Chinese External Trade – 5 charts for Illustration

Five charts to better understand the Chinese external trade momentum.
The main point is the change in regime after the 2009 crisis. Before it annual growth for both exports and imports was between 20 and 40 %. Currently and since 2011 their growth rate is close to 10 % and sometimes less.
These two figures explain why it is necessary for China to find new sources of impulse for its economic activity. The main sources of economic momentum have to be found in the Chinese economy not outside. Continue reading

The Bank of England has made its Revolution

After the Federal Reserve, the Bank of England has changed its communication on monetary policy.
As the economy was in stagnation or on a low growth path, central banks had no trouble to convince investors that it would maintain its very accommodative monetary policy for a long time. It made sense and it was also a reduction of uncertainty as the economic and financial environment was very volatile. Central banks’ credibility was sufficient to convince investors that interest rates would remain low even in the case of improvement in activity.

It is on this point that the situation has changed. Continue reading

German Industrial Orders and Italian GDP in 3 charts

Germany: Industrial Orders in June
Two charts on German industrial orders allow a more optimistic view on the current economic outlook for developed countries.
The first chart below shows the geographical sources of these orders. The total index in purple  is mildly up trending. The decomposition shows that domestic and Euro orders are not too strong and that the main source of orders’ growth comes from outside the Euro Area. The red line has a strong momentum.
Nevertheless in June we see an impressive jump in the Euro Area. Continue reading

USA – GDP growth for Q3 and Q4 2013 and the Fed’s forecasts

In June after its FOMC meeting, the Federal Reserve has published its forecasts for 2013. GDP growth is expected for 2013 to be in the range [2.3 – 2.6%]. The middle of the range is 2.45%.
We then have to compare this number to the result of the first two quarters.
In Q1 GDP growth was 1.1% at annual rate and in Q2 it was 1.7%. This means that the carryover growth at the end of the second quarter is just 1.05%. (carryover growth is the average growth for 2013 if Q3 and Q4 GDP level remains at Q2 level (last known)).
To converge to 2.45% on average for 2013, GDP numbers have to be 7.4% at annual rate both in Q3 and Q4.
Such a sequence has not been seen since the beginning of the 80’s when Ronald Reagan had a very strong program to boost the economy.
The current fiscal policy is conditionned by sequestration and we see that since the beginning of 2010 government expenditures (local and federal) are a drag on GDP growth.
Once again, the Fed’s behavior will be interesting to watch.
Nevertheless as it was mentionned by Tim Duy (@TimDuy), (see here): in the past unemployment rate forecasts were more accurate than GDP forecasts. Even with that in mind the gap will be large and will probably require interpretation by Ben Bernanke.


USA- Strong ISM indices: change in regime or catch up?

In July the two ISM indices jumped strongly erasing the weak period seen from February to June 2013. The manufacturing index was at 55.4 in July versus only 50.2 on average for the second quarter and the non manufacturing index was at 56 versus an average of 53 in Q2.
The first chart clearly shows that the main change was seen on the manufacturing sector. This is the most volatile index. We can see that as two months ago the index was below 50 (49 in May and only 50.9 in June). Continue reading

THE ECB Spring: Change in Tone with Strong and Long Term Commitment from the ECB

The main message from Mario Draghi at his press conference was the following “The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time.”
Official interest rates could go lower if needed. This means refi rate could go lower but also deposits facilities rate which in that case would become negative. This possibility has not change the way Mario Draghi answered questions. He just said that everything was ready to manage this possibility. Negative interest rate on deposits facilities is something that has been accepted at the ECB.
This long-term commitment was taken unanimously. Continue reading

Employment – The New Frontier for Women – Emploi – La nouvelle frontière pour les femmes


Voilà une vidéo courte mais pertinente sur la situation des femmes sur le marché du travail. Il est question de formation, de taux d’activité, de fiscalité et finalement du rôle que leur laissent les hommes. Vidéo en anglais

Here is a short but smart video on women’s situation on the labor market. Education, participation rate, tax policy and the relationship with men on the labor market and elsewhere. Very relevant. Video in english