Here's the Economic Calendar for the week commencing the 31st of May 2010. This week there's more Q1 GDP results from Australia, Canada, Switzerland, and the EU; Australia and Canada also have their central banks meeting to set monetary policy rates this week. Elsewhere there are PMI (Purchasing Manager Index) results due out from China, the EU, UK, and the US. The other key data points are EU retail sales, CPI, and unemployment, and of course nonfarm payrolls in the US (and similar stats in Canada). There's also the G-20 meetings at the end of the week in South Korea. [more]
This week we look at the 2nd estimate of US GDP, US house prices and consumer confidence, the Japanese unemployment and deflation picture, Japan's international trade, and New Zealand's international trade. In the analysis we arrive at a one line summary that says things are still chugging along in this post-great-recession environment, but risks are rising.
1. US GDP
The 2nd estimate of US GDP came in slightly lower than the first estimate. The figure (SAAR) was 3.0% (or 0.8% q/q) against initial 3.2%, and consensus 3.5%. The year on year figure now sits at 2.5%, which considering the depth of the recession is not really all that impressive. The overall result is symptomatic of a gradual and fragile recovery, and though the risks have been repeatedly highlighted, they've only really taken on a real consideration as things like the Euro crisis, housing market weakness, and geopolitical situations (e.g. Korea), have surfaced. On that note, time to review the consumer confidence and housing market situation (below). [more]
Here's the Economic Calendar for the week commencing the 24th of May 2010. This week there's more GDP updates with the second estimates due out for Q1 in the US and UK. There's also trade figures due out from New Zealand, Japan, and Switzerland. And of course, there's the monthly S&P Case Shiller house prices index and the Conference Board Consumer Confidence index due out in the US (as well as personal income and expenditure). [more]
This week we look at the data out over the past week that showed a continued (yet fragile) economic recovery in Japan, higher economic growth rates in Mexico, continued strength in the economy of Taiwan, and relatively subdued inflation pictures in both the EU and US.
1. Japan GDP Growth
Japan's economy grew at an annualized 4.9% in Q1 2010, below consensus estimates of 5.5%, but on par with a revised Q4 2009 growth figure of 4.2%. Japan's economy has made a decent bounce-back over the past year, driven largely by international trade; showing a continued reliance of the Japanese economy on exporting. However much of the recovery thus far has been driven by export demand from China (relating to stimulus spending), and more broadly from inventory rebuilding (inventory cycle). Thus much of it to date has been somewhat artificial - it's almost coming down to a question of whether international trade will make a solid and broad based recovery as to whether Japan's economic recovery will be cemented. But then there's also deflation issues and fiscal challenges.
This week we look first at the GDP results and interest rate decision in Malaysia, then take a look at the Russian GDP growth results as well as how the rest of the BRICs are tracking. Then we look at some of the detail in the EU GDP results; tracking how the largest EU economies are growing against trend. Then we review the US trade balance figures for March, and the April employment numbers from Australia. One theme that comes out is the idea of a two-speed recovery.
1. Malaysian Monetary Policy Adjustment
The central bank in Malaysia increased the benchmark interest rate to 2.5% from 2.25%, the second tightening this year, in a move that was broadly expected by most analysts. Earlier in the week the Malaysian economy was revealed to have grown 10.1% vs an expected 9% year on year (thus prompting the central bank to lift rates as the Malaysian economic recovery surges on; Euro risks notwithstanding). Another Asian growth powerhouse in a time where developing and emerging markets are almost assured to outperform developed economies on economic growth, but the global risks are still there - we live in an increasingly interlinked global community. [more]
China just released its monthly economic data update; in this article we review some of the numbers on inflation, retail sales, industrial production, lending growth, and money supply. The main themes from the data suggest the economy is still growing strong, and that the outlook is for continued expansion of activity. However given the still stimulatory policy stance, the data adds to a view of increasing inflation, and risks of short-medium term overheating.
Read the full article: http://www.econgrapher.com/11may-chinaupdate.html [more]
China saw exports rise 30.5% year on year in April to $119.9billion, and imports up 49.7% to $118.24billion, leaving a trade surplus this month of $1.68billion compared to a deficit last month of -$7.24billion. Consensus estimates were for a deficit of -$0.55billion.
The rise in imports, though much of it driven by increasing commodity prices, is a positive sign for global trade and economic activity as China increasingly becomes a driver of world economic growth. [more]
Here's the Economic Calendar for the week commencing the 10th of May 2010. The main event out this week, and a topical one at that, is Euro Zone GDP for Q1 2010 on Wednesday. Another key set of data will be the monthly update from China on lending, money supply, trade, inflation, industrial production, fixed asset investment, and retail sales. In the retail sales space there's also an update from the US and New Zealand. There's also the Bank of England meeting on Monday, which may be interesting given the Euro context. [more]
This week we look at the consumer credit numbers out of the US, continued expansion in US nonfarm payrolls, surprising growth in NZ employment, Australasian trade numbers, and China's PMI for April (and notes on its currency and monetary policy).
1. US consumer credit expands
US consumer credit expanded $2bn in March, against expectations for a -$3bn contraction (and February's -$11.5). The year on year growth rate is starting to turn up now, signaling that the decline in consumer credit may now be over - or at least that a tentative floor has been found. Looking at the breakdown, Non-revolving credit was the source of the growth, while revolving credit declined. This tells you that much of the growth is driven by things like car sales (which included incentives), rather than consumer spending (revolving credit is generally more associated with general consumer spending). So really, the de-leveraging story still stands for now.
2. US nonfarm payrolls
US nonfarm payrolls surprised to the upside with 290k jobs added in April vs consensus 200k, and an upward revised 230k in March. However the 'official' unemployment rate increased to 9.9% from 9.6% due to a surge in the labor force. Census hiring added 66k to the number (48k in March), in a conveniently timed running of the 10-yearly survey. The expansion in payrolls is a welcome respite for the US, following a mass shedding of jobs as the financial crisis hit. The US tends to take it on the chin with jobs; cutting quickly in bad times, but allowing the necessary adjustments to be made.
3. NZ Employment surprise
Another surprise this week was the jump in New Zealand employment numbers, the unemployment rate fell to 6% from a downward revised 7%; with 22k jobs added. I ran more indepth analysis of the release here. The main points to take are that much of the jobs were added in the productive sector, and it shows that after 3 quarters of positive GDP growth, the economy is finally starting to pick up. Job ads are on the rise, and confidence is also increasing. The scene is almost definitely set now for the RBNZ to raise the official cash rate by 25bps to 2.75% in June (but then there are external risks e.g. Europe, that could play into the mix).
4. Australasian trade
Australia released its international trade figures for March this week, and New Zealand the week before. Australia recorded 2 and 3% growth month on month in exports and imports respectively, with its trade deficit widening to -$2.08bn in March vs -$1.7bn in Feb, and consensus for -$2.13bn. Meanwhile New Zealand reported exports rising higher than imports, recording its 3rd surplus in a row as agricultural commodity prices gave a boost to exports; while demand for imports remained low. It's pretty clear on the chart and in the numbers that the trend for exports and imports has been turning the corner in both Australia and New Zealand.
5. China PMI signals further strength
The HSBC PMI was out this week, slipping slightly to 55.4 from 57 in April (and consensus 57); while the official CFLP PMI rose to 55.7 from 55.1 when it was released in the weekend. So both indexes show the outlook for Chinese manufacturing activity is reasonably strong, in spite of a slight hiccup in February; and firmly rebounding since 2008. Of course the obvious implication is that further strength means further chance for overheating, indeed the People's Bank of China increased the required reserve ratio again last weekend by 50bs, and there has been musings that China will alter its exchange rate policy before the June G-20 meetings.
Some of the key takeaways from this edition are that the US is still seeing its dubious recovery playing through with some aspects of consumer credit creeping up, and employment beginning to expand through a process of normalisation, stimulus effects, and national surveying. As noted in the analysis of the two US PMI indexes, the US economy is seeing a pick up in activity and signs are for more activity, but the elusive sustainable recovery is yet to be seen.
Looking to Australasia, the growth story continues to play out Australia shows continued strength, and expanding trade (and further interest rate increases - another 25bps this week). Meanwhile New Zealand surprised with its employment numbers, suggesting that the economic recovery there could be picking up; New Zealand also recorded further trade surpluses - but mostly due to cyclical factors. The Australasian economies are islands of growth and stability amongst the developed nations.
Meanwhile - and related to the previous two - China shows no sign of slowing down as the PMIs point to further growth in activity. So the obvious questions of whether or not it's overheating, and what should be done arise. With the PBOC taking a gradualist approach of tinkering with the reserve requirements ratio, will it be forced to take bigger moves soon? The next few months could be most revealing in that respect.
1. US Federal Reserve www.federalreserve.gov
2. US Bureau of Labor Statistics www.bls.gov
3. Statistics NZ www.stats.govt.nz
4. Australian Bureau of Statistics www.abs.gov.au & Statistics NZ www.stats.govt.nz
5. CFLP: www.chinawuliu.com.cn & Markit/HSBC: www.markiteconomics.com
Article Source: http://www.econgrapher.com/top5graphs8may.html [more]
The European Central Bank announced no change to the policy rate (at 1%); and in spite of pressure to do otherwise, also no changes to other monetary policy moves. With the fiscal problems surfacing in the EU (most notably Greece), there had been some expectations that the ECB might e.g. "go nuclear"... implementing extraordinary measures, but for now it seems the ECB doesn't see this as necessary. Before moving into the economic analysis part it's worth reviewing what they did say in this respect (given the topical nature of fiscal challenges):
"As regards fiscal policies, we call for decisive actions by governments to achieve a lasting and credible consolidation of public finances. The latest information shows that the correction of the large fiscal imbalances will, in general, require a stepping-up of current efforts. Fiscal consolidation will need to exceed substantially the annual structural adjustment of 0.5% of GDP set as a minimum requirement by the Stability and Growth Pact.
The longer the fiscal correction is postponed, the greater the adjustment needs become and the higher the risk of reputational and confidence losses. Instead, the swift implementation of frontloaded and comprehensive consolidation plans, focusing on the expenditure side and combined with structural reforms, will strengthen public confidence in the capacity of governments to regain sustainability of public finances, reduce risk premia in interest rates and thus support sustainable growth over the medium term.
In this context, the Governing Council welcomes the economic and financial adjustment programme which was approved by the Greek government following the successful conclusion of the negotiations with the European Commission, in liaison with the ECB, and the International Monetary Fund, with a view to safeguarding financial stability in the euro area as a whole."So the ECB does see fiscal challenges as a problem, but it's comfortable limiting its official monetary policy stance as verbal for now (other than the moves announced earlier this week). So the name of the game is holding the rounds in the clip - the ECB still maintains the capacity to act if need be. For instance it could drop the rate from 1% to parity with the Fed's 0 to 0.25%, and it could also take the 'nuclear option' of an aggressive "quantitative easing" financial market intervention program. So it is comforting to know that 1. they have the capacity to act; and 2. they don't see a need to act (yet).
Now, onto the usual concerns; inflation is currently viewed as being "contained" in the EU. On the inflationary side there's upward pressure from commodity prices and faster growing (mostly developing) economies. But meanwhile the EU economy is broadly still struggling along (albeit recording some growth in some regions) so on balance the view is that inflation is not a near term problem in the EU:
"Taking into account all new information since our meeting on 8 April 2010, we expect price developments to remain moderate over the policy-relevant horizon. Global inflationary pressures – driven mainly by price developments in commodity markets and in fast-growing economic regions of the world – are still being counteracted by low domestic price pressures. The latest information has also confirmed that the economic recovery in the euro area continued in the early months of 2010. We expect the euro area economy to expand at a moderate pace in 2010, but growth patterns could be uneven in an environment of high uncertainty.
Our monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence."So for now, no move is probably the right move. Growth will, in aggregate, continue in the Euro Area, but as noted previously it will be fragile, gradual and uneven. The usual risks of faster than expected increases in commodity prices, protectionist pressures and disorderly unwinding of global imbalances remain. So the outlook for the EU is, if muted, at least mildly positive; and as far as fiscal challenges go, one can only hope the ECB doesn't have do anything more.
Econ Grapher Analytics www.econgrapher.com
European Central Bank www.ecb.int
Trading Economics www.tradingeconomics.com
Article Source: http://www.econgrapher.com/7may-ecb.html [more]
New Zealand today released its employment data (the Household Labour Force Survey), showing a marked reduction in the unemployment rate from a revised 7.1% in Q4 2009 down to 6% in Q1 2010. Consensus estimates were for no change at the previously announced 7.3% level. And as we conclude in the following analysis, the improvement was for all the right reasons...
Read more: http://www.econgrapher.com/6may-nzjobsmarket.html [more]
In this article we look at both ISM manufacturing and non-manufacturing indexes and ask "Are there any real indications of a sustainable economic recovery yet?" - with the the obvious implication of the broader economic outlook for the US. As a quick reminder the ISM manufacturing PMI came in at 60.4 (just below consensus 61.0, and above previous 59.6); meanwhile the non-manufacturing index came in at 55.4 (unchanged from March, and below consensus 56.4).
Neither of the headline results were particularly interesting apart from the fact they were both still definitely in expansionary territory. But as you'll soon see, a quick look under the surface reveals some pretty interesting moving parts.
Read full article: http://www.econgrapher.com/6may-uspmi.html [more]
The RBA (Reserve Bank of Australia) today said in its monetary policy decision release that it would raise the cash rate by 25 basis points to 4.5%, continuing its path to neutral monetary policy. In the announcement the RBA Governor, Glenn Stevens said: [more]
Here's the Economic Calendar for the week commencing the 3rd of May 2010. This week there's a few PMI (Purchasing Managers Index) figures out from the US, Canada, China, and the UK; which will all provide a good insight into where the manufacturing (and depending on the release, services) sector is performing - and more importantly, how some of the leading indicators are shaping up. Also, on the monetary policy front there's interest rate decisions due from the ECB, and RBA, and speaking of policy, the UK is set to have its election this week. And of course another big data point this week will be the unemployment figures, with non-farm payrolls in the US, as well as an employment update from Canada, and New Zealand. [more]