Fri, 24th March 2017

Anirudh Sethi Report


Archives of “Economy” Category

Cash shortage may slowdown GDP to 6.5% in Oct-Dec quarter: Nomura

Cash crunch post demonetisation is expected to slowdown India’s GDP growth to 6.5 per cent for the fourth quarter of 2016 and is likely to spill over into the first quarter of 2017, says a report. According to global financial services firm Nomura, the cash shortage is likely to last till January.

Nomura noted that even though the economy experienced a robust aggregate momentum before the demonetisation, its recovery was narrow-based due to weak investments and slow non-agriculture sectors with consumption serving as the only growth engine.

“We expect the cash shortage triggered by demonetisation to last until January and GDP growth to slow to 6.5 per cent in fourth quarter (October-December) and to remain subdued at 7 per cent in the first quarter 2017,” Nomura said.

“However, once the cash shortage eases, we expect a gradual recovery to take hold in the second half of 2017, owing to a boost to government fiscal finances and improved banking system liquidity,” it added.

India : Fiscal deficit at 79.3 per cent of BE in Apr-Oct

Fiscal deficit in the first seven months of 2016-17 reached the Rs 4.23 lakh crore mark, or 79.3 per cent of the budget estimate (BE) for the whole year.

The fiscal situation in April-October worsened over the year-ago period as the deficit then stood at 74 per cent of BE. Fiscal deficit, the gap between expenditure and revenue for the entire fiscal, has been pegged at Rs 5.33 lakh crore or 3.5 per cent of GDP, in 2016-17.

As per data released by the Controller General of Accounts, tax revenue came in at Rs 5.30 lakh crore, or 50.3 per cent of the full-year BE of Rs 10,54,101 crore. Total receipts from revenue and non-debt capital of the government during the first seven months read Rs 7.27 lakh crore.

The government’s Plan expenditure during the period came in at Rs 3.41 lakh core, 62 per cent of the full-year BE. During the same period last year, the government had managed to achieve 58.2 per cent of Plan expenditure estimate. The non-Plan expenditure during April-October of 2016-17 was Rs 8.09 lakh crore, or 56.7  per cent, of the whole-year estimate.

The total expenditure (Plan and non-Plan) was Rs 11.50 lakh crore as against the government’s estimate for the current fiscal at Rs 19.78 lakh crore. The revenue deficit during the seven months stood at Rs 3.27 lakh crore, or 92.6 per cent of BE for 2016-17.

Latest Atlanta Fed GDPNow down to 2.4% from 3.6% on November 23

Trade and inventories cited

As per the Atlanta Fed:
“The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2016 is 2.4 percent on November 30, down from 3.6 percent on November 23. The forecast of the combined contributions of real net exports and real inventory investment to fourth-quarter growth fell from 0.61 percentage points to 0.18 percentage points after last Friday’s advance economic indicators report from the U.S. Census Bureau. The forecast of fourth-quarter real consumer spending growth fell from 3.0 percent to 2.2 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.”
 That is a pretty hefty drop.  


India’s Q2 FY17 GDP growth at 7.3% vs 7.6% YoY

India’s GDP (Gross Domestic Product) for the second quarter of FY17 grew at 7.3% versus 7.1% quarter-on-quarter and 7.6% year-on-year. The GDP data comes at a time when there are growing concerns that the demonetisation decision of Modi government may slow down the world’s fastest growing economy in the coming quarters. Fitch Ratings has already lowered India’s GDP growth forecast for this fiscal to 6.9 per cent from 7.4 per cent, saying there will be “temporary disruptions” to economic activity post demonetisation.

It said economic activity will be hit in the October- December quarter because of the cash crunch created by withdrawal and replacement of 500 and 1000 rupee notes that accounted for 86 per cent of the value of currency in circulation. “Indian growth has also been revised down to reflect temporary disruptions to activity related to the RBI’s surprise demonetisation of large-denomination bank notes,” Fitch said, as it revised real GDP growth forecast down to 6.9 per cent for 2016-17, from 7.4 per cent projected earlier

Japan inflation already above BOJ target, at least for luxury items

Japan is known for its persistent deflation. Despite the Bank of Japan’s best efforts, consumer prices are again on a downward trajectory. But for high net worth individuals, the situation is totally different, according to a new report by the private Swiss bank Julius Baer.

Excluding fresh foods, consumer prices in Japan dropped 0.5% in September from a year earlier. It was the seventh consecutive month of decline and far short of the BOJ’s target of 2% inflation.

 But “if you are a high net worth individual, your lifestyle on average increased by 2.4% in cost in 2016,” said Stefan Hofer, head of business development at Julius Baer Wealth Management. “If you look at luxury hotels, if you look at business class travel, if you look at luxury ladies’ handbags, all those kinds of things for the high income people who live in Japan is not deflation; it is actually inflation.”
In Julius Baer’s recently published “Wealth Report: Japan,” Tokyo ranks as the fourth most expensive of 11 Asian cities for luxury goods and services, in dollar terms. Shanghai, Singapore and Hong Kong were Nos. 1, 2 and 3. Japan’s capital was the most expensive in terms of wedding banquets, hotel suites, tooth implants and ladies’ shoes, but third in golf club memberships (behind Manila and Hong Kong) and ladies’ handbags (under Jakarta and Shanghai).

Germany Q3 GDP flash qq +0.2% vs +0.3% exp

Germany Q3 GDP flash readings 15 Nov

  • +0.4% prev
  • yy WDA +1.7% vs +1.8% exp/prev
  • yy NSA 1.5% vs +1.65 exp vs +3.1% prev

Softer data but euro still trawling around for the moment trying to make its mind up

EURUSD 1.0754 in a 40-70 range still. EURGBP a tad higher at 0.8618 EURJPY 116.47 on the rise again as USDJPY finds demand again to post 108.34


Germany industrial production Sept mm SA -1.8% vs -0.5% exp

Germany industrial production 8 Nov

  • +3.0% prev revised up from +2.5%
  • yy WDA +1.2% vs +2.05 exp vs +2.4% prev revised up from +1.9%

Also out Sept trade balance +€24.4bln vs +22.4bln exp vs +20.1bln prev revised up from +19.9bln

  • current account +€24.2bln vs +24.5bln exp vs +17.4bln prev revised down from +17.9bln
  • exports mm SA -0.7% vs -0.8% exp vs 3.4% prev
  • imports mm SA -0.5% vds -0.2% exp vs +1.9% prev

Data not going to shake anything up right now with the US election turmoil looming.

Disappointing ind prod though following on weak factory orders yesterday and not good news.

EURUSD 1.1045 EURGBP 0.8901 EURJPY 115.30 none going anywhere in a hurry


China October trade balance: CNY +325.25bn (expected CNY366.61bn, prior CNY278.35bn)

The trade surplus in yuan terms, the USD terms data will come a little later. For the month of October.

China trade balance: +325.25 bn yuan. A miss on expectations.

  • expected is CNY366.61bn, prior was CNY278.35bn

Exports (CNY) y/y: -3.2% MISS

  • expected is -0.8%, prior was -5.6%
Imports (CNY) y/y: +3.2% MISS
  • expected is +5.0%, prior was +2.2%
AUD/USD is hitting its session low, its been weak all day here (after the first hour of Sydney trade anyway)

The “USD terms” should be soon … OK, here they come …

China trade balance USD +49.06bn. Surplus smaller than expected but up from the prior month.

  • expected is $51.7bn, prior was $41.99bn

Exports (USD) y/y:  -7.3% MISS

  • expected is -6.0%, prior was -10.0%

Imports (USD terms) y/y : -1.4% MISS

  • expected is -1.0%, prior was -1.9%

AUD extending its session lows (just a bit)