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

Economic Calendar - Week Starting 4 October 2010

Here's the Economic Calendar for the week commencing the 4th of October 2010. This week the main events are in the monetary policy and employment space. Firs up there's Japan with its monthly monetary policy meeting, then the RBA in Australia is expected to re-commence tightening, then the ECB and Bank of England meet on Thursday. On the employment front there's data from Australia, Canada, and the US with the much watched non-farm payrolls report. Also this week, the IMF will release its World Economic Outlook forecasts and commentary on Wednesday, shortly before the IMF annual meetings kick off in the coming weekend.

(More commentary follows the table)

Day	Time (GMT)	Code	Event/Release	Forecast	Previous
MON	EUR	09:00	Euro-Zone Producer Price Index (YoY) (AUG)	3.7%	4.0%
MON	USD	14:00	Pending Home Sales (YoY) (AUG)		-20.1%
MON	USD	14:00	Factory Orders (AUG)	0.0%	0.1%
MON	JPY		Bank of Japan Rate Decision (OCT 5)	0.10%	0.10%
MON	AUD	00:30	Retail Sales s.a. (MoM) (AUG)	0.4%	0.7%
MON	AUD	00:30	Trade Balance (Australian dollar) (AUG)	2300M	1888M
MON	AUD	03:30	Reserve Bank of Australia Rate Decision	4.75%	4.50%
TUE	CHF	07:15	Consumer Price Index (YoY) (SEP)	0.3%	0.3%
TUE	EUR	07:55	German PMI Services (SEP F)	54.6	54.6
TUE	EUR	08:00	Euro-Zone PMI Services (SEP F)	53.6	53.6
TUE	EUR	08:00	Euro-Zone PMI Composite (SEP F)
TUE	GBP	08:30	Purchasing Manager Index Services (SEP)	51.0	51.3
TUE	EUR	09:00	Euro-Zone Retail Sales (YoY) (AUG)		1.1%
TUE	USD	14:00	ISM Non-Manufacutring Composite (SEP)	52.0	51.5
TUE	USD	21:00	ABC Consumer Confidence (OCT 3)		-46
WED	EUR	09:00	Euro-Zone GDP s.a. (YoY) (2Q F)		1.9%
WED	EUR	09:00	Euro-Zone GDP s.a. (QoQ) (2Q F)	1.0%	1.0%
WED	EUR	10:00	German Factory Orders s.a. (MoM) (AUG)	1.0%	-2.2%
WED	USD	12:15	ADP Employment Change (SEP)	20K	-10K
WED	CAD	14:00	Ivey Purchasing Managers Index (SEP)	62.0	65.9
WED	GBP		NIESR GDP Estimate (SEP)		0.7%
WED	AUD	00:30	Employment Change (SEP)	20.0K	30.9K
WED	AUD	00:30	Unemployment Rate (SEP)	5.1%	5.1%
THU	GBP	08:30	Industrial Production (YoY) (AUG)	4.2%	1.9%
THU	EUR	10:00	German Industrial Production (YoY) (AUG)		10.9%
THU	GBP	11:00	Bank of England Rate Decision (OCT 7)	0.50%	0.50%
THU	GBP	11:00	Bank of England Asset Purchase Target	200B	200B
THU	EUR	11:45	European Central Bank Rate Decision (OCT)	1.00%	1.00%
THU	USD	12:30	Initial Jobless Claims (OCT 2)	453K	453K
THU	USD	19:00	Consumer Credit (AUG)	-$3.0B	-$3.6B
THU	CNY	02:30	China HSBC Services PMI (SEP)		57.6
FRI	EUR	06:00	German Exports s.a. (MoM) (AUG)	-0.8%	-1.6%
FRI	EUR	06:00	German Imports s.a. (MoM) (AUG)	0.4%	-2.2%
FRI	GBP	08:30	Producer Price Index Input n.s.a. (YoY) (SEP)	8.6%	8.1%
FRI	GBP	08:30	PPI Output Core n.s.a. (YoY) (SEP)	4.3%	4.6%
FRI	CAD	11:00	Net Change in Employment (SEP)	10.0K	35.8K
FRI	CAD	11:00	Unemployment Rate (SEP)	8.0%	8.1%
FRI	USD	12:30	Change in Non-farm Payrolls (SEP)	5K	-54K
FRI	USD	12:30	Average Hourly Earning All Employees (MoM)	0.2%	0.3%
FRI	USD	12:30	Change in Private Payrolls (SEP)	82K	67K
FRI	USD	12:30	Unemployment Rate (SEP)	9.7%	9.6%
FRI	USD	12:30	Average Weekly Hours All Employees (SEP)	34.2	34.2
	All		IMF Meetings

Starting off with the monetary policy events, the Bank of Japan of course wont touch interest rates, if anything they might look to do additional stimulus to get the economy moving and attack the persistent deflation problem - it will also be interesting to see what they say about the yentervention . The Reserve Bank of Australia will also come firmly into the spotlight as the consensus is growing toward seeing another interest rate increase... remember this time last year it kicked off the tightening cycle - dejavu anyone? The ECB probably wont do much, but it always puts out some insightful commentary, and the Bank of England could well release more stimulus - in preference of addressing the economic growth risks vs the inflation risks.

On the jobs front, Australia is up first, and is expected to show jobs growth around 20k vs 30.9k in August, as the lucky country's economy goes from strength to strength on the back of a strong resources sector that is likely to only grow in strength (as long as commodity prices stay right... and the Aussie dollar for that matter). In Canada it's a similar story, the resources sector is going strong and jobs growth is expected to come in at 10k vs 35.8k in August. Meanwhile in the US, consensus is for about 5k on the headline payrolls figure vs -54k in Aug, while the private payrolls number is expected to be about 82k vs 67k in Aug... still nothing to write home about in the context of the net negative jobs growth over the past decade.

Elsewhere there's a few data points out on Germany this week including the PMI numbers, factory orders (expected to increase), industrial production, and exports and imports data. There's also producer price index info from the EU and UK. Also among the remaining PMI data to be released this week for September, there's the US non-manufacturing composite, and the China HSBC services PMI; both of which will be critical data points to be across in terms of monitoring the two largest economies. In the US there's also consumer credit data due out for August, as well as pending home sales and the ABC consumer confidence index.

Another interesting feature of this week will be the IMF (International Monetary Fund), with the respected World Economic Outlook due to be released on Wednesday, and the IMF annual meetings in the coming weekend. While its unlikely to be too much more than a talk-fest, it will be worth monitoring what they have to say.

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/4oct-calendar.html

Welcome to the Muddle Ages of the Recovery

Before diving into the analysis, a theme occurred to me the other day; more and more the economic data from the US is looking confused. There are some parts of the economy that are showing some relatively promising signs e.g. manufacturing, but then there are other parts (e.g. consumers, housing, etc) which say - "you know, this recovery... it's not that great, things are still hard!" And thus we are at the muddle ages of the post-great-recession recovery. And so, I was just looking at the US total bank assets statistics, and there were a few noteworthy standouts in the data:


The first chart is in someways an acknowledgment that there are a few bright patches in the US economy at present. Commercial and Industrial lending is one of the most cyclically sensitive sectors of lending, if you track it over a longer time period on a year on year percentage basis it shows a fairly persistent cyclical ebb and flow. Not to be calling the all clear, but the turning of the (still negative) year on year % change, and pick up in new lending in C&I loans is certainly an interesting data point in the context of my previous comments.


And that's the good part over, you can stop reading now if you're a blind optimist. The above chart is monthly consumer lending, with monthly percent change vs year on year percent change. It's tempting to call a turn on this one by looking at the course of the year on year percent change. But if you look beyond the data and think about what's going on, it's hard to make a case for any credible short term strength in this lending category.


In what is in some ways the antithesis of consumer lending, the US personal savings rate has reversed its decades long downward trend, which for the long term is a good thing. It is things like this that will help bring the coming of the economic renaissance (eventually)... if it can be sustained. But of course a sustained higher personal savings rate will also mean more consolidation of consumer lending, and lackluster short-term consumer spending (and then there's the government sector side of the savings coin...).


Oh and before we finish, real estate lending has continued its downward spiral and with the US housing market going no where fast, personal savings rates on the rise, unemployment still at highs, and consumer confidence still in the doldrums... it's like; "hmm, where to next on the real estate lending front?" It's hard to see any strong near-term drivers of a reversal in this sector; this is where the consolidation really needs to take place, not that there's really a choice. So, once again; welcome to the muddle ages.

Sources
Econ Grapher www.econgrapher.com
US Federal Reserve www.federalreserve.gov

Article source: http://www.econgrapher.com/18aug-muddleages.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

Top 5 Graphs of the week - 11 June 2010

This week we examine the GDP results from last "BRIC" economy to report, Brazil, then we look at another one; China and see how international trade and retail sales are tracking. Then we analyze the recent US consumer credit data, and finish up with a review of four of the monetary policy decisions this week.

The themes are big ones this week; there's emerging markets leading the recovery, there's global imbalances and potential changes in the make up of the Chinese economy, and finally, monetary policy continues on a de-synchronized path in response to a de-synchronized global economic recovery.

1. Brazil GDP
Brazil reported year on year GDP growth of 9%, smashing the consensus forecasts for 7.6%, and accelerating from the 4.29% in the previous quarter, and -2.14% same time last year. Some of the large number is related to a lower base comparator, but much of it is related to an accelerating recovery in Brazil; highlighting risks of overheating. Indeed the Brazilian central bank ended up raising the Selic rate another 75bps a day or two after the GDP results were announced (see the piece on monetary policy below). So it is good news for the Brazilian economy, it's interesting to see it growing at China levels, but the question of sustainability remains.

2. China International Trade
The Chinese international trade figures for May produced additional ammunition for the yuan bashers, with the surplus growing from about $1 billion in April, to $20 billion in May, and pretty much proving that the March deficit was a one-off cyclical quirk. So exports rose 48.5% year on year, and imports rose 48.3% year on year (mind you, this time last year they were still reporting sub-100 billion dollar figures), month on month imports fell and exports rose. I'm going to repeat that this is going to be an interesting chart to watch in the coming years as the rebalancing of the Chinese economy commences. As I'll note below, the yuan part of it (while still relevant, and unhelpful to be fixed), may start to lose relevance in the case for Chinese economic restructuring driving sustainable growth...

3. China Retail Sales
China reported retail sales of 1.25 trillion yuan in May, up 18.7% year on year (compares to 1.15 trillion in April, with a y/y rise of 18.5%). As with the chart above this is going to be an interesting chart to watch as the Chinese economy begins to draw more and more growth from domestic consumption, and less from an export led strategy. Already there are some high profile wage rise increase stories in the media, with Foxconn being very notable, and the Honda case also being notable (especially given that it is a foreign company, thus there is a bit of a signaling effect that the authorities are allowing it to happen). The point I alluded to above is that as wages rise in China (and they will eventually, driven in part by inflation, driven in part by the new generation and cultural trends). This is probably even a preferable solution to yuan floating, but will eventually have the same effect as wage costs push up export prices and lower competitiveness on a price basis. Watch this space...

4. US Consumer Credit
US consumer credit rose by $1billion in April, matching consensus and beating the previous (downwardly revised) -$5.4 billion. The gain was driven by a $9.4 billion increase in non-revolving credit (reflecting strong car sales), off set by an -$8.5 billion decrease in revolving credit. The chart below shows what looks like a turning of the corner for consumer credit, and this lines up with the trend in the labour market. However arguably this number should still be contracting due to the need for consumer deleveraging to continue, the US personal savings rate was reported as 3.6% in April, which is towards the higher end compared to recent times for the US, but work still needs to be done in deleveraging, and increasing the savings rate (similar but in different direction to the China rebalancing above), for a more structural and sustainable recovery in the US.

5. Monetary Policy Review
In the past week the Reserve Bank of New Zealand increased the official cash rate 25bps to 2.75%, the Banco do Brasil increased the Selic rate 75bps to 10.25%, the Bank of England held at 0.50%, and the European Central Bank held at 1.00%. In a more detailed analysis, I identified that the key trend going on here is that monetary policy stimulus withdrawal continues to be uneven, with different paces matching different prospects, and rightfully so as the global economic recovery looks more and more uneven. So it's synchronised on the way down, just like the stock markets - highly correlated on the way down, but correlations will decrease as the recovery unfolds.

Summary

To re-cap, the Brazilian economy is showing strong growth and adding to the theme of strong growth in emerging markets; a recovery led by emerging markets. But at the same time it also points to the risks for emerging markets, including potential for overheating.

Similarly in China, the new data out this week seems to point in positive directions, but there's more to the surface numbers (if you believe them that is). There are forces in motion in the Chinese economy that will result in an eventual rebalancing of export lead growth to domestic consumption lead growth, and this could happen with or without the yuan if wage increases continue.

Meanwhile in the US, there are weak signs of potential continuation of consumer deleveraging and wealth rebuilding in the consumer credit and savings rate numbers. However it probably wont last, and as with the risk to China's rebalancing; old habits die hard.

Finally, monetary policy stimulus exit is commencing in more places and picking up, but is distinctly de-synchronised, but then so is the economic recovery. Already we've seen it confirmed, emerging markets are growing strong, developed economies are scarcely growing at all. But through all the recovery and stimulus exits, and so-on, it shouldn't be forgotten that with such a disruptive turn of events, there is the opportunity for structural change for a more balanced and sustainably growing global economy.

Sources:
1. Brazil Statistics Agency www.ibge.gov.br
2. China Customs www.customs.gov.cn
3. National Bureau of Statistics www.stats.gov.cn
4. US Federal Reserve www.federalreserve.gov
5. Bank of New Zealand www.rbnz.govt.nz & Banco Central do Brazil www.bcb.gov.br & European Central Bank www.ecb.int & Bank of England www.bankofengland.co.uk

Article Source: http://www.econgrapher.com/top5graphs11jun.html

Top 5 Graphs of the Week - 8 May 2010

This week we look at the consumer credit numbers out of the US, continued expansion in US nonfarm payrolls, surprising growth in NZ employment, Australasian trade numbers, and China's PMI for April (and notes on its currency and monetary policy).

1. US consumer credit expands
US consumer credit expanded $2bn in March, against expectations for a -$3bn contraction (and February's -$11.5). The year on year growth rate is starting to turn up now, signaling that the decline in consumer credit may now be over - or at least that a tentative floor has been found. Looking at the breakdown, Non-revolving credit was the source of the growth, while revolving credit declined. This tells you that much of the growth is driven by things like car sales (which included incentives), rather than consumer spending (revolving credit is generally more associated with general consumer spending). So really, the de-leveraging story still stands for now.

2. US nonfarm payrolls
US nonfarm payrolls surprised to the upside with 290k jobs added in April vs consensus 200k, and an upward revised 230k in March. However the 'official' unemployment rate increased to 9.9% from 9.6% due to a surge in the labor force. Census hiring added 66k to the number (48k in March), in a conveniently timed running of the 10-yearly survey. The expansion in payrolls is a welcome respite for the US, following a mass shedding of jobs as the financial crisis hit. The US tends to take it on the chin with jobs; cutting quickly in bad times, but allowing the necessary adjustments to be made.

3. NZ Employment surprise
Another surprise this week was the jump in New Zealand employment numbers, the unemployment rate fell to 6% from a downward revised 7%; with 22k jobs added. I ran more indepth analysis of the release here. The main points to take are that much of the jobs were added in the productive sector, and it shows that after 3 quarters of positive GDP growth, the economy is finally starting to pick up. Job ads are on the rise, and confidence is also increasing. The scene is almost definitely set now for the RBNZ to raise the official cash rate by 25bps to 2.75% in June (but then there are external risks e.g. Europe, that could play into the mix).

4. Australasian trade
Australia released its international trade figures for March this week, and New Zealand the week before. Australia recorded 2 and 3% growth month on month in exports and imports respectively, with its trade deficit widening to -$2.08bn in March vs -$1.7bn in Feb, and consensus for -$2.13bn. Meanwhile New Zealand reported exports rising higher than imports, recording its 3rd surplus in a row as agricultural commodity prices gave a boost to exports; while demand for imports remained low. It's pretty clear on the chart and in the numbers that the trend for exports and imports has been turning the corner in both Australia and New Zealand.

5. China PMI signals further strength
The HSBC PMI was out this week, slipping slightly to 55.4 from 57 in April (and consensus 57); while the official CFLP PMI rose to 55.7 from 55.1 when it was released in the weekend. So both indexes show the outlook for Chinese manufacturing activity is reasonably strong, in spite of a slight hiccup in February; and firmly rebounding since 2008. Of course the obvious implication is that further strength means further chance for overheating, indeed the People's Bank of China increased the required reserve ratio again last weekend by 50bs, and there has been musings that China will alter its exchange rate policy before the June G-20 meetings.

Summary

Some of the key takeaways from this edition are that the US is still seeing its dubious recovery playing through with some aspects of consumer credit creeping up, and employment beginning to expand through a process of normalisation, stimulus effects, and national surveying. As noted in the analysis of the two US PMI indexes, the US economy is seeing a pick up in activity and signs are for more activity, but the elusive sustainable recovery is yet to be seen.

Looking to Australasia, the growth story continues to play out Australia shows continued strength, and expanding trade (and further interest rate increases - another 25bps this week). Meanwhile New Zealand surprised with its employment numbers, suggesting that the economic recovery there could be picking up; New Zealand also recorded further trade surpluses - but mostly due to cyclical factors. The Australasian economies are islands of growth and stability amongst the developed nations.

Meanwhile - and related to the previous two - China shows no sign of slowing down as the PMIs point to further growth in activity. So the obvious questions of whether or not it's overheating, and what should be done arise. With the PBOC taking a gradualist approach of tinkering with the reserve requirements ratio, will it be forced to take bigger moves soon? The next few months could be most revealing in that respect.

Sources
1. US Federal Reserve www.federalreserve.gov
2. US Bureau of Labor Statistics www.bls.gov
3. Statistics NZ www.stats.govt.nz
4. Australian Bureau of Statistics www.abs.gov.au & Statistics NZ www.stats.govt.nz
5. CFLP: www.chinawuliu.com.cn & Markit/HSBC: www.markiteconomics.com

Article Source: http://www.econgrapher.com/top5graphs8may.html

US Consumer Credit Update

US Consumer Credit statistics were just released by the US Federal Reserve, surprising firmly to the upside. The figure for January was US +$5 billion, vs consensus expectations for a decline of -$4 billion, and December's figure of -$1.8 billion.


Diving into the details, the breakdown was a $6.6 billion rise in non-revolving credit (e.g. things like car loans), while revolving credit continued to decline, down $1.7 billion. Thus it is very much symptomatic of a still weak consumer given consumer reluctance or inability to take on more credit card debt.


This is interesting in terms of the article last week on Lending, Saving and Spending, about US consumer deleveraging. This data point may cause some to think that the US consumer is back to its old habits, but this is just one point, and the weakness in revolving credit is worth noting. So the impact of this data is really to leave the picture still unclear, but for now the deleveraging trend still seems to be present. Data to watch for next are consumer spending numbers and savings rates to add to the picture.

Sources:
1. US Federal Reserve http://www.federalreserve.gov/
2. US Federal Reserve http://www.federalreserve.gov/

Article Source: http://www.econgrapher.com/7marUSconcred.html

Lending, Saving, and Consumption - A tale of US deleveraging...

Here's a brief update on where US bank lending is at. The theme of the day for this is basically deleveraging. Bank credit is on most counts still declining on a year on year % basis, a weekly net new loans basis, and on an absolute basis. It's still very much a story of no credit growth.

It's not a surprise either, lending conditions are still pretty harsh, there are still bank failures popping up, and consumers and businesses are still (but maybe to a lesser degree?) struggling - so finding it hard to obtain financing, or even service existing levels of financing.

To that end there's bound to be the influence of plain and simple write-offs. Bad loans = detractor to loan growth.

There's probably also an element of debt aversion in some cases, where people have been left underwater and truly stressed to the limit with asset price declines, employment loss and income pressures. IMF studies have even pointed to a period of higher savings rates following periods of high labour market and asset market volatility.

So it's also unsurprising and even positive to see that the US personal savings rate has recently spiked upwards (also included a chart on this below FYI). Positive because a sustained increase in the savings rate will support a more balanced and structural recovery - and due to wealth effects will see stronger future growth - but be ware it will also mean that in GDP growth numbers consumer spending will probably come through later in the process.

US Aggregate Lending
The below chart has total lending by US banks broken into C&I, real estate, Consumer, and other. The points to note are the previously mentioned declines in absolute values. It's also an interesting chart to look at in terms of the make up of total lending...


Commercial & Industrial
Business lending is still deeply in the negative, you can hardly even call the below stablising/bottoming out. But ultimately this is really the one you want to see turning up the most (given the previously touted thesis of the consumer-coming-last-recovery).


Real Estate
This one had been turning upward thanks to the impulse of the home buyer subsidies basically bringing a bit of demand forward and probably soaking up all the good credit risks. Now its back into declines (as are, coincidentally, house prices).


Consumer
This is different from the much looked at consumer credit figures, this is consumer lending (higher frequency data from US Fed aggregate bank stats). This lines up to a T with the consumer deleveraging thesis...


US Personal Savings Rate
Thanks to "fred" we've got the US personal savings rate here showing a marked turnaround - we can really only hope that this trend continues for the US consumer. I mean really it's like the US consumer has collectively had a heart attack and survived - they've had the wake-up call and now they need to realise they have to change their habits. Like diet and exercise, a lift in the savings rate is just what the doctor ordered.


Live long and prosper US consumer, live long and prosper.

Sources:
1. http://www.federalreserve.gov/
2. http://www.federalreserve.gov/
3. http://www.federalreserve.gov/
4. http://www.federalreserve.gov/
5. http://research.stlouisfed.org/fred2/data/PSAVERT.txt

Article Source: http://www.econgrapher.com/usloans4mar.html