Markets took a dive today as the US consumer confidence numbers disappointed; showing a reading of 52.9 vs consensus 63.3, and down sharply on the May reading of a downward revised 62.7, as consumers adjusted their views slightly on the back of a still tepid jobs market.
Read more: http://www.econgrapher.com/30june-ushousecon.html
Here's the Economic Calendar for the week commencing the 28th of June 2010. The end of June confidence indicators and PMI's start to come out this week; on the confidence indicators side there's US consumer confidence, New Zealand business confidence, EU economic confidence, UK consumer confidence, and the Bloomberg financial conditions index. On the PMI side, there's the closely watched ISM manufacturing PMI in the US, and the CFLP and HSBC PMI's in China, there's also Japan's Tankan survey, and UK and EU PMIs. On the employment front there's the nonfarm payrolls update from the US (as well as an update on the housing market with the S&P Case Shiller index due out), and official unemployment rates from the EU and Japan. [more]
This week we look at the progress of the economic recovery in New Zealand, examine the latest US consumer sentiment statistics, then review CPI data from Canada and Japan, and finish up with a review of the trade data from Japan this week. The word gradual pops up several times, and is consistent with the theme of a broadly gradual global economic recovery.
1. New Zealand GDP
New Zealand recorded its 4th quarter of positive GDP growth with 0.6% q/q for the March quarter of 2010. This matched consensus estimates, but was down slightly from the 0.9% recorded in the December quarter of last year; reflecting the somewhat subdued economic recovery, following one of the worst recessions in decades. The growth mostly came from the primary sector and manufacturing sector. New Zealand also reported its current account numbers, showing a current account deficit to GDP ratio of -2.4%, the lowest in more than a decade. Overall the NZ economy is in recovery mode, with the central bank already lifting interest rates, but as I mentioned previously, it's onwards, but only slightly upwards.
2. US Consumer Sentiment
The US consumer sentiment report for June showed a level of 76.0 for the final reading, up from the May reading of 73.6, with an improvement in the current conditions component to 85.6 from 81 in May; the highest in about 2 years. The future expectations component only rose slightly to 69.8 from 68.8 in May. The index is starting to see gains as employment conditions have seen improvements due to some one-offs such as the census, but also genuine jobs normalization (not growth, but normalization - i.e. corrections to overreactions during recession). The results are consistent with a seemingly sustained, yet gradual in the US.
3. Canada Inflation
Canada reported an annual inflation rate of 1.4% in May, following a rise of 1.8% in April. The slightly slower rate reflected a moderation in gasoline costs, and lower prices for clothing. On a core basis, the consumer price index rose 1.8% vs 1.9% in April. The Bank of Canada expects that inflation will be "slightly higher" than its 2% target over the next year, indeed the Bank of Canada has already begun its tightening or monetary policy normalization; increasing the key lending rate to 0.50% from 0.25% in its June meeting. As noted previously, Canada is in a relatively enviable position compared to most over developed economies.
4. Japan Deflation
Japan's annual rate of deflation slowed slightly in May to -1.2%, vs a fall in the consumer price index of -1.5% in April. The consensus was for a -1.3% drop in the CPI. The result is unlikely to dampen the Japanese Government's demands for the Bank of Japan to step up measures to combat deflation. Indeed, the Bank of Japan recently announced a 3 trillion-yen program to encourage lending to companies. The deflation trap can be an insidious one, causing economic growth to slow as companies and households hold off spending; waiting for lower prices - it also encourages over-investment into financial assets vs real assets. The Bank of Japan is not seen raising interest rates until at least 2012, as the fight against deflation continues.
5. Japan Trade
Staying with Japan, the monthly trade figures were out this week, showing continued strong year on year growth, but reasonably lackluster monthly growth. Exports totalled 5.3 trillion yen, and imports 4.9 trillion yen, leaving the trade surplus down at 324 billion yen. Strong demand from China saw exports to China grow 25.3% year on year; with the increased flexibility of the Yuan, the Yen may strengthen against the Yuan, as the imbalances with the USD are unwound. The Yuan USD rate was about 6.796 at the time of writing. Japan has yet to see a return to pre-crisis levels of trade, in contrast to China which has practically fully rebounded. Yet the gains are positive, and also a confirmation of a gradual but seemingly sustained global economic recovery.
So we have the New Zealand economy showing signs that the recovery is becoming increasingly entrenched, but at the same time; tracking at a relatively subdued pace as the economy recovers in the true sense of the word from one of the worst recessions on record. Meanwhile in the US, the consumer sentiment data lines up with other data points showing a gradual improvement and normalization in activity levels; as the US continues its fragile economic recovery.
On the inflation front, Canada is showing reasonably subdued levels of inflation for now, but as noted by the Bank of Canada, inflationary pressures are likely to grow over the coming year as the economic recovery continues. On the other hand, Japan continues its struggle with deflation, causing the government to put increasing pressure on the Bank of Japan to do more to stimulate the economy and beat the deflation.
But things aren't all bad for Japan, with its international trade figures showing a gradual recovery, which confirms a gradual improvement in demand around the world (as Japan is still a key source of consumer electronics to the world). We also saw the passing of the first week since China announced plans to improve flexibility of the Renminbi; since then the moves haven't been spectacular, but it has managed to gain 0.03 against the USD, which leaves us with the key word of this article and of the global economy: gradual.
1. Statistics New Zealand www.stats.govt.nz
2. Reuters/Univesity of Michigan customers.reuters.com
3. Bank of Canada www.bankofcanada.ca
4. Trading Economics www.tradingeconomics.com
5. Japan External Trade Organization www.jetro.go.jp
Article Source: http://www.econgrapher.com/top5graphs26jun.html [more]
New Zealand recorded its 4th quarter of positive GDP growth with 0.6% q/q for the March quarter of 2010. This matched consensus estimates, but was down slightly from the 0.9% recorded in the December quarter of last year; reflecting the somewhat subdued economic recovery, following one of the worst recessions in decades. On a year-over-year basis, growth accelerated to 1.9% from 0.5% in the previous quarter (rebounding from -3.1% in the March quarter of 2009). [more]
So China has just announced that it will "Further Reform the RMB Exchange Rate Regime and Enhance the RMB Exchange Rate Flexibility". See the full statement here.
Just what exactly this means remains to be seen, but this is a very positive move, and from a global economic stability standpoint will now allow some of the focus to be shifted towards some of the other sources of imbalances like US (and other developed nations) profligacy both on consumer finances and government finances.
But more on the announcement, and some clues as to what might follow... Here's what happened last time (for some more background on the CNY click here): [more]
This week we look at Industrial Production figures from the US, EU, Japan and China, and then we take a look at where commodities are tracking, before reviewing the inflation results out over the week from the US and EU. Then we finish up with a review of the monetary policy decisions from Japan, Switzerland, and Mexico. The analysis echoes some of the comments made in the economic calendar for the week just past.
1. Industrial Production
Industrial production figures released over the week showed no real surprises with the pattern broadly in line with the expected path from recovery. The US showed a deceleration in Industrial production growth as the comparator figure started to recover; still too soon to call a double dip but it will pay to watch the rest of the data. Japan also saw a slight deceleration in its industrial production recovery - as the trade dependent economy continues to rebound from the deep drops during the height of the crisis. The EU showed continued signs of recovery or renormalisation, and the China data - there for comparison showed continued strength. So broadly Industrial Production has shown a period of deep contraction followed by short term recovery, the question is - where to next? [more]
Here's the Economic Calendar for the week commencing the 14th of June 2010. This week there's an inflation check in with CPI results due from the UK, EU, and US. There's also an update on industrial production with Japan, the Euro Zone, and the US all expected to report. On the monetary policy front there's Japan and Switzerland scheduled to announce their policy decisions this week, and Australia with the RBA meeting minutes. Elsewhere there's US housing starts and current account balance, leading indicators from the US, Canada, China, and Australia, and New Zealand house prices and consumer confidence. [more]
This week we examine the GDP results from last "BRIC" economy to report, Brazil, then we look at another one; China and see how international trade and retail sales are tracking. Then we analyze the recent US consumer credit data, and finish up with a review of four of the monetary policy decisions this week.
The themes are big ones this week; there's emerging markets leading the recovery, there's global imbalances and potential changes in the make up of the Chinese economy, and finally, monetary policy continues on a de-synchronized path in response to a de-synchronized global economic recovery.
1. Brazil GDP
Brazil reported year on year GDP growth of 9%, smashing the consensus forecasts for 7.6%, and accelerating from the 4.29% in the previous quarter, and -2.14% same time last year. Some of the large number is related to a lower base comparator, but much of it is related to an accelerating recovery in Brazil; highlighting risks of overheating. Indeed the Brazilian central bank ended up raising the Selic rate another 75bps a day or two after the GDP results were announced (see the piece on monetary policy below). So it is good news for the Brazilian economy, it's interesting to see it growing at China levels, but the question of sustainability remains. [more]
In the past 48 hours we saw monetary policy decisions from New Zealand, Brazil, Europe, and UK. The New Zealand rate hike was as expected, the Brazilian one was too (though most probably didn't know it), the ECB and BoE non-decisions were also as expected. Following is a run down on each of the decisions and the current drivers of monetary policy in these four economies.
Article Source: http://www.econgrapher.com/11june-monetarypolicy.html [more]
Is there a 3 tiered global economic recovery under way? And how might stock market performance look?
Have a look at the article and let me know your thoughts...
Article Source: http://www.econgrapher.com/7june-3tieredrecovery.html
Here's the Economic Calendar for the week commencing the 7th of June 2010. This week there's the monthly data release from China, with CPI, fixed asset investment, industrial production, retail sales, new loans, trade balance. On trade balances, there's also trade figures from the UK, Japan, Canada, Germany, and the US. The US also has consumer credit, retail sales, UoM consumer sentiment, and the Fed's Beige Book economic report. On the monetary policy front there's reviews by the Reserve Bank of New Zealand, the Bank of England, and the European Central Bank. [more]
This week we look at the surging growth in the Indian economy, continued improvement in the GDP results from Australia, a strengthening recovery in the Canadian economy, and monetary policy decisions by Australia and Canada, and finish up with a look at the US nonfarm payroll figures which showed strong census hiring and not much else.
The main theme is global growth is being lead by emerging markets, with a select few developed economies in close pursuit, while other developed economies continue to dawdle as the gradual fragile global economic recovery continues.
1. India GDP
India's economy grew 8.6% year on year in the first quarter of this year, cementing a trend of strong economic growth in emerging markets. The figure compares to 6.5% in Q4 2009, and was slightly below consensus 8.8%. The figure puts India on a similar path to it's neighbour and fellow economy, China, and places it in a similar predicament on the monetary policy front, with India having already increased its interest rate 25bps in April. In terms of the outlook, the Indian economy seems to be relatively strong at this point, echoing the trends of the other big emerging markets like China, Brazil, Indonesia, etc. The IMF noted in its World economic outlook that it expects the Indian economy to grow 8.8% in 2010 and 8.4% in 2011. [more]
The Bank of Canada became the first G7 country to raise rates, lifting the target for the overnight rate 25bps to 0.50%, a move widely expected. The Bank however did note the considerable risks to domestic and global growth, and noting the quote below, the path back to neutral may not be clear cut: [more]
China released its official CFLP (China Federation of Logistics & Purchasing) PMI figure today, recording 53.9 for May vs 55.7 in April, and below the 54.5 market expectations. The HSBC PMI number (which surveys 400 businesses, and is weighted to smaller/privately owned businesses than the CFLP index) also disappointed with 52.7 vs 55.4 in April.