Global mkt cap now near $82tn, equates to 94% of global GDP, just shy of Buffett’s 100% bubble indicator.
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rssChina total yuan deposits: CNY190 trillion ($27 trillion), more than double the US. Total US deposits: $12 trillion.
European mid-morning: Currencies remain little changed but big week lies ahead
Major currencies are <0.1% changed against the dollar so far today
The pound is arguably the only active mover as cable rose to a high of 1.2859 earlier in the session before settling back to near flat levels currently around 1.2820-30 levels.
Other major currencies are holding in narrow ranges against the dollar with little conviction to break stride so far today.
The risk mood is a bit mixed overall with European equities looking indecisive but bond yields are marked higher amid the fact that a Brexit extension was granted, with the move higher coming after France moved on their stance from last week.
Despite the slower start to currencies this week, fret not because it is going to be a crucial week ahead and here are some of the highlights to look forward to:
Monday, 28 October (still to come)
– UK parliamentary vote on Johnson’s election motion
Wednesday, 30 October
– Australia Q3 CPI data
– France Q3 preliminary GDP data
– US October ADP employment change
– US Q3 advanced GDP data
– Bank of Canada October monetary policy meeting
– FOMC October monetary policy meeting
Thursday, 31 October
– New Zealand October ANZ business confidence
– China October manufacturing, non-manufacturing PMI
– BOJ October monetary policy meeting
– Eurozone October preliminary CPI data
– Eurozone Q3 preliminary GDP data
– Canada August monthly GDP data
– US September PCE deflator data
Friday, 1 November
– China October Caixin manufacturing PMI
– US October non-farm payrolls, labour market report
US Q2 GDP third reading 2.0% vs 2.0% expected
The third look at Q2 2019 GDP:
- Initial reading was +2.1%
- Second reading was 2.0%
- Q1 was 3.2%
- Q4 was 1.1%
- GDP y/y 2.3% vs 2.3% in 2nd estimate
Details:
- Personal consumption 4.6% vs 4.7% in 2nd reading
- Initial personal consumption +4.3%
- Consumer spending on durables +13.0% vs +13.0% in 2nd reading
- Business investment -1.0% vs -0.6% in 2nd reading
- Home investment -3.0% vs -2.9% in 2nd reading
- Exports -5.7% vs -5.8% in 2nd reading
- Imports 0.0% vs +0.1% in 2nd reading
- Trade cut 0.68 pp from growth rather than 0.72 pp in 2nd reading
- Corporate profits +3.7% vs +5.1% in 2nd reading
Inflation:
- GDP price index 2.4% vs 2.4% in 2nd reading
- Prior GDP price index 1.1%
- Core PCE 1.9% vs 1.7% in 2nd reading
- Prior core PCE 1.1%
- GDP deflator 2.6% vs +2.5% in 2nd reading
The three notable changes are all highlighted. Business investment was even worse than believed and inflation was higher. The revision lower in business investment made it the worst quarter by that metric since Q4 2015.
A big drag on business investment was investment in structures, which fell at an 11.1% pace.
Upcoming Week : Cutting to the Quick
Central banks are prepared to take fresh measures to strengthen and extend the business cycle primarily because price pressures are below what their predecessors thought would be acceptable levels. Draghi, speaking for the ECB, the Federal Reserve, and the Bank of Japan ratcheted up their concerns, which, even without new initiatives, were sufficient to drive interest rates lower.
There is no real definition of many terms economists throw around like recession or depression. The “two negative quarters of declining GDP” is not a technical definition but a rule of thumb. Ironically there weren’t recessions before the Great Depression. The end of business or credit cycles were called panics and crises. The use of “recession” appears to have been applied to economies to distinguish the end of the business cycle from the Great Depression. Neither the US nor Europe seems to be on the verge of an economic contraction. Given a shrinking population, the Japanese economy can contract, and per capita GDP can still rise.
The Bundesbank warned last week that the German economy may have contracted in Q2, but the eurozone flash composite PMI suggests the region expanded. Although the composite PMI averaged 51.8 in Q2, following a 51.5 average in Q1, GDP growth maybe half of the 0.4% in recorded in the first three months of the year.
The most important data point for the eurozone next week is the flash CPI reading. Some may see it as a non-story as headline inflation is expected to remain at 1.2% and the core rate at 0.8%. Unchanged data is the story. Draghi was clear: if conditions do not improve, the ECB needs to provide more stimulus.
U.S debt to rise to $19.6 trillion by 2015
June 8 (Reuters) – The U.S. debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015, according to a Treasury Department report to Congress.
The report that was sent to lawmakers Friday night with no fanfare said the ratio of debt to the gross domestic product would rise to 102 percent by 2015 from 93 percent this year.
“The president’s economic experts say a 1 percent increase in GDP can create almost 1 million jobs, and that 1 percent is what experts think we are losing because of the debt’s massive drag on our economy,” said Republican Representative Dave Camp, who publicized the report.
He was referring to recent testimony by University of Maryland Professor Carmen Reinhart to the bipartisan fiscal commission, which was created by President Barack Obama to recommend ways to reduce the deficit, which said debt topping 90 percent of GDP could slow economic growth.
The U.S. debt has grown rapidly with the economic downturn and government spending for the Wall Street bailout, the wars in Afghanistan and Iraq and the economic stimulus. The rising debt is contributing to voter unrest ahead of the November congressional elections in which Republicans hope to regain control of Congress.
The total U.S. debt includes obligations to the Social Security retirement program and other government trust funds. The amount of debt held by investors, which include China and other countries as well as individuals and pension funds, will rise to an estimated $9.1 trillion this year from $7.5 trillion last year.
Why relying on GDP will destroy the world-Video
“The longer our obsession with GDP goes on, the longer the issues that really matter to people across the globe will continue to go ignored,” Mr Green said. “It’s not a measure of our well-being and it shouldn’t be a guide to all decision making.”
GDP was introduced as a concept in the 1930s by the economist Simon Kuznets, who warned at the time that “the welfare of a nation can… scarcely be inferred from a measurement of a national income”such as GDP. He later pointed out that there are distinctions between quantity and quality of growth, and between short term and long term goals.
“But we have ignored Kusnets’ warning,” said Mr Green, and we now talk about GDP as if it were “handed down from God on tablets of stone”. But major institutions are now weighing in with alternative measures of growth.
Japan: Land of the Rising Debt
Investors are understandably scared of the sovereign debt crisis unfolding in Europe. Amid their angst, however, they are ignoring a more likely, and significantly larger, debt catastrophe that is about to hit the nation with the second-largest economy in the world — Japan. Two decades of stimulative, low-interest-rate fiscal policy have made Japan the most indebted nation in the developed world, and as new Prime Minister Naoto Kan recently said, in his first address to Parliament, that situation is not sustainable. Japan has little choice but to raise interest rates substantially, with dire consequences far beyond its shores.
The prelude to the current crisis began in the early 1990s, after Japan’s housing and stock market bubbles burst and its economy slipped into recession. For the next 20 years, using flashy names like Fiscal Structural Reform Act, Emergency Employment Measures and Policy Measures of Economic Rebirth, the government cut taxes, increased spending and borrowed money to finance itself. Today, Japan’s ratio of debt to gross domestic product stands at almost 200 percent, more than twice that of the U.S. and Germany and second only to Zimbabwe. (more…)
India's GDP growth to crawl at 4.7% in second quarter: ZyFin
Barely over a week ahead of release of the official GDP data, research and analytical firm ZyFin today estimated India’s economy to expand by 4.7% in the second quarter of the current financial year. The methodology used by ZyFin is distinct and it claimed that it uses variables which are lead indicators to the official data. If GDP indeed grows by this rate, the Finance Ministry’s hopes of GDP growth between 5-5.5% in 2013-14 may be dashed.
In the first quarter of the current financial year, the GDP expanded at a four-year bottom of 4.4%. At that time, ZyFin had estimated a growth of 4.5%.
“We still believe that the economy is in a crisis mode and much below what the economy used to grow at a pace of around 8%”, Debopam Chaudhuri, Vice President of Research and Development at Zyfin told Business Standard.
However, even if the economy grows at this pace, it would be at a year high — both according to official and ZyFin estimates. In the second quarter of 2012-13, the economic growth was higher at 5.2% as per official estimates and by ZyFin’s calculations it was 5.1%.
“While the estimates indicate a sluggish recovery, high inflation, weak consumer sentiment and a slowing services sector will constrain any sustained recovery”, said the firm. (more…)
China Stunner: Real GDP Is Now A Negative -1.1%, Evercore ISI Calculates
With Chinese data now an official farce even among Wall Street economists, tenured academics, and all others whose job obligation it is to accept and never question the lies they are fed, the biggest question over the past year has been just what is China’s real, and rapidly slowing, GDP – which alongside the Fed, is the primary catalyst of the global risk shakeout experienced in recent weeks.
One thing that everyone knows and can agree on, is that it is not the official 7% number, or whatever goalseeked fabrication the communist party tries to push to a world that has realized China can’t even manipulate its stock market higher, let alone its economy.
But what is it? Over the past few months we have shown various unpleasant estimates, the lowest of which was 1.6% back in April.
Today we got the worst one yet, courtesy of Evercore ISI, which using its own GDP equivalent index – the Synthetic Growth Index (SGI) – gets a vastly different result from the official one, namely Chinese growth of -1.1% annually. Or rather, contraction.
To wit, from Evercore:
Our proprietary Synthetic Growth Index (SG!) fell 1.1% mim in July, and was also down 1.1% y/y. No wonderglobal commodities are so weak. The most recent 18 months have been much weakerthan the 2011-13 period. Even if we adjust our SG I upward (for too-little representation of Services — lack of data), we believe actual economic growth in China is far below the official 7.0% yly. And, it is not improving, Most worrisome to us; the ‘equipment’ portion of Plant & Equipment spending is very weak, a bad sign for any company or country. Expect more monetary and fiscal steps to lift growth.
And here is why the world is in big trouble.
