The Productivity Puzzle (excerpt)

There is widespread concern about the slow growth in nonfarm business productivity. Over the past 20 quarters (five years) since Q1-2010, it is up only 0.5% on average during each of the Q1-to-Q1 periods spanning this period: 0.4% through Q1-2011, 0.9% through Q1-2012, 0.5% through Q1-2013, 0.6% through Q1-2014, and 0.3% through Q1-2015. That’s awfully weak growth.

There are lots of different reasons to be concerned. Fed Chair Janet Yellen is worried that wage gains are being held down by weak productivity. Bond investors are worried that inflation might rebound if tightening labor markets push up labor costs, with wages rising faster than productivity. In this scenario, stock investors would fret that profit margins would be squeezed if labor costs rise faster than prices. Progressives are saying that companies are using their cash and borrowings to buy back their shares rather than invest in productivity-enhancing capital equipment. They claim that’s worsening income inequality.

In other words, everyone wants to see productivity growing at a faster pace. The key reason is that productivity is the key determinant of consumers’ purchasing power (i.e., real income) and the standard of living (i.e., consumption). However, there are measures of these two variables suggesting that the productivity problem may not be as serious as widely believed. Consider the following:

(1) Long term. First, let’s keep in mind that technological innovations--which are the key drivers of productivity--tend to be lumpy. They don’t happen continuously over time, and they take time to be adopted once they are ready for prime time. We can see this by looking at the growth in productivity over 24-quarter periods. Since the early 1950s, productivity grew especially fast during the 1960s and the late 1990s and the first few years of the next decade. Before and after these bursts, the pace of productivity growth was relatively subpar.

(2) Short term. On a shorter-term basis, productivity jumped 5.2% from Q1-2009 through Q1-2010 before the slowdown since then. That boosts the average productivity growth rate a full percentage point to 1.3% per Q1-to-Q1 period over this six-year time span. I constructed a good proxy for productivity by dividing real GDP by the average weekly hours index in the private sector. I did so because there are no official productivity measures for goods and services industries in real GDP.

I constructed proxy measures of productivity in goods and services industries by dividing their contributions to real GDP by their average weekly hours indexes. Both proxies jumped during 2009. Goods productivity has continued to trend higher at a slower pace, but services productivity has dropped 5.7% from Q4-2009 through Q1-2015! That seems very odd and suggests that the government’s bean counters may be having an especially tough time counting the beans in services.

(3) Freebies. “[T]he U.S. doesn’t have a productivity problem, it has a measurement problem.” That’s according to a 7/16 WSJ article titled “Silicon Valley Doesn’t Believe U.S. Productivity Is Down.” It reviews the contrarian views of Hal Varian, Google’s chief economist. The article notes, “[T]he only way goods and services move the official U.S. productivity needle is when consumers and businesses pay for them. Anything free, no matter how much it improves everyday life, isn’t included.” Many of today’s time-saving technologies are free, like some location-based apps, cloud computing, and robust search engines.

On the other hand, the first posted comment about the article observes: “I suspect that all the productivity gains provided by Google and the like are more than offset by the ridiculous amount of time people spend on FaceBook, Twitter, Instagram etc writing about the cute thing their dog did today, or posting a picture of what they had for lunch...”

Today's Morning Briefing: Opie Kicks the Can. (1) The best can kickers on the road. (2) Going fishing on a summer’s day down a country road. (3) Mario and Opie. (4) Between “aw, shucks” and “shock and awe.” (5) Another panic sell-off followed by another relief rally. (6) Marty Zweig’s famous mantra on steroids. (7) Another better-than-expected earnings season, especially ex-Energy. (8) Putting together the pieces of the productivity puzzle. (9) Productivity has a long boom-bust cycle because innovation is lumpy. (10) Our productivity proxies suggest bean counters aren’t counting all the beans in services. (11) The freebie problem. (12) “Mr. Holmes” (+ +). (More for subscribers.)

Global Economy: More Secular Stagnation (excerpt)

Is it a banana? In the 19th century, downturns were called “depressions.” However, the term got a bad name in the 1930s, and “recession” was coined. Alfred Kahn, one of President Jimmy Carter’s economic advisers, was once rebuked by the President for scaring people by talking of a looming recession. Mr. Kahn, in his next speech, substituted the word “banana” for “recession.”

“Secular stagnation” also has lots of negative connotations. Alvin Hansen was a professor at Harvard University who introduced Keynesian economics in the US during the 1930s and helped create the Council of Economic Advisors. His first book at Harvard was titled Full Recovery or Stagnation? (1938). He outlined what came to be called the “secular stagnation thesis.” He claimed that the American economy would never grow rapidly again because all the growth ingredients had played out, including technological innovation and population growth. The only solution, he argued, was constant, large-scale deficit spending by the federal government.

The economic boom of the 1940s and 1950s buried the term “secular stagnation” in the dust bin of economic history until Professor Lawrence Summers of Harvard University recently dusted it off to explain the slow pace of the current economic expansion. He too is all for more deficit-financed government spending.

I agree that the global economy is struggling with secular stagnation. However, I think it is mostly attributable to too much fiscal and monetary intervention by our governments. More of these policies will make things worse, not better. I’ve discussed my views on this subject on a regular basis in the recent past. For now, let’s review the latest data showing that the global economy is just muddling along.

Global economic growth slowed during June led by a significant contraction in emerging market output, according to Markit’s latest report. The J.P. Morgan Global Composite PMI fell from 53.6 in May to 53.1 in June, down from a recent high of 55.6 during July 2014. The Global M-PMI fell from 51.3 to 51.0 in June, back down at April’s reading, which was the lowest since July 2013.

Most of the weakness was in the BRIC economies, while Japan and the Eurozone posted growth. The US remained well below recent highs, yet above the global average. On a positive note, employment rose m/m for the overall index, albeit at a slower rate, with declines posted in the BRICs.

The HSBC Emerging Markets Composite PMI fell to 49.6 during June. It was only the second reading below 50 since the start of the data in January 2010.

Today's Morning Briefing: Ban Buybacks? (1) Who’s on first? (2) Financial engineering in one easy lesson. (3) Strategists shouldn’t be preachers. (4) Elizabeth Warren: The Fairy Godmother of the Bears. (5) Are buybacks sugar highs for corporations? (6) Meet Senator Baldwin. (7) Professor Lazonick explains how buybacks worsen income inequality. (8) Goldman prefers M&A to buybacks. (9) Depressions, recessions, secular stagnation, and bananas. (10) Mostly ho-hum indicators around the world. (11) Focus on overweight-rated S&P 500 Health Care industries. (More for subscribers.)

US Economy Is Still the Promised Land (excerpt)

June’s employment report was released on Thursday rather than Friday, when US markets and government offices were closed for the long Fourth of July weekend. Overall, there weren’t any fireworks in the report. Our Earned Income Proxy rose to a new record high in June, edging up only 0.2% m/m. Last month’s 223,000 payroll gain was fine, but the previous two months were revised downwards by 60,000. The labor force fell 432,000, while the household measure of employment declined 56,000.

Wages rose, but by only 2.0% y/y, which remains remarkably low given that the JOLTS measure of the jobs openings rate rose during April to the highest since January 2001. The unemployment rate is down to 5.3%, the lowest since April 2008. It is just 4.8% for adults, a new cyclical low. Yet despite the tightness in the labor markets, wage inflation remains remarkably subdued. On the other hand, Q1’s Employment Cost Index for private industry rose to 2.8% y/y, the highest since Q3-2008.

Like Moses, Fed Chair Janet Yellen has pledged to bring us to the Promised Land of milk and honey, i.e., good jobs and good wages. Are we there yet? There certainly are plenty of job openings that can’t easily be filled by the available supply of labor. Apparently, employers aren’t convinced that raising wages will attract the workers they need. Workers who have the right skills to match the available jobs are in the Promised Land. The ones who don’t qualify are still wandering around in the desert, or they’ve dropped out of the labor force and stopped searching for the Promised Land.

There are plenty of other economic indicators suggesting that the US is still the Promised Land for most Americans. Here’s a brief review of the latest:

(1) Construction spending, especially on factory capacity. Construction spending rose to a cyclical high of $1.04 trillion (saar) during May. Leading the way was a 1.5% m/m jump in nonresidential private construction, with manufacturing soaring 6.2% during the month. The latter has been climbing almost vertically this year, posting a 70% y/y gain. This is certainly consistent with the view that despite the strong dollar, the US may be enjoying an industrial renaissance based on cheap energy and technological innovation.

(2) Business equipment spending, especially on heavy trucks. Another category of capital spending that’s showing strength is sales of medium and heavy trucks. It rose to 450,000 units (saar) during June, a new cyclical high and the best pace since February 2007. That’s impressive given that the oil patch has been hard hit by the plunge in oil prices since last summer.

(3) Consumer spending, especially on autos. Retail auto sales averaged 17.1 million units (saar) during Q2, the best such pace since Q3-2005. Overall retail sales have rebounded smartly this spring following the winter’s ice patch. There seemed to be a spring soft patch in retail sales, but it was revised away. While June’s employment report had some soft spots, there was enough strength to provide consumers with more purchasing power.

(4) Purchasing managers, especially the ISM survey. There was also a soft patch in the M-PMI earlier this year. The index fell from 55.1 last December to a recent low of 51.5 during March and April. But it rose during the past two months to 53.5 in June.

Today's Morning Briefing: Ye Shall Merge & Acquire. (1) Greece: This too shall pass? (2) Greeks invented mythology and mathematics. (3) Be fruitful and multiply. (4) M&A and buybacks are shrinking supply of stocks. (5) The Wilshire 3,666. (6) Jump-starting growth with M&A. (7) America is still the Promised Land for most Americans. (8) Janet and Moses. (9) Wages: Are we there yet? (10) More evidence of US industrial renaissance. (11) Pedal to the metal. (12) “Terminator Genisys” (+). (More for subscribers.)

Happy Fourth of July! (excerpt)

In addition to barbeques and fireworks, the Fourth of July weekend is also a big one for big discount sales. Consumers are certainly in a happy mood. The Consumer Confidence Index rose from 94.6 during May to 101.4 during June, remaining near recent cyclical highs. The labor market continues to improve, with the percentage of consumers saying that jobs are plentiful at 21.4% last month, a new cyclical high and the best reading since February 2008.

An index of pending existing home sales rose in May to the highest since April 2006. That’s yet another sign of improving consumer confidence. The puzzle, though, is that Census data on household formation show that they continue to be all renters. This suggests that most of the housing transactions are between younger current owners who are trading up and older current owners who are trading down. First-time homebuyers seem to be missing in action. That may be because the Millennials are saddled with student debt, postponing getting married, and renting apartments in cities, as we discussed last week.

Finally, I should note that the five available regional business surveys for June are showing an upturn from their winter/spring soft patch. The average of the composite business indexes for the Fed Districts of New York, Philadelphia, Richmond, Kansas, and Dallas rose to 0.7 last month, the first reading above zero since February. That’s still relatively weak, suggesting that there may still be some soft spots in the economy. The Dallas survey is especially weak because the oil industry in Texas has been hard hit by lower oil prices.

Today's Morning Briefing: Land of the Free, Home of the Brave. (1) Fireworks on July 4 in US, July 5 in Greece, and July 6 in the markets. (2) Another panic attack followed by another relief rally? (3) Greece will either be kicked out or kicked down the road. (4) US fundamentals improving relative to rest of world, but valuation is a problem. (5) S&P 1500 forward earnings bottoming and turning up. (6) Consumers are in a spending mood as labor market continues to improve. (7) Housing sales looking up, although all new households are renting. (8) Trading up and down. (9) Regional business surveys still show a few soft spots. (10) Focus on market-weight-rated S&P 500 housing-related industries. (More for subscribers.)

The Productivity Puzzle (excerpt)

There is something very odd about the productivity numbers. They don’t make much sense. Productivity growth seems awfully weak given all the news articles about robots, automation, drones, the Internet of Things, and all the apps that are enabling everyone to work more efficiently.

The real output of the nonfinancial business (NFB) sector recovered from the last recession during Q4-2011, when it first exceeded the previous cyclical peak. Since then through Q1-2015, it is up 10.3%. Over this same period, NFB productivity is up only 2.3%. In other words, an 8.0% increase in hours worked accounted for most of the increase in output. On a y/y basis, real NFB output has been hovering around 3% since mid-2010. Over the same period, hours worked has been growing around 2%, while productivity has been rising around just 1%.

My hunch is that the output of the services-producing industries may be undercounted. Alternatively, productivity may be particularly weak in these industries. The easiest and best productivity gains in services-producing industries may have been gotten, and extracting more out of them is getting harder to do. Here are the relevant data points:

(1) The ratio of real GDP for goods to goods-producing payroll employment was at a near-record high of $267,810 per worker during Q1 (saar), up 1.7% y/y. The similar ratio for services rose to $81,372 per worker, down 0.1% y/y.

(2) Since the start of the data in 1947, the goods-producing “productivity” ratio is up a whopping 908%, while the comparable rate for services is up only 77%.

Today's Morning Briefing: Everyday Low Price. (1) EDLP. (2) Walmart stuffing labor costs down supply chain. (3) Is the Phillips Curve right about wage inflation, but wrong about price inflation? (4) S&P 500 Hypermarkets & Super Centers are getting squeezed. (5) Other retailers still showing upbeat metrics. (6) Is there something wrong with the productivity stats? (7) Productivity ratio falling recently in services. (8) Global economy muddling along in the mud. (9) US economy still has some soft spots. (10) Eurozone’s M-PMIs more upbeat than actual production. (11) Submerging economies. (More for subscribers.)

S&P 500 Forward Earnings Driving Economic Slowdown (excerpt)

There are lots of correlations between S&P 500 forward earnings and several key economic indicators. The former dropped sharply late last year and early this year as Energy industry analysts slashed their earnings estimates for this year and next year.

While the plunge in oil prices accounts for much of the weakness in forward earnings since last fall, the soaring dollar has also weighed on earnings. Corporate profits tend to be the key driver of employment and capital spending. Profitable companies tend to expand their payrolls and capacity. Unprofitable companies don’t do so.

This explains why there is such a good correlation between the y/y growth rates of forward earnings and aggregate weekly hours. Forward earnings is also highly correlated with total factory orders as well as nondefense capital goods orders excluding aircraft. The weakness in forward earnings confirms that the slowdown in US economic growth so far this year wasn’t attributable just to the icy winter. Spring’s economic indicators remain disappointing so far.

The profits picture should brighten a bit if the dollar has peaked and oil prices have bottomed. The US economic outlook should also brighten in this scenario. However, don’t expect a boom.

Today's Morning Briefing: Forward Thinking. (1) Six degrees of separation. (2) LinkedIn and the kindness of strangers. (3) Correlations and divergences. (4) Industrial commodity prices aren’t confirming oil rally. (5) The oil price might have bottomed and peaked. (6) The dollar might have peaked. (7) Don’t buy into A$, C$, and gold rallies. (8) Expected inflation rebounding. (9) Forward earnings flagging, and so is economy. (10) Profitable companies expand. Unprofitable ones don’t. (11) Neither boom nor bust. (12) Focus on now underweight-rated S&P 500 housing-related industries. (More for subscribers.)

From Ice Patch to Soft Patch (excerpt)

The performance of the US stock market is quite impressive considering that there isn’t much of a spring in the latest batch of economic indicators. The winter’s ice patch is looking more and more like the spring’s soft patch--all the more reason to expect either one-and-done or none-and-done from the Fed. Consider the following:

(1) Business surveys. Three of the six regional business surveys that I track are available through April. The averages of their composite indexes tend to be highly correlated with the national M-PMI. The average for the FRB districts of Kansas City, New York, and Philadelphia fell to -0.2 this month from 2.6 last month and a recent peak of 18.8 during November of last year. It’s the lowest since May 2013.

The average of the three new orders indexes was -5.8 this month, about the same as last month’s -6.2, which was the lowest since October 2012. The employment index fell to 1.0, the lowest since November 2013.

(2) Flash M-PMI. The national flash M-PMI compiled by Markit fell from 55.7 in March to 54.2 this month. The ISM’s M-PMI was much weaker than Markit’s reading in March. The same is likely this month given the weakness of the available regional surveys so far.

(3) Durable goods orders. The weakness in the regional orders indexes was confirmed by Friday’s release of March durable goods orders. While the overall number rose 4.0% m/m, boosted by a surge in aircraft orders, nondefense capital goods orders excluding aircraft fell for the seventh consecutive month through March, by a total of 6.7%. Orders have been especially weak for primary metals, fabricated metal products, machinery, and electrical equipment, appliances, and components. That probably reflects the combined depressing impact of lower oil prices on the energy industry and the higher dollar on exports.

(4) Lumber prices. In recent days, I’ve noted the plunge in lumber prices since the beginning of the year through Wednesday. That’s not a good omen for housing starts or the S&P 500 Homebuilding Index. Neither is the flat trend in railcar loadings of lumber and wood products over the past year. New home sales fell 11.4% m/m during March.

Today's Morning Briefing: Conspiracy Theories. (1) Compelling narratives without any proof. (2) The central bankers are doing it in broad daylight. (3) Bonds and stocks achieve “escape velocity,” while economies don’t. (4) Connecting the dots in Chicago. (5) Fed’s bunker in Chicago. (6) Bernanke’s new job in Chicago. (7) Spoofing the CME in Chicago. (8) Crash Boys: Michael Lewis has some questions for CME & CFTC. (9) Meet Sarao and Aleyniko. (10) Goldman’s sinister algorithm. (11) The stock market is high on life. (12) More soft-patch indicators in the US. (13) Flash-fried PMIs. (14) “House of Clinton” (+ + +). (More for subscribers.)

Solid Rebound in PMIs Augur Well for Global Economy (excerpt)

Stock investors have been going global rather than investing in the US. While going global has been mostly driven by relative valuation considerations rather than relative earnings, global fundamental economic indicators are generally improving. The reasons could be that lower oil prices are boosting global growth and that the stronger dollar is redistributing growth away from the US to other countries.

Especially impressive is the rebound in the JP Morgan Global Composite Output PMI from a recent low of 52.4 during December to 54.8 last month. The increase has been led by the service component, while the manufacturing component has meandered between 51 and 52. The Eurozone has been leading the improvement in the global composite, rising from a recent low of 51.1 during November to 54.0 during March.

The March PMIs suggest that manufacturing may be weakening in the US, while services are holding up. Japan’s M-PMI (50.3) and NM-PMI (48.4) were relatively weak last month. China’s M-PMI continues to hover around 50.0, while its NM-PMI has remained solidly above that level at 53.7. Both indexes are strong in the UK.

Today's Morning Briefing: Earnings Revival? (1) Another earnings season. (2) Oil, the dollar, and exports all weighing on earnings. (3) Analysts now expect S&P 500 earnings growth of only 2.6% this year. (4) Negative growth during H1-2015. (5) Recent forward earnings rebound waiting for confirmation from commodity pits. (6) US exports are the pits. (7) Going with “Go Global” for now. (8) Cheap is in fashion. (9) Puzzling: Weak currencies boosting forward earnings in Japan, but not Eurozone. (10) Global PMI rebounded smartly in March, led by Eurozone. (11) Focus on market-weight-rated S&P 500 Transportation. (More for subscribers.)

Is US Economy Coming Out of Ice Patch? (excerpt)

On March 18, I observed that spring is coming. Just as I predicted, it started two days later on March 20. On the other hand, the latest batch of economic indicators for March suggests that I may have been too optimistic when I wrote: “I agree with Chauncey Gardiner’s prediction: ‘In the spring, there will be growth.'”

I argued that the economy’s weakness during the first two months of the year reflected an ice patch rather than a soft patch. There are still grounds for optimism as the ground thaws. However, the latest data suggest that it could be a cold spring:

(1) Business surveys. Yesterday we learned that the latest survey of manufacturing purchasing managers showed a decline in the M-PMI to 51.5 during March from 52.9 during February. I wasn’t surprised since the overall index is highly correlated with the average of the composite indexes for the six available regional business surveys. This average fell to -0.1 during March, the lowest since April 2013.

The same can be said for the orders and employment components of the national and average regional surveys. The average regional orders index was especially weak in March, falling to -9.6, the lowest since May 2009. The national orders index (51.8) wasn’t as weak, but it was down from February (52.5). The national employment index (50.0) was weaker than suggested by the regional average, which edged higher during March.

It’s getting harder to blame the weather. Of course, other factors are working to slow the economy. The strong dollar’s negative impact is visible in the M-PMI’s new exports component, which dropped to 47.5 in March, the lowest reading since November 2012. The plunge in oil prices may be depressing energy-related new orders as well as production.

(2) Employment. Yesterday, we also learned that the ADP measure of private payroll employment rose 189,000, the weakest since January 2014. It may be that energy-related employment is taking a hit from the drop in oil prices. The four-week average of jobless claims in North Dakota, Ohio, Pennsylvania, and Texas has spiked up recently from 41,210 near the end of last year to 54,408 in mid-March.

Today's Morning Briefing: Ice & Soft Patches. (1) Full steam ahead on ECB’s QE. (2) ECB facing self-inflicted bond shortage. (3) Negative yields at the short end of the yield curve. (4) Questioning the necessity of ECB’s QE. (5) Taper talk already. (6) Central bankers co-opt the bond market that was once ruled by Bond Vigilantes. (7) Will there be growth in the spring? (8) March business surveys mostly downbeat. (9) Energy-related job losses weighing on ADP payroll gains. (10) Personal income strong, while spending is weak. (11) March data will be key, with auto sales auguring well for spring spending. (12) Focus on market-weight-rated S&P 500 auto-related industries. (More for subscribers.)

PBOC Fueling Chinese Stock Rally (excerpt)

The PBOC is committed to doing whatever it takes to boost China’s flagging economy. The central bank started lowering interest rates late last year and bank reserve requirements early this year. As a result, the China Shanghai ‘A’ stock price index (in yuan) has soared 53.1% since November 19.

Markit reported bad news on China’s M-PMI, which fell back into contractionary territory in March. It sank from 50.7 in February to 49.6 last month, which was slightly above an earlier flash estimate of 49.2. On the other hand, the official M-PMI rose to 50.1 in March from February's 49.9.

On Monday, the PBOC, the housing ministry, and the banking regulator said in a joint statement that buyers of second homes would be required to make a minimum down payment of 40%, down from the previous 60%, as part of efforts to stimulate the housing market.

China new home prices registered their sixth straight month of annual decline in February, as tepid demand continued to weigh on sentiment despite the government's efforts to spur buying. New home prices fell 5.7% y/y in February, according to Reuters calculations based on data from the National Bureau of Statistics. The reading was worse than January's 5.1% decline and marks the largest drop since the current data series began in 2011.

On Sunday, Zhou Xiaochuan, China’s central bank governor, said that he is concerned about signs of deflation and that policymakers are closely monitoring the slowing of global economic growth and declines in commodity prices. He added that the central bank is “vigilantly” ready to battle deflation. The Shanghai ‘A’ stock price index jumped 2.6% on Monday.

In the past, there was a good correlation between the China MSCI (in yuan) and the CRB raw industrials spot price index. They’ve diverged since early last year, suggesting that while slowing growth in China is bearish for commodities, it is bullish for stocks because the PBOC will be forced to ease. Bad news is good news.

Today's Morning Briefing: Bad News Bulls. (1) Breaking bad. (2) Central bank liquidity is the drug of choice. (3) Updating the “insanity trade.” (4) Global stocks move higher as commodity prices move lower. (5) Japan’s CPI and industrial production disappoint. (6) Draghi steps on the accelerator of an accelerating Eurozone economy. (7) Bad news out of China. (8) PBOC eases mortgage terms and remains vigilant about deflation. (9) US stocks marking time while waiting for Fed to do something, nothing, or not much. (10) S&P 500 forward earnings rising again. (More for subscribers.)

More Signs of Life in Eurozone (excerpt)

The Eurozone’s economic indicators have perked up in recent months. The region’s flash Composite Output PMI rose to 54.1 during March, the best reading since May 2011. That’s mostly attributable to the success of ECB President Mario Draghi in dragging the euro down, which may be starting to boost Eurozone exports. He continues to do whatever it takes to hold the Eurozone together and talk the euro down.

On Monday, Draghi strongly reiterated that the ECB’s mandate is to boost inflation. In testimony before the European Parliament, he said that the central bank’s QE bond-buying program, which started earlier this month, is likely to continue for at least another 18 months until inflation stabilizes convincingly around 2%. Let’s review some of the recent Eurozone economic indicators:

(1) Orders. Manufacturing orders fell 3.2% during January in Spain, and have remained fairly flat and depressed since mid-2012. Eurozone orders show more of a recovery over this period, led by Germany.

(2) Production. The upturn in Eurozone orders has yet to be convincingly reflected in the region’s industrial production, which is up just 2.4% from the most recent low during November 2012 through January 2015. Here’s the performance derby for the major economies over this period: Germany (5.0%), Spain (2.9), France (0.9), and Italy (-1.6).

(3) Real GDP. Real GDP in the Eurozone rose 1.3% saar during Q4-2014. Here’s the performance derby for the major economies of the region from highest to lowest: Germany (2.8%), Spain (2.7), France (0.3), and Italy (-0.1).

Today's Morning Briefing: History Repeats Itself. (1) Madrid & Seville. (2) Anti-austerity protestors. (3) Hispania’s religious wars. (4) Ferdinand & Isabella and Columbus. (5) Are the Crusades making a comeback? (6) ISIS following a bloody millenarian script. (7) ISIS jihadists vs. Iran’s mullahs: Dueling apocalyptic visions. (8) Andalusian vote. (9) Rajoy’s challenge. (10) Draghi’s latest whatever-it-takes pledge. (11) Looking up in the Eurozone. (More for subscribers.)