Thu, 23rd February 2017

Anirudh Sethi Report


Archives of “Economy” Category

UK mortgage approvals at 8-month high

UK mortgage approvals edged up to their highest level since last March in November, according to data from the Bank of England, but analysts warned the housing market is showing signs of a slowdown.

Around 67,500 mortgages were approved in the month, up from a downwardly revised 67,301 in October. The number marked a continued improvement after the summer’s slump, but was still lower than the same month last year, and below the 68,500 predicted by economists surveyed by Bloomberg.

Net mortgage lending, moreover, fell to its lowest level since August, to £3.16bn, according to the BoE.

The overall impression coming from the latest data and surveys is that while housing market activity has come off its August lows, it is still relatively limited and struggling to build momentum.

The fact that the housing market is seemingly struggling for momentum reinforces our suspicion that it is likely to find life increasingly difficult as 2017 progresses.

Statistics on broader credit availability were similarly mixed. Net consumer credit figures notched their largest monthly rise in more than eleven years, but net lending to non financial business declined by £0.8bn after climbing the previous month.

December 2016 UK Markit CIPS construction PMI 54.2 vs 52.8 exp

Details of the December 2016 UK Markit CIPS construction PMI data report 4 January 2016

  • Prior 52.8
  • Housing activity 54.9 vs 53.0
  • Input costs at the highest since Apr 2011 (Level of GBP blamed for that)
  • New orders strongest for 11 months
  • Employment rose at the fastest since May 

Another decent PMI to end the year with.

“December’s survey data confirmed a solid rebound in UK construction output during the final quarter of 2016. All three main areas of construction activity have started to recover from last summer’s soft patch, but in each case growth remains much weaker than the cyclical peaks seen in 2014.

Trade zones out, tough bargains in for 2017

A reversal in U.S. trade policy could make 2017 the year that efforts to build multinational trade zones crumble, returning the focus to tough, bilateral dealmaking.

In October 2015, officials from 12 nations including the U.S. and Japan gathered in the American city of Atlanta to ink the historic Trans-Pacific Partnership, confident of the dawning of a new age of trade governed by such high-level, multilateral agreements. Yet that dream lies all but dead just over a year later, not least due to Donald Trump’s presidential victory and his pledge to pull the U.S. from the agreement upon taking office Jan. 20.

 Many bilateral free trade agreements, which reduce or abolish tariffs and set rules for trade in goods and services between two nations, have been struck over the years. Multilateral agreements extend this notion to the regional level and improve security in the areas they cover, further greasing the wheels of commerce.

Yet Trump prefers his trade pacts one on one — the better to drive hard bargains, leveraging U.S. economic and diplomatic might to secure the most advantageous terms. Multilateral pacts involve far more careful compromise and require each nation to give and take small concessions rather than pushing for an unambiguous win.

Us first

India : November core sector output growth slows to 4.9%

The annual infrastructure output growth slowed to 4.9% in November compared with 6.6% in the previous month as crude oil and natural gas production declined, government data showed on Monday.

For the first eight months of the current fiscal year, which ends in March 2017, the output growth came in at 4.9%.

Electricity generation, however, grew 10.2% year-on-year in November, faster than a 2.8% rise in the previous month. It may be recalled that demonetisation was introduced during November


Demonetisation a big blow! GDP growth may dip below 6% in FY17

With consumption spends in rural and urban India stifled by the acute scarcity of cash, the economy is set to clock sharply lower levels of growth in the current and coming quarters. While the initial days of demonetisation saw economists merely pruning their growth estimates, the cuts could get bigger.

Nomura, for instance, believes there is a downside risk to its Q1 GDP growth projection of 6.9% y-o-y. “Near-term growth may fall much more than expected,” economists at the brokerage wrote. They alluded to proprietary indicators which had slumped to their lowest level since the series started in 1996 and were consistent with a below 6% GDP growth.

While sales have decelerated across markets, given the larger volume of cash transactions, the hinterland has been hurt far more than urban areas.

Q3 2016 UK GDP final 0.6% vs 0.5% exp q/q

Details from the Q3 2016 UK GDP final data report 23 December 2016

  • 2.2% vs 2.3% exp y/y. Prior rev 2.3%. Q2 2.1%
  • Exports -2.6% vs 0.7% prior rev. Q2 -1.0%
  • Imports 1.4% vs -1.5% prior rev. Q2 1.3%
  • Business investment 0.4% vs 0.9% prior rev q/q. Q2 1.0%
  • -2.2% vs -1.6% prior rev y/y. Q2 -0.8%
  • Index of services 0.3% vs 0.2% exp m/m. Prior 0.2%
  • 1.0% vs 0.8% exp yy/y. Prior 0.8%. Revised to 1.0%
  • Q3 current account -25.5bn vs -28.2bn exp. Prior -28.7bn. Revised to -22.1bn

Not as good a final read as the tick up in the headline suggests. Exports dive, imports jump, household income fell (-0.6%), and the biggest fall since Q4 2013.

Q1 and Q2 have also been revised lower by a pip each.

There’s not a lot here that gives reason for the pound to jump.

US GDP final for 3Q 3.5% vs 3.3% est.

The 2nd estimate came in at 3.2%

  • GDP Price index (deflator) 1.4% vs 1.4% est and 1.4% last
  • Personal Consumption +3.0% vs 2.8% est and 2.8% last
  • Core PCE QoQ comes in at 1.7% vs 1.7% est and 1.7% last
  • Corporate profits for the 3Q came in at 6.7% vs 7.6% last
  • Final sales for the quarter rose 3.0% vs 2.8% est
  • Gross private investment increased by 3% versus 2.1% prior
  • Govt increased by 0.8% vs +0.2% in the last estimate
Contributor breakdown to the 3.5% GDP
  • personal consumption +2.03% vs +1.89% prior
  • investment +0.5% vs +0.34% prior
  • Net exports +0.85% vs +0.87% prior
  • Government +0.14% vs +0.05% prior

Inventories – which is a subset of investment contributed 0.49% which was unchanged from the last report.

Overall a better report but it is in the rear view mirror as we are nearly done with the 4Q