Fri, 24th February 2017

Anirudh Sethi Report


Archives of “Economy” Category

BOJ’s Kuroda says Japan’s economy has improved a lot since QQE

Bank of Japan governor Kuroda speaking from Davos 20 Jan

  • top priority is to beat inflation
  • 2% target not yet achieved
  • cautious wage demands mean inflation expectations have dropped again after rising.
  • Asian economies gaining momentum
  • Japanese exports, industrial output showing recovery
  • Japan’s economy to grow +1.5%, well above potential in current/next FYs

Repetition Man back to the mic.

Meanwhile USDJPY still holding gains above 115.00. Looking to short around 115.50 again.

           Kuroda speaks again – Anyone still listening?


Obama Fails To Breach $20 Trillion

Over the past several years, a raging debate among debt-watchers was whether Obama would leave the presidency with more than $20 trillion in US national debt. We now have the answer, and can report that Obama failed in this particular endeavor… but just barely. According to the US Treasury, as of the most recent update, total Federal debt was some $39 billion short of the key “psychological level”, clocking in at precisely 19,961,467,137,973.64.

This means that both “Dow 20,000” and “Debt $20,000,000,000,000” accomplishments will belong to Trump. It is still unclear which comes first.

And while some may be disappointed, Obama’s achievement is still quite impressive: in exactly 8 years, total US debt has increased by $9.3 trillion, or 88% since Obama’s first day in office.

On Obama’s first day, Jan. 20, 2009, federal debt was $10,626,877,048,913.08.  As of the close of business Wednesday, it was $19,961,467,137,973.64. The final debt number for Thursday, Obama’s last full day in office, will not be released until after Donald Trump is sworn in as president on Friday, although it is unlikely to surge by $40 billion.

The total debt added on Obama’s almost doubled America’s total indebtedness, and was nearly double the $4.9 trillion piled up during the presidency of George W. Bush. It also means that the total debt “owed” by each of America’s 124,248,000 full-time employed workers amounts to $160,658, having increased by $75,129 during Obama’s tenure.

China Dec. data: Industrial Prodn: 6.0% m/m (exp. 6.1%), Retail sales 10.9% m/m (exp 10.7%)

China December data

December Industrial Production 6.0% y/y MISS
  • expected 6.1%, prior was 6.2%
December industrial production YTD 6.0% y/y
  • expected 6.0%, prior was 6.0%
December Fixed Assets (excluding rural) YTD 8.1% y/y, MISS
  • expected 8.3%, prior was 8.3%
  • At 8.1% it’s the slowest growth since 1999
  • Private sector fixed asset investment up 3.2% in 2016
December Retail Sales 10.9% y/y  BEAT

China Q4 GDP :6.8% y/y (expected 6.7%, prior 6.7%)

The run of solid GDP results remains unbroken

Q4 GDP: 6.8% y/y BEAT
  • expected 6.7%, prior 6.7%
The latter part of 2016 saw enhanced economic stimulus from Chinese authorities, a subsequent stabilisation & growth in economic activity, and an accompanying surge in property prices as liquidity sloshed out of the real economy (if it even got there in the first place). Still, mustn’t grumble.
            Headlines via Reuters:
  • Q4 2016 GDP +1.7 pct q/q s/adj (reuters poll +1.7 pct)
  • China revises Q1 2016 gdp to +1.3 pct q/q vs +1.2 pct q/q
  • China stats bureau says economy still faces complex internal, external environment
  • China 2016 gdp +6.7 pct y/y
  • China revises Q4 2015 GDP to +1.5 pct q/q vs +1.6 pct q/q
  • China stats bureau says foundation for stablisation, improvement in economy still not solid


Chinese Province Admits It Fabricated Economic Data For Three Years

While it will hardly come as a surprise to China watchers who have for years mocked China’s cooked “data”, overnight the state-run People’s Daily reported that the severely impacted by the commodity crunch of the past 2 years rust-belt province of Liaoning fabricated fiscal numbers from 2011 to 2014, citing local officials have said, raising fresh doubts about the accuracy of China’s economic data just two days ahead of the release of China’s GDP report.

The city of Shenyang in Liaoning province of China

 City and county governments in the northwestern region committed fiscal data fraud in the period, Governor Chen Qiufa said at a meeting with provincial lawmakers Tuesday, Bloomberg adds. Not surprisingly, the fabricated economic data was meant to show a state of economic strenght with fiscal revenues inflated by at least 20%, and some other economic data were also false, the paper said, without specifying categories.

Why paint a rosier picture? The same reason as alwasy: Chen said the data were made up “because officials wanted to advance their careers.” The fraud misled the central government’s judgment of Liaoning’s economic status, he said, citing a report from the National Audit Office in 2016.

The admission of fraud comes now because with growth now moderating, officials have “sought to improve the credibility of economic data” as diffusing financial risks becomes a key policy consideration, along with keeping growth ticking along at a rapid clip.

And while the outgoing Obama administration is cracking down on “fake news”, Ning Jizhe, head of the National Bureau of Statistics, has said China is focusing on preventing “fake economic data” as well as increasing the quality of its statistics. Naturally, incidents such as this one will make China watchers that much more skeptical.

Fake economic data may be the least of Liaoning’s worries which in recent years has seen an unprecedented purge of more than 500 deputies from its legislature Bloomberg reports. The deputies were implicated in vote buying and bribery in the first provincial-level case of its kind in the Communist Party’s almost seven-decade rule, according to the official Xinhua News Agency. Former provincial party chief Wang Min, who led Liaoning from 2009 until 2015, was earlier expelled following corruption allegations by China’s top anti-graft watchdog.

As China’s debt-fueled economic impulse continues, if only for a few more months, we wxpect more such instances of fake data to swim to the surface.

Eurozone construction output up 0.4% in November

Construction output across the eurozone climbed in November for the second month in a row, but the annual rate cooled sharply.

Output rose by 0.4 per cent in November from October, matching the previous months’ pace that was revised lower from a rise of 0.8 per cent. Production in construction was steady on a year-on-year basis, compared with a 1.8 per cent advance in October.

The rate of growth in the building of residential and commercial buildings slowed to a month-on-month rate of 0.3 per cent, from 0.8 per cent in November. In contrast, the civil engineering component, which includes structures like railyways, was up by 1.7 per cent after a 2.3 per cent dip in the prior month.

Activity was robust in Germany, the eurozone’s economic powerhouse, increasing by 1.5 per cent. However, it dipped by 0.2 per cent in France, the bloc’s No. 2 economy.

World’s fastest-growing large economy – the two-horse race with a new leader

China is the new fastest-growing large economy says the IMF

The Fund has published its report for 2016 growth rates
  • Says India shot itself in the foot (there’s a lot of that going around) when it cancelled 90% of its cash in circulation
(ps. I’ll quit it with the mixed metaphors now)
India’s growth slowed to 6.6% in 2016 from 7.6% in 2015
  • China’s economy grew by 6.7% in 2016
IMF says 2017 growth in India, though, is expected to be 7.2%, which will put it back in front
Then 7.7% projected for 2018
  • China forecast is 6.5% in 2017 % 6.0% the following year

(ps. The IMF admits these forecasts are unlikely to be precise)