We are, of course, talking about iron ore which has slipped into bear market territory overnight (defined here as 20 per cent fall from a recent high).
It turns out that China’s official statisticians might not have adjusted for 2012 being a leap year in the Q1 accounts. Plus, there have been big sampling changes that render the numbers even more subjective than we thought… Read more
A great pick-up from Climateer Investing on the extremely important subject of whether we are collectively, as a planet, mismeasuring GDP by failing to account for the transformation of the economy into a service-oriented, information-based, digital entity.
It comes from Irving Wladawsky-Berger, the former IBM executive.
As he notes:
Gross domestic product (GDP) is the basic measure of a country’s overall economic output based on the market value of all the goods and services the country produces. Most measures of economic performance used by government officials to inform their policies and decisions are based on GDP figures. But, many concerns have been raised about the adequacy of GDP-based measurements given the major structural changes that economies around the world have been going through over the past few decades. GDP is essentially a measure of production. While suitable when economies were dominated by the production of physical goods, GDP does not adequately capture the growing share of services and the production of increasingly complex solutions that characterize advanced economies. Nor does it reflect important economic activity beyond production, such as income, consumption and living standards.
ROBOTS! AUTOMATONS! CYBORGS! ARTIFICIAL INTELLIGENCE! ARGHH!!!
Last weekend I attended Robots on Tour, a robotics, humanoids and cyborg exhibition put together by the Zurich-based Artificial Intelligence Laboratory at the University of Zurich. Read more
We’ve read two very interesting and distinct pieces of analysis today that raise quite dramatic questions about China’s GDP data. Yes, we know you probably weren’t too credulous to begin with, but the details of both are interesting. Read more
Hugh Small is an independent economic analyst and management consultant, who was formerly with US-based firms Arthur D. Little and A. T. Kearney. He blogs at mature economy.org, and has a running thesis that mature economies must be assessed differently to developing economies because they share very different strategic goals.
Furthermore, once you factor in the subtle differences that apply to developed economies, things like the UK productivity puzzle begin to look a little less mysterious. Read more
The preliminary UK GDP estimate for the fourth quarter is out and it looks like there’s been a return to err.. contraction.
Via the ONS:
GDP was estimated to have decreased by 0.3% in Q4 2012 compared with Q3 2012. Output of the production industries was estimated to have decreased by 1.8% in Q4 2012 compared with Q3 2012, following an increase of 0.7% between Q2 2012 and Q3 2012.
Friday’s announcement of new daily liquidity operations by the Peoples’ Bank of China has prompted a lot of speculation about what it means for monetary policy in China. The PBoC has historically set rates via tools such as reserve requirement ratios, and prescribing loan and deposit interest rates.*
Societe Generale’s economists believe this is a step towards interest rate liberalisation, and that the PBoC will increasingly use its liquidity operations and repo rates to guide policy rates, rather than prescribed RRR and deposit and lending rates. Read more
China’s GDP grew 7.8 per cent in 2012; the slowest full-year of growth in 10 years, as the FT points out.
However the figure for Q4 was 7.9 per cent; a little above the consensus for 7.8 per cent. This was the first quarterly increase after seven straight quarters of decline, so it’s probably going to be seen as turning point after which China gets back towards the 8 per cent-plus growth that most forecasts are anticipating. Read more
China’s Q4 GDP is due out this Friday. Huzzah!
If you’re wondering how seriously to take it… wonder no more. Read more
Need some help from the ghost of Fiscal Cliff future with regards to what happens if current unsustainable trajectories are unchanged?
It’s possible you need look no further than Europe. While the causes of the cliff are different, it’s still the sort of drop off that can teach a valuable lesson or two. Read more
For quite a while now we’ve been wondering whether a quite bullish forecast by Nomura’s Zhiwei Zhang and Wendy Chen will prove correct. They believe that China’s Q4 GDP growth will be 8.4 per cent — a big jump from 7.4 per cent last quarter. Not surprisingly, today’s flash PMI has made Zhang more confident in his forecast.
We were rather sceptical when first considering it in October, because a lot of Zhang’s argument related to the local government plans that were being announced in great number in the third quarter of this year. Read more
From Citi’s Michael Saunders and Ann O’Kelly: Read more
It’s up 1 per cent in the three months to September. No wonder he was smiling…
The market was expecting a 0.6 per cent quarter on quarter bounce following nine months of contraction. Read more
It’s Eurozone flash PMI time again. It’s a sad time. From Markit:
The Eurozone sank further into decline at the start of the fourth quarter, with the combined output of the manufacturing and service sectors dropping at the fastest rate since June 2009.
Germany’s IFO survey didn’t help much either.
China’s Q3 GDP data is out on Thursday, and there’s naturally a lot of speculation about whether it will show yet another quarter of declining growth (almost certainly) and whether it will even fall below the official 7.5 per cent target, (quite possibly). However the numbers revealed won’t be suitable for an apples-for-apples comparison with most other countries. In fact, they’ll barely be suitable for comparison with previous Chinese GDP numbers. Read more
Here’s a bold call: the developed world’s fastest growing (that’s Australia for those of you at the back of the class) will fall in to recession next year as the China-driven mining investment boom ends.
Given the recent declines in Chinese steel prices and spot iron ore price, Deutsche Bank economist Adam Boyton reckons Australia’s terms of trade (the price of exportable goods divided by price of importable goods) could be 15 per cent lower year-on-year by the fourth quarter. Read more
Germany and France both beat expectations for GDP growth in the second quarter, while the eurozone and wider group of 27 European countries saw an anticipated quarter-on-quarter contraction of 0.2 per cent.
The figures, released on Tuesday morning, revealed some resilience in the German economy, with 0.3 per cent growth. Economists had expected the quarter-on-quarter figure to come in at 0.1 per cent. Read more
A warning to Great Britain from UK-based investment fund Hinde Capital (a hedge fund that specializes in precious metals):
We wish to outline the gravity of the situation in which the UK finds itself, and by assessing how we got here we can begin to offer our solutions both for monetary and political reforms. Unfortunately we are deeply concerned that far from being cynics or purveyors of doom, the very harsh reality is that the UK is caught in an intractable spiral of negative outcomes. Read more
Germany’s Zew index has suffered its worst decline in 13 years and while it has never been a perfect indicator this level of decline doesn’t bode well for Germany’s future prospects. This is from the Zew Center for Economic Research (with our emphasis):
The ZEW Indicator of Economic Sentiment for Germany has decreased by 27.7 points to a level of minus 16.9 points in June 2012. This is the indicator’s strongest decline since October 1998. The worsening of the situation in the Spanish banking sector and the insecurity about the outcome of the Greek general election, which had been lasting for most of the survey period, are likely to have contributed to the sharp decline of the indicator. Read more
Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 2.7 percent in the first quarter, compared with an increase of 2.6 percent in the fourth. For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data. However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.
By contrast a 0.3 percentage point, or $11.4bn, fell off the US economy in the first quarter, according to the BEA’s ‘second’ estimate of real GDP. The annual rate rose 1.9 per cent instead of the first-estimate 2.2 per cent. Read more
Our US econo-stat of the day:
Vehicle purchases by consumers alone accounted for 30% of all the GDP growth in the last two quarters. Read more
Making babies is fun and good for economic growth (sexing up a lede has never been so easy). Nomura has taken a shot at calculating just how significantly population changes can hit GDP. Their conclusion is that:
[A]lthough a population decline will dent GDP growth and inflation, the degree of correlation is not that high and the negative impact may not be as large as some observers fear. Read more
China’s trade data for April came in well short of expectations on Thursday, and was followed by a raft of more disappointing data on Friday.
Here are a few highlights, courtesy of BAML’s China economists Ting Lu, Xiaojia Zhi and Larry Hu: Read more
The European Central Bank will meet on Thursday, and the broad consensus is for rates to remain on hold. After yesterday’s dismal Purchasing Manager Indices, the press conference will be watched even more closely.
A quick recap of those PMI numbers, courtesy of Jim Reid and Colin Tan at Deutsche Bank, and then onto the implications for the ECB’s rate setting. Read more
The China GDP figures change little in terms of the choose-your-own-adventure thing happening with China. Yes, the 8.1 per cent growth for Q1 was lower than consensus forecasts of 8.3 or 8.4 per cent. But no, it’s not causing the bears to rejoice.
Witness this from Nomura strategist Zhiwei Zhang, who’d forecast a well-below-consensus 7.8 per cent: Read more
Chart via Citigroup, bouncing off the latest UK GDP revisions downward (hat-tip Bond Vigilantes):
A couple of quarters of falling output is all it takes.
On Thursday morning, a flash estimate for March’s purchasing manager’s index suggested that the eurozone is in recession. The composite output index was 48.7, down from 49.3 in February, and is the sixth decline in business activity over the last seven months. The weakness was primarily in manufacturing, which saw its eurozone index fall from 49.0 to 47.7, rather than in services. Read more
Older entries
1Man walks into a gold bar. Au!
2The end of QE?
3The persistent supply-side constraints in US housing
4Bird, plane, Abe
5Bove vs Bloomberg, redux
Show more6A glorious episode in the history of the Revenue
7Stress you next year
8An unusual bear market
9The short arm of the SEC
10Breaking up is hard to do - Rio Tinto edition
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