Business investment profile is still worrisome

The pace of capital goods orders in Germany in March suggests a further slowdown in investment in OECD countries over the coming months.
Orders are down 5.9% year-on-year and this indicator is closely correlated with the investment profile of OECD countries.

This slowdown in orders is global.
The rebound in the Euro zone is limited since over a year the decline in orders is still -6.5%. The rest of the world does not look encouraging either.

This is why I have doubts on the investment profile published by INSEE yesterday for the manufacturing sector for France. A 11% growth is expected for 2019 after 0% in 2018. This seems excessive since the survey shows a rapid slowdown in the second half. This means that the first semester has to be very strong. This is not necessarily consistent with what we see in the pace of investment of non-financial companies in the first quarter.
The survey is probably a bit too optimistic. Capital goods orders continue to contract in April 2019. I do not imagine strong investments in France while the rest of the world is rather in an investment slowdown.

Life expectancy in the US

Life expectancy used to be high in the US. The graph shows that it was higher than the OECD average. This has dramatically changed since the late 90’s. Life expectancy is now lower than the OECD average. It was +1 year vis a vis the OECD average, it is now -2 years: a dramatic change.

More than that, life expectancy is decreasing in absolute value in 2016. It was already the case in 2015. This has to do with the opioid crisis but not only.

Do you think it is the best moment to limit access to Obamacare for the poorest? Certainly not – Something wrong in the US

Read this article from the Wapo

My Daily Column – Income Distribution and Growth

Income distribution is currently a major topic as the crisis has persistent effects. We remember during fall of 2011 the “Occupy Wall Street” movement. More recently Thomas Piketty‘s book gave a framework to analyze and to understand deformations in income distribution. Piketty suggests that the economic dynamics doesn’t spontaneously converge to a fair situation and that corrective measures may be needed.

Nevertheless we didn’t have an analysis linking income distribution and growth.
In a recent document, OECD gave some answers to this question that divides economists: Is an unequal income distribution a key-element to create incentives for growth? Or: Is a narrow income distribution the clue for a strong growth? We understand that answers are necessary to understand how economies move in the long-term. Continue reading

Three Graphs on Global Oil Demand

The dynamics of the oil market has changed. The weight of emerging countries in the demand for oil is now at least equivalent to that of industrialized countries. This upheaval reflects the changing balance of the world economy during the first years of the 21st century. Given the evolution of the market and because of what it reflects in terms of economic activity, a new equilibrium has appeared, reflecting a change in the balance of power between industrialized and emerging countries.

It is just a measure, not an explanation but it provides insight into the changing world. Moreover, emerging countries demand will have a stronger impact on oil price than industrialized countries’ behavior can have on it. This dependence is new and appeared in the middle of the first decade of the 2000s. The long period of reduced growth in industrialized countries has reinforced this phenomenon and can also help to understand the American desire to develop shale gas and oil in order to escape at least partially to this constraint. Continue reading