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Sun, 28th May 2017

Anirudh Sethi Report

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Archives of “Economy” Category

China Xinhua again: Chinese economy likely to hit bottom in 2017

Some weekend China press from Xinhua (official press agency of China), quoting economist Wang Yiming, deputy director of the development research center of the State Council:

  • If investment, supply-side structural reforms and the fostering of new growth momentum achieve desired results, there is a high probability that the economy may bottom this year
  • On the demand side, manufacturing investment is on the up, while infrastructure spending will remain strong, which mean overall investment will stabilize in 2017
  • If China’s capacity-cut targets are solidly delivered, producer prices will keep going up to support the broader economy
There is quite a few ‘ifs’ in there.
The piece also notes the IMF forecast for China growth this year:
  • 6.5%
  • & the IMF says  the economy will continue sustainable growth as it is rebalancing from manufacturing to services, despite reemerging concerns for property markets

Inflation eases to 3.41 per cent in December, industrial output up by 5.7 per cent

The annual consumer price inflation eased to 3.41 percent in December, its lowest level in more than two years, helped by a sharp cooling in food prices, government data showed on Thursday.

Economists had expected annual retail inflation to come in at 3.57 percent last month, compared with 3.63 percent in November. Food inflation was 1.37 percent last month, lower than a revised 2.03 percent in November.

Meanwhile, the industrial production grew by 5.7 per cent in November against contraction of 3.4 per cent same month last year.

November 2016 Eurozone industrial production 1.5% vs 0.5% exp m/m

November 2016 Eurozone industrial production report 12 January 2017

  • Prior -0.1%. Revised to 0.1%
  • 3.2% vs 1.6% exp y/y. Prior 0.6%. Revised to 0.8%

Some more cheer for Europe. Strong numbers, and intermediate & non-durable consumer goods did the best out the lot. That suggests there’s demand coming from consumers.

Brazil slashes rates by 75bps to 13% in surprise move

Don’t anyone accuse Brazil’s central bank of not being bold.

In a unanimous decision, the bank cut its policy interest rate by 75 basis points on Wednesday, exceeding the consensus call for a 50bps cut and sharply picking up the pace on an easing cycle it began with two back-to-back cuts of 25bps each in October and November

In a statement, the bank said economic activity had fallen below expectations and that a recovery would take longer than previously anticipated.

The size of the cut will be welcomed by many, given the economy’s stubborn refusal to return to growth. The rebound expected by many when congress ditched president Dilma Rousseff last year has failed to happen. GDP contracted by 8 per cent over the past two years under Rousseff’s watch; her pro-growth, market-friendly successor, Michel Temer, was expected to turn things round quickly.

November 2016 UK industrial production 2.1% vs 0.8% exp m/m

Details from the November 2016 UK industrial and manufacturing production report 11 January 2017

  • Prior -1.3%. Revised to -1.1%
  • 2.0% vs 0.6% exp y/y. Prior -1.1%. Revised to -0.9%
  • Manufacturing 1.3% vs 0.5% exp m/m. Prior -0.9%. Revised to -1.0%
  • 1.2% vs 0.4% exp y/y. Prior -0.4%. Revised to -0.5%

Very good numbers from UK industry. We’ve already seen that the year could be ending well in manufacturing via the Dec PMI. This one lags those by a month so we should (on paper) see  this sustained.

Oil and gas production led the way and a lot of the gains are being tied to the reopening of the Buzzard oil field and an increase in the pharma sector.

World Bank latest reports says global growth to accelerate slightly

World Bank’s latest Global Economic Prospects report … headlines:

 
  • Forecasts global real GDP growth at 2.7% in 2017 vs 2.3% in 2016
  • Forecasts advanced economies’ growth at 1.8% in 2017 (vs 1.6% in 2016)
  • Emerging/developing economies’ growth at 4.2% in 2017 (3.4% in 2016)
  • Forecasts US growth at 2.2% in 2017 (vs 1.6% in 2016) … they say their forecast excludes effects of any policy proposals from trump administration

More:

  • Challenges for emerging market commodity exporters are receding, while domestic demand solid in emerging market commodity importers
  • Fiscal stimulus in US could generate faster domestic and global growth, but extended uncertainty over policy could keep global investment growth slow
  • Forecasts China’s growth slowing to 6.5% in 2017 (from 6.7% in 2016)
(Headlines via Reuters)
 
The World Bank looking at the recovering oil and commodity prices, noting this eases the pressures on emerging-market commodity exporters. Expects the recessions in Brazil and Russia to end.
As always the Bank notes uncertainties in its forecasts (all forecasters should), with upside uncertainty (in the short term at least) on US potential increased fiscal stimulus, tax cuts, infrastructure spending.  Looking further out, though, a surge in debt load, higher interest rates & tighter financial conditions would have adverse effects.
Also downside potential on a more protectionist trade stance.

Venezuela’s president raises minimum wage 50%

Venezuela’s embattled President Nicolás Maduro on Sunday hiked the minimum wage by 50 per cent in another hapless attempt to face a festering economic crisis teetering on hyperinflation. “To start the year, I have decided to raise salaries,” he said on his weekly broadcast. This is one of many increases over the last year.

With the hike, a Venezuelan worker will earn 40,683 bolívars a month. This is $60 a month at the weakest legal exchange rate, or roughly $12 a month at the black market exchange rate. That, alongside a hike in a mandatory food subsidy, brings the total minimum wage to 104,358 bolívares, or $31 at the unofficial rate.

According to calculations by Reuters, this means Mr Maduro has raised the minimum salary by a cumulative 322 percent since February 2016. But critics argue this will do nothing for impoverished Venezuelans to alleviate the dual perils of food shortages and galloping inflation forecast by the IMF to top four digits in 2017.

The pencils have been sharpened for the first NFP forecasts of 2017 – What’s the trade for today?

Yes, I know it’s Dec data but it’s the first release in 2017

It’s nearly time for the most exciting data point of the month.

Here’s a run down of the numbers;

NFP expected in at 178k Reuters, 175k BBG
BBG hi est 221k
BBG Lo 125k
Nov 178k
Average hourly earnings 0.3% exp vs -0.1% prior m/m
2.8% exp vs 2.5% prior (that’s a pretty high expectation)
The top 5 NFP callers are thus;

Jim O’Sullivan – High Frequency Econ – 155k
Ryan Sweet – Moody’s – 180k
P de Bruin/M Cabezas ABN Amro – 185k
Stephan Buu CTI Capital – 162k
Robert Dyer – Comerica – 163k

Indian economy’s growth estimated at 7.1% in 2016-17: Government

The Indian economy is expected to grow at 7.1 per cent this fiscal, according to an official advance estimate for the year released on Friday, compared with actual expansion of 7.1 per cent in the first six months of 2016-17. According to the estimate of national income for 2016-17 released by the Central Statistics Office (CSO), the country’ gross domestic product will grow at 7.1 percent in 2016-17 compared to 7.6 per cent in 2015-16.

The anticipated growth of real GVA (gross value added, which excludes taxes and subsidies) in 2016-17 is 7 per cent against 7.2 per cent in 2015-16, said an official statement.

Going by the parameters used for the advance estimate, the impact of demonetisation has not been considered in the forecast.