncorp’s insurance arm reported a solid rise in profit in the December half, with one of the major factors the absence of any big weather disasters. The industry has had some costly experiences with natural disasters in the past decade, as that speech last Friday by APRA’s insurance member John Trowbridge makes clear. He had a list of the bills for some recent natural disasters: “The Canberra bushfires in 2003 were perhaps the worst in that period, at some $350 million, but several larger events occurred in 2006, ’07, ’08 and ’09. They included Cyclone Larry in March 2006 ($540 million), the Hunter Valley storms in June 2007 ($1450 million), storms in Sydney, Brisbane and Mackay in 2007 and 2008 (about $400 million each) and the Victorian bushfires just over one year ago in February 2009 ($1070 million).”

The biggest? Well, the 1999 Sydney hail storm cost $1.7 billion in absolute insured value. This interesting report from Risk Management Services says the hail storm “remains the largest absolute insured loss in Australian history (Insurance Council of Australia, 2009). If one considers population, inflation, and wealth adjustments, it still ranks third behind 1989’s Newcastle earthquake and 1974’s Cyclone Tracy. The 1999 hailstorm affected an approximate 130,000 individuals and caused one death, when a fisherman’s boat was struck by lightning.”