- US: IIP (Q4)
- Zambia: BOP (Q4); Israel: Credit Card Purchases (Feb); UAE: CPI (Feb); Saudi Arabia: GDP (Q4-Prelim)
- Hungary: Employment (Feb); Bulgaria: Business Survey (Mar); Kazakhstan: Consolidated Budget (Feb)
- Sweden: Consumer Confidence, Business Tendency Survey, Public Finance (Mar); Iceland: PPI (Feb)
- Spain: Mortgage Market (Jan), Order Book Forecast (Mar)
- Italy: ISTAT Business & Consumer Survey (Mar)
- more updates...
Economy in Brief
U.S. Energy Product Prices Remain Under Pressure
Regular gasoline prices held steady at $2.32 per gallon last week (12.1% y/y) for the third straight week...
German Federal Debt Levels Fall
German debt level fell outright in Q4 2016 as the ratio of federal debt-to-GDP also fell...
NABE 2018 Forecast: Modest Improvement in Economic Growth & Higher Inflation
The NABE expects 2.5% real U.S. economic growth in 2018 compared to 2.3% forecast for 2017...
Texas Factory Sector Activity Remains Strong
The Dallas Fed indicated in its Texas Manufacturing Outlook Survey that the General Business Activity Index eased during March...
EMU Money and Credit Growth Are Less Than Impressive Than Euro-PMIs
EMU nominal money supply growth is slightly higher over three months, but credit growth in the EMU is slower...
Durable Goods Orders Strengthened by Another Jump in Aircraft
New orders for durable goods rose 1.7% (5.0% y/y) during February...
by Robert Brusca March 17, 2016
The EMU trade balance shrank in January and stands a tick below its three-month average. Exports have fallen in January and are lower over three months and six months but higher by 1.2% over 12 months. Imports are lower in January, also lower over three months and six months, but higher over 12 months. Both exports and imports show progressive deterioration in their 12-month to six-month to three-month rates of growth. This is double-barreled trouble.
This progressive export and import shrinkage speaks of weakening global growth as well as a weakening of growth within the euro area itself. Of course, on the import side, there is a downward distortion because these are nominal flows and oil prices are falling. But EMU exports and imports of manufactured goods alone show the same progressively deteriorating trends with negative growth rates over both three-month and six-month. Exports post a tiny 0.5% rise over 12 months, while manufactured imports are up a more robust 3.3% over 12 months. Still, the patterns are weak. The flows are weakening. Those trends also are made clear in the chart. There simply is not much room for prevarication here.
Some country patterns
Germany, France, the U.K., the Netherlands, Finland and Portugal, all early trade reporters in the table, show exports dropping over three months. All of these except the U.K. (+0.6%) show exports falling over six months as well. Year-over year growth is at or under 2% over 12 months (2.1% for the U.K.). These are impressively weak and uniform patterns. And all of this is from an area that continued to have a weak exchange rate that should cause its EMU members (Germany, France, the Netherlands, Finland and Portugal) to benefit from exchange rate competitiveness. The British pound sterling has been separately weak too.
The meaning of an easier Fed policy path
Markets today are walking on eggshells in the wake of an unexpected pullback from the tightening path announced by the Federal Reserve in the U.S. at yesterday's FOMC meeting. The pullback was much more severe than expected and it shocked many in markets. It is causing some reappraisal about what the Fed might be looking at. There have been reverberations in global markets from the Fed move. But with inflation in the U.S. finally showing some life (core inflation, not headline), the Fed did not take the step to reinforce its direction it backed off. And since all the conditions seemed right for that next step, there is a quandary among market watchers about what exactly the Fed has seen. Was it a ghost?
Second guessing why the Fed moved
Is there weakness that we have not yet seen publically? Or has the Fed suddenly discovered that U.S. data outside of head-count job data have been weakening for some time? The Fed manufacturing surveys for March from NY and Philadelphia actually improved month-to-month. Is there something on the international front? The European trade data show this shrinking in global trade growth trend and that is disturbing right there. The Baltic dry index has been anemic for some time. Oddly, oil prices are getting a bid despite the ongoing glut of oil and Iran's clear opposition to being part of any output restricting deal. Still, OPEC has a meeting scheduled and markets are wary of OPEC and `friends'. In the wake of the Fed meeting yesterday, gold prices absolutely soared. Markets think where there is smoke there is fire. Is there? If so, who or what is `on fire?' And by that, I do not mean who has a hot economy; I mean where is somebody's house burning down?
Dealing with Fed-inspired anxiety
When a central bank that had thrown caution to the wind and had gone its own way suddenly pulls back into its shell markets sit up and take notice. Did the Fed simply take a detour to prudence and away from aggression? Was its hand forced by the recent BOJ and ECB policy actions? Fed Chair Yellen says `no.' But would she really tell us? Markets will be scouring incoming data across the globe for a clue. So far nothing (new) that is obvious has emerged. But it is worth staying alert. The sudden shift by the Fed, the impact on the dollar, the surge in gold and the odd firmness in oil prices are all newsworthy events. Now if we could really nail down the cause, we would be in business. Instead, we are in a state of anxiety.