Category Archives: Retail Sales

Pre Christmas update

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The good news is the US budget deficit still looks to be plenty large to support modest top line growth.

And as the deficit continuously adds to incomes and savings, the financial burdens ratios continue to fall, and the stage is set for a ‘borrow to spend’, ‘get a job buy a car’, ‘it’s cheaper to own than to rent’ good old fashioned credit expansion.

But most all of that good news may already be discounted by the higher term structure of interest rates and the latest stock market rally.

And there are troubling near term and medium term risks out there that don’t seem at all priced in.

The rise in crude prices is particularly troubling.

Net demand isn’t up, and Saudi production remains relatively low.

So the Saudis are supporting higher prices for another reason. Maybe it’s the wiki leaks, or maybe they just had a bad night in London.

No way to tell, but they are hiking prices, and there’s no way to tell when they will stop.

Crude prices are already up enough to be a substantial tax on US consumers that has probably more than offset whatever aggregate demand might have been added by the latest tax package.

Might explain the weaker than expected holiday retail sales?

Congress will soon have a deficit terrorist majority, with many pledged to a balanced budget amendment.

And the world seems to be leaning towards fiscal tightening pretty much everywhere.

The unemployment benefits program has been extended but benefits still expire after 99 weeks, and less in many states.

Net state spending continues to decline as state and local govs continue to reduce their deficits and capital expenditures.

Catchup in the funding of unfunded pension liabilities will continue to be a drag on demand.

A federal pay freeze has been proposed.

The Fed’s 0 rate policy and qe continue to reduce net interest income earned by the economy.

Bank regulators continue to impose policies that work against small bank lending.

Seems some income has likely been accelerated into this quarter from next year over prior concerns of taxes rising, distorting q4 earnings to the upside and maybe lowering q1 earnings a bit?

Euro zone muddles through with very weak domestic demand, and curves perhaps flattening as markets start to believe the ECB will fund it all indefinitely?

China slows as a result of fighting inflation?

Same with Brazil?

Maybe India as well?

Commodity price slump with demand flattening?

Fed low forever?

Stocks in a long term trading range like Japan?

US term structure of interest rates gradually flattens to Japan like levels?

Relatively weak demand gradually brings on alternatives to over priced crude?

Merry Christmas!!!

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Australia

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I don’t follow it at all closely but in general they have been following a policy of budget surpluses and relying on increasing levels of private sector debt to sustain aggregate demand.

That’s not sustainable, even for China’s coal mine, and especially with China showing signs of slowing down.

Retailers cry poor as sales drop sharply during Christmas period

By Nick Gardner and Brittany Stack

December 19 — MAJOR store bosses claim Australia is experiencing a retail recession, with the quietest and slowest Christmas shopping period in 20 years.

Rising utility bills, mortgage rates and rents have decimated families’ disposable incomes, forcing many retailers to start Boxing Day sales one month in advance in a bid to entice shoppers, reported The Daily Telegraph.

Harvey Norman boss Gerry Harvey said there would be “blood on the streets” in the retail sector because business is so bad, the worst since the recession of the early 1990s.

“It’s a crisis, the worst in 20 years,” he said.

“There is a recession in retail right now. Boxing Day sales have had to come early because retailers need to sell something to pay their staff.”

The news comes as the Government announced an inquiry into the future of the retail sector to examine issues of competition, and the $1000 GST and duty-free threshold on overseas shopping.

Australian retailers and shopping centre owners have formed an alliance to try to persuade the government to abolish the $1000 GST-free threshold. They plan to spend millions on an advertising campaign to try to have imported goods subject to tax and import duty. Mr Harvey is not alone in his bleak outlook.

David Jones and Myer are offering discounts of up to 40 per cent across all departments in their Sydney stores, saying it was the toughest environment for years.

“Retail is challenging right now and to drive people into stores we are offering significant discounting,” Myer spokesman Mitch Catlin said.

“Every retailer is doing it. It is the best final week I can remember for consumers going into Christmas.”

David Jones described its sales as “patchy”.

Retailers traditionally make up to a third of their annual profits in December, but sales are down across the board as stores battle plummeting sales, shrinking profit margins and increased competition from overseas websites.

Russell Zimmerman, executive director of the Australian Retailers’ Association, said he’d never seen tougher conditions in 30 years.

“We’ve had 43 per cent of our retailers reporting sales figures for the period from December 5 to 11 at below last year’s levels. To have so many suffering falling sales is terrible.”

He said consumers have been affected not only by rate rises and higher utility bills but also spooked by events overseas. “They’re seeing economies such as Greece and Ireland in crisis and they’re getting worried,” Mr Zimmerman said.

He predicted retail sales of $39.9 billion, a 3.5 per cent rise on last year or about half the usual increase. He said this may force retailers to cut staff hours or cut back on casual workers. “We’re hoping for a good last week into Christmas,” he said.

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China reduces long term treasuries by record amount

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Notice US Tsy yields fell to their lows even with China reducing holdings.
The fear mongerers will just tell us to thank goodness someone else came in to replace them, and that without the Fed buying it’s all over for the US, etc.
To which I say, it’s just a reserve drain, get over it!
And if you don’t understand that, try educating yourself before you sound off.

Interesting they are letting overseas banks invest in their bond markets.
Maybe a move to help strengthen their currency?
They can see the $ reserves aren’t coming in as before?
Or overseas banks bought their way in, looking to profit?
Or the next generation western educated Chinese thinks an expanded financial sector is a prerequisite to growth?
In any case, looks like another western disease has spread to China.

China Headlines,
China Threatened By Export Risk After Eclipsing Japan

China Reduces Long-Term Treasuries by Record Amount

China Economic Index Rises, Conference Board Says

China to Let Overseas Banks Invest in Bond Market

China Lags Behind on Key Measures After Surpassing Japan: Govt

Foreign Investment in China Climbs for 12th Month

Yuan Gains Most Since June as China Favors Greater Volatility

China Copper Consumption Growth to Slow, Antaike Says

Hong Kong Jobless Rate Slides to Lowest in 19 Months

Singapore Exports Cool as Government Predicts Slowing Demand

China Reduces Long-Term Treasuries by Record Amount

By Wes Goodman and Daniel Kruger

August 17(Bloomberg) — China cut its holdings of Treasury notes and bonds by the most ever, raising speculation a plunge in U.S. yields has made government securities unattractive.

The nation’s holdings of long-term Treasuries fell in June for the first time in 15 months, dropping by $21.2 billion to $839.7 billion, a U.S. government report showed yesterday. Two- year yields headed for a fifth monthly decline in August, falling today to a record 0.48 percent.

Two-year rates will rise to 0.85 percent by year-end as the U.S. economy rebounds in 2010 from a contraction in 2009, according to Bloomberg surveys of financial companies. Reports today will show improvement in housing and manufacturing, signs of stability even as growth is less than expected, analysts said.

“Buying now is a big risk,” said Hiroki Shimazu, an economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “I don’t recommend it. The economy is stable.”

Investors who purchased two-year notes today would lose 0.4 percent if the yield projection is correct, according to data compiled by Bloomberg.

The economy will expand at a 2.55 percent rate in the last six months of 2010, according to the median of 67 estimates in a Bloomberg survey taken July 31 to Aug. 9, down from the 2.8 percent pace projected last month.

Housing, Production

China’s overall Treasury position fell for a second month in June to $843.7 billion.

“This may have been opportunistic,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in New York, one of 18 primary dealers that trade with the Federal Reserve. “Look at the level of yields. If you’ve held a lot of Treasuries, you’ve done well.”

The People’s Bank of China on June 19 ended a two-year peg to the dollar, saying it would allow greater “flexibility” in the exchange rate. The currency has since strengthened 0.5 percent.

The central bank limits appreciation by selling yuan and buying dollars, a policy that has contributed to its accumulation of the world’s largest foreign-exchange reserves and led to the build-up of its Treasury holdings.

Domestic Investors

Treasury yields fell as U.S. investors increased their holdings to 50.5 percent, the biggest share of the debt since August 2007 at the start of the financial crisis, amid signs that a recovery from the longest contraction since the Great Depression has lost momentum.

U.S. reports last week showed retail sales increased in July less than economists forecast and inflation held at a 44- year low.

The two-year note yielded 0.50 percent as of 12:19 p.m. in Tokyo. The 0.625 percent security due in July 2012 traded at a price of 100 7/32, according to data compiled by Bloomberg.

China, with $2.45 trillion in foreign-exchange reserves, turned bullish on Europe and Japan at the expense of the U.S.

The nation has been buying “quite a lot” of European bonds, said Yu Yongding, a former adviser to the People’s Bank of China who was part of a foreign-policy advisory committee that visited France, Spain and Germany from June 20 to July 2. Japan’s Ministry of Finance said Aug. 9 that China bought 1.73 trillion yen ($20.3 billion) more Japanese debt than it sold in the first half of 2010, the fastest pace of purchases in at least five years.

Diversification Strategy

“Diversification should be a basic principle,” Yu, president of the China Society of World Economy, said in an interview last week, adding a “top-level Chinese central banker” told him to convey to European policy makers China’s confidence in the region’s economy and currency. “We didn’t sell any European bonds or assets. Instead we bought quite a lot.”

China held 10 percent of the $8.18 trillion of outstanding Treasury debt as of July. Investors in Japan hold the second- largest position in Treasuries with $803.6 billion of the securities, or 9.8 percent. Total foreign holdings rose 1.2 percent to a record $4.01 trillion, the Treasury said. China’s holdings peaked in July 2009 at $939.9 billion.

China needs a strong U.S. dollar, said Kenneth Lieberthal, a senior fellow specializing in China at the Brookings Institution, a research group on Washington.

“I don’t think we’re going to see any massive flight from China’s holdings of U.S. debt,” Lieberthal said on Bloomberg Television. “That would be self defeating and they well recognize that.”

China to Let Overseas Banks Invest in Bond Market

August 17 (Bloomberg) — China will let overseas financial institutions invest yuan holdings in the nation’s interbank bond market in a pilot program to spur currency flows from abroad.

The People’s Bank of China will start with foreign central banks, clearing banks for cross-border yuan settlement in Hong Kong and Macau, and other international lenders involved in trade settlement, according to a statement on its website today.

“It’s a big boost for the offshore renminbi market,” said Steve Wang, a credit strategist for Bank of China International Securities Ltd. in Hong Kong. It “would allow offshore holders of yuan to invest the money directly in China rather than going through middlemen. It’s a step in the right direction that really opens the domestic securities market.”

The move comes as China seeks to broaden the use of its currency. The nation approved use of the yuan to settle cross- border trade with Hong Kong in June 2009, part of a drive to reduce reliance on the U.S. dollar. The popularity of that program was limited by the investments available in the currency.

Each overseas bank needs a special account at a local lender for debt transaction clearing, according to the regulations, which come into effect from today. Overseas banks must first apply for investment quotas on the interbank market, the central bank said. Foreign central banks should disclose funding sources and investing plans in their applications, according to the central bank.

There were a total 14.3 trillion yuan ($2.1 trillion) of bonds on the interbank market as of June, including debt issued by the central government, banks and companies, the central bank said July 30. That amount accounted for 97 percent of total debt outstanding.

Yuan Deposit Growth

Yuan deposits in Hong Kong climbed 4.8 percent in June to a record as China ended a two-year peg against the dollar. Currently, trade is the main way for offshore holders of yuan to return money to China, Wang said.

The program is a step forward to internationalization of the renminbi, said Dariusz Kowalczyk, a currency strategist at Credit Agricole CIB in Hong Kong. The Chinese currency, the yuan, is also known as the renminbi.

“By opening the new avenue to invest Chinese yuan funds, the currency will become more attractive and may come under further upward pressure in the offshore market in Hong Kong,” Kowalczyk said. “Foreign central banks may decide to begin the process of diversifying their reserves into Chinese yuan.”

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UK News — Summer Sales Drive Credit Card Spending

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Possible sign of a ‘hand off’ to private sector credit growth as double digit deficit spending replenishes savings and eases debt service and debt service ratios.

Austerity measures will take a bit off growth at some point but probably not drive it anywhere near negative.

UK Headlines:
U.K. House Prices Increased 0.1% in July, Acadametrics Says
UK Summer Sales Drive Credit Card Spending
UK Government Bonds in Demand

UK Summer Sales Drive Credit Card Spending

Aug. 13 (Telegraph) — It might be less than a year since
the end of the worst recession since the 1930s but consumers seem
to have already forgotten the lessons of the credit crisis.

Spending on credit and debit cards rose 9.9pc in July as
consumers ignored fears of a double-dip recession and hit the
high street, according to figures from Barclaycard.

The year-on-year increase was achieved as retailers enticed
shoppers with summer discounts.

“If consumer confidence is taking a hit, it’s not happening
on the high street,” said Stuart Neal of Barclaycard. “If
spending remains at this level compared to last year, 2010 could
prove to be a very good year for retailers.”

July was the third month in a row that the annual growth
rate in sales was above 9pc, according to Barclaycard.

The report said that spending last month was 1.9pc higher
than in June, partly reflecting an earlier start to the summer
sales season.

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China Seen Robbing Consumers With Low Interest Rates

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Looks like someone’s catching on to the interest rate channel. And Bloomberg is reporting it.

(Bloomberg never reported it when I communicated with them.)

China Seen Robbing Consumers With Low Interest Rates

Aug 6 (Bloomberg) — Peking University professor Michael
Pettis was discussing declining bank-deposit returns when a
student interrupted with a story about her aunt that may stymie
China’s plan to boost consumer spending.

“To send her son to university in six years it means she
must replace each yuan in lost income with one from her wages,”
the student said, according to Pettis.

The government’s policy of keeping interest rates low to
reduce the burden of soaring municipal debt is costing savers as
much as 1.6 trillion yuan ($236 billion) a year in lost income
on bank deposits, according to Pettis, former head of emerging
markets at Bear Stearns Cos. To make up the shortfall, savers
have to set aside a larger proportion of wages, undermining
China’s efforts to counter slower export growth with consumer
spending at home.

“Consumption is already at a dangerously low level,” said
Pettis, author of the “The Volatility Machine,” a 2001 book
that examines financial crises in emerging markets. “If it
doesn’t begin to rise very quickly, China has a problem because
household consumption will continue to drop as a share of GDP.”

Emphasis on exports and investments have caused domestic
consumption to fall to 35 percent of gross domestic product, the
lowest of any major economy, from 45 percent a decade ago,
Societe Generale AG says.

Pettis isn’t alone in being skeptical about a consumer boom
in China. Yale University finance professor Chen Zhiwu and Huang
Yasheng at the Massachusetts Institute of Technology also
predict constrained consumer spending.

State Controlled

Chen estimates the state controls 70 percent of the
nation’s assets and says most of its profits don’t flow to
consumers. On an inflation-adjusted basis government income
surged more than tenfold in the past 15 years while disposable
urban income increased less than three times, he said.

Pettis said the drag on consumer spending from depressed
deposit rates may help slash China’s annual economic expansion
to between 5 and 7 percent a year through 2020, from an average
of about 10 percent in the past decade.

The Group of 20 nations has urged China to boost domestic
consumer spending to help offset reduced consumption from debt-
strapped consumers in the U.S. and Europe. If Chinese shoppers
fail to take over that mantle as the government’s 4 trillion
yuan in stimulus wanes, then the nation may have to fall back on
exports for growth. That would revive trade disputes with the
U.S., which is battling 9.5 percent unemployment, said Huang.

Trade Tensions

“I do not see how trade tensions can be avoided,” said
Huang, a professor at MIT’s Sloan School of Management in
Cambridge, Massachusetts, and author of “Capitalism with
Chinese Characteristics: Entrepreneurship and the State.”
“Even in the best-case scenario I do not see household
consumption replacing investment as a driver of growth in the
foreseeable future.”

China’s leaders have vowed to boost consumption’s share of
GDP since at least 2006 — so far to no avail. The ratio of
consumption in China’s economy is about half that of the U.S.,
and about 60 percent of both Europe and Japan, according to
Credit Agricole CIB.

China’s past development has created an “irrational
economic structure” and “uncoordinated and unsustainable
development is increasingly apparent,” said Vice Premier Li
Keqiang in a June article in the government-owned Qiu Shi
magazine. Long-term dependence on investment and exports for
growth “will grow the instability of the economy,” he said.

Low Rates

Pettis computes the 1.6 trillion yuan in lost returns to
savers by comparing the difference between China’s nominal
deposit and growth rates to those in other emerging markets.
That calculation indicates China’s deposit rates should be at
least 4 percentage points higher, he said.

“The government maintains a cap on deposit rates, which
helps prop up bank profits, but only by spreading the cost to
households in the form of artificially low interest returns,”
said Mark Williams, an economist at Capital Economics Ltd. in
London who worked at the U.K. Treasury as an adviser on China
from 2005 to 2007.

China has left interest rates unchanged since December 2008,
even as countries from Malaysia to Taiwan, South Korea and India
raised them. The central bank sees little need for an imminent
increase, the International Monetary Fund said in a staff report
on July 29 after consultation with the Chinese government.

China’s inflation, near a two-year high of 2.9 percent in
June, is also eroding household savings. That may cause people
to spend less and save more to cover rising costs of healthcare,
pensions and children’s education, said Pettis. The one-year
deposit rate is 2.25 percent.

Lost Returns

In June 2009 savers earned a real return on one-year
deposits of 3.95 percent. That slumped to a negative 0.65
percent in June this year, indicating lost returns to savers of
1.8 trillion yuan annually compared with a year earlier. Pettis
estimates China’s household deposits account for 60 percent of
total deposits, or about 40 trillion yuan.

Chinese investors have few appealing options. Capital
controls inhibit citizens from investing overseas. A crackdown
on property speculation may cause property prices to fall as
much as 30 percent in the next 12 months, according to Barclays
Capital. The Shanghai Composite Index, up 0.1 percent as of the
11:30 a.m. local time break in trading, has slumped about 20
percent this year.

Pettis said the 3.06 percentage-point spread between
deposit and lending rates that is set by the central bank will
help banks pay for potential bad loans after an 18-month lending
boom that was almost as big as the U.K.’s gross domestic product.

Bad Loans

“Evidence is mounting that the lending spree not only has
created bad loans but is now constraining monetary policy,”
said Huang.

Concern about potential losses in the financial system may
deepen after China’s banking regulator decided to conduct stress
tests of the nation’s lenders. The tests include a worst-case
scenario of property prices falling as much as 60 percent in
cities where they have risen significantly, a person with
knowledge of the matter said.

Banks could be saddled with bad loans of more than $400
billion, said Jim Walker, chief economist at Hong Kong-based
Asianomics Ltd.

Some economists argue that surging retail-sales figures and
rising wages show China’s shift to greater consumer spending is
on track. Dariusz Kowalczyk at Credit Agricole CIB in Hong Kong
estimates consumption will account for 47 percent of GDP within
10 years.

Retail sales rose 18 percent in the first half of 2010 to
7.3 trillion yuan. Citigroup Inc. says wages in the unskilled
labor market may double over the next five years.

Middle Class

“Disposable income levels are growing, the middle class is
growing and urbanization is alive and strong,” said Andy Mantel,
Hong Kong-based managing director of Pacific Sun Investment
Management Ltd.’s consumer-focused Mantou Fund, which invests
mainly in Greater China equities. “That would be positive for
the next five to 10 years.”

Mantou’s holdings include companies like Fujian-based fruit
and vegetable producer China Green (Holdings) Ltd. whose new
drinks line is “higher quality than has been available on the
market,” said Mantel. “People these days are willing to pay a
bit extra for better products.”

Hong Kong-based Nomura Holdings Inc. analyst Emma Liu
expects China Green’s stock to rise more than 20 percent over
the next year to HK$10.8 ($1.4).

Investor’s Picks

Rising rural incomes prompted Shanghai-based River Fund
Management to buy shares this year in Qingdao-based Qingdao
Haier Co. Ltd. and Zhuhai-based Gree Electric Appliances Inc.,
two of China’s biggest makers of air conditioners.

“People nowadays are not only replacing their old air-
conditioners, but upgrading from low-end to high-end ones,”
said fund manager Zhang Ling. “This will continue over the next
10 years.”

Driven by government subsidies for consumer products
including cars and refrigerators, retail sales rose 16 percent
in 2009 after adjusting for consumer price changes, the most
since 1986.

China supplanted the U.S. as the world’s largest auto
market last year as vehicle sales jumped 46 percent. Households
borrowed 2.5 trillion yuan, almost four times more than a year
earlier.

Even as sales rise, the hope that China was at “a turning
point” for the role of consumer spending in the economy may
have been premature, said Nicholas Lardy, a senior fellow at the
Peterson Institute for International Economics in Washington.

‘More Unbalanced’

The economy is “still becoming slightly more unbalanced”
toward investment, said Glenn Maguire, chief Asia Pacific
economist at Societe Generale in Hong Kong. “Until consumption
grows faster than fixed-asset investment for a sustained period,
the economy will remain unbalanced.”

Urban fixed-asset investment surged 25.5 percent in the
first half to 9.8 trillion yuan. Another 29.6 trillion yuan is
needed to finish outstanding fixed-asset projects, said Sun
Mingchun, an economist with Nomura Holdings Inc. in Hong Kong.

To achieve sustained rebalancing, China should allow a
stronger currency that boosts household purchasing power,
improve pension and healthcare coverage and gradually allow
markets to determine interest rates, the IMF report said.

“I never believed the hype that China was turning the
corner on rebalancing growth toward consumption,” said Huang.
“The main political agenda is not to let GDP growth slip and
that means continued investment growth.”

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ISM

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Yes, I think we have a nice L shaped economy with modest GDP growth and modestly improving employment, so far mostly evidenced by the increased hours worked that you’ve been pointing out. Acceleration happens when/if some aspect of private sector credit growth takes off.

If euro solvency risks are indeed fading, it should be back to an ok market for stocks (which could have a large one time shift upwards to reflect the reduced euro risk), and low rates from the Fed until something changes.

Like Japan, the budget deficit may be large enough to keep it all from collapsing but not enough for the kind of growth that would trigger higher rates from the Fed.


Karim writes:

Data off recent peaks but still firmly in expansion territory:
Anecdotes mixed:

  • “Component lead times are increasing sharply.” (Computer & Electronic Products)
  • “Market had begun to change, but it is now declining again.” (Wood Products)
  • “BP oil spill will impact business conditions over the next few months.” (Fabricated Metal Products)
  • “The economy continues to be sluggish, with orders 8 percent to 10 percent below last year.” (Nonmetallic Mineral Products)
  • “Retail sales are strong for both the domestic and international markets.” (Food, Beverage & Tobacco Products)


June May
Index 56.2 59.7
Prices paid 57.0 77.5
Production 61.4 66.6
New Orders 58.5 65.7
Inventories 45.8 45.6
Employment 57.8 59.8
Exports orders 56.0 62.0
Imports 56.5 56.5
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EU News

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Pretty much all bad:

European Unemployment Unexpectedly Increases to 12-Year High

Trichet Says Fiscal Sustainability Fosters Confidence, Growth

By that he means the austerity measures/deficit cutting which only makes things worse.

Trichet Says ECB ‘Fiercely Independent,’ Stable Prices Mandate

Just doing his job.

Trichet sees need for ‘budgetary federation’

He’s sees this as a watchdog to keep deficits down.

Trichet Says ECB Won’t Tolerate Budget Indiscipline Any Longer

He’s concerned about the secondary mkt purchases of greek debt meaning even this very modest support is in question.

ECB’s Noyer Says Rating Firms Aggravating Crisis

Weber Says ECB Bond Purchases Musn’t Exceed ‘Tight Limits’

More talk on limiting ECB purchases.

ECB’s Stark Says Bank May Start Withdrawing Liquidity in July

Doesn’t matter but indicates their attitude.

Nowotny Sees No Risk of Double-Dip Recession due to Austerity

That’s the entire source of the risk of a double dip recession.

Bank of Italy: EU euro defense package can’t last

And calls for a return to the 3% deficit limits.

ECB: Banks Will Suffer Considerable Loan Losses In 2010, 2011

Bank deposits are insured only by the national govts that are already seeing their funding threatened.

ECB warns of ‘hazardous contagion’

True, but they have their channels totally confused.

Trichet Says Second-Quarter Growth May Be Better Than Expected

European Manufacturing Growth Slowed More Than Estimated in May

Germans, ECB Spar Over Bond Plan

After Debt Crisis, New Tension Between ECB, Germany

Survey suggests Germans are unhappy with Merkel

Merkel Says Budget Deficit Looks ‘Moderate’ Versus Spain, U.K.

Still doesn’t get how the UK comp isn’t applicable.

Hypo Real Estate gets more loan guarantees

Spain presses for labor market reform deal

Fitch downgrades Spain’s credit rating

European Loans Post First Annual Increase in Eight Months

German Unemployment Falls Twice as Much as Forecast

German Retail Sales Rose in April on Declining Unemployment

French New Car Sales Fall 12% in May, After 12 Monthly Gains

Italian Unemployment Climbs as Recovery Fails to Create Jobs

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U.S. Data

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Karim writes:

Brief and delayed recap:

Looks like Goldilocks is officially here. 4% GDP gwth and 0% core inflation.

Agreed, remains a good market for stocks apart from looming shocks from Europe and elsewhere that could do a lot of damage.
Tax hikes can do damage but they are off in the future for now.

I describe 4% gdp as more L shaped than V shaped, but that’s just semantics. It’s modest growth that will very gradually bring down unemployment.

In the end, growth will be important to the Fed as it leads inflation. Look for Bernanke to continue to tweak extended period language today.

  • Retail sales up 1.6% with upward revisions to Jan and Feb
  • Control group up 0.5% and 3mth annualized rate for control group jumped to 7.4% from 5.2%
  • Looks like 4% GDP growth in Q1
  • Core CPI up 0.05%; helped largely by another 0.1% drop in OER
  • 3mth annualized rate of core inflation now -0.1%

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European Retail Sales Decline Most in Nine Months

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‘market forces’ are driving national deficits higher via automatic stabilizers which drives the euro lower to the point exports rise sufficiently to turn the tide, but that needs to happen before the rising deficits result in defaults.

On Thu, Apr 8, 2010 at 6:04 AM, La-Toya Elizee wrote:

European Retail Sales Decline Most in Nine Months

Revamped ECB Lending Rules May Cause Greece Pain

German Factory Orders Unchanged After January Jump

French Trade Deficit Widened in February on Imports

Capital flight squeezes Greek banks

Italy needs deep reform, say employers

Spain’s Industrial Output Falls More Than Expected in February

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CPI/Claims

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Interesting how years of 0 rate policies don’t seem to generate inflation.


Karim writes:

Data in past week (retail sales, Empire survey, claims, PPI, CPI) continues to show best of both worlds—economy improving and inflation very low.

Initial claims drop another 5k to 457k.

  • CPI unch on headline basis and +0.053% on core.
  • Core now 1.3% y/y and has a couple more mths of favorable base effects that should allow it to fall below 1%.
  • Core inflation running 0.1% on a 3mth annualized basis!
  • OER (unch) continues to hold down the series with apparel (-0.7%) the only notable outlier this month.

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