Much is being made of China being about to pass the US as the world’s biggest economy — and of China’s fight to massage down the figures.
We hate to side with Chinese statisticians, but at the very least Beijing may well be right to play down the comparison in its local media.
Here are a couple of surprises which come out from using similar adjustments to the PPP calculations used to show China’s economy is bigger (using the IMF’s World Economic Outlook database)…
- In 1980, Greece and Gabon (which was in default on its debt from 1999 to 2005, but has lots of oil) were ranked above the UK for PPP-adjusted GDP per person. Before adjustment they were about a third poorer.
- East Timor, on the IMF’s 2014 estimates, is ranked as richer on PPP-adjusted GDP per capita than Poland, Estonia or Hungary – and is ranked only 1.4 per cent poorer per person than Portugal, its former colonial master. It has discovered oil, boosting GDP. But before the PPP adjustment, GDP per capita is put by the IMF this year at $4,669 vs $14,166 a head for Portugal.
Like other parts of the US economic recovery — housing, the labour market — capital expenditures by companies have been a letdown recently, even accounting for the weather.
The latest example came in Wednesday’s durable goods report, in which the “nondefense capital goods orders excluding aircraft” component fell. (That figure is a proxy and obviously doesn’t capture everything that normally counts as capex, which also includes investment in property and structures, imported capital goods, and certain intangible assets. Capex is often poorly or loosely defined in discussions about it.) Read more
A chart from Credit Suisse (click to enlarge for a clearer picture):
The strategists add:
Later on Friday comes the US employment situation report, the first major economic indicator to give a sense of how strongly the American economy finished 2013.
Before obsessing over its details, we wanted to first set down our broader thoughts on what happened last year, and what we’ll be paying attention to this year. Read more
BUY (The shutdown didn’t wreck everything, the jobless rate’s still weak)
NO, SELL (Tapering sooner) Read more
Two charts to nurture some hope this morning.
First, a reminder that when long established trends turn, they can do so very quickly. And second, if there is a real turn in the US, there is plenty of scope for activity to pick up. Read more
From Steven Englander of Citi, a list of US data releases possibly now subject to delay because of the shutdown:
And those unlikely to be delayed:
You’ve seen those who were (ahem) surprised by the US central bank’s decision not to start tapering this month… now read the words of one who got it right: BNP Paribas’ Julia Coronado, the bank’s chief North America economist and ex-forecaster at the Fed.
And interestingly, BNP think even December is in doubt: Read more
Oped pages in recent months have been regular hosts to pieces extolling some of the unsung benefits of the US shale-gas revolution. Some of these have gone so far as to proclaim that shale gas is, or will be, a significant benefit for the country’s entire economy.
Lately, though, the narrative is beginning to sound hollow. Read more
Self-explanatory, and they come via RBC Capital Markets:
From a note Wednesday morning by ConvergEx (emphasis ours): Read more
Welcome to see such punchy prose from an executive, surely.
“Have you ever had one of those weeks where your best- prepared plans weren’t good enough to accomplish everything you set out to do?” Geiger asked in a Feb. 1 e-mail to executives. “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” Read more
A h/t to Mark Dow for the spot. That’s Citi’s US Economic Surprise Index threatening to turn negative after a decent run in positive territory.
As the festive season draws nearer, Albert Edwards brings us good cheer:
Expect the New Year to bring nothing but disappointment.
Yes, our favourite bear argues that even though we’re getting relatively decent US economic data, it’s falling corporate profits to come we should be concerned about. In short, he argues the US is already entering another recession. Read more
Well we’re no longer off 300 points on the Dow. (Off 265, as we went to pixels.) But what went on here?
The estimates of $10bn to $20bn for damage caused by hurricane Sandy fall well short of the costs incurred by hurricane Katrina ($113.4bn) and 1992′s hurricane Andrew ($58.6bn), Goldman Sachs’ Jan Hatzius says. But it’s difficult to know how much to rely on the cost estimates so early on, as Hatzius highlights:
These numbers are likely to strike many readers as surprisingly small given the scale of the devastation in several mid-Atlantic states. It is certainly possible that they are too small, as initial cost estimates for natural disasters have sometimes proved too low in the past. For instance, the damage from Tropical Storm Irene was about twice as large as the initial estimates had suggested, and the damage from Hurricane Katrina was about four times as large. However, it is also likely that the concentration of the impact in the area between Washington and New York has magnified its media impact, even relative to the population density and the value of the real estate in this part of the country.
(Ouch – the media card? Really?) Read more
In attempts to explain why companies (particularly in the US) are so reluctant to invest and hire of late, the word “uncertainty” will usually make an appearance. “Policy uncertainty” is generally seen as the enemy of business confidence, and the combination of post-crisis regulatory reforms and ever-increasing partisanship in the US Congress make it a very big theme of late. Intuitively it makes sense that uncertainty would affect business decisions, but can that be separated from the effect of actual economic activity itself? Read more
Says this guy here with our paraphrasing, naturally (click through for the full paper):
It is less than a month away from the next FOMC meeting (September 12-13), and Bernanke’s speech at Jackson Hole is at the end of August.
Check this week’s posts at Calculated Risk or this series of charts from Joe Weisenthal for detail, but the short story is that quite a few economic indicators have outperformed expectations in the last couple of weeks. Read more
It’s GSEs. It’s a guilty pleasure of sorts in housing recovery indicators. It’s also – arguably – the future of US housing reform.
Freddie Mac posted $3bn of net income in the second quarter. That means it has positive net worth (well a pat on the back for you, Freddie) and hence, it’s paying far more back to the US Treasury this year than it’s taking out, in dividends on the government’s preferred stock. (See also Fannie, earlier.) Read more
Since we found it a useful exercise, here’s a quick, simpli
sticfied snapshot of the US recovery. Or non-recovery, whatever it is. Not all of these carry equal weight, naturally:
Stuff that looks good Read more
Another notable increase in US consumer credit, this time for May…
We already discussed at length the evolving and (yet again) disappointing relationship between jobs and profits growth, along with the not-so-anomalous-in-context swings in productivity growth these past few years.
But it’s worth mentioning one more time given this morning’s crapadocious jobs report and the start of earnings season on Monday. Read more
A few notes on the report as we make our way through it:
– This sentence caught our eye: Read more
A US GDP factoid that we missed last week, spotted by the econ team at Credit Suisse:
We would note that the profit share of GDP in the first quarter, reported in [last Thursday's] GDP revision, shrunk for the first time in the current business recovery/expansion. Without much stronger nominal GDP growth, and with the low hanging fruit of lower interest rates and debt service costs already having been harvested, restoration of margins is achieved mainly through reducing labor costs. This factor may prove more enduring for the employment data. Read more
Consensus had been 150k. A big revision downward in April’s figure of 115,000 too:
The change in total nonfarm payroll employment for March was revised from +154,000 to +143,000, and the change for April was revised from +115,000 to +77,000. 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
With a hat tip to Blood and Treasure, the Committee of 100 (how mysterious does this lede sound already?) has released a big survey of how the US and China see each other. Previous one was in 2007.
There are some fun financial/economic sidelights… and some confused elites: Read more
Quite a blow-out in March’s US consumer credit numbers…
Highlighted in the chart below… Read more
Consensus had been 160k. Unemployment rate came in at 8.1 per cent. March payrolls revised up from 120k to 154k though, and February up from 240k to 259k.
Full Bureau of Labour Statistics release below… Read more