Tuesday, August 28, 2012

Global Economic Indicators

If you are looking for better-than-expected global economic indicators, welcome home; they are mostly here in the US. Earlier this month, July reports for payroll employment, retail sales, and industrial production were all on the strong side, with all three rising to new cyclical highs. July durable goods orders were also strong, though they’ve been weak excluding transportation industries. Citigroup’s Economic Surprise Index continued to rebound in late August. Railcar loadings of intermodal containers rose to a record high in mid-August.

That’s about all the good news I can find for the US for now. The average August composite index of the three available Fed regional surveys for Dallas, New York, and Philadelphia remained negative for the third month in a row, as did the average for orders. On the other hand, the average employment index for these three remained positive. It’s getting much harder to find any positive economic indicators overseas at all. Let's take a quick world tour:

(1) World Production. Global industrial production has flattened out over the past four months through June. It’s actually been flat for the so-called “advanced economies”, and it recently went flat among the emerging ones. Available data for July show solid increases in the US and China. Upticks were recorded last month in Russia, Taiwan, and Poland. Thailand and Singapore were down.

(2) Germany. Among the latest and worst economic indicators are Germany’s Ifo Business Confidence Index and its components. Germany’s DAX is highly correlated with the current component of the Ifo, which suggests that the rally in German stock prices may soon be over.

(3) China. This morning we learn that profits at China's industrial companies dropped sharply by 5.4% y/y in July for a fourth straight month. There was a huge divergence between the profits of state-owned companies, which plunged 12.2%, and private sector profits, which rose 15.5%. The preliminary version of HSBC Corp.'s monthly purchasing managers' index showed August manufacturing activity fell to a nine-month low with the new export orders index the lowest in three years.

Today's Morning Briefing: Punching Holes. (1) Fed feud. (2) A critique of ultra-easy monetary policy. (3) Lots of holes to fill at Jackson Hole. (4) When buying time is a waste of money. (5) Dear Darrell. (6) US has the lead on upbeat indicators. (7) Global economy is flat-lining. (8) Germany’s Ifo is bearish for DAX. (9) China’s SOEs are less profitable. (10) S&P 500 forward earnings also flat-lining at record high. (More for subscribers.)

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