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

Economic Calendar - Week Starting 25 October 2010

Here's the Economic Calendar for the week commencing the 25th of October 2010. This week the main event is the US Q3 GDP report on Friday, the UK will also release its Q3 GDP data this week. In monetary policy New Zealand and Japan are both due to announce interest rate decisions this week. Japan also has a swath of key monthly data out such as employment, inflation, industrial production, and trade data. The US will also see its much Case-Shiller house price report, and consumer confidence numbers released this week.

(More commentary follows the table)

Day	Time (GMT)	Code	Event/Release	Forecast	Previous
SUN	23:50	JPY	Merchandise Trade Exports (YoY) (SEP)	9.6	15.5
SUN	23:50	JPY	Merchandise Trade Imports (YoY) (SEP)	7.4	17.9
SUN	23:50	JPY	Merchandise Trade Balance Total (SEP)	¥710.0B	¥86.0B
MON	09:00	EUR	EU Industrial New Orders (MoM) (AUG)	2.4%	-1.8%
MON	14:00	USD	Existing Home Sales (SEP)	4.30M	4.13M
MON	14:00	USD	Existing Home Sales (MoM) (SEP)	4.1%	7.6%
TUE	08:30	GBP	Gross Domestic Product (QoQ) (3Q A)	0.4%	1.2%
TUE	08:30	GBP	Gross Domestic Product (YoY) (3Q) A	2.4%	1.7%
TUE	13:00	USD	S&P/Case-Shiller Home Price Index (AUG)		148.91
TUE	13:00	USD	S&P/Case Shiller 20 City (MoM) SA (AUG)	-0.20%	-0.13%
TUE	13:00	USD	S&P/Case-Shiller Composite-20 (YoY) (AUG)	2.20%	3.18%
TUE	14:00	USD	Consumer Confidence (OCT)	49.5	48.5
TUE	21:00	USD	ABC Consumer Confidence (OCT 24)
TUE		EUR	German CPI (YoY) (OCT P)	1.3%	1.3%
TUE	00:30	AUD	Consumer Prices Index (YoY) (3Q)	2.9%	3.1%
WED	12:30	USD	Durable Goods Orders (SEP)	2.0%	-1.5%
WED	14:00	USD	New Home Sales (SEP)	300K	288K
WED	14:00	USD	New Home Sales (MoM) (SEP)	4.2%	0.0%
WED	20:00	NZD	RBNZ Rate Decision (OCT)	3.00%	3.00%
WED		JPY	Bank of Japan Rate Decision (OCT 28)	0.10%	0.10%
THU	04:00	CNY	Leading Index (SEP)		101.91
THU	07:55	EUR	German Unemployment Change (OCT)	-30K	-40K
THU	12:30	USD	Initial Jobless Claims (OCT 23)	455K	452K
THU	12:30	USD	Continuing Claims (OCT 16)	4430K	4441K
THU	21:45	NZD	Exports (New Zealand dollars) (SEP)		3.15B
THU	21:45	NZD	Imports (New Zealand dollars) (SEP)		3.59B
THU	23:15	JPY	Nomura/JMMA Manufacturing PPMI (OCT)		49.5
THU	23:30	JPY	National Consumer Price Index (YoY) (SEP)	-0.6%
THU	23:30	JPY	Jobless Rate (SEP)	5.1%	5.1%
THU	23:30	JPY	National CPI Ex Food, Energy (YoY) (SEP)	-1.5%
THU	23:50	JPY	Industrial Production (MoM) (SEP P)	-0.6%	-0.5%
THU	23:50	JPY	Industrial Production (YoY) (SEP P)	12.3%
THU		CNY	MNI Business Condition Survey (OCT)		69.54
FRI	09:00	EUR	Euro-Zone Unemployment Rate (SEP)	10.1%	10.1%
FRI	12:30	CAD	Gross Domestic Product (MoM) (AUG)	0.3%	-0.1%
FRI	12:30	USD	Gross Domestic Product (Annualized) (3Q A)	2.2%	1.7%
FRI	13:55	USD	U. of Michigan Confidence (OCT F)	68.0	67.9

As noted the key report this week is the US Q3 GDP figures, which will provide a timely insight into where the US economy is at - of course as always its not so much the quantum that matters as much as the breakdown. In other words where is the growth coming from? and what are the flow on effects? In any case the forecasts are for around 2-3%, and will likely slow in the 4th quarter. The UK is also on the GDP radar this week, with expectations for a slower 0.4% q/q rate (compared to 1.2% in Q2), and is likely to only slow further as the UK comes to grips with some of the key challenges it's currently facing.

On the monetary policy front there's the RBNZ in New Zealand, which is likely to hold at 3.00%, as the governor recently signaled rates would likely be on hold until next year (having tightened from 2.50% this year). The bank of Japan has already reached the limit in terms of interest rates, but could come out with further quantitative easing plans in efforts to stimulate the economy and get inflation going.

Speaking of Japan, there's the usual consumer price index data due this week (expected to show continued deep deflation), and employment data (little change expected), and industrial production (a slight decrease), and trade data (also expecting a slower rate of expansion). So combined with potential policy action from the Bank of Japan, the data will give a good insight into where the Japanese economy is headed. Oh and its neighbor has a leading index report out this week too.

Back to the US, the other key data this week is the ever critical housing report; S&P Case-Shiller home price indexes (as well as the existing and new home sales reports), so it will be good to check in on the US housing market. There's also the consumer confidence indexes due out (conference board, and University of Michigan). But of course waiting for positive changes in these data sets is currently like watching paint dry - but do search for insights in the details nonetheless.

So as always, have a great week, watch out for surprises, and stay tuned for updates...

Sources
DailyFX www.dailyfx.com/calendar
Forex Pros www.forexpros.com/economic-calendar/
Forex Factory www.forexfactory.com/calendar.php
Bloomberg www.bloomberg.com
+various statistics websites and central bank websites for verification

Article Source: http://www.econgrapher.com/25oct-calendar.html

Top 5 Economics Graphs of the Week - 28 August 2010

This week we take a look at GDP stats from the robust German economy, and the less than robust US economy. Then we look closer at the US situation; reviewing the existing home sales data, and consumer sentiment data. We then wrap up with a review of the July trade figures from Japan.

1. German GDP
Germany proved itself to be one of the strongest developed economies (and certainly within the EU). Overall the German economy grew 2.2% compared to the previous quarter (the fastest growth rate since East and West Germany reunified). The surge in growth was driven by strong exports, up 8.2% in Q2; boosted by trade with China and the US... which should immediately raise some concerns given the slowing of those two economies. However equipment investment (up 4.4%) also grew relatively strongly; and consumer spending returned to growth (0.6%). So there are growing signs of fundamental strength in the German economy, as well as from the rebound in international trade.


2. US GDP
The US economy showed further signs of descending into the double dip as the second quarter GDP growth rate was downgraded to 1.6% annualised (0.4% q/q) vs initial reading of 2.4% annualised (0.6% q/q). The downgrade was driven by a higher net export deficit and smaller gain in inventories; as well as residential investment and government purchases; these were partially offset by slight upward adjustments to personal consumption and nonresidential fixed investment. From here the vulnerability and weight of risks is almost certainly weighted to the downside, there's a weakening housing market, a still high unemployment rate, a necessary period of deleveraging to go through; so the weight of probabilities is for a dip back into negative growth. The best case scenario would be for stagnant growth (the muddle ages).


3. US Existing Home Sales
US existing home sales confirmed concerns by many that the US housing market is still a major risk area for the US economic recovery. On a seasonally adjusted annualised basis existing home sales dropped to 3.83 million from 5.37 million in June (consensus was for a dip to just 4.65m). Supply at the current sales rate expanded from 8.9 months to 12.5 months - the worst reading in 11 years. For now prices have only dipped slightly, with reluctant sellers not yet giving in, the median price dipped to $182,600 from $183,700 in June. So, as noted above, unless something radical happens, the US housing market remains a critical threat to the US economic recovery.


4. US Consumer Sentiment
On a similar vein, the Reuters/University of Michigan Consumer Sentiment index crept along, rising slightly from the July reading (68.9 vs 67.8). Expectations improved less; 62.9 vs 62.3 and current conditions improved to 78.3 from 76.5. Overall the impact of scarce jobs and stagnating incomes have spurred consumers to hunker down; taking a more defensive outlook with the whole deleveraging and cash reserve building behaviour becoming more and more endemic (and for good reasons). The data lines up with the weak housing data, and slowing trend in the GDP data; unless the manufacturing sector really pulls a rabbit out of the hat; and exports somehow surge, the outlook keeps coming back to the scenario of a double dip.


5. Japan Trade
Japan saw a continuation of the recovery in exports (and imports), but at a slightly slower pace. Looking to the chart its clear the trend is showing a recovery, but still; exports are well below trend, and are still yet to return to levels seen prior to the crash in global trade. Exports climbed 23.5% year on year to 5.983 trillion yen ($71 billion), the year on year growth rate in June was 27.7%. Interestingly the key driver of growth was continued sales of cars and electronic components to emerging economies like China and other Asian countries; which is promising somewhat given their higher potential growth rates. But the Japanese Yen has been appreciating, and this could reduce export competitiveness. So for Japan, trade remains the key to sustaining economic growth, but the downside risks remain.


Summary

So we saw two key developed economies provide updates on their GDP situations. On the one hand there was Germany - albeit caught up still with some of the wider EU risks - which was showing surprising resilience, with strong exports, growth in investment, and even a return of consumer spending. The signs are for continued strength in the German economy.

The US however showed weakness on almost all fronts; and the housing data and consumer sentiment data did nothing to provide comfort. It's becoming increasingly harder to get to any other conclusion than for a double dip. The best case is likely to be a prolonged period of stagnant growth, aka the muddle ages of the recovery.

Over to Japan, the challenges of deflation (which increased to -1.1% in July), high government debt, and low consumer spending; were carried once again by strength in trade. But again, as some of its key trade partners show signs of slowing, and as the Yen appreciates, the outlook is probably also for relatively stagnant growth at best.

Sources
1. OECD Stats stats.oecd.org
2. Bureau of Economic Analysis www.bea.gov
3. Realtor.org www.realtor.org
4. Reuters/Univesity of Michigan customers.reuters.com
5. Japan External Trade Organization www.jetro.go.jp

Article Source: http://www.econgrapher.com/top5graphs28aug.html

Top 5 Graphs of the week - 17 July 2010

This week we look at some of the major data points out of the two economic juggernauts; China and the US. In particular we focus on China GDP, industrial production, and CPI for both China and the US, and the current path of the US trade balance.

1. China GDP
China, as expected showed signs of slowing down in the June quarter with year on year growth slipping to 10.3% from a blistering 11.9% in the March quarter this year. Year to date over year to date the economy grew 11.1%. The authorities appear to be reasonably successful so far at orchestrating a slowdown in order to prevent possible overheating. The September quarter is also likely to show a slower growth figure as the base period rises, and as industrial production continues to slow and global activity remains relatively subdued, however trade continues to recover.


2. China Industrial Production
On the Industrial production figures, China saw growth in industrial production slip to 13.7% year on year, compared to 16.5% in the previous month, but still up on the June figure of 2009, and still very much positive. But for the time being, and certainly the PMI points to it, Chinese industrial production is unlikely to grow at the same stellar rates that it enjoyed in the past, but the probable outcome is for slower growth, not negative growth...

3. China CPI
On the inflation front, the Chinese authorities claimed a small victory of sorts in keeping inflation below the 3% mark, with the figure coming in at 2.9% year on year, vs 3.1% in May. Inflation is still a risk factor in China, but the authorities are clamping down to prevent excessive appreciation in asset markets, and goods prices. For now it appears things are under control, but the inflation expectations are still relatively elevated.

4. US CPI
The US CPI report gave potential confirmation for the deflation hawks, i.e. those who are cautioning about the risks of the US entering into a period of deflation (where price movements are negative). Headline CPI was recorded at 1.1% vs a 2% climb the previous month, with energy prices taking a dent. Core inflation however managed a slight increase at 1% vs 0.9% in the previous month. Certainly the near term outlook is for relatively subdued inflation in the US with the only upside risks coming when economic growth picks up and if the loose monetary policy gets properly transmitted through, and of course the specter of redundant capacity materializes.

5. US Trade Balance
The US also reported its trade balance this week, with the May deficit surprising; widening to -$42.3 billion, from -$40.3 billion. However there was some good news within the numbers with exports increasing from $148.8 billion to $152.3 billion; and imports at $194.5 billion (up from $189 billion). The increase in absolute volumes is somewhat promising from an activity perspective, also much of the worsening of the deficit was in the non-petroleum portion.

Summary

As a brief wrap-up, the Chinese economy is still chugging along, but the impact of the authorities' controlled slowing, and the loss of momentum of the recovery is starting to show through; both in the activity indicators, and in price levels. For instance the drop off in industrial production, growth, and stabilisation of the inflation rate, give tentative evidence for preliminary success.

The US on the other hand is also cruising a long in its recovery; but keep in mind that the reset of this year is going to be much harder than the first part of the year. On the inflation front the CPI figures showed further deceleration of the inflation rate, and the risks are relatively low for a near term resurgence of inflationary pressure.

So overall for these two powerhouses, the recovery is well under way, but there are plenty of risks floating around in terms of the sustainability of the recovery.

Sources
1. National Bureau of Statistics www.nbs.gov.cn
2. National Bureau of Statistics www.nbs.gov.cn
3. National Bureau of Statistics www.nbs.gov.cn
4. Bureau of Labour Statistics www.bls.gov
5. Bureau of Economic Analysis www.bea.gov

Article Source: http://www.econgrapher.com/top5graphs17jul.html

Economic Calendar - 7 June 2010

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 commentary follows the table)

Day	Time (GMT)	Code	Event/Release	Forecast	Previous
MON	8:30	EUR	Euro-Zone Sentix Investor Confidence (JUN)	-7	-6.4
MON	19:00	USD	Consumer Credit (APR)	$0.0B	$2.0B
MON	22:45	NZD	Manufacturing Activity (1Q)		0.7%
MON	23:50	JPY	Trade Balance - BOP Basis (Yen) (APR)	871.9B	1074.7B
TUE	5:45	CHF	Unemployment Rate s.a. (MAY)	3.9%	4.0%
TUE	6:00	JPY	Eco Watchers Survey: Outlook (MAY)		49.9
TUE	6:00	EUR	German Trade Balance (euros) (APR)	15.0B	17.2B
TUE	7:15	CHF	Consumer Price Index (YoY) (MAY)	1.2%	1.4%
TUE	10:00	EUR	German Industrial Production s.a. (MoM) (APR)	0.7%	4.0%
TUE	23:01	GBP	Nationwide Consumer Confidence (MAY)	72	74
TUE	23:50	JPY	Machine Orders (YoY) (APR)	7.3%	1.2%
TUE		CNY	New Loans		774B
TUE		CNY	M2 Money Supply y/y	21.3%	21.5%
WED	0:30	AUD	Westpac Consumer Confidence (JUN)		-7.0%
WED	1:30	AUD	Home Loans (APR)	-2.0%	-3.4%
WED	8:30	GBP	Visible Trade Balance (Pounds) (APR)	-7.000B	-7.522B
WED	14:00	USD	Fed Chairman Ben Bernanke Testifies at House Budget Committee
WED	18:00	USD	Fed Releases Beige Book Economic Report
WED	21:00	NZD	RBNZ Interest Rate Decision	2.75%	2.50%
WED	22:45	NZD	Terms of Trade Index (QoQ) (1Q)		5.7%
WED	23:50	JPY	Gross Domestic Product (QoQ) (1Q F)	1.0%	1.2%
WED	23:50	JPY	Gross Domestic Product Annualized (1Q F)	4.2%	4.9%
WED	23:50	JPY	Gross Domestic Product Deflator (YoY) (1Q F)	-3.0%	-3.0%
THU		CNY	Trade Balance	8.2B	1.7B
THU	1:30	AUD	Employment Change (MAY)	20.0K	33.7K
THU	1:30	AUD	Unemployment Rate (MAY)	5.4%	5.4%
THU	5:00	JPY	Consumer Confidence Households (MAY)	42.0	42.0
THU	9:00	EUR	Italian Gross Domestic Product (YoY) (1Q F)	0.6%	-3.0%
THU	11:00	GBP	Bank of England Interest Rate Decision	0.50%	0.50%
THU	11:00	GBP	Bank of England Asset Purchase Target	200B	200B
THU	11:45	EUR	European Central Bank Interest Rate Decision	1.00%	1.00%
THU	12:30	CAD	International Merchandise Trade (CAD) (APR)	0.7B	0.3B
THU	12:30	USD	Trade Balance (APR)	-$41.0B	-$40.4B
THU	18:00	USD	Monthly Budget Statement (MAY)	-$140.0B	-$82.7B
THU	22:00	CNY	CPI y/y	3.0%	2.8%
THU	22:00	CNY	Fixed Asset Investment	25.8%	26.1%
THU	22:00	CNY	Industrial Production (YoY)	17.3%	17.8%
THU	22:00	CNY	Retail Sales y/y	18.6%	18.5%
FRI		GBP	NIESR Gross Domestic Product Estimate		0.5%
FRI	8:30	GBP	Industrial Production (YoY) (APR)	2.3%	2.0%
FRI	12:30	USD	Advance Retail Sales (MAY)	0.2%	0.4%
FRI	13:55	USD	U. of Michigan Confidence (JUN P)	75.0	73.6

Starting off with China, there's new loans and money supply from the PBOC which will both be informative in terms of concerns around overheating and bubble building (obviously greater loan growth means greater potential flows into asset markets). Then there's the trade balance which will also be an interesting one given some of the recent results, consensus is for a bit of normalisation there with the median around 8 billion.

Then there's the usual stats from the NBS; CPI, which is expected to show further growth in inflation, fixed asset investment (expect continued strong growth around 26%), industrial production (expect a slight tapering off given the PMI), and retail sales (expect growth to be maintained around 18-19%).

On the monetary policy front, first up is the Reserve Bank of New Zealand, which is widely expected to lift the official cash rate to 2.75% from 2.50%, as the New Zealand economy makes a gradual recovery. Meanwhile the Bank of England is expected to hold rates and the asset purchase program unchanged; likewise the European Central Bank is expected to hold the rate steady (not that it could really do much except for a token drop to try poke around with confidence).

There could be scope for a curve ball from the ECB, but it will probably be similar to last meeting, note no change, note all the challenges, and note the previous moves taken. On a related note the US Federal Reserve will release its Beige Book economic report, which may make for some interesting bedtime reading.

Keeping with the US, first data point out will be consumer credit for April, which consensus says no change, versus the previous $2 billion increase (one might expect slow or no growth given the trend and need for deleveraging). The other key ones out will be at the end of the week with retail sales expected to make a slight improvement, and the University of Michigan consumer sentiment indicator expected to rise slightly.

The US is also set to put out its May monthly budget statement, and its April trade balance, with consensus for -$41 billion vs -$40.4 billion in March, the trade deficit trend is likely to continue on the back of energy imports, and no real trend towards a structural rebalancing towards exports.

Briefly on trade, Japan is expected to show a slightly lower trade surplus for April, the UK is expected to show a slightly improved deficit, Germany is expected to report a lower surplus, and Canada is expected to show a slightly improved surplus. Elsewhere, Japan will give an update on its GDP, with the forecast for 1% q/q growth in Q1.

There's also an update to Q1 GDP for Italy, with consensus for 0.6% y/y, and the NIESR will update on its May GDP numbers for the UK. On employment, Australia will report its employment figures, expected to show another 20k jobs added, and an unemployment rate of 5.4%.

So as always, have a great week, watch out for surprises, stay tuned for updates...

Sources
DailyFX www.dailyfx.com/calendar
Forex Pros www.forexpros.com/economic-calendar/
Forex Factory www.forexfactory.com/calendar.php
Bloomberg www.bloomberg.com
+various statistics websites and central bank websites for verification

Article Source: http://www.econgrapher.com/7june-calendar.html

US ISM - Manufacturing Takes the Lead

In this article we look at both ISM manufacturing and non-manufacturing indexes and ask "Are there any real indications of a sustainable economic recovery yet?" - with the the obvious implication of the broader economic outlook for the US. As a quick reminder the ISM manufacturing PMI came in at 60.4 (just below consensus 61.0, and above previous 59.6); meanwhile the non-manufacturing index came in at 55.4 (unchanged from March, and below consensus 56.4).

Neither of the headline results were particularly interesting apart from the fact they were both still definitely in expansionary territory. But as you'll soon see, a quick look under the surface reveals some pretty interesting moving parts.


Right, the first thing to note is that new orders shot up from 61.5 to 65.7 (only this time last year it was 47.2), new orders is the leading part of the PMI - it shows how much activity is set to come through the system. It's particularly interesting that the new orders index has stayed so strong for so long - one might expect the easing of the stimulus and inventory cycle effects to start taking a toll pretty soon - but hey, maybe there is some hint of underlying strength starting to show through...

The other interesting line in that chart is the employment sub-index, which has also shown some strength (note the details: 26% say higher employment, only 6% say lower now). The employment index is currently sitting at 58.5 (a reading above 49.8 is generally consistent with expansion of the main employment stats). This aspect also provides some interesting indications in terms of the near term outlook for the US economy.


Moving on to the non-manufacturing index, the results are still positive, but it's clear that the manufacturing sector is accelerating faster. The employment index for the non-manufacturing series is still below 50, but the breakdown is 22% higher vs 17% lower - slimmer margin than the PMI; but still positive. Many are looking for a solid improvement in employment for a recovery to take hold (and this is also probably a pre-requisite to Fed rate hikes), so the signs here are somewhat promising - however this is just one part of the economy, and there are still plenty of risks to the US economic recovery (including external risks!).


The last chart shows the prices indices from both series with the annual change in the Consumer Price Index overlayed (i.e. the main inflation proxy). The point of this is that both price indexes appear to be pretty reliable indicators of headline inflation. The other interesting part is the implications of rising prices: 1. It means that there must be at least some appetite from customers to pay the higher prices, 2. It means that margins may end up improving further (having been assisted by the drop in salary and wage costs - in part driven by the huge job losses seen through the crisis).

So there are some interesting signs coming through in the ISM indices for the manufacturing and non-manufacturing sectors. Sure there are still a lot of significant vulnerabilities in the US economy, and the economic recovery is far from sustainable at this point. But, there are some positive signs in the ISM numbers for April. Indeed it's even tempting to suggest that there are some faint glimmering hints of underlying strength coming through. But again, it's a long hard road to a sustainable economic recovery from here, with many bumps along the way.

Sources
Econ Grapher Analytics www.econgrapher.com
Institute for Supply Management www.ism.ws
Bureau of Labour Statistics www.bls.gov

Article Source: http://www.econgrapher.com/6may-uspmi.html

US House Prices and Confidence update

Here's a short sharp update on the US housing market, consumer confidence, and the direction of the US economy. The US S&P Case Shiller 20 Cities house price index rose 3% year on year in February, and was basically flat month on month. The figures indicate the housing market is still confused somewhat; consolidating before the next move... which could well be more sideways movement.


On a year over year basis (seasonally adjusted), San Francisco (12%), San Diego (7.6%), LA (5.4%), and Washington DC (5.1%) are up the most; while Las Vegas (-14.6%), Tampa (-6%), Seattle (-5.6%), Portland (-4.7%), are the laggards. The US housing market could yet stand to go through a prolonged period of stabilization or consolidation before returning to growth; thus it remains a key vulnerability for the US economic recovery.

Moving on to the other key data point; US consumer confidence showed a slight pick up coming in at 57.9 vs previous 52.5, and consensus for 53.5. On components the expectations index picked up to 77.4 from 70.4 in a promising move, likewise the current conditions index rose to 28.6 from 25.2. The move is also a milestone, being the highest since September 2008, which says a bit.

Outlook
In terms of implications for outlook, it depends how you read it. There are two obvious ways of looking at it; the first is that both the pattern of house prices and consumer confidence are consistent with a cyclical recovery, and that the recent uptick we are seeing in both of them points to an eventual cyclical economic recovery or rebound.

The other says on both counts we're basically set to see a prolonged period of consolidation and economic healing; consumer confidence remains low and the housing market remains subdued; as people spend less, pay down debt, try to get their jobs back, and rebuild wealth.

It's still hard to say just which one it is yet, but whichever one it turns out to be will have a huge bearing on the medium to long term pattern of growth in the US economy: structural recovery or cyclical recovery? sustainable recovery or a return to the vicious cycle?

Sources
Econ Grapher Analytics www.econgrapher.com
Conference Board www.conference-board.org
Standard & Poors www.standardandpoors.com

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