Top 5 Economics Graphs of the Week - 11 December 2010

This week we look at the international trade stats for the US and China, with some interesting signs in the China data. Then we review an interesting short term trend in US consumer credit, before checking the jobs data out of Australia. Finally we review some of the monetary policy decisions out over the past week.

1. China International Trade
China announced its trade data on Friday, and revealed record numbers on both imports and exports. Exports jumped to an all time high of $153.3bn (up 13% month on month and 35% year on year). Imports also rose, hitting $130.4bn (up 20% m/m and 38% y/y), leaving a trade surplus of $22.9bn and a $233bn rolling 12 month surplus. The results are pretty interesting on a global basis when you think about the climb in imports, but for China the results could be somewhat double-edged. For one the surplus will raise pressure on the Yuan, and the strong exports could also impact on inflation - but more about that later...

2. US Trade Balance
The US trade deficit reduced slightly in October to -$38.7billion vs consensus -$44bn and previous -$44bn. The reduction was driven by a fall in the petroleum gap ($19.1bn vs $21.7 bn), but the non-pretroleum shortfall also shrank ($31.0bn vs $34.1bn); with imports down slightly and exports up slightly. Though it's only one month it is an interesting result, if it could be sustained. If you think about global imbalances it should be countries like the US that export their way out of the recession given the large current account deficit (not to mention the other problems)... but just how that could be done or how realistic that is is another question.

3. US Consumer Credit
Over to US consumer credit, the short term trend emerging is somewhat interesting, albeit the figures are year on year so coming off a low base comparator it's easy to look good. But it does initially look like the worm has turned. However it probably shouldn't really just yet as the deleveraging cycle still needs to happen for the recovery to be really sustainable, otherwise it's just back to old habits (and I suppose if everyone's willing to take the consequences of that then fine). But if you look at the detail the increase is coming from non-revolving credit (mostly auto-loans), while revolving credit (i.e. credit cards etc) is still contracting.

4. Australia Jobs Growth
Australia beat all expectations with its November job numbers, recording 54,600 new jobs in November, against consensus estimates for 20,000 with 55,100 full-time jobs added. The jobless rate fell to 5.2% from 5.4%. Much of the strength in the Australian economy is coming from the booming resources sector, which is benefiting from high commodity prices, emerging markets demand, and increasing amounts of investment; including several significant projects. Of course the other part of the economy is still chugging along at the same pace as the likes of NZ or the US, but the jobs results show that the mining sector is starting to spin-off some benefits to the rest of the economy.

5. Monetary Policy
Banks in Mauritius, Australia, Canada, Iceland, New Zealand, Serbia, Brazil, Ghana, Korea and the UK announced their monetary policy decisions last week. The standouts were Serbia +100bps and Iceland -100bps. But the main event was yet another 50bp hike to the Required Reserve Ratio by China, which will bring the RRR to 18.50% on the 20th of December. But for the most part central banks held steady as uncertainty ruled, with banks holding rates to help the economy (in the case those with low rates) and others holding to stem inflation (in the case of those with high rates). The theme of emerging market overheating and resultant tightening is still playing through with India saying it could raise rates again, and Russia likely to raise rates later in December.

Summary

So we saw China international trade rocketing along, setting new records on both exports and imports, and cementing its growing trade surplus. Over in the US we saw a slight decline in the trade deficit, but one month does not a trend make. Also from the US we saw the possible beginning of a turnaround in consumer credit, but possibly this is too soon. In Australia the jobs numbers surpassed all expectations as the Australian economy cruises along. In monetary policy there was a couple of outliers, but the main move was no move, apart from China who tightened the RRR once again as it heads into 2011 - the year of "prudent" policy.

Sources
1. China Customs www.customs.gov.cn
2. Trading Economics www.tradingeconomics.com
3. US Federal Reserve www.federalreserve.gov
4. Australian Bureau of Statistics www.abs.gov.au
5. CentralBankNews.info www.centralbanknews.info

Article Source: http://www.econgrapher.com/top5graphs11dec.html

Top 5 Economics Graphs of the Week - 9 October 2010

This week we look at some of the monetary policy decisions during the past week (Australia, Indonesia, Japan, Europe, UK, Philippines). Then we review some interesting data points from the US; non-manufacturing PMI, consumer credit, and the nonfarm payrolls report. Then we finish up with a look at the strong employment numbers in Australia.

1. Monetary Policy Review
Among the central banks announcing monetary policy decisions last week, the Reserve Bank of Australia held its rate at 4.50%, the Central bank of Indonesia held at 6.50%, the Bank of Japan decreased from 0.10% to between 0 and 0.10%, Bangko Sentral Ng Pilipinas held at 4.00%, the European Central Bank held at 1.00%, and the Bank of England held at 0.50%. So all quiet really except for japan who also announced a 5 trillion yen quantitative easing program where it would buy bonds, REITs, and even shares in an attempt to ease further and stimulate the economy. The close call was Australia, which is likely to raise at their next meeting as the Australian economy goes from strength to strength (more on this later).


2. US Non-manufacturing PMI
The US non-manufacturing index rebounded in September on the back of a surge in new export orders. The index rose to 53.2 from 51.5 in August, and up against consensus estimates for 52.0. The other standouts in the report were inventories (falling from 53.5 to 47), supplier deliveries (improving to 55.0 from 51.0), employment (improving to 50.2 from 48.2). Overall the non-manufacturing PMI report showed relatively broad strength (especially as compared to the manufacturing PMI report released last week). Thus the result is relatively positive in the scheme of things.

3. US Consumer Credit
US Consumer Credit continued to contract in August as the deleveraging cycle continues to run its course. In total consumer credit contracted by $3.3 billion in August, vs -$3.6 billion in July, and slightly below an expected contraction of -$4.0 billion. Breaking it down to revolving vs non-revolving, non-revolving is experiencing continued positive numbers due largely to car loans. But overall it reflects the trend of consumer deleveraging, and fits with the data we're seeing in terms of savings rates and retail sales. So basically it's the same old story of the long hard recovery.

4. US Nonfarm Payrolls
So it should be no surprise that we're still seeing subdued results in the non-farm payrolls data. in September payrolls fell by -95k vs consensus for -8k and previous -54k, but stripping out the government cuts and census worker cycle; private payrolls expanded by 64k, which was slightly down against August 67k and consensus 85k. Average earnings were flat against August, and the average work week was also flat. So really just another subdued result as the subdued economic recovery continues to unfold. But of course the positive numbers in the private payrolls can't be ignored, it says that there is at least a pulse - albeit a weak one.

5. Australian Employment
Looking at Australia, the jobs story is a much different one with jobs expanding again, the Australian economy added 49.5k jobs on a seasonally adjusted basis, with all of the strength again coming from full-time jobs, with part time jobs actually contracting as part-timers converted to full-timers and new employees entered the market. The unemployment rate remained at 5.1%. So again the lucky country rides strong as it continues to expand its resource sector and reaps the residual benefits of the stimulus spending last year. With continued strength in the employment data its almost a given (unless anything external happens) that the RBA will need to start lifting rates again in November.

Summary

So we saw continued inaction by the central banks around the world this week as the various monetary policy decisions were announced. Much of the inaction is simply due to a relative comfort of the risks of greater inflation vs the risk of slowing or halting the economic recovery. But in some cases perhaps the more probable or helpful move would even be continued expansion e.g. in the UK, and as Japan acted in its apparently desperate moves. One thing is sure - it will pay to closely watch the central bankers around the world as the recovery unfolds.

Over to the US, we saw signs of strength in the non-manufacturing sectors, just as last week we saw rather ominous signs from the manufacturing sector - which is consistent with a confuse and muddling recovery. We also saw no surprises in the direction of the results in the consumer credit data as deleveraging plays through and in employment as the recovery remains subdued. But in Australia the employment situation is coming along strong - just as the economy is there. So in terms of what I've previously said - nothing much has changed and things are evolving much as expected.

Sources
1. Trading Economics www.tradingeconomics.com
2. Institute for Supply Management www.ism.ws
3. US Federal Reserve www.federalreserve.gov
4. Bureau of Labour Statistics www.bls.gov
5. Australian Bureau of Statistics www.abs.gov.au

Article Source: http://www.econgrapher.com/top5graphs9oct.html

Top 5 Graphs of the week - 10 July 2010

This week we look at the languishing US consumer credit figures, and the slowing non-manufacturing PMI, then examine the continued string of strong jobs growth in Australia, followed by a wrap-up of some of the key monetary policy decisions this week, and a review of the IMF World Economic Outlook update.

1. US Consumer Credit
Unsurprisingly, given the way much of the US data is pointing lately, the consumer credit figures dropped-off further in May, as deleveraging continued and consumer appetites for new lending remained cool. Consumer credit fell -$9.1 billion in May, vs expected -$2.0 billion, and a revised (down from positive $1 billion) -$14.9 billion. But in some ways a negative is a positive, sure in the short term it's not great, but it's a process that needs to continue, the US consumer needs to continue recovering; pay down debt after excessive borrowing, re-build balance sheets, and generally live within their means (which will be made even more difficult by potentially more constrained means in which to live!).

2. US Non-manufacturing PMI
Sticking with the theme of growing pessimism in the US (have you noticed all the articles being churned out on the next depression, the double dip, etc etc?) - whether it is warranted or not... The ISM non-manufacturing PMI or NMI, disappointed as well; falling to 53.9 from 55.4 (consensus 55). The employment sub-index fell back below 50 to 49.7, new orders slipped again to 54.4, and prices (similar to the manufacturing index) fell -6.8 to 53.8 - signaling a potential mismatch between supply and demand, and pointing to further slowing of inflation in the short term. The first half of this year has been easy for the US, the second half will be a little bit more difficult, and it's likely the W-shaped recovery will start seem more and more likely. But as noted in the previous chart; this has to be a structural recovery - not a cyclical one, and it's going to be hard.

3. Australian employment
Australia saw further jobs growth in June, adding 45.9k jobs vs an expected 15k, and building on the 22.8 added in May. This brings the total to 185k YTD, and 105k for the June quarter (-22.8k in Q2 2009). So overall a good outcome for the Australian economy, the strong labour market will likely underpin the economy as some of the stimulus measures start to run out (e.g. monetary policy tightening). It will also increase the case for further hikes of the interest rate as employment growth sees increasing rates of capacity utilisation. But as noted by the RBA in its recent monetary policy announcement, the Australian economy is basically fine at the moment - it's the global economy that will make or break the recovery from here.

4. Monetary Policy review
The week saw a few non-events on the monetary policy front with the BOE (Bank of England), ECB (European Central Bank), and RBA (Reserve Bank of Australia) holding each of their respective policy rates steady - as expected. But there was a couple of interesting moves in Asia; BNM (Bank Negara Malaysia) increased rates 25bps again to 2.75% as growth continued to surge. Likewise the BOK (Bank of Korea) increased rates for the first time in in 2 years, lifting the rate 25bps to 2.25%, having held at 2% for about 17 months. The actions are consistent with the view of a 3-tiered economic recovery; the fast growing emerging markets, the selected developed economies, and the languishing advanced economies.

5. IMF World Economic Outlook
Another key update out this week was the IMF's periodic update to its World Economic Outlook. The IMF updated its global growth forecasts, projecting the global economy to growth 4.5% in 2010, and 4.25% in 2011; representing an increase of about 0.50% in 2010 - reflecting stronger activity in the first half of the year. They rightly pointed out however that risks to the recovery "have risen sharply amid renewed financial turbulence", and that one of the key risks to the economic recovery - and to a more sustainable recovery is policy reform; the growth forecasts "hinge on implementation of policies to rebuild confidence and stability".

Summary

To provide a brief summary; US consumer confidence disappointed in May, adding to a string of disappointing US data, and adding to the case of further slowing. The non-manufacturing PMI did nothing to improve the outlook. And as noted the US economic recovery will need to be structural (because there just isn't the capacity for a cyclical recovery at the moment), so there will be a recovery - but it's going to be hard.

Meanwhile, Australia is cruising along (one of the tier-2 economies), adding jobs left right and center, and possibly adding to the case for a further increase or two of the interest rate. But as the RBA noted, while the economic recovery in Australia is relatively entrenched, it is very much exposed to the course of the global economy.

On the monetary policy front, the developed economies held as expected, but the faster growing Asian economies hiked rates, as the risks shifted to containing inflation over stimulating growth. And on that note, the IMF slightly lifted its global growth forecasts for 2010 in its update to the world economic outlook, but noted significant risks to the recovery.

Sources
1. US Federal Reserve www.federalreserve.gov
2. US Institute for Supply Management www.ism.ws
3. Australian Bureau of Statistics www.abs.gov.au
4. Bank of England www.bankofengland.co.uk ECB www.ecb.int Reserve Bank of Australia www.rba.gov.au Bank Negara Malaysia www.bnm.gov.my Bank of Korea www.bok.or.kr
5. International Monetary Fund www.imf.org

Article Source: http://www.econgrapher.com/top5graphs10jul.html

RBA Waits and Watches the World

The RBA (Reserve Bank of Australia) today left interest rates unchanged at 4.50% for a second time as it continued to wait and see. Indeed it is probably the correct move given that it has tightened reasonably aggressively, and probably finds itself near neutral at present. The next move will be dependent on whether the Australian economy strengthens further (or indeed, if the global economic and financial system goes into relapse).

"The current setting of monetary policy is resulting in interest rates to borrowers around their average levels of the past decade. Pending further information about international and local conditions for demand and prices, the Board views this setting of monetary policy as appropriate"

The RBA echoed similar comments about the Australian economy in its monetary policy announcement, noting jobs growth, improving spending, credit conditions etc (but tempered a little), but focused mostly on the international picture. Indeed, what is perhaps most notable about the announcement is the length at which they discuss the global economic outlook and situation in the first paragraph:

"The global economy has continued to expand over recent months, consistent with a trend pace of growth. The expansion remains uneven, with the major advanced countries recording only modest growth overall, but growth in Asia and Latin America, to date, very strong. There are indications that growth in China is now starting to moderate to a more sustainable rate. In Europe, while output in some key countries has been improving recently, prospects for next year are more uncertain given the budgetary constraints governments face and the pressure on euro area banks. US growth has looked stronger in the first half of 2010 but the pace of labour market improvement is slow."

So in many ways the RBA has dealt with the Australian part of the recovery, but now it just has to sit on its hands and closely monitor the global part of the recovery. If there's anything we learned from the great financial crisis, it's that the world; the economic and financial systems, the social and political systems, are only growing more and more interconnected.

Sources
Econ Grapher Analytics www.econgrapher.com
Reserve Bank of Australia www.rba.gov.au

Article source: http://www.econgrapher.com/6jul-rba.html

Top 5 Graphs of the Week - 15 May 2010

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.

2. Russian Economic Growth
The Russian economy also showed an impressive bounce-back this week for the first quarter of 2010 with 2.9% growth year on year (vs -9.8% in Q1 2009, and -3.8% in Q4 2009). The impressive bounce-back shows how interlinked the Russian economy is with commodity prices, and affirms the view that Russia has good prospects, but with volatility to boot. You may recall recently the Russian central bank dropped interest rates (in contrast to the monetary policy actions of most other emerging markets) in order to secure and sustain the recovery; and it will be interesting how this plays through in the R of the BRIC - major emerging economies.


3. European Economic Growth
You probably caught the headlines where the EU beat consensus by 100% with 0.2% vs an expected 0.1% growth! But it is worth looking through into more of the details. The larger EU economies like Germany, Italy, Spain, France, are experiencing the similar global pattern of a sharp v shaped recovery in GDP growth. However with the exception of Germany the large EU economies are still below their average year on year growth rate of about 1.5%. Granted, some of the "rebound" is due to a low comparator period, but this "V" shaped recovery in the EU is probably the most likely spot for a "W" shaped recovery to eventually unfold given the weight of the problems and risks there.


4. US Trade Balance
The US recorded a slightly worse trade balance in March with a deficit of -$40.4 billion, vs -$39.7 billion in February. The slightly worse result is mostly driven by oil imports, which has a distorting impact on assessing whether or not the US is changing its consuming ways in terms of the export/import mix and global imbalances. Ultimately the US reliance on foreign oil continues to be a key vulnerability for the US and a source of structural trade imbalances. If the yuan were to appreciate then this gap may even widen if the appreciation were small enough not to greatly impact on spending decisions by US importers. But then on that front much of what the US gets from China doesn't carry the same necessity as oil. As always - this is an area of keen interest to me as the US economic recovery unfolds; keep watching this space!


5. Australian Employment
Australia added jobs again in April, recording a total of 33.7k new jobs (27.7k in March), with part-timers declining by -3.9k and all of the growth coming from full-timers 37.5k. The unemployment rate remained stable at 5.4% as the population proved able to supply for the new jobs. As the unemployment rate begins to drop even more, this will probably put the pressure back on the Reserve Bank of Australia to start raising interest rates again; having raised from 3% late last year to 4.5% in May - indicating a pause to be on the cards in its most recent statement. Still a strong economy, but recently brought out some new taxes designed to try remedy the two-speed mining vs non-mining economy (this could have the unintended effect of changing it to a one-speed (slow), economy).


Summary

So Malaysia is showing a pretty strong rebound from the crisis, even being spurred to ratchet up interest rates for fears of overheating (as has some of its emerging market ilk). Indeed the BRICs have also shown a pattern of a sharp recovery; with Russia - the one that took the biggest hit - showing a drastic turnaround, reflecting the volatility inherent in emerging markets.

Meanwhile developed markets are showing the same pattern but don't at this stage give any monetary policy setters any jitters whatsoever just yet - indeed the developed markets probably need a lot more water to go under the bridge before they can declare it all over.

And as for the US trade balance and Aussie employment, it just plays into the two-speed idea... The recovery is going to carry on at a two-speed pace with emerging markets leading the charge and developed economies falling behind, and global risks will be waiting at every corner!

Sources
1. Bank Negara Malaysia www.bnm.gov.my
2. Trading Economics www.tradingeconomics.com Bloomberg www.bloomberg.com
3. OECD Statistics database www.oecd.org
4. Trading Economics www.tradingeconomics.com
5. Australian Bureau of Statistics www.abs.gov.au

Article Source: http://www.econgrapher.com/top5graphs15may.html

Top 5 Graphs of the Week - 10 April 2010

This week we look at rising Chinese inflation expectations, signs of improvement in the US non-manufacturing sector, revisions to EU 4th quarter GDP growth, Australian jobs growth, and finish with a review of some of the monetary policy decisions announced this week. The overall theme is pretty much one of growth, inflation, and monetary policy; one that will become increasingly interesting this year.

1. China inflation expectations
The data in this chart isn't new, but it's probably unknown to most people. The March quarter price expectations index came out in mid-March at 65.6, down from 73.4 (compared to the low in December 2008 of 6.1). This is a startling graph from an inflation point of view, as in the past the future price expectation index has reliably tracked very closely to CPI inflation, and has been a strong leading indicator. So what can you take from this chart? Basically inflation in China is set to rise, and the fundamentals support the idea too; large stimulus spending, rapid loan growth, rapid money supply growth, and commodity price recovery. You could easily argue with this kind of chart that China hasn't done enough on the monetary policy tightening front yet.


2. US Non-manufacturing PMI
The US Non-manufacturing PMI came out on Tuesday, showing further improvement to 55.4 vs 53 in February, and beating consensus forecasts for a climb to 54. In the components you can also see some promising signs too, for example the new orders index jumped from 55 to 62.3, indicating stronger activity to come. Another bright spot was new export orders spiking up to 57.5 from 47 in February. Another interesting facet was the employment index continuing to rise.


3. EU GDP revision
The European Union statistics agency, Eurostat, released revised GDP figures for the Euro Area. There was broadly speaking, little change to the figures, but it is notable that for the EA16 quarterly growth dropped from 0.1% to zero (and -2.2% vs -2.1%), showing that the Euro Area economies are still struggling, and growing slower than expected. For now the EU is basically headed sideways with subdued growth; as previously mentioned the recovery there is fragile and uneven (e.g. Poland with 2.8% y/y growth vs Latvia with -17.1%).


4. Australian jobs growth
The surging Australian economy generated a further 19.6k jobs in March (-4.7k in February), with the split being 30.1k full time and -10.6k part time (indicating possible switching of part to full time). The most interesting aspect of the March Aussie jobs figures was that it now appears as though most of the job growth is driven by full-time job growth. Meanwhile the unemployment rate has virtually gone sideways at 5.3%. As noted by the RBA this week, Australia is seeing growth and inflation tracking near average trend.


5. Monetary policy overview
As an overview of some of the monetary policy decisions last week: The Reserve Bank of Australia increased its cash rate from 4% to 4.25%; The Bank of Japan held at 0.10%, The Bank of England held at 0.50%, The European Central Bank held at 1.00%, and The Bank of Korea held at 2.00%. Also on Monday the US Federal Reserve Governors met but did not change the discount rate as some had surmised, keeping it at 0.75%. For a more in depth look at the Australian, Japanese, and UK/EU decisions check out my reviews published during the week.


Summary
If there is a theme to this week it's that the recovery is underway, and in some places signs of growth are more obvious. At the same time, with the recovery in economic growth, there is also a recovery in inflationary pressure - again more obvious in some places than others.

One of the key takeaways from this article is the path of Chinese inflation expectations, you can see a strong leading indicator of prices spiking up, and when you think about the fundamentals supporting it, then it's clear where things are headed. China is due to release much of its main statistics for the March quarter next week.

Another point to note is the EU figures, showing that the recovery there is fragile and uneven but that it is also potentially going to be a bit stop-start in nature. Meanwhile the strong non-manufacturing PMI figures in the US give potential clues to a recovery that may well end up being stronger than some expected. While Australian job growth shows a still strong economy, but interesting dynamics.

On monetary policy, the theme of recovering growth and inflation points to one thing: exit strategies. Already Australia has been leading the charge with interest rate increases, and the EU announced further moves to eventually unwind some of its extraordinary monetary policy measures. Overall though one thing is sure, and that is that the growth-inflation-monetary policy picture will become increasingly interesting as the year unfolds.

Sources:
1. PBOC www.pbc.gov.cn & NBS www.stats.gov.cn
2. ISM www.ism.ws
3. Eurostat epp.eurostat.ec.europa.eu
4. ABS www.abs.gov.au
5. Various central bank websites

Article Source: http://www.econgrapher.com/top5graphs10apr.html

Australian Employment Numbers

The Australian job market took a slight breather in the month of February with job growth falling to 400 new jobs, against expectations for 15,000. The unemployment rate also rose slightly to 5.3% from a downward revised 5.2% in January.


However, as illustrated in the monthly change in jobs chart, one positive in the results was that full time jobs outpaced part time jobs. It also marks the sixth increase in jobs in a row with total new full-time jobs in those months of 103k.


Overall the report showed really just a temporary weakness in a strong trend of job growth - in a country where the economy is growing strong; and monetary policy tightening has continued once again.


Sources:
Australian Bureau of Statistics www.abs.gov.au Econ Grapher Analytics www.econgrapher.com

Article Source: http://www.econgrapher.com/ausemp11mar.html

Top 5 Graphs of the Week - 13 February 2010

This week we look at the EU GDP numbers showing a pretty fragile and mixed recovery, then US retail sales showing a back-loading of holiday spending. Then we look at some of the China data that came out over the week, focusing on inflation data, and international trade stats. Finally we look at Aussie employment stats which shows continuing strength down under.

The key takeaways or themes to pull out of this edition are probably first of all that things are continuing to recover, but at a very gradual pace - and at a very mixed pace. Some positive signs could almost be called false positives, and some arguably negative signs could in fact be pointing to stronger long term growth.

1. EU GDP - gradual improvement
The EU saw 0.1% growth q/q in Q4 2009, this was against expectations of 0.4% (the same as in Q3). Year on year the declines moved closer to -2% than the previous -4%. Of course it was a mixed picture again too. The leading economies of Germany and France even differed this time with Germany recording 0 growth q/q while France recorded its 3rd quarterly gain. Of course you're probably wondering about Greece; the numbers were -0.8% q/q and -2.6% y/y, which on both case was the 3rd quarter of worsening results. So the overall message from the EU is a recovery; but a slow one, a fragile one, and an uneven one.


2. US Retail Sales - back-loaded holiday spending?
The US just released retail sales figures for January, month on month retail sales were up 0.5%, matching consensus, and showing possible back-loading of holiday spending as people went to town to spend their gift vouchers and cash presents. Year on Year the growth rate slipped slightly to 4% (versus 5.7% in December). Overall retail sales figures show consumer spending recovering at a gradual pace - and this is good, in fact the last thing you want to see is a rapid increase in consumer spending in the US; what's more important is that the personal savings rate starts to pick up, this is a requirement of more sustainable long term growth...


3. China CPI - signs of inflation coming through
China released its CPI figures this week with the January figure up 1.5% year on year, this was below consensus of 2% and less than the previous 1.9%. This is the 3rd positive figure in a row, and when juxtaposed with a few other data points leads to a view of increasing inflation. Indeed it matches up with the moves made on the tightening front so far with the increases in the required reserve ratio, government bond issues, and words of caution by the authorities to the banks. If this trend persists we could even see a lift in the official interest rate sometime in the first half of 2010.


4. China International Trade - recovery strengthening
China also released its trade stats for January, showing a continued recovery, albeit with slightly lower figures due to the whole January/February Chinese new year period. Exports came in at 109.5 and imports 95.3, which compare to January figures in 2009 of 90.5 and 51.3 respectively. Distortions aside, the story told in the chart below is one of visible improvement. Though some of it can be explained by the inventory cycle and low currency driving exports, and stimulus spending and commodity price recovery driving imports. This plays into the debate about the yuan; will the authorities let the yuan appreciate a little this year? 3%? 6%? or will they increase wages instead as a means of encouraging domestic demand over exports?


5. Australian Employment - the Aussies have still got it
Australia beat estimates again, and showed further acceleration of jobs growth with 52.7k new jobs vs consensus of 15k, and December figures of 37.5k. The unemployment rate also shrank to 5.3%, from 5.5% in December and off of the peak of 5.8%. Thus things are still looking pretty good in Australia. It's also worth noting that the RBA paused on its tightening cycle in February, opting instead to leave rates at still stimulatory levels, due to the banks passing on all the increase and a little bit more, and views that inflation had been kept relatively in check for the time being. Figures like this though will only add pressure for the RBA to return to its tightening path from still "below average levels" sooner or later.


Summary
To sum up, the EU economies are gradually recovering, but at a very subdued, fragile, and mixed pace across the member states. There's still many risks to the recovery over there, including the most talked about, Greece fiscal situation. Over in the US, meanwhile, retail sales are pointing to a continued yet below trend recovery in consumer spending, however the US consumer is still relatively weak.

In China, the CPI figures are showing a pick up in the pace of inflation, confirmed with other data points, and gradual moves toward tightening. China has also seen a steady improvement in international trade volumes since the lows of 2009, and while the drivers may be temporary it has the potential to push forward momentum, and adding to the case for a potential move on the yuan. Meanwhile in Australia - a country increasingly coupled to the Chinese economy, rapid and continued job growth points to a strengthening recovery and likely continuation of tightening in the medium term.

So there you have it, a tale of a gradual recovery, a fragile recovery, and an uneven recovery. It's also one of opportunity, that is, opportunity for change. It's possible that the recovery will herald some rebalancing and structural changes. For example it may lead to the Chinese looking more internally for growth, likewise it could lead to higher savings rates in the US; and less reliance on external financing.

Sources:
1. Eurostat http://epp.eurostat.ec.europa.eu
2. US Census Bureau http://www.census.gov/retail/
3. National Bureau of Statistics http://www.stats.gov.cn/english
4. Trading Economics http://www.tradingeconomics.com
5. Australian Bureau of Statistics http://abs.gov.au

Article Source: http://econgrapher.site1.net.nz/top5graphs13feb.html

An Answer To The Unemployment Challenge?

I was pondering the other day about the economy, unemployment, recession-recovery, and it got me thinking about a topic I think is very important. This post takes a very different track from the usual analysis – in fact I will issue you a challenge.

In this time of high unemployment I think it is important to focus on the foundations of the economy, i.e. businesses. It is in these times that it is more important than ever for people to embrace the entrepreneurial spirit.

Especially for youth unemployment, where the rate is particularly high, those just out of college/university are particularly well placed to get into business. They will have built up knowledge and picked up skills, they would have made a lot of contacts, and probably have an extra affinity for new trends and mediums. It’s basically this; if you can’t find a job out of college, then make one.

The case is equally compelling for those that have been in the workforce for some time. They will have built up skills and talents, specialized knowledge, industry contacts, and have an awareness of businesses and opportunities.

In both cases you start from your strengths, and think about what sorts of opportunities can be created or exploited with your unique set of skills, knowledge, contacts, and experience. Then you look at your resources, your own labour, family/friends who can help, your own capital, and then that of others. You identify your weaknesses – maybe you don’t know much about how to run a business; but you probably know someone who does… or know someone who knows someone…

I don’t want to make it sound easier than it is, starting a business from scratch is one of the hardest, yet most rewarding things you can do. I have done it twice, and accomplished a lot, learnt a lot, and gained a lot in terms of character and fulfillment.

You might not succeed on the first try, but you will learn a lot, and you will take your destiny into your own hands. Of course you could also end up making a lot of money, or at least setting yourself up with a steady income stream and building a valuable asset.

Now here’s the challenge for you the reader (and no it’s not to get out there and start a business – but maybe that is a good idea for you?). Most of you reading this will probably have some knowledge and experience about running a business, or have capital or connections…

I call upon you to do what you can to help out an entrepreneur:
-Give someone who’s thinking about starting a business some encouragement
-Suggest starting a business to someone who’s out of a job and doesn’t know what to do
-Offer someone starting in business some advice and ideas
-Provide capital backing to those with sound business ideas
-Use your connections to introduce them to the right people
-Give them some business

You can do a lot or a little, it may have no impact but then it could make a huge difference. It could even payoff financially. You may not agree with all that I’ve written but your help could help someone help themselves. So why not give it a shot?

Article Source: http://econgrapher.site1.net.nz/entrepreneur.html

Australian Employment - the nitty gritty details

In response to some discussion in my recent "Top 5 Graphs of the Week" article, I have decided to do a little piece that drills deeper into the details on Australian employment stats.

First up, the graph that started it:
This chart shows a reasonably clear topping out of the unemployment rate. This is somewhat intuitively sensible given that the Australian economy has been performing reasonably well on a GDP basis, helped in part by fundamental strength, lack of banking sector problems (compared to e.g. US), stimulus spending, loose monetary policy, doing business with China (China stimulus spending).

But what we were interested in first of all is the breakdown between part-timers and full-timers.
This chart shows the change in seasonally adjusted Australian jobs broken into full-time and part-time. You can see that in the past four months of positive job growth, it's been mostly driven by FT (78.3k) vs PT (57.4k).

On a year over year percentage change basis you can see that there has been a clear trend of the shifting of full-timers to part-timers (conclusion drawn on the basis that while full-time growth is negative, part-time growth is positive). We can see that they are starting to converge though. The theory behind this is that in hard times you can either let people go or cut their hours down (convert them to part-timers). Thus if things were improving you'd expect more full-timers. But then you could argue that on the other side of the recession employers might start loading part-timers up with more hours...
This chart is based on data reported by the ABS - it is untouched by me i.e. simply graphed (as opposed to the chart that follows). Anyway one conclusion to be drawn is that on average Australians are working less! But seriously, this data piece is lacking because it misses out a lot of the detail, but it is an effective if rough tool for this context.
This chart is based on data I chopped up from the ABS - I took aggregate hours worked per month and divided it by total persons in employment each month and then just assumed the average month has 4 weeks. It does show roughly the same trend as the previous chart, but is a bit more choppy as it is monthly vs the other one being quarterly.

Point to take from the average working hours per week is that both charts show a tentative bottoming out if not uptick. Thus on that basis it's probably safe to assume that the jobs recovery there is somewhat genuine e.g. the pattern of working more hours, hiring more temps/part-timers, and then getting the full-timers in, seems to be playing through.

Now all that's left to do is look at the rest of the Australian economy.... (next time)

-EG

Sources:
All data was from the Australian Bureau of Statistics http://abs.gov.au/
Specifically,
Here and Here

Article Source: http://econgrapher.site1.net.nz/ausjobs.html

Top 5 Graphs of the Week - 16 December

This week we look at US inflation, European inflation, US retail sales, Chinese international trade, and the Australian employment situation. The quick summary is that US inflation is picking up for a few key reasons, European inflation is slowly turning up but without any significant near term pressure, the recovery in US retail sales adds to an interesting picture for the US consumer. Meanwhile in China imports and exports are showing a clear recovery with some interesting implications, and the strong Australian economy seems the place to be in the developed world for jobs.

1. US Inflation: ticking up
The US showed further signs of a pick up in inflation with the release of the December figures. Headline inflation (in part boosted by a lower base period i.e. because it's an annual % change) was recorded at 2.7% while core firmed up it's turnaround with an upward move of 1.8% vs 1.7% previously. The drivers of this turnaround in inflation are probably a number things, first of all back when the crisis was at its peak a lot of retailers would have had to cut prices to boost sales - so some part of it is normalisation of prices. Another aspect is the recovery of commodity prices, such as energy (impacting on headline inflation). Then there's the loose monetary and fiscal conditions; some may suggest that these aren't working through yet as easy money conditions aren't expressing as new loans, whether or not this is true will play-out on the chart below during this year.


2. European Inflation, slowly reviving
The EU released its December inflation figures, revealing a further pick-up in headline rates (thanks again to the commodities boom and bust), while core inflation showed a tentative bottoming out with 1.1% vs 1.0% in Nov. The European Central Bank also released its statement on monetary policy this week where it ruled out any near term inflationary pressure, noting that rates remain appropriate for keeping inflation below the 2% target in the near to medium term. Given that the economic outlook for Europe remains relatively subdued with risks to the upside and downside reasonably balanced, a view of inflationary pressure not being excessive is probably about right.


3. US Retail Sales: a gradual recovery
The United States of America released retail sales figures for December 2009, the month on month change was a small negative while the yearly change was about 5%. This is again symptomatic of the severe drop-off around this time last year. But to be sure the trend is that retail sales are recovering, if you look at the actual values you can see a clear upward trend from the bottom in early 2009. The recovery is there but it is gradual. Two other data points to note for this one are: a. US consumer confidence is picking up and showing its usual relationship of leading retail sales; b. US consumer credit is falling on an annual % basis while retail sales are rising. What does this say? US consumers are slightly more confident, spending slightly more, while also shedding a bit of debt...


4. Chinese International Trade: up and up...
Last weekend China released its trade figures which showed an increase in the momentum of their trade recovery. The key to note is that while exports were up strongly, so too were imports. This is important to note: on the one hand the increase in exports shows a pick up of global demand (even if it is stimulus/inventory cycle driven), while the growth in imports shows China starting to drive demand and may herald an era where China becomes a real driver of global growth. The only other thing to add is that it signals a return to normal, which means that global imbalances are unlikely to abate significantly in the medium term.


5. Australian Jobs Boom
Australia is the place to be for jobs. Australia has shown a clear peak in its unemployment rate, coming in at 5.5% in December vs 5.6% in November. If that's not enough, it recorded the 4th consecutive month of positive job growth. Australia is doing pretty well, it only experienced one quarter of negative growth during the 'recession', benefiting from a fundamentally strong economy, further development of mineral and energy resources, dealings with China, and a strong and relatively stable banking sector. December's data will probably add to the case for the Reserve Bank of Australia to increase the cash rate another 25 basis points, having already hiked 75 basis points (up from an 'emergency settings' rate of 3.00%).


To briefly summarise and tie some of the themes from this week's edition together. The picture for inflation is that conditions are there that might usually cause inflation to overheat, but the economy and financial system are still recovering. That's not to say that inflationary pressures aren't there, but some countries will start to see accelerating inflation soon. Meanwhile in the traditional driver of global economic growth, the US, the consumer is starting to recover, but is currently behaving slightly differently. While confidence is up and spending has started to recover, the priority is rebuilding balance sheets, so spending and credit growth are probably both going to be somewhat subdued in the near term.

On that note the new driver of global economic activity, China, is showing a reasonably strong recovery in both imports and exports. This presents positive signs for the global economy on both fronts; however also points to a continuation of global imbalances. Meanwhile down in Australia things are ticking along strongly, thanks in part to China. Australia continues to prove itself the strongest economy in the developed world with a healthy job market, and while others are considering how to make monetary policy more stimulatory, Australia is on the tightening path. So overall you could say the main theme is that emerging and developing economies, to the benefit of western powers, are leading the way back to prosperity.

Sources:
1. US Bureau of Labour Statistics http://www.bls.gov/news.release/cpi.nr0.htm
2. EuroStat & ECB http://ec.europa.eu/eurostat & http://www.ecb.int/home/html/index.en.html
3. US Census Bureau http://www.census.gov/retail/
4. Trading Economics http://www.tradingeconomics.com/Economics/Exports.aspx?Symbol=CNY
5. Australian Bureau of Statistics http://abs.gov.au/

Article Source: http://econgrapher.site1.net.nz/top5graphs16jan.html