Even with increasing net exports, over all GDP isn’t benefiting all that much, as fiscal policy and structural reforms that assist exports do so by restricting incomes and domestic demand to achieve ‘competitiveness’. Additionally, negative rates and QE remove some interest income from the economy, which also restricts domestic demand to some degree. And, ironically, the subsequent current account surplus puts upward pressure on the euro until there are no net exports, obviating the efforts and sacrifices that went into achieving the competitiveness. Further note that a Greek default, for example, fundamentally removes net euro financial assets from the economy, further tightening the euro, as Greek debt is nothing more than bank deposits in the ECB system:
European Union : Industrial Production
The goods producing sector began the second quarter on a surprisingly soft note. A 0.1 percent monthly rise in production (ex-construction) was comfortably short of expectations and followed a steeper revised 0.4 percent decline in March. As a result, annual workday adjusted output growth dropped from 2.1 percent to 0.8 percent, its slowest pace since January.
However, April’s minimal monthly rebound would have been rather more impressive but for a 1.6 percent slide in energy. Elsewhere there were gains in intermediates (0.3 percent), capital goods (0.7 percent) and consumer durables (1.0 percent). Non-durable consumer goods were down 0.8 percent but, apart from this category, all sectors reported increases versus a year ago.
Amongst the larger member states output rose a solid 0.8 percent on the month in Germany but there were falls in France (1.0 percent), Italy (0.3 percent) and Spain (0.1 percent). Elsewhere Finland, already technically in recession, only saw output stagnate following a cumulative 2.4 percent loss since the end of last year while Greece (also back in recession) posted a hefty 2.3 percent reversal.
April’s advance leaves Eurozone industrial production just 0.1 percent above its average level in the first quarter when it increased fully 0.9 percent versus October-December. This provides early warning of a probable smaller contribution from the sector to real GDP this quarter and so underscores the need for the ECB to see out its QE programme in full.
Portfolio selling from blind fear of QE and negative rates and Greece, etc. drove down the euro, but fundamentally inflation was falling and ‘competitiveness’ increasing so the trade surplus was pushed higher by the lower levels of the currency. Now it looks like the increasing trade flows are ‘winning’ and beginning drive the euro higher, with portfolios ‘sold out’ of euro, all of which should continue until the trade flows subside:
Back to the US:
I see no sign of whatsoever of accelerating credit growth:
This got some attention when the growth rate was increasing, but not anymore since it rolled over and remains well below prior cycles:
They make point of potential growth every time one of the little wiggles bends up, but just look at how low the growth rate actually is, especially compared to prior cycles:
Nothing happening with consumer lending:
This shows how competitive banking is as banks compete by narrowing their spreads over their cost of funds:
The Atlanta Fed forecast ticked up with the latest retail releases, but still remains well below mainstream forecasts and is also indicating what would be a very weak ‘bounce’ from the negative Q1 print, as the implied first half GDP growth rate would only be around .6%- very close to an ‘official’ recession. And as you’ve seen from the charts, those same releases indicated continued year over year deceleration of growth (including autos and retail sales) as well as elevated inventories, which doesn’t bode well for Q3 and Q4: