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May 2010

Economic Calendar: 31 May 2010

May 30, 2010 by Econ Grapher   Comments (0)

Here's the Economic Calendar for the week commencing the 31st of May 2010. This week there's more Q1 GDP results from Australia, Canada, Switzerland, and the EU; Australia and Canada also have their central banks meeting to set monetary policy rates this week. Elsewhere there are PMI (Purchasing Manager Index) results due out from China, the EU, UK, and the US. The other key data points are EU retail sales, CPI, and unemployment, and of course nonfarm payrolls in the US (and similar stats in Canada). There's also the G-20 meetings at the end of the week in South Korea.

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Top 5 Graphs of the Week - 29 May 2010

May 28, 2010 by Econ Grapher   Comments (0)

This week we look at the 2nd estimate of US GDP, US house prices and consumer confidence, the Japanese unemployment and deflation picture, Japan's international trade, and New Zealand's international trade. In the analysis we arrive at a one line summary that says things are still chugging along in this post-great-recession environment, but risks are rising.

1. US GDP
The 2nd estimate of US GDP came in slightly lower than the first estimate. The figure (SAAR) was 3.0% (or 0.8% q/q) against initial 3.2%, and consensus 3.5%. The year on year figure now sits at 2.5%, which considering the depth of the recession is not really all that impressive. The overall result is symptomatic of a gradual and fragile recovery, and though the risks have been repeatedly highlighted, they've only really taken on a real consideration as things like the Euro crisis, housing market weakness, and geopolitical situations (e.g. Korea), have surfaced. On that note, time to review the consumer confidence and housing market situation (below).

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

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

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

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

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

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

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

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

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Economic Calendar: 24 May 2010

May 23, 2010 by Econ Grapher   Comments (0)

Here's the Economic Calendar for the week commencing the 24th of May 2010. This week there's more GDP updates with the second estimates due out for Q1 in the US and UK. There's also trade figures due out from New Zealand, Japan, and Switzerland. And of course, there's the monthly S&P Case Shiller house prices index and the Conference Board Consumer Confidence index due out in the US (as well as personal income and expenditure).

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Top 5 Graphs of the Week - 22 May 2010

May 21, 2010 by Econ Grapher   Comments (0)

This week we look at the data out over the past week that showed a continued (yet fragile) economic recovery in Japan, higher economic growth rates in Mexico, continued strength in the economy of Taiwan, and relatively subdued inflation pictures in both the EU and US.

1. Japan GDP Growth
Japan's economy grew at an annualized 4.9% in Q1 2010, below consensus estimates of 5.5%, but on par with a revised Q4 2009 growth figure of 4.2%. Japan's economy has made a decent bounce-back over the past year, driven largely by international trade; showing a continued reliance of the Japanese economy on exporting. However much of the recovery thus far has been driven by export demand from China (relating to stimulus spending), and more broadly from inventory rebuilding (inventory cycle). Thus much of it to date has been somewhat artificial - it's almost coming down to a question of whether international trade will make a solid and broad based recovery as to whether Japan's economic recovery will be cemented. But then there's also deflation issues and fiscal challenges.


2. Mexico GDP Growth
Mexico saw its economy return to growth on an annual basis (but pulling back slightly on a quarterly basis - note the impact of the comparator period). GDP grew 4.3% in Q1 year on year; slightly above the 4% Bloomberg median estimate. On a growth basis Mexico has also made a sharp recovery back to 'normal' from the deep lows at the height of the crisis. However Mexico's growth is running below potential as the drug war drags on; with continued violence spooking off foreign direct investment. Even the Finance Minister, Ernesto Cordero, noted that violence from the drug war cuts about 1% point off of GDP growth. So as with most emerging economies, lots of potential return, but plenty of volatility.


3. Taiwan GDP Growth
The economy of Taiwan grew 13.27% in Q1 year on year, beating estimates for 11% growth, and surging ahead of the Mainland's 11.9% growth. The statistics bureau of Taiwan raised its 2010 GDP growth projection to 6.14% from 4.72%, and inflation to 1.4% from 1.27%. The economy of Taiwan (whether you call it province of China, or republic of China), has benefited immensely from sales of computer chips and display panels to the Mainland as the Chinese economy continues to surge; opting for closer trade ties over ideology differences as progress moves on in freeing up trade and commerce. But again, as there is huge potential return, there is also risk; eventually China wants reunification, and the form that eventually may take will also have significant economic ramifications (with the potential to be positive or negative).


4. EU Inflation
European inflation crept up slightly in April, with Euro Area inflation tracking at 1.5% (1.4% in March, and 0.6% in April 2009), and European Union inflation tracking at 2% (1.9% in March, and 1.3% in April 2009). As can be seen on the chart below headline inflation is making a bit of a rebound as cyclical factors such as commodity prices push through into the more volatile/market driven aspects of inflation. However core inflation continues to track downwards. Basically the inflation picture for Europe is reasonably subdued for the near term, especially as fiscal challenges continue to dog the continent; but there are risks to the upside longer term, particularly if stimulus measures become more significant and prolonged in their use.


5. US Inflation
US inflation muddled along sideways in April, recording 0.9% year on year in the core index, and 2.2% in the headline index. The results are fairly boring this time, no particular signs of inflation re-surging just yet, which in the short term will give the Fed plenty of comfort (and those who watch the Fed - opposing any step to withdraw stimulus) to continue its policy of significantly low interest rates for a long extended period. Of course the risks to this policy include sowing the seeds for future inflation, encouraging excessive risk taking, and promoting asset bubbles. But to be fair there is a time and a place - and that probably is still now, but the challenge will be to pull out before the vicious asset bubble cycle is reflated (with timing being one aspect, and political pressure being another aspect).


Summary

On the GDP front we looked at the strong rebound in the Japanese economy; noticing that it is still heavily dependent on international trade, with consumer spending and inflation still lack luster, and risks arising from deflation and fiscal challenges. Then we looked at Mexico, which showed a strong recovery in economic growth, but held back by drug and gang related violence. Then Taiwan with a surging recovery, helped by forging closer ties with the Mainland. The uniting theme is a strong bounce back since the peak of the crisis, but in each case significant risks remain to continued strong economic growth.

On the inflation front, the EU showed little signs of a pick up in inflation, other than headline measures. While the US results showed little in the way of an upward trend in the past index results. So on both fronts, a reasonably subdued inflation picture in the short to medium term. But what will be interesting to monitor is the medium to long term, and of course - the policy response to this.

So as a one line summary for the data we looked at this week: strong economic growth bounce back with plenty of risks, and relatively subdued inflation pictures in the developed economies.

Sources
1. Economic and Social Research Institute (Japan) www.esri.cao.go.jp
2.
OECD Statistics database www.oecd.org
3. National Statistics, Republic of China (Taiwan) eng.stat.gov.tw
4. Eurostat ec.europa.eu/eurostat
5. Bureau of Labour Statistics www.bls.gov

Article Source: http://www.econgrapher.com/top5graphs22may.html

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Top 5 Graphs of the Week - 15 May 2010

May 15, 2010 by Econ Grapher   Comments (0)

This week we look first at the GDP results and interest rate decision in Malaysia, then take a look at the Russian GDP growth results as well as how the rest of the BRICs are tracking. Then we look at some of the detail in the EU GDP results; tracking how the largest EU economies are growing against trend. Then we review the US trade balance figures for March, and the April employment numbers from Australia. One theme that comes out is the idea of a two-speed recovery.

1. Malaysian Monetary Policy Adjustment
The central bank in Malaysia increased the benchmark interest rate to 2.5% from 2.25%, the second tightening this year, in a move that was broadly expected by most analysts. Earlier in the week the Malaysian economy was revealed to have grown 10.1% vs an expected 9% year on year (thus prompting the central bank to lift rates as the Malaysian economic recovery surges on; Euro risks notwithstanding). Another Asian growth powerhouse in a time where developing and emerging markets are almost assured to outperform developed economies on economic growth, but the global risks are still there - we live in an increasingly interlinked global community.

2. Russian Economic Growth
The Russian economy also showed an impressive bounce-back this week for the first quarter of 2010 with 2.9% growth year on year (vs -9.8% in Q1 2009, and -3.8% in Q4 2009). The impressive bounce-back shows how interlinked the Russian economy is with commodity prices, and affirms the view that Russia has good prospects, but with volatility to boot. You may recall recently the Russian central bank dropped interest rates (in contrast to the monetary policy actions of most other emerging markets) in order to secure and sustain the recovery; and it will be interesting how this plays through in the R of the BRIC - major emerging economies.


3. European Economic Growth
You probably caught the headlines where the EU beat consensus by 100% with 0.2% vs an expected 0.1% growth! But it is worth looking through into more of the details. The larger EU economies like Germany, Italy, Spain, France, are experiencing the similar global pattern of a sharp v shaped recovery in GDP growth. However with the exception of Germany the large EU economies are still below their average year on year growth rate of about 1.5%. Granted, some of the "rebound" is due to a low comparator period, but this "V" shaped recovery in the EU is probably the most likely spot for a "W" shaped recovery to eventually unfold given the weight of the problems and risks there.


4. US Trade Balance
The US recorded a slightly worse trade balance in March with a deficit of -$40.4 billion, vs -$39.7 billion in February. The slightly worse result is mostly driven by oil imports, which has a distorting impact on assessing whether or not the US is changing its consuming ways in terms of the export/import mix and global imbalances. Ultimately the US reliance on foreign oil continues to be a key vulnerability for the US and a source of structural trade imbalances. If the yuan were to appreciate then this gap may even widen if the appreciation were small enough not to greatly impact on spending decisions by US importers. But then on that front much of what the US gets from China doesn't carry the same necessity as oil. As always - this is an area of keen interest to me as the US economic recovery unfolds; keep watching this space!


5. Australian Employment
Australia added jobs again in April, recording a total of 33.7k new jobs (27.7k in March), with part-timers declining by -3.9k and all of the growth coming from full-timers 37.5k. The unemployment rate remained stable at 5.4% as the population proved able to supply for the new jobs. As the unemployment rate begins to drop even more, this will probably put the pressure back on the Reserve Bank of Australia to start raising interest rates again; having raised from 3% late last year to 4.5% in May - indicating a pause to be on the cards in its most recent statement. Still a strong economy, but recently brought out some new taxes designed to try remedy the two-speed mining vs non-mining economy (this could have the unintended effect of changing it to a one-speed (slow), economy).


Summary

So Malaysia is showing a pretty strong rebound from the crisis, even being spurred to ratchet up interest rates for fears of overheating (as has some of its emerging market ilk). Indeed the BRICs have also shown a pattern of a sharp recovery; with Russia - the one that took the biggest hit - showing a drastic turnaround, reflecting the volatility inherent in emerging markets.

Meanwhile developed markets are showing the same pattern but don't at this stage give any monetary policy setters any jitters whatsoever just yet - indeed the developed markets probably need a lot more water to go under the bridge before they can declare it all over.

And as for the US trade balance and Aussie employment, it just plays into the two-speed idea... The recovery is going to carry on at a two-speed pace with emerging markets leading the charge and developed economies falling behind, and global risks will be waiting at every corner!

Sources
1. Bank Negara Malaysia www.bnm.gov.my
2. Trading Economics www.tradingeconomics.com Bloomberg www.bloomberg.com
3. OECD Statistics database www.oecd.org
4. Trading Economics www.tradingeconomics.com
5. Australian Bureau of Statistics www.abs.gov.au

Article Source: http://www.econgrapher.com/top5graphs15may.html

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China Economic Outlook - monthly data update

May 11, 2010 by Econ Grapher   Comments (0)

China just released its monthly economic data update; in this article we review some of the numbers on inflation, retail sales, industrial production, lending growth, and money supply. The main themes from the data suggest the economy is still growing strong, and that the outlook is for continued expansion of activity. However given the still stimulatory policy stance, the data adds to a view of increasing inflation, and risks of short-medium term overheating.

1. CPI Inflation
China showed further signs of increasing prices as inflation rose to 2.8% year on year in April vs 2.4% and consensus 2.7%. However much of the increase was related to increased food price inflation, but the overall trend of increasing prices has been flagged by the quarterly inflation expectations index (see the chart below); and lines up with the thinking and observations of most internal and external analysts which suggests the Chinese economy is showing signs of overheating. The near term outlook for inflation will most certainly be for continued rises in the near term, probably breaching the 3% target within a month or two.


2. Retail Sales
Moving on, an indicator of Chinese domestic consumer spending, retail sales, increased a further 18.5% year on year; pulling back slightly from the seasonal peak earlier in the year, but beating consensus 18.2% and previous 18%. Retail sales is an interesting metric to watch in light of the Yuan/global imbalances debate; part of the cause of the global imbalances was under-consumption in China vs over-consumption in the US. So continued growth in this metric may be promising in terms of that relationship - but old habits die hard. The more important point to take is that retail sales are consistently rising, which adds to the long term opportunities for investment in China.


3. Industrial Production
On the flip-side of retail sales, industrial production grew another 17.8 in April, which was below consensus forecasts for 18.5% (and March 18.0%). The slight decline was flagged by the April PMI figures (charted along side industrial production below). It's hard to say that it's a negative at this point given the magnitude it's still at, but it will pay to monitor this metric as stimulus spending gets wound back, and potential tightening steps up - and of course, as the global context adds complications (à la Europe) in terms of export related demand. In a similar vein, urban fixed asset investment continued to boom, rising 26.1% - matching consensus, but slightly below 26.4% in March.


4. Loan Growth
Incredibly topical, given concerns about Chinese overheating, and policy moves already taken to crack down on excessive loan growth, the stats for April will give no comfort for those with concerns of overheating. New loans were up CNY 775 billion, sending new loans year to date above CNY 3.5 trillion (which is high historically, but below the CNY 5 trillion this time last year, spurred on by the government to help stimulate the economy during the global financial crisis). On a year on year basis this puts loan growth at 24% and lifts total loans above CNY 46 trillion. So this is a positive in terms of its stimulatory effect on the economy, but a negative in terms of the inflation/overheating context.


5. Money Supply
In a similar track, money supply - a key monetary metric, and important facet to the inflation picture - saw continued growth in April. On a year on year basis M2 grew 21.5% vs consensus 22.1% and previous 22.5%. So the rate of increase is slowing slightly, but it's still expanding at a reasonably rapid pace. M1 expanded 31.2%, while M0 grew 15.9% even after a slight seasonal pull back. To some extent the pace of growth in China can probably absorb some of the large expansion in the money supply, but there will certainly come a point where its influence will become increasingly inflationary. But as with loan growth - it lines up with comments by officials along the lines of being concerned about inflation, but happy to keep conditions relatively stimulatory to help the cement the recovery, and boost growth.


Summary

So the main themes to draw from the data would be, that growth is still strong, activity is still expanding, and that fears about overheating and rising inflation aren't without support. Inflation is rising, and though in the short term some of the drivers are temporary, the medium term outlook is for continued rises in prices.

On consumer spending, the trend is still strongly upwards, reflecting rising wealth and incomes, but is unlikely to herald a shift in savings habits. Meanwhile on the industrial production front, there is potential early signs of slowing - but even so still growing at a strong pace, but one to watch as things unfold.

On the monetary analysis, loan growth is still strong, and money supply is still expanding at a fast rate. The measures announced by the government will likely limit loan growth from rising at the same pace as last year, but both measures are clearly expansionary at this point.

So overall, the outlook is for continued growth in activity, and if things keep up, probably another double digit GDP growth figure in Q2. And the long-term story of economic growth in China stands. But given the still very much stimulatory policy stance (in spite of the reserve requirement increases), the risks of overheating and increasing inflation are certainly rising, and may force the government's hand in policy tightening or alterations sooner rather than later.

Sources
1. National Bureau of Statistics www.stats.gov.cn & People's Bank of China www.pbc.gov.cn
2. National Bureau of Statistics www.stats.gov.cn
3. National Bureau of Statistics www.stats.gov.cn & CFLP: www.chinawuliu.com.cn & Markit/HSBC: www.markiteconomics.com
4. People's Bank of China www.pbc.gov.cn
5. People's Bank of China www.pbc.gov.cn

Article Source: http://www.econgrapher.com/11may-chinaupdate.html

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China International Trade Review - April Surplus

May 10, 2010 by Econ Grapher   Comments (0)

China saw exports rise 30.5% year on year in April to $119.9billion, and imports up 49.7% to $118.24billion, leaving a trade surplus this month of $1.68billion compared to a deficit last month of -$7.24billion. Consensus estimates were for a deficit of -$0.55billion.

The rise in imports, though much of it driven by increasing commodity prices, is a positive sign for global trade and economic activity as China increasingly becomes a driver of world economic growth.


One issue of contention may lie in the results around the squeezing of the Chinese trade surplus, and the obvious implications this may have for the, seemingly much yearned for, Yuan policy adjustment.

The chart below shows the pretty stark decline in the trade surplus over the past year. However how long this trend will continue is up for debate as the rolling 12-month surplus showed signs of stabilizing in April coming in at about $170billion, vs $174billion in March (down from the all time high of $360billion in January 2009).

However, the main downside risks to the trade balance of weak domestic demand and rising commodity prices, could well be persistent - particularly on the demand side as the troubles in Europe threaten to shake up market sentiment and consumer confidence (note, the EU makes up for about 20% of China's exports).


But again, an important takeaway from the results is the surprising resilience that trade volumes have shown since plummeting in early 2009. To be sure, volumes are below trend, but are tracking around pre-crisis levels. But as far as the yuan goes, no matter what angle you take on the trade issue, the European crisis (trillion dollar backstops notwithstanding) could well take away any compulsion that the Chinese may have felt to alter yuan policy.

The data due in the next couple of days though will add to the mix, So watch this space! As a reminder, the data due out this week includes: (consensus vs previous): Consumer Price Index (2.7% vs 2.4%), Fixed Asset Investment (26.1% vs 26.4%), Industrial Production (18.5% vs 18.1%), and Retail Sales (18.2% vs 18%).

Sources
Econ Grapher Analytics www.econgrapher.com
China Customs www.customs.gov.cn
Bloomberg www.bloomberg.com

Article Source: http://www.econgrapher.com/10may-chinatrade.html

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Economic Calendar: 10 May 2010

May 9, 2010 by Econ Grapher   Comments (0)

Here's the Economic Calendar for the week commencing the 10th of May 2010. The main event out this week, and a topical one at that, is Euro Zone GDP for Q1 2010 on Wednesday. Another key set of data will be the monthly update from China on lending, money supply, trade, inflation, industrial production, fixed asset investment, and retail sales. In the retail sales space there's also an update from the US and New Zealand. There's also the Bank of England meeting on Monday, which may be interesting given the Euro context.

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Top 5 Graphs of the Week - 8 May 2010

May 8, 2010 by Econ Grapher   Comments (0)

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

ECB Holds Fire, For Now...

May 6, 2010 by Econ Grapher   Comments (0)

The European Central Bank announced no change to the policy rate (at 1%); and in spite of pressure to do otherwise, also no changes to other monetary policy moves. With the fiscal problems surfacing in the EU (most notably Greece), there had been some expectations that the ECB might e.g. "go nuclear"... implementing extraordinary measures, but for now it seems the ECB doesn't see this as necessary. Before moving into the economic analysis part it's worth reviewing what they did say in this respect (given the topical nature of fiscal challenges):

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