Top 5 Economics Graphs of the Week - 1 Jan 2011

This week we look at China PMI, US house prices, US consumer confidence, French GDP results, and Japan's unemployment and inflation situation.

1. China PMI
China recorded slightly lower PMI figures for December with the HSBC index falling to 54.4 from 55.3 and the CFLP index falling to 53.9 from 55.2. Clearly there are a few issues bubbling away i.e. a spike in inflation... and more importantly - how the authorities deal with it. That alone will be one of the biggest wild-cards for 2011.

2. US Housing
The US housing market saw further weakness with the October reading of the Case-Shiller index down both on a monthly and annual basis. There's not much else to say on this one, house prices ran ahead of themselves and the market needs to correct - further government measures may put a temporary floor under the market, but the question is how long would that be necessary before the fundamentals finally came around? Another couple of years of flat house prices wouldn't be a surprise.

3. US Confidence
US Consumer Confidence dipped slightly in December, dropping to 52.5 from 54.1, with the weakness being expressed in both the current conditions and futures expectations indexes. Similar story to the housing market really - when will the key fundamentals turnaround? High unemployment and stagnant house prices will continue to weigh on this one in the medium term.

4. France GDP
France saw its economy expand 0.3% q/q vs 0.6% in Q2, with some minor downward revisions. Net exports made a negative contribution, household consumption and government consumption both made a positive contribution. Most are forecasting about 0.4% GDP growth in Q4. So it's chugging along OK for the French economy, not as fast as the Germans, but they're getting there.

5. Japan unemployment and inflation
Japan saw another month of positive inflation in November - barely, with the CPI increasing 0.1% y/y vs 0.2% in October. Meanwhile unemployment stuck around 5% with a 5.1% reading for November. Still many a challenge for Japan - but will the policy makers get it right? (for that matter what else is there left for them to do?)

Summary

So we saw China show a lower PMI figure on the back of uncertainty about the inflation battle. Over in the US there were no positive signs for the housing market in terms of prices in the near term, and consumer confidence is still low - also reflecting where fundamentals are currently at, but let's see what 2011 brings. Then we looked at France's GDP growth, and saw that they're chugging along alright out of the recession. Meanwhile in Japan there's just barely some positive inflation, and unemployment is little changed. So there you go, the first issue of 2011, may the year ahead bring you much happiness, health and success - it's sure to be an interesting year!

Sources
1. CFLP www.chinawuliu.com.cn & Markit/HSBC www.markiteconomics.com & Yahoo Finance finance.yahoo.com
2. Standard & Poor's www.standardandpoors.com
3. US Conference Board www.conference-board.org & US Bureau of Labor Statistics www.bls.gov
4. OECD Statistics Database stats.oecd.org/index.aspx
5. Trading Economics www.tradingeconomics.com

Article Source: http://www.econgrapher.com/top5graphs1jan11.html

Top 5 Economics Graphs of the Week - 27 November 2010

This week we review the Q3 GDP revisions from the US and UK, then we look at the October CPI data from Canada and Japan, before finishing with a summary of a selection of emerging market monetary policy decisions over the past week.

1. US Q3 GDP Revision
US Q3 GDP was revised up to a 2.5% seasonally adjusted annualised rate, from the previous estimate of 2.0%, this was ahead of expectations for 2.4%. Within the results final demand was revised up, and net exports made a smaller negative contribution. Year on year GDP is up 3.2% vs 3.0% in the September quarter. Overall the result is relatively strong, showing a continuation of the bounce back, and it could well gain momentum, but the more likely outcome is ups and downs over the next year.

2. UK Q3 GDP Revision
UK GDP expanded 0.8% from the June quarter, in line with previous data, and placing the UK economy ahead by 2.8% compared to 2009. In the detail the stronger sectors were construction, manufacturing, exports, and transport, storage and communication services. While the weaker sectors were mining and utilities. The UK economies continues to bumble along out of recession, but it is quite promising that exports are expanding, the test will be how the UK government can manage its budget and how monetary policy plays out from here.

3. Japan Consumer Price Index
Japan saw its first positive year on year inflation rate in October, with CPI increasing 0.2% year on year, vs -0.6% in September. But it can't really be said that deflation is done, as much of the increase in the CPI was related to an increase in tobacco taxes. But it will be a welcome result to the Bank of Japan, which has been trying and trying to stimulate the economy and start inflation going again, instead of the persistent and pernicious deflation.

4. Canada Consumer Price Index
Canada saw a bit of a jump in inflation in October, with the CPI increasing 2.4% year on year vs 1.9% in September. This has caused the market to anticipate further rate rises from the Bank of Canada, which last changed the key policy rate to 1.00% in September, as part of a gradual normalization of monetary policy. Canada in many ways has been relatively lucky in coming through the crisis, and is in some ways similar to Australia, with its rich natural resources.

5. Monetary Policy Review
The past week saw several emerging market economies review their monetary policy interest rate settings, including; Russia, Mexico, Georgia, Kenya, Poland, Nigeria, Angola, and Israel. The main standout was Angola, which slashed its benchmark rate -394 basis points to 18.00% as a new central bank governor took the helm. Nigeria and Israel also made adjustments to the spread between borrowing and lending around the main policy rate, as steps towards policy normalisation following the global recession. But basically the main theme was a lot of holding rates, with much of the justification being that rates were appropriate at current settings either due to inflation being contained or relatively high, and overall balancing the risks of growth and inflation.

Summary

So we saw GDP expanding in the US, and at a faster pace than expected, and with promising signs in the details. Meanwhile in the UK the results were also relatively positive. But for both nations the challenge for their economies will be to carry on the momentum of the initial bounce back - but in a sustainable manner.

On the inflation and monetary policy front, there were positive, but not fabulous results in Japan, as the first positive headline inflation figure came through in almost 2 years. While Canada saw an acceleration of inflation, and speculation of further rate hikes. On monetary policy, there was a few meetings over the week but very little action, as settings were seen appropriate in achieving the balance between growth risks and inflation risks.

Sources
1. US Bureau of Economic Analysis www.bea.gov
2. National Statistics Office www.statistics.gov.uk
3. Trading Economics www.tradingeconomics.com
4. Trading Economics www.tradingeconomics.com
5. Central Bank News www.centralbanknews.info

Article Source: http://www.econgrapher.com/top5graphs27nov.html

Top 5 Economics Graphs of the Week - 2 October 2010

This week we review the apparent rebound in the Chinese manufacturing sector, followed by a look at the quarterly Tankan survey results from Japan. Then we look at the US PMI results which show grim signs; as do the housing and confidence figures. Finally we wrap up with a look at some other statistics from Japan in this top 3 economies of the world version of the top 5 graphs of the week.

1. China PMI: Continued Rebound
China saw a continued rebound in its manufacturing sector, as indicated by the PMI results which had the official index rising to 53.8 from 51.7 in August, and the HSBC index also rising from 51.9 to 52.9. The rebound in the main index is a promising sign, indeed the new orders index rose to 56.3 from 53.1 while the export-order index rose only to 52.8 from 52.2. Also of note in the data was the rise in the input price index component, which rose to 65.3 from 60.5. Seasonal factors aside (it is supposed to be seasonally adjusted), i.e. filling orders for Christmas, the results show an end to the drop in the index, and possibly a new revival as the Chinese economy continues to expand and personal incomes rise.

2. Japan Tankan: Gradual Recovery
Another positive, but somewhat less so, was the Tankan September quarter survey results from Japan. The overall index improved to -10 from -15 in the 2nd quarter this year. Into the detail, the standout was medium-sized manufacturers, who saw a 10 point rise from -6 to positive 4, similarly, large manufacturers solidified their recovery, adding 7 points to positive 8. So in that negatives were getting less negative, and prospects were improving for the 3rd quarter, it was a good result. However the December 2010 forecast figures were much less optimistic, with most firms expecting a reasonably deterioration in conditions. So the story is basically, small improvement, outlook not great.

3. US PMI: Grim Signs
The US also released its PMI results this week, showing what appears to be a continued turn in prospects. If you recall, there was a time when people were asking "what will happen when the inventory cycle and stimulus runs out?" and here's your answer, not a whole lot really for the US. The PMI index fell from 56.3 to 54.4 with the only real strength coming from an increase in the prices sub-index from 61.5 to 70.5, a significant increase - stagflation anyone? All the other indexes that you usually want to see rise didn't, so not a great result from the US.

4. US Housing and Confidence
Staying with the US, and thinking about gloomy economic prospects, there's the US housing market and consumer confidence data details that came out this week. The US housing market continued to flat-line (no surprises there), and will likely do so for an extended period. Meanwhile the US consumer also basically flat-lined, if not deteriorated a little. The Conference Board Consumer Confidence index came out much worse than expected at 48.5 vs 53.5 in August, the present situation index decreased to 23.1 from 24.9 and the expectations index fell to 65.4 from 72 in August. So overall, while it's still not panic time, things are just not good, and they will continue to muddle along because of the damage caused by the excesses everyone got into that caused the financial crisis.

5. Japan Inflation and Unemployment
Back to Japan, there was some slight improvements in the inflation and employment situation with the unemployment rate dipping to 5.1% from 5.2%, and the deflation rate improving slightly to -1.0% from -1.1% in July. So onward with the gradual export driven recovery in Japan - "Yentervention" or not. So it seems that some progress might be getting through from the Bank of Japan in its desperate struggle to stem deflation and stimulate the economy, but there are still serious challenges for the Japanese economy, at least it has China as its neighbor and trade partner, otherwise, muddle along too.

Summary

This week we looked at the 3 largest economies as they release indicators on the prospects of their manufacturing and business sectors. China showed pretty good results all round, Japan showed slight improvement, and the US did not impress with its PMI results. The story of continued economic growth (catch up) and expansion in China remains intact, and the story of a long hard slog in the US and Japan also remains intact.

Japan and the US are the real spots to watch as the global recovery unfolds, though emerging markets are coming up fast and strong, it is these two pillars of stability that will drive or fail to drive much of the growth in the near term. Unfortunately things are still subdued in the US as it goes through the muddle ages of the recovery, and even Japan is showing potential warning signs of a double-dip.

Go emerging markets, hang in there developed markets...

Sources
1. CFLP www.chinawuliu.com.cn & Markit/HSBC www.markiteconomics.com & Yahoo Finance finance.yahoo.com
2. Bank of Japan www.boj.or.jp
3. Institute for Supply Management www.ism.ws
4. Standard & Poors www.standardandpoors.com & Conference Board www.conference-board.org
5. Trading Economics www.tradingeconomics.com

Article Source: http://www.econgrapher.com/top5graphs2oct.html

Top 5 Economics Graphs of the Week - 31 July 2010

This week we look at the GDP numbers for Q2 from the US and South Korea. Then we look at the US consumer confidence and Case Shiller housing market data, and finish up with a look at inflation and unemployment in Japan, and New Zealand monetary policy.

1. US GDP
The US economy grew 2.4% SAAR in the second quarter (0.6% in normal terms), slightly below consensus 2.5%, and slower than the revised 3.7% in Q1. On an annual basis GDP is up 3.2% vs 2.4% in Q1. The main drivers of growth were residential investment, investment in equipment & software, and inventories; the main detractor was (surprise, surprise) a shrinking of net exports. So overall not a bad result, but probably as good as it gets for now, especially given where much of the US data points are at, there are several indicators (as well as underlying fundamentals e.g. weak housing market) that will make the second half a lot harder. So rumors about the potential for more easing both on the fiscal and monetary policy fronts may end up validated in the second half of this year... watch this space.

2. South Korea GDP
The South Korean economy grew 1.5% in the second quarter, slower than the 2.1% recorded in Q1, but above consensus of 1.1%. On an annual basis GDP was up 7.2%, off slightly from 8.1% in Q1, but also above consensus 6.6%. The expansion was driven by strong export-led manufacturing activity and facility investment, but the construction sector was a detractor (driven by a sluggish domestic real estate market). The continued expansion will likely spur the Bank of Korea to raise interest rates again (having increased 25bps to 2.25% early this month). But like all trade driven economies, the Republic of Korea will be closely exposed to the fortunes of the global economy in the second half.

3. US Housing market and Consumer Confidence
US consumer confidence fell again in July to 50.4 vs consensus 51.0 and previous 52.9. The drop was led by a fall in the expectations component. On the housing front, the May reading of the S&P Case-Shiller 20-city home price index showed a 3.9% rise year on year (vs 4.1% in April), and a 0.5% monthly gain (vs 0.6% in April). The residual impact of the tax credits continued to underpin house prices. But going into the second half of 2010, the theme of 'this is as good as it gets' will likely ring true in the housing market space also. The fundamentals point to sideways movement at best, and a fall at worst. Unemployment is still high, debt levels compared to house prices are still too high, consumers are still hurting, and interest rates are probably - if anything - going to rise, so this bit remains a key vulnerability for the US economic recovery.

4. Japan unemployment and deflation
Japan saw a slight easing of deflation on a headline CPI basis, with the annual rate at -0.7% in June vs -0.9% in May, on a core basis the rate also reduced slightly to -1.0% vs -1.2% in May and consensus for -1.1%. So on the deflation front there has been cause for at least a bit of hope with recent trends. On the unemployment side though, the jobless rate rose to 5.3% from 5.2% in May, but there were some positives in the data with payrolls rising 40k in June, vs a fall of -240k in May. The job offer to job seeker ration rose slightly to 0.52 in June from 0.50 in May. So signs are tentatively that inflation and employment are gradually starting to catch up with the trade-driven rebound of economic activity in Japan, but the serious deflation and government debt problems still remain, as do the global vulnerabilities.

5. New Zealand monetary policy
The RBNZ (Reserve Bank of New Zealand) increased the official cash rate at its July meeting 25bps to 3.00%, and signaled that further rate rises will likely be on the go-slow. The bank noted that policy normalization may be more moderate going forward, but of course with the caveat of monitoring the economic environment and financial market developments. The New Zealand economy is in recovery mode and is growing, but is still dealing with the damage from the global financial crisis and the deep recession; as well as a spate of finance company collapses, beginning prior to the crisis and still continuing (the banking system remains firmly intact though, as none of the finance companies were particularly systemically important - but a lot of investors got burned). So, in spite of a projected short term (mainly artificial) spike in inflation, the outlook is for a few more interest rate rises this year, as appropriate.

Summary

So we've got the US economy showing another quarter of growth, but a little slower, and the potential to slow even further in the second half. There's also the key vulnerability of the US housing market, and the lingering damage of the crisis on the US consumer.

In Korea, the economy is still going strong, albeit a little slower, and this is likely to result in a couple more interest rate rises. But the Korean economic recovery has been driven exports, thus the recovery remains exposed to trends in international trade. Likewise Japan is starting to see improvements in its employment and deflation situation as the economy recovers with the help of rising trade.

In New Zealand the same theme of global vulnerabilities shows through, but for the most part on the domestic front the recovery is reasonably in tact and both GDP, inflation and monetary policy look fairly predictable in the second half of this year - holding all else constant.

Sources
1. US Bureau of Economic Analysis www.bea.gov
2. OECD Statistics stats.oecd.org/index.aspx
3. Standard & Poors www.standardandpoors.com & Conference Board www.conference-board.org
4. Trading Economics www.tradingeconomics.com
5. Reserve Bank of New Zealand www.rbnz.govt.nz

Article Source: http://www.econgrapher.com/top5graphs31jul.html

Top 5 Graphs of the Week - 29 May 2010

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).

2. US House Prices and Confidence
US Consumer Confidence picked up strongly in May to 63.3 from 57.9 in April (beating consensus 59.0). On the components, present conditions picked up from 28.2 to 30.2, while future expectations jumped to 85.3 from 77.4 which is positive from an outlook perspective. On the housing market, the S&P Case Shiller index (20-City Composite) was basically flat in March. Consumer Confidence has increasingly become a proxy for unemployment and house prices. Particularly on the jobs side, Consumer confidence is now basically a second order metric of the unemployment rate, and it will probably only meaningfully recover once the jobs (and housing) market picks up.

3. Japan Inflation and Unemployment
Japan saw worse figures on both fronts in April, with the jobless rate ticking up slightly to 5.1% from 5.0% in March (having gone as low as 4.9% after peaking initially at 5.6%). On the inflation (deflation) side Japan's consumer price index fell by -1.5% year on year; accelerating declines since the -1.2% decline in March (driven in part by high school fees), and showing no sign of respite in the deflation trap. Japan's economy has been recovering pretty sharply on a GDP basis since the height of the crisis, but it still faces significant problems, such as those highlighted in the chart below (as well as fiscal issues). Indeed the main strength in the Japanese economy is the export sector (see below).

4. Japan International Trade
Japan recorded stronger trade numbers in April, with exports growing 40.4% year on year to 5.89 trillion yen (beating consensus 38.9%). Imports also grew, rising 24.2% year on year to 5.15 trillion yen. This left the trade surplus at 742 billion yen (consensus 709), down from 949 billion in March. As noted above (and last week), this is the bright spot in the Japanese economy. Boosted by a strong economy (in part helped by strong stimulus spending) in China, and the global pick up in trade, boosted in part by the inventory cycle (of which Japan benefits from due to its large manufacturing base, particularly in electronics goods). So basically this is a bright spot, but also a vulnerability for Japan - any global double dip in international trade will stymie the Japanese economy.

5. New Zealand International Trade
New Zealand recorded a higher surplus in April (NZ$656m vs NZ$590m in March, and consensus NZ$445m), due to decline in imports (e.g. crude oil and machinery), while commodity prices and seasonal factors boosted soft commodity exports (dairy, agriculture, logs). Exports fell 2.2% from March to NZ$3.97 billion, lead by the dairy sector. Exports to China increased 44% to NZ$460 million, with China now New Zealand's second biggest customer (after Australia), as the free trade agreement signed in 2008 boosted trade ties between the two countries. The improvement is likely to be temporary however, because as the New Zealand economy recovers, demand for imports will grow, and interest rates will go up which will strengthen the NZD (making exports less competitive).

Summary
So this week we saw the US economy slowly climbing out of recession, and US house prices stagnating; while consumer confidence saw some respite. In Japan, the deflation situation worsened slightly, as did unemployment, but international trade (the main stay of Japan's economy) is still going strong. The global trade recovery picture was also somewhat echoed in New Zealand's trade results, with China also playing a key part, but owing much of the improvement to cyclical factors.

Together the data supports a view of a fragile recovery from a deep recession. It also affirms the view of recovering global trade, driven primarily by cyclical factors such as inventory cycles, commodity cycles, and some residual impact from stimulus spending. International trade still remains a vulnerable point in the global recovery, as a worsening of the Euro crisis or geopolitical events have the potential to scuttle the recovery in trade - which in turn would scuttle the still relatively nascent and fragile economic recovery. So in one line, things are still chugging along in this post-great-recession environment, but risks are rising.

Sources
1. US Bureau of Economic Analysis www.bea.gov
2. Conference Board www.conference-board.org Standard & Poors www.standardandpoors.com
3. Japan External Trade Organization www.jetro.go.jp
4. Trading Economics www.tradingeconomics.com
5. Statistics New Zealand www.stats.govt.nz

Article Source: http://www.econgrapher.com/top5graphs29may.html