Econ Grapher's Top 5 Graphs of the Week.
6 - September - 2009
This week the charts start with a strong focus on the US economy, with some clues of a potential bottoming out of job losses, a potential - but mayhaps misleading - pick up in economic activity, and some promising signs in the banking sector. Then the view goes to the global stage with a look at trade volumes, which appear to be bottoming out. Finally we look at the Australian economy - how the folks down under have waltzed their way through the crisis, relatively unscathed (or less scathed). One difference in this week's report is that the graphs are all from other sources - I'll look to have my own graphs back in the picture next week (when I, hopefully, have more time). Enjoy - and feel free to tell me if you agree, disagree, or especially if I'm missing something.
1. US Non Farm Payrolls
A recent data release, US non farm payrolls came in slightly better than expected (versus the Reuters poll for -225k) at -216k. So only 216k people out of a job in August. On a cumulative basis the change in non farm payrolls is approaching 0 for the decade as total non farm employment approaches year 2000 figures. However there is some respite in the numbers as the number of losses is clearly slowing - and it is forcing labour productivity up slightly. It is promising to see a bottoming out of job losses, but they are still that - losses, albeit unemployment is a lagging indicator, it wont really be a positive reading until we at least get back to changes closer to 0.
2. US ISM PMI
Institute of Supply Managers report on business data was also out in the past week. The figures were broadly speaking positive. They were "good" in that manufacturing appeared to be expanding, and new orders were positive. However this is likely to be driven more by two somewhat artificial factors than a more endemic recovery. The drivers of course are government stimulus i.e. cash for clunkers, and the inventory cycle i.e. inventory falling following a period of little restocking to the point that new orders need be placed [note most survey participants thought their customers needed more inventory]. This should pretty much signal a bit of a surge in economic activity - but it is unlikely to be sustainable. Another point to note is a rogue sign of inflation as the number of respondents reporting paying higher prices spiked up - this is an interesting dynamic in terms of US inflation; especially if juxtaposed with the extraordinary loose fiscal and monetary policy stances.
3. Bank lending
This graph comes from the recent OECD update to its world economic outlook. I thought this graph was quite fascinating - it shows that banks have begun to relax a little after an involuntary sphincter-like contraction around the peak of the crisis. This is encouraging as it indicates that there may be two things occurring; 1. banks may be taking a view that there are relatively better credit risks applying for loans 2. demand for (better quality) lending may be increasing. Of course loose monetary conditions may also be impelling banks to consider expanding the loan book. In any case this is encouraging and could be linked to a reactivation of the credit multiplier - and certainly is going to be much more supportive of a real economic recovery than the days where panic/liquidity squeeze/credit risk aversion were at a peak.
Having dwelled somewhat on US, its time to move toward a more global perspective. The below chart is also from the OECD report and shows what I have recently observed in trade numbers from a few different countries e.g. last week's report which feature Japanese exports... a tentative bottoming out or "stabilisation". In basic terms this means "it looks like it's stopped falling" - and for naysayers, guess what; this needs to happen before a recovery happens, so it is a positive sign. But the hard part is how and when (if?) it gets back to where it was and beyond. As previously mentioned it looks like the inventory cycle is starting to work through so I would expect the chart below to tick up a bit in the near term. What's not seen in this graph though is the components or the imbalances in trade and (hence) balance of payments. There are a few notable examples of persistently large current account surpluses/deficits, it's hard to foresee whether or not these balances may be catalysed to change on the other side of an eventual recovery.
5. Australian GDP
Australia released it's GDP stats for Q2 last week, beating forecasts with a QoQ GDP growth rate of 0.6%. Australia is one of the only developed countries to skip through the crisis with little harm. It only recorded 1 quarter (Q1 09) of negative growth in it's "recession". Indeed, it may even be the first developed economies to commence tightening of monetary policy. Some people are predicting the RBA will lift interest rates from 3% in October; I am one of them.
Until next week.
1. Bureau of Labour Statistics (6/09/2009) http://www.bls.gov/web/ceshighlights.pdf
2. Bloomberg Report: (6/09/2009) http://bloomberg.econoday.com/byshoweventfull.asp?fid=438208&cust=bloomberg&year=2009#top
3. OECD WEO update: (6/09/2009) http://www.oecd.org/dataoecd/10/32/43615812.pdf
4. Ibid.: (6/09/2009) http://www.oecd.org/dataoecd/10/32/43615812.pdf
5. Australian Bureau of Statistics: (6/09/2009) http://www.abs.gov.au/AUSSTATS/abs@.nsf/ProductsbyReleaseDate/35F488B5F9F7D242CA256DF000814610?OpenDocument
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