The main issue this week was the US employment figure as it may change the Fed’s mind on monetary policy. Nevertheless, employment is not the only aspect to mention to catch the US economy momentum. Another important issue, this week, is the rapid and deep drop of German industrial orders from outside the Euro Area. It’s a source of concern for the global investment dynamics. The last important point is the non-null probability of a rate lift-off at the Bank of England in 2016. Mark Carney has mentioned this possibility after the Monetary Policy Committee Meeting of the Bank. It’s not the first time that the BoE and Carney take this kind of commitment.
Eight points this week to follow the macroeconomic environment
1 – There was impatience to get the number of jobs creation in October in the US as it could be a trigger for a Fed’s rate move at its December meeting.
The number was strong at 271 000, way above expectations at 185 000. Nevertheless, the employment rate was almost unchanged for all classes of age and was unchanged for the 25-55 years of age. In other words, there were no supplementary pressures on the labor market even with employment surprising on the upside.
This figure comes after August and September during which the number of jobs creation was low. As a consequence, the average number of new jobs in the last 3 months is below the average of the 3 previous months: +187 000 in August, September and October versus 243 000 from May to July. Continue reading →
Ten macroeconomic points to keep in mind this week
1 – The IMF has revised on the downside its forecast. In 2015 the world GDP will grow by 3.1% after 3.4% in 2014. Expectations for 2016 are marginally higher at 3.6%.
The main reason is in emerging countries which suffer with low commodity prices and the persistent weaker dynamics seen in China. The other point of concern is associated with higher Fed’s rates in the US. We feel a worried environment at this meeting
2 – The signature of the Trans-Pacific Partnership (or TPP) between the USA and 11 Asian partners (without China) is important. It is supposed to boost trade between all these members but we don’t know exactly what will happen in the balance of strength in this new framework. The arbitrage in case of conflict will be done by the World Trade Organization but we know that the role of states and companies will be different. This could be directly seen on the labor market conditions. As negotiations have been secret we need more details to clearly see the global picture and we will see with the experience how this TPP will work. Continue reading →
Data on the world production index and on world trade (in volume) have just been released by the CPB Netherlands Bureau of Economic Policy Analysis. It’s an independent research institute in the Netherlands
Industrial Production Profile
The first graph shows the industrial production index since 2002. There are 4 distinct phases:
One from 2002 to summer 2008 during which the trend growth rate was 4.5% (annualized growth rate). The second phase is the break of 2008/2009 clearly seen on the graph. The third phase is the recovery from 2009 to January 2011. The trend growth rate was 8.3%. During this period every government had an accommodative fiscal policy to support the economic activity. Since the beginning of 2011 the trend is lower. It’s average growth rate is just 2.8%, well below the figure seen before the 2008 crisis.
Figures in spring 2014 are not far from the trend (green) seen on the graph. Survey data on the manufacturing sector (Markit) for the world economy in July and August do not suggest a change in trend. Continue reading →
The Netherlands Bureau for Economic Policy Analysis (CBP) has just released the world industrial production index and the world trade data for June. This gives a good perception of the economic momentum during the second quarter.
I’ve already used this data (see here) and this is an update and a way to understand the current economic situation. Continue reading →
The world economy is on a weak growth trajectory. Expectations are always too positive and the recurrent downward revisions of its global forecasts by the IMF are problematic.
Fives charts can help us to understand what going on at the global level.
The global economic situation can be characterized by two elements: production and trade.
The chart below shows the world industrial production index. This index is computed by the CPB a Dutch institute from national sources