Posts Tagged ‘conference board’

The world had de-coupled, we were told. Time was, that when the US consumer sneezed, the rest of the world got a cold.

Then in 2008, the US consumer was sent to bed, with a thermometer in his/her mouth, and the rest of the world was in agony.

Then something odd happened. After a few months, in which everyone suffered, the emerging world did okay. China did more than okay, it boomed.  The BRICs, or if you want to include South Africa in that illustrious group, the BRICS, took the baton of growth from the US.

Sure there was talk of currency wars, sure the UK limped along like a cripple on broken crutches, but the global economy did well. It had de-coupled we were told.

Or did it? There are time lags in these things.

Now things seem to have gone into reverse. Sure China is still growing, but it is struggling to change from export to consumer led growth. India is picking up, Brazil looks dire, Russia looks worse, and if you want to make the small ‘s’ at the end of BRICS into a big “S” South Africa  is struggling.

There are signs Japan may be recovering, more of that in another article, the Eurozone is well and truly stuck in a very low gear, or even reverse, but the UK and US are the new stars.

The UK economy slowed a bit in Q3, with quarterly growth down to 0.7 per cent, from 0.9 per cent the quarter before. But then the UK’s main trading partner is the Eurozone. At least investment is rising at a very brisk pace, and that gives good reason for cheer.

But there is even more reason to cheer the US.

The year got off to an awful start, with a cold winter and unfortunate timing of the inventory cycle hitting  the economy hard. Was the Q1 contraction a one-off?   Or was it a sign of something more serious?

Well the data on the US economy has been unremittingly good, ever since.  Take for example the latest US consumer Confidence Index from the Conference Board. It hit a new seven year high in October. If you like your numbers, then you may be interested to know the index hit 94.5. The last time it was so high was in October 2007.

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Yet, the global economy still struggles. If it has de-coupled, then right now this is negative thing.

But there is one other issue here.

As the US recovers, the Fed makes noises about upping rates. This is spooking markets, and hitting emerging economies hard.

It is not that the US economy is no longer the lynchpin of the global economy. It still is. It is just that the actions of the Fed seem to count for more than the well-being of the US consumer.

But can the US consumer yet save the day? Only time will tell, but it is surely the case that if US Consumer Confidence continues to grow, then the rest of the world will grow with it – eventually.

p.s. I have been away for a while to complete my new book, called ‘iDisrupted‘ which is available to purchase via Amazon. If you are interested in my thoughts about how the incredible changes in technology are likely to change our world forever then you are invited to buy the book and let me know whether you agree or disagree with my predictions. Further details about the book can be found on www.idisrupted.com

Michael Baxter, The Money Spy

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The latest news out of the US really was good. But one question remains: is the US engaged in some kind of Ponzi Scheme or is the recovery real?

Here is the idea: you borrow, say, £100 off one set of people, and £200 off another set. You use the £200 loan to repay the first set, giving them, say, £130 back.

So happy are these people with their profit, that when you go back to them asking for a £400 loan they gladly oblige. You can then use the £400 loan to repay the £200 loan and provide a nice profit for the backers too. You can carry on like that right up to the moment when you run out of places to go to raise money.

That’s what Bernard Madoff did; it is what Charles Ponzi did in the 1920s. And it is what we call a Ponzi Scheme.

The question is, however, whether the word Ponzi Scheme applies to the US economy. The answer may surprise you.

US consumer confidence, as measured by the Conference Board, rose to 76.2 in May, which was the highest reading since January 2008. It may be the strongest evidence yet that the US economy is on the road to recovery.

However, it might be worth asking why? US stocks are up, as are US house prices, which makes US consumers feel a good deal happier. In the US, stock market performance is more closely correlated with consumer confidence than in the UK, where our obsession with house prices is all pervasive.

But why are US stocks up? At least one of the reasons given for some of the rises seen in recent months is that US consumer confidence has improved. Do you see why there is a slight Ponzi Scheme feel about it all?

There is another reason for buoyant stock prices, however, and that reason is QE. So the Fed buys bonds, forcing their price up. Other assets seem cheap in comparison, so they rise in price, and thus US consumers feel more confident. If you think this has a whiff of Ponzi Scheme, you are not alone.

It is just that when we look at the macro economy things are different. When consumers are more confident, they spend more, and when they spend more, companies sell more stuff, wages rise, investment goes up, and maybe we see more innovation as a result of this. This drives up stock prices and in turn US consumer confidence. Yes it is like a Ponzi Scheme, but the difference is that it can create real wealth.

Maybe all growth we have seen over the last two hundred years is built on a Ponzi Scheme, but on this occasion it is as if snake oil has turned into nectar.

© Investment & Business News 2013

The data out of the US on Friday was a tad worrisome. In fact, at one stage during the day it looked as if US markets were in for something of a collapse, although the Dow finished Friday less than 0.1 points down on the day before – at 14865.06 from 14865.14 on Friday.

Two significant pieces of data on the US economy were published on Friday, and neither was good.

First there was the US Consumer Confidence Index, published by the University of Michigan. This fell to a nine month low. The Conference Board measure will be out at the end of this month, and if this supports the findings of the University of Michigan that will be a blow.

Secondly, US retail sales saw a 0.4 per cent month on month fall in March. Especially worrying was that discretionary items, such as sales of electronics, saw an particularly sharp fall.

What with disappointing jobs data out on the Friday before last, (88,000 increase in non-farm payrolls, the smallest rise since June Last year), and purchasing managers’ indices for both US manufacturing and non-manufacturing down on the previous month, the runes seem to point to a downturn Stateside.

Mind you, all that woe was not enough to stop the Dow and S&P hitting all-time highs last week, and Friday’s close was below that peak by the tiniest of margins.

Chris Williamson at Markit said: “The concern is that growth could slow again in the second quarter. There are suggestions that the downturn in March could have been caused by temporary factors such as the timing of Easter and cold weather, but the fact that consumer confidence fell markedly during the month suggests otherwise, and that instead there is an underlying weakening of demand occurring.

“This weakness is possibly linked to increased payroll and income tax hikes which took effect at the start of the year, and will inevitably add to worries that the US economy is slowing as we move into the spring as automatic budget spending cuts come into force. With this in mind, the Fed will be more cautious about sending signals that it is preparing to ease back on policy stimulus. “

©2013 Investment and Business News.

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The FTSE 100 finished Monday 11 March at 6503. That was a five year high, just 217 points off a decade high (set 31 October 2007), and 426 points off an all-time high (set 30 December 1999).

As an aside, it is quite interesting to note that the FTSE 100 decade high occurred after the run on Northern Rock. I find it hard to imagine  what madness possessed the markets to show such exuberance when the signs of problems ahead had been writ large on the wall.

The question is: are the markets mad this time, too?

The news from the UK is not very good. But then there is this thing called the global economy, and perhaps what really counts is how the rest of the world is doing. Besides the FTSE 100 is not really a bellwether of the UK at all; after all, many of the companies listed on this index do most of their trading abroad.

The news from our two biggest trading partners is okay. In the US, annualised GDP was a tiny 0.1 per cent in the final quarter of last year, but there are reasons for believing this was a one off, and the poor performance was mainly explained by falling inventories and cuts in defence spending. Other data is far more promising.

The latest US Consumer Confidence Index from the Conference Board was 69.6. Okay that was down from the heady heights of 73.1 seen in October when the index hit a near five year high, but not a lot down. More to the point, the index rose sharply on the month before.

US Consumer Confidence

The latest Purchasing Managers’ Indices (PMIs) are promising too. The index tracking non-manufacturing hit a 12 month high, and the index for non-manufacturing rose to a two year high.

Finally, the news on US jobs is promising, with February seeing an increase of 236,000 non-farm jobs. In fact, the US unemployment rate fell to 7.7 per cent, which is the lowest level since George Dubya and Dick ruled the roost at Capitol Hill.

All in all then the data coming out of the US, is not bad. Sure you can be cynical, and say it won’t last or the US is built on a bubble, but the US does at least provide a rationale for surging stock markets.

The news out of our second largest trading partner is not quite so good, but it is still all right. The Germany economy contracted in the final quarter of last year, but the various surveys including PMIs (the Germany composite was 53.3 in February), Zew index and German IFO all point to a much better performance in Q1.

Next on the list of main exports markets is the Netherlands. The Dutch economy contracted by 0.2 per cent in Q4 last year after contracting 1 per cent in the quarter before.

But it is when we look a little further down that things are looking worrying. Our fourth largest export market is France. The French economy contracted by 0.3 per cent in Q4, a smaller contraction than Germany. But, unlike Germany, the latest Purchasing Managers’ Index was bad; at 43.1 it pointed to the contraction continuing, and the latest data on French industrial production showed a 1.2 per cent contraction.

More worrying still, our seventh largest export market is China, and things have turned for the worse. UK exports to the economy on the other side of the Great Wall have risen eight times since 2000. Earlier this year it appeared as though China was over the worst and on the mend. Not so says the latest data: growth in both industrial production and retail sales in the year to January  and February was down on the year to December. Investment into bubble areas, such as property and infrastructure is still surging, but investment into other areas, which can create sustainable growth, is not.

Markets may be riding a tide of euphoria.

But the tide may yet go into reverse.

©2012 Investment and Business News.

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The economic news came in four packets.

Packet number one was US consumer confidence. The latest index produced by the Conference Board fell to a 14 month low. It is hard to see how this is anything but disappointing. Three months ago it was a different story. The index had risen to nearly a five year high. “Great,” said the markets, “these indices are important,” and then they bought. Last week, on news that the index had reverted back to the levels last seen at the end of 2011, markets said: “Well, these consumer confidence indices don’t have much meaning.”

Packet number two: the US economy contracted in Q4 last year, or at least that’s what the not always reliable data said. The contraction was modest, just 0.1 per cent, but even so, when the stats say the economy is moving backwards, economic commentators usually look a little alarmed. Not so this time. “It was down to one offs,” they said. “US defence spending fell, inventories fell; these things will be not repeated. Q1 2013 will be better.”

The one positive aspect of the GDP data was news that consumer spending rose sharply, and why was that? It appears that an increase in company dividends, as companies fretted about tax changes and chose to make payments before the changes came into force, put money into consumers’ pockets.

So to recap: US GDP was down, but we were told it was down to one-offs. Consumer spending was up, thanks to one-offs. If consumer confidence indices are to be believed, consumer spending will fall in the months ahead, yet the markets ignored that bit.

Packet number three: the latest Purchasing Managers’ Index (PMI) for US manufacturing was a bit better. These PMIs are important. Any score over 50 is meant to suggest growth. Back in November the index was down at 49.9. In December it was up at 50.2, but still perilously close to the 50 no change mark. But in January the index surged, hitting 53.1, which was a one year high.

So whilst the consumer confidence index and GDP data was disappointing, the PMIs were good.

Packet number four: data on US jobs. January saw another 157,000 US workers in non-farming jobs join the employed. Non-farm payrolls have now seen increases in excess of 150,000 every month for six months. Furthermore, the data for November and December was revised upwards, and by quite a bit too – up 127,000 in fact.

But despite all this, US unemployment rose from 7.8 to 7.9 per cent.

So the news on US jobs is good, but doubts linger. In particular, critics are saying that too many of the jobs being created are part-time.

So that’s the economic news. You will no doubt agree, it was ambiguous. Good in some respects, worrisome in others.

The markets reacted by buying. In fact, at the end of last week the Dow closed at over 14,000 for the first time since 2007. At close of play last week, the Dow stood at 14,009. The index’s all-time highest closing price was set on 9 October 2007 with a reading of 14,164. In other words, we are very close to seeing the Dow break into new territory.

Have the markets correctly priced-in recovery, or have they been infected with irrational euphoria?

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

If you are a journalist, the French are great. They provide the juiciest copy, which can transform the driest topics into cannon fodder for xenophobes, and realists alike.

This time the task of ramping up Anglo/Gallic prejudices has fall to the Governor of the Bank of France Christian Noyer.  Talking to the ‘FT’, he suggested that the City of London should be stripped of its position as the financial hub of euro trading. So that’s bonds, derivatives, equities – in fact just about everything. If it’s finance and involves the euro, then London holds the position that should belong to Paris.

Mr Noyer said: “We’re not against some business being done in London, but the bulk of the business should be under our control. That’s the consequence of the choice by the UK to remain outside the euro area.”

The funny thing is, however, that Mr Noyer might be right – or at least partially right.

He is wrong about stripping London of its pre-eminent position. It is not up to governments to decide which centres should be hubs. You can’t wake up one morning, and say let’s rid London of its status as a financial capital.

But the markets can decide to do this. And there are signs that this is happening, and this is the price the UK pays for not being in the euro. It has nothing to do with the wishes of politicians, just the reality of markets.

But it doesn’t seem very likely that Paris will take over from London, however, not as long as France insists on anti-market friendly policies. A recent survey from the Conference Board in the US recently forecast that France will be the worst performing economy in the world over the next ten years or so.  The report may or may not prove to be right, but even if there is only a miniscule of truth in the report, it is hard to see Paris taking over from London in anything. See: Is France really set to be the worst performing economy in the world over the next ten years?

Moving away from France and the UK, there is the issue of tax avoidance. We hear about the evils of Amazon, Google, Starbucks and co avoiding tax, but the truth is that they are multinationals, and an advantage of being a multinational is that you can channel profits into countries where tax rates are lower. There is only one possible solution and that is to have some kind of minimum worldwide corporation tax rate (either that or have no corporation tax, at all).  Getting international agreement for such as idea is probably impossible, but a reasonable half-way measure might be an EU-wide corporation tax. Alas, the UK’s influence in the EU is such that it is unlikely to get such an idea through, even if it wanted to. This is another disadvantage of the UK’s EU cynicism.

On the other hand, a new series on ‘Sky News’ is set to expose the way the UK’s economy’s woes are focused on certain regions. As Ed Conway, the presenter of the TV series, said in the ‘Telegraph’: “It transpires that London and the South East of England never experienced a double-dip recession at all, they simply did not shrink through 2011 and 2012. The economic contraction that led to the national ‘double dip’ happened exclusively in the North, the Midlands, Northern Ireland, Scotland and Wales.” See: Prosperity across the South is hiding a recession in much of Britain

Here is the irony. While some may lament the disadvantages of not being in the euro, the UK suffers from its own single currency.

Truth is that the success enjoyed by the City has pushed up the value of the pound so much that regions outside the South East struggle to compete.

So should London and the South East have their own currency, let’s call it the Boris? Maybe an independent Catalonia needs its own currency too.

You may think this is a daft idea. You may be right.

It is probably the case that if indebted European countries left the Eurozone, their economies would, after an initial shock, enjoy a strong economic recovery.

But if you accept that the idea of London having its own currency is daft, this would suggest you believe the euro must survive, at any cost.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

The hurricane delayed things. The latest report on US consumer confidence was due on Tuesday, but in the end it had to wait until Thursday. When it saw the light of day, the news was good.

Last month US consumer confidence, according to the Conference Board, hit its highest level since February 2008. If these things interest you, the index hit 72.2.

Actually, QE may have something to do with it. When the Fed goes out and buys bonds via quantitative easing, it forces up bond prices. As a result, equity prices rise (probably) and house prices stop crashing (maybe).  US consumers like it when their equity holdings rise in value, hence the jump in their confidence.

But there was more good news from the US. The latest Purchasing Managers’ Index (PMI) from ISM was out yesterday too, and while it was not exactly the stuff that runaway booms are made of, it wasn’t half bad either. In fact the headline index rose to 51.7, from 51.5 in September and 49.5 in August. Okay, they’re just numbers.  “How are you feeling today?” “Today I feel three?” It makes no sense. Consumers’ confidence is 72.2, manufacturers’ 51.7. You might ask 51.7 what? Wishes perhaps?

But it’s the history that makes these numbers mean something. For the PMI, any score over 50 is meant to suggest growth, and the reading for October was the highest score since May.

This evening (2 November) the latest US jobs report will be out. The last one had US unemployment falling to 7.8 per cent, pretty much back to the level it occupied when George Dubya and Dick Cheney moved out of the White House.  (And someone called Obama moved in). If the data is good, Barack will surely be chuffed.

Not that he must look too chuffed. It does seem as though the world is divided into three. Those who think Barack gets pushed around, does not speak up for himself, and needs to do the political equivalent of punching Mitt Romney on the nose. Then there are those who say he looks Presidential and rises above that kind of nastiness. Then there are those who just don’t like him.

Returning to the US economy, house prices may be the key. Back in 2006 residential investment as a share of US GDP was 6 per cent. In 2012 it stood at just 2 per cent. No wonder Uncle Sam lost a shed load of jobs.

Of course, the fall in US house prices mattered for two other reasons. As prices fell, consumers lost confidence (and by the way in July 2007 the US consumer confidence index passed 110), and it mattered for another reason.

What was it now? Thinking…

Oh yes, that’s right, it led to the subprime debacle, followed by a global banking crisis.

According to Keith Wade, Chief Economist at Schroders: “The number of residential properties in negative equity at the end of the second quarter was 10.8 million (22.3 per cent), down from 11.4 million (23.7 per cent) at the end of the first quarter….around 1.3 million households have moved out of negative equity since the beginning of 2012, although 2.3 million remain in ‘near-negative’ equity (less than 5 per cent equity in the property). For these homeowners the incentive is to pay down debt before looking to borrow again.”

The truth is that US house prices have been rising of late – not much, but the downward trend seems to have reversed. Mr Wade put it down to QE. He said: “Whilst QE may not be stimulating stronger borrowing, it is helping to drive investors out of low yielding cash and bonds and into higher yielding assets such as property.”

Meanwhile, devastating though Hurricane Sandy was, at least America seems to be waking up to the reality that there is something odd going on with the climate. Who knows for sure whether the storm was down to climate change, but there has to be a chance. New York Mayor Michael Bloomberg reckons there is a connection, hence his Road to Damascus type of conversion to back Obama for the election.

But moving away from the US economy, while Sandy might have given a shock to climate change sceptics, the ‘Daily Mail’ recently ran a piece rubbishing the whole idea of manmade climate change. Apparently global temperatures have not risen since 1997. Except of course, the data was distorted by an El Nino at the beginning of the period in question and La Nina at the end of the period. Strip out the effects from the El Nino and La Nina from the data, and in fact global temperatures have very much been on an upwards trajectory since 1997. Anyway, talking about rubbish, here is a link to the ‘Daily Mail’ article, see: Global warming stopped 16 years ago, reveals Met Office report quietly released… and here is the chart to prove it

And here is a rebuttal from the Met office:

The ‘Mail’ makes the case for some kind of censorship of the press in pretty impressive fashion.

And finally, here is a piece by yours truly covering a rather shocking idea to put forward by Martin Wolf at the ‘FT’. He has suggested that the Bank of England needs to start buying foreign bonds so that sterling will tumble in value. See: Is it time the Bank of England started buying foreign debt?

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here