Peak Employment?

Submitted by Lance Roberts of STA Wealth Management,

 

"If we are creating between 150,000 and 200,000 jobs a month, how could we be at peak employment?"

The point is very valid and made me realize that a more apropos title would have been "Have We Reached Peak Employment GROWTH."  While it is very true that we are creating 150-200,000 jobs a month, it is also important that the working age population is growing each month either through natural births or immigration.  The chart below shows employment versus population growth.

Employment-population-growth-021314

Over the last 12 months, employment, as reported by the BLS has averaged 186,500 jobs per month while the working age population (16-54 years of age) has grown by 187,700 jobs.  In other words, employment is being created only by the incremental demand increases caused by population growth.

The issue of population growth is consistently overlooked when evaluating isolated jobs numbers.  By accounting for population growth, the monthly employment report is put into a contextual framework.  The chart below illustrates my point.

Employment-population-growth-021314-2

Prior to the turn of the century, employment accelerated faster than population growth.  However, beginning in 2000 the structural shift in employment began in earnest.  Outsourcing, increased productivity and technological innovations have contributed to slower rates of employment growth as the drive for profitability surged.

While my previous post generated many questions, the point was that there is a limit to employment growth in any given economic cycle.  It is also important to remember that economies do cycle.  Therefore, could the stagnation of employment growth be indicating a mature stage of the current economic cycle?

The Job Opening Labor and Turnover Survey (JOLTS) may provide some additional evidence to support the idea of "peak employment growth."  The chart below shows the ratio of job openings to hires.

JOLT-hires-openings-021314

As you would expect, there is an equilibrium where the number of individuals being hired matches the number of job openings.  At 90%, or above, the economy may be pushing the limits of full employment. 

The next chart shows Net Hires (new hires less total separations) versus employment growth.

JOLT-NetHires-Employment-021314

Again, as you would suspect, there is an equilibrium point where employment is "full" and job openings and hires are simply matching job separations caused by quits, discharges and layoffs.  This also brings up the point of "labor hoarding" as it relates to initial jobless claims.

Employers have slashed labor costs to the bone in order to maximize profitability.  This is why corporate profits are at their highest levels on record while wage and employment growth lag.  However, there is a point where businesses simply cannot cut any further and they begin to "hoard" what labor they have.  The focus then turns to maximizing the labor force's productivity (increase output with minimal increases in labor costs) and hire additional labor only when demand, such as through population growth, forces expansion.

It is this issue of "labor hoarding" which explains the sharp drop in initial weekly jobless claims.  In order to file for unemployment benefits, an individual must have been first terminated, by layoff or discharge, from their previous employer.  An individual who "quits" a job cannot, in theory, file for unemployment insurance.  However, as companies begin to layoff or discharge fewer workers the number of individuals filing for initial claims will decline.  This is shown in the chart below which shows the 4-month average of layoff and discharges versus the 4-week average of initial jobless claims.

labor-hoarding-021314

The "good news" is that for those that are currently employed – job safety is high.  Businesses are indeed hiring; but prefer to hire from the "currently employed" labor pool rather than the unemployed masses.  The "bad news" is that full-time employment remains elusive and wages remain suppressed due to the high competition for available work.

While the Federal Reserve's interventions continue to create a wealth effect for market participants, it is something only enjoyed primarily by those at the upper end of the pay scale.  For the rest of the country, the key issue is between the "have and have nots" – those that have a job and those that don't. 

While it is true that the country is creating jobs every month, the data may be suggesting it is "as good as it gets."  Of course, this is a very disappointing statement when you consider that roughly 1 in 3 people sit outside of the workforce, 20% of the population uses food stamps, and 100 million people access some form of welfare assistance.  The good news is, we aren't in a recession?


    



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TEPCO Hid Record Fukushima Radiation Levels Before Olympics Bid

Days before Tokyo won its bid to host the 2020 Olympics last September, Japanese PM Shinzo Abe stated that Fukushima contaminated water was “under control.” Now, as Reuters reports,  the nation’s nuclear watchdog has uncovered that, following  “uncertainty about the reliability and accuracy of the September strontium reading,” which prompted a re-examination of samples, levels of Strontium-90 were five times the levels previously recorded. The Japanese NRA blasted TEPCO, “We did not hear about this figure when they detected it last September. We have been repeatedly pushing TEPCO to release strontium data since November. It should not take them this long to release this information.” One can only wonder why – when the promise of $500 million of government support is on the line… and new cracks are appearing.

 

Via RT,

Japan’s Tokyo Electric Power Co (TEPCO) is again in the midst of controversy for failing to timely report on record radiation levels at the crippled Fukushima nuclear plant. It is now blasted for holding back strontium measurements since September.

 

TEPCO on Wednesday revealed that it detected 5 million becquerels per liter of radioactive Strontium-90 in a groundwater sample taken some 25 meters from the ocean as early as last September, Reuters reports. The legal limit for releasing strontium into the ocean is just 30 becquerels per liter.

 

Although the reading was alarmingly five times the levels taken at the same spot two months prior to that, TEPCO decided not to immediately report it to the country’s nuclear watchdog. That is despite Strontium-90 being considered twice as harmful to people as Cesium-137, which was also released in large quantities during the meltdowns at the Fukushima Daiichi plant in March 2011 caused by powerful earthquake and tsunami.

 

According to a TEPCO spokesman cited by Reuters, the decision was due to “uncertainty about the reliability and accuracy of the September strontium reading,” which prompted the plant’s operator to reexamine the data.

 

However, Nuclear Regulation Authority (NRA) officials say no data came up until now despite repeated demands to TEPCO.

 

“We did not hear about this figure when they detected it last September. We have been repeatedly pushing TEPCO to release strontium data since November. It should not take them this long to release this information,” Shinji Kinjo, head of the NRA taskforce on contaminated water issues at Fukushima, told the agency.

 

Top NRA officials, including the watchdog’s chairman, have lashed out at TEPCO for “lacking a fundamental understanding of measuring and handling radiation” while responding to the 2011 Fukushima nuclear disaster.

 

This is not an appropriate way to deal with the desire of the public [for transparency] and in particular, the regulator, which is now very closely regulating issues related to public health, the environment and so on,” Martin Schulz, a senior research fellow at the Fujitsu Research Institute, has said.

 

On Thursday, fears of new leaks surfaced in Japanese media, as Asahi Shimbun reported two cracks in a concrete floor of the stricken Fukushima No. 1 facility near radioactive water storage tanks. Some contaminated water from the melting snow may have seeped into the ground through the cracks stretching for 12 and 8 meters, TEPCO said.

 

Earlier last year, TEPCO came under criticism for letting radioactive water leak from a tank at Fukushima and also concealing the fact for some time.

Days before Tokyo won its bid to host the 2020 Olympic Games last September, Japan’s Prime Minister Shinzo Abe claimed that contaminated water at Fukushima was “under control” and vowed to provide some $500 million to help contain it.

Unbelievable!!


    



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The Sell-Side Starts Its Mass GDP Downgrades

Despite the promise that it’s different this time, that this time the growth rebound is “sustainable”, that we we have finally reached “escape velocity”, the dismal truth – as we noted last night courtesy of Mr Santelli – is that it is anything but different this time. On the back of disappointing retail sales (among others) and likely further weakened by this morning’s drop and downward revisions in Industrial Production, the herd of sheep-like sell-side strategists have taken the knife to their hope-filled GDP growth expectations. Of course, this is all weather-related and the hockey-stick will revert to a new normal self-sustaining recovery any day now.

 

 

Charts: Bloomberg


    



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It Was So Cold In January, Even The Internet Froze

Of course, the internet can not freeze – at least not in the Old Normal world – however that is the only logical explanation we can offer in a world in which yesterday’s atrocious retail sales were blamed on the weather – supposedly people stay at home, don’t drive, don’t go to the mall, don’t shop because they have never had to engage in such activities in the winter when it snows outside – and yet online retail sales…. dropped even more? Because we know that in said world, consumption weakness can not possibly be explained by a tapped out US consumer who actually has little disposable cash left, and so we have to assume, correctly, that the weather was so bad in January, that even the Internet and online retail websites, must have frozen. There is no other explanation.

Source: Department of Commerce


    



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“Catastrophic” Winter Storms Send Consumer Confidence Outlook To 6-Month Highs

Take your pick of which "confidence" measure you choose to watch to confirm your previous "common knowledge" meme. Unsurprisingly, the government's own Conference Board indicator provides the highest level of confidence relative to recent months but today's beat by UMich (81.2 flat from last month but above 80.2 expectations) is the highest overall level among the indices. It seems not even the weather can dampen the enthusiasm of the US consumer (who is retail spending at a dismally low level?) Hardly surprising is the fact that the tumble in the current conditions index was entirely dissolved by the hope for the economic outlook which stands at 6 month highs! Short-dated inflation expectations also ticked up. Of course what really matters is keeping the dream alive that multiple-expanding confidence will cover up any and all missed expectations in macro and micro data.

 

All driven by a six-month high in hope…

 

Take your prick – Bloomberg Comfort, Conference Board Confidence, or UMich Sentiment…

 

Of course, what is critical is the continuation of the confidence bubble… because earnings won't get the market to Nirvana so multiple expansion better keep rising…

As a gentle reminder, as we have noted previously [17] – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

[18]

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

[19]

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

  • Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
  • Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
  • Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

[20]

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

[21]

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.


    



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"Catastrophic" Winter Storms Send Consumer Confidence Outlook To 6-Month Highs

Take your pick of which "confidence" measure you choose to watch to confirm your previous "common knowledge" meme. Unsurprisingly, the government's own Conference Board indicator provides the highest level of confidence relative to recent months but today's beat by UMich (81.2 flat from last month but above 80.2 expectations) is the highest overall level among the indices. It seems not even the weather can dampen the enthusiasm of the US consumer (who is retail spending at a dismally low level?) Hardly surprising is the fact that the tumble in the current conditions index was entirely dissolved by the hope for the economic outlook which stands at 6 month highs! Short-dated inflation expectations also ticked up. Of course what really matters is keeping the dream alive that multiple-expanding confidence will cover up any and all missed expectations in macro and micro data.

 

All driven by a six-month high in hope…

 

Take your prick – Bloomberg Comfort, Conference Board Confidence, or UMich Sentiment…

 

Of course, what is critical is the continuation of the confidence bubble… because earnings won't get the market to Nirvana so multiple expansion better keep rising…

As a gentle reminder, as we have noted previously [17] – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

[18]

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

[19]

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

  • Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
  • Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
  • Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

[20]

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

[21]

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.


    



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Industrial Production Plunges, Fed Blames Weather

Despite Utilities soaring 4.1%, the Federal Reserve “blames” the worst miss (and biggest drop) in Industrial Production since August 2012 on “severe weather” in some regions of the country. Capacity Utilization also tumbled – to its lowest since October. Numbers for November and December’s exuberance were revised lower in both series (that must be the weather effect being anticipated that weather would be bad in January!?!). There were 6 mentions of the word ‘weather’ in the report (just missing out of Deutsche’s Lavorgna with 8 yeaterday) as any weakness in macro data is due to unforeseeable events (weather in Winter) but any surprising beat is due to solid fundamentals underlying the real economy.

 

Of course the plunge in Industrial Production would have nothing to do with the near-record levels of inventories in channel-stuffed over-laden mal-invested auto makers?…

 

 

 

From The Fed,

Industrial production decreased 0.3 percent in January after having risen 0.3 percent in December. In January, manufacturing output fell 0.8 percent, partly because of the severe weather that curtailed production in some regions of the country

 

 

The severe weather in January contributed to a decrease of 0.8 percent for manufacturing production. Output had risen in each of the previous five months, though the rates of increase for October through December are now reported to be slower than previously stated: Steel, semiconductors, motor vehicles, and organic chemicals made the largest contributions to the downward revision for the fourth quarter. The level of factory output in January was 1.3 percent above its year-earlier level.

 

Capacity utilization for manufacturing moved down 0.7 percentage point in January to 76.0 percent, a rate 2.7 percentage points below its long-run average.


    



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Gold’s Technicals Support Positive Fundamentals – 9 Key Charts

Submitted by GoldCore

Gold’s Technicals Support Positive Fundamentals – 9 Key Charts

Gold is up 3.3% this week and headed for the biggest weekly advance since October as U.S. economic data was again worse than expected. This increased safe haven demand and the biggest exchange-traded product saw holdings rise to a two-month high.


Gold Prices/Fixes/Rates/Vols, February, 2014 – (Bloomberg)

Call options on gold, giving the buyer the right to buy June 2015 futures at $2,200 an ounce, surged 24% to a five-week high as prices climbed to a three-month high.


Gold in US Dollars, 2009 – February 2014 – (Bloomberg)

Gold has traded above the 100 day moving average since February 10, and is heading for a close above the 200 day moving average for the first time since February 2013.

A weekly close above the 200 day moving average and the psychological level of $1,300/oz will be very positive for gold and could lead to gold challenging the next level of resistance at $1,357/oz and $1,434/oz.

Gold is up 5.3% so far in February and 9.3% so far this year as concerns about emerging market markets, currencies, and the U.S. economy boosted safe haven demand.  Recent employment and sales data was poor. U.S. jobless claims reached 339,000 in the week ended February 8 and retail sales in the U.S. declined in January by the most in 10 months.


GOFO or Gold Forward Offered Rate (1989 – February 2014)

The fundamental outlook for gold remains encouraging as there continues to be robust physical demand for gold despite frequent sharp and sudden sell-offs in the paper futures market. Indeed, there are continuing stresses in the physical bullion market as seen in the Gold Forward Offered Rate (GOFO) rates. These are rates at which contributors, LBMA banks primarily, are prepared to lend gold on a swap against U.S. dollars.

 
Bloomberg Industries (January 2009 – February 2014)

Robust physical demand is also confirmed by the government mints and their coin and bar sales – many of whom had record sales in 2013. The U.S. Mint saw gold coin sales surge 63% to 91,500 ounces in January from 56,000 ounces in December. This was the highest monthly total since April, as sales continued to rebound from their August and September lows.

Chinese demand was quite weak in the last day or two but as ever with Chinese demand it is important to focus on the long term- the monthly and annual data, and fade out the daily noise.

After a massive, record year for Chinese gold demand in 2013, Chinese demand for gold in January was again staggering. SGE data shows that withdrawals from the Shanghai Gold Exchange vaults in January 2014 accounted for 247 tons. This is an increase of 43% compared to January 2013. It’s also more than monthly global mining production and an all-time record.


Bloomberg Industries (2011 – December 2013)

Gold is hemorrhaging out of the western banking system and flowing east to China and also to the increasingly important Asian precious metals hub in Singapore. Storage in Singapore is extremely attractive to the very risk averse, gold owning public. In just three weeks, we already have more bullion stored in Singapore than in Zurich and Hong Kong combined. Our research regarding storing gold in Singapore is the most widely downloaded and read research we have ever produced.


COMEX Gold and Silver Inventories (1999 – Feb 2014)

The flow of gold from west to east can also be seen in the COMEX gold inventory data which remains near multi year lows.

We are confident this trend will continue in the coming weeks, given the fragility of the western economies and banking systems. Indeed, it may lead to a COMEX default and a scramble to acquire physical gold amid surging prices.

Increasingly, gold investors are seeking the safest way to own gold and are avoiding paper gold and gold stored with banks in favour of fully segregated and fully allocated physical coins and bars, in their name, in safer jurisdictions.


Bloomberg Industries

Continuing rumblings of bail-ins and the risk of punitive taxes, levies and even confiscation of assets is contributing to the flow of gold from west to east. As is the ultra loose monetary policies of western central banks who continue to punish savers.

This week brought confirmation, if it were needed that loose monetary policies are set to continue. Doves Carney at the Bank of England and Draghi at the ECB have been joined by Yellen taking over at the Fed.

In her testimony to Congress, Yellen confirmed that she is set to be remain dovish and will continue with QE in the billions per month and maintain interest rates near zero. Yellen said the markets should expect the central bank to continue to follow the ultra low-interest-rate path laid out by her predecessor. She failed to outline the exit strategy of how and when the U.S. might be able to wean itself off the drug that is cheap money and debt monetisation.

It is important to note that while the U.S. money supply did not increase much in the final year of Bernanke’s stewardship of the Fed, it has accelerated as he leaves and Yellen takes over. Money supply in the form of M2 has surged in January and February and has doubled in pace so far this year.


Global Money Supply (M2) of U.S., EU, UK, Japan and China (1999- Feb 2014)

Despite the recent taper and a recent slight improvement in the U.S. annual trade and budget deficits, the U.S. financial position remains appalling as seen in the national debt. Then, there is also the small matter of the unfunded liabilities in the U.S. of between $100 trillion and $200 trillion.

Conclusion
The technicals of gold are increasingly aligned with the bullish fundamentals. Gold’s momentum and it’s holding above the 100 day moving average and now moving above the 200 day moving average are bullish indicators. As is the recent close above resistance at $1,294/oz. 

This is aligned with the still positive fundamental backdrop of significant macroeconomic, systemic, geo-political and monetary risk which is leading to significant demand for physical bullion globally.

Gold is good value at these levels. However, those considering accumulating gold should not assume that the correction is over as it may not be. There is still the potential of falls to test support at $1,180/oz and more range bound trading.

However, if the very positive demand and supply fundamentals are allowed to assert themselves then we should see gold enter a new bull market. Buyers are advised to dollar cost average into position to protect from further corrections and pullbacks and to always own physical bullion and have full title to it.


    



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The “Sick Man Of Europe” Is Back – German Economy Barely Grows In 2013

Everyone knows that without the German export-driven growth dynamo, the European economy would quickly wither and disappear into nothingness. Which is why today’s report that the German economy grew by just 0.4% last year, its worst performance since the global financial crisis in 2009, with strong domestic demand only partially offsetting the continued negative impact of the euro crisis, should be reason for significant concern to all especially since all the artificial, goalseeked GDP readings from the periphery are just that, and are completely meaningless in the grand scheme of things – should Germany’s growth falter, as it clearly has been over the past two years, may as well put the lights out.

For the past three years we have been hearing how Germany is about to turn the corner and its GDP will surge… any minute now. Instead what happened was that growth slowed to 0.7% in 2012 and the economy barely skirted a recession at the start of 2013. Luckily, soon thereafter Europe revised its GDP definition and all was well, if only for the time being. Still, excluding 2009, when the economy shrank by 5.1 percent, its biggest contraction of the post-war era, 2013 proved Germany’s weakest since 2003 when it was dubbed the “Sick Man of Europe”.

Reuters reminds us that the events of 2003 prompted then-chancellor Gerhard Schroeder to unveil far-reaching reforms of the welfare state, which are now being diluted by the new right-left coalition of Angela Merkel’s conservatives and the Social Democrats (SPD).  Investments took 0.1 percent off GDP last year as companies held off on investing due to uncertainty over the euro zone crisis. Foreign trade, which had underpinned growth for the previous three years, subtracted 0.3 percent. The fact import growth outpaced that of exports could tame criticism of Germany’s traditional reliance on exports and suggests it is contributing to recovery among its euro zone trading partners by buying up their products.

Prespun excuses aside, when it comes to Germany, it is all about exports. Recall that net trade accounts for nearly 40% of German GDP – the highest of any developed world economy!

And while the Euro means Germany is competitive within the Eurozone (since the dreaded DEM is no longer around), it still has to export outside the monetary union. Which is what seems to not be happening.

Reuters puts this print in the context of analyst expections: “The preliminary gross domestic product (GDP) estimate from the Federal Statistics Office, released on Wednesday, fell just short of the consensus forecast for a 0.5 percent expansion in a Reuters poll of 18 economists.” It adds the following color:

Germany faced international criticism earlier in 2013 for not doing enough to reduce its high trade surpluses. The U.S. administration reprimanded Germany in October in its semi-annual report to Congress for its economic imbalances.

 

Private and public consumption rose 0.9 and 1.1 percent respectively in 2013, helping domestic demand contribute 0.7 percent to GDP despite the drag from investments.

 

The private household savings rate dropped to its lowest level since 2001 as low interest rates and a robust labor market encouraged traditionally thrifty Germans to spend.

 

The public sector budget swung to a slight deficit of 0.1 percent after posting a surplus of 0.1 percent in 2012.

 

The BGA trade association has said it expects exports, the cornerstone of the Germany economy for decades, to grow by up to 3 percent in 2014.

Good luck: maybe this time will be different and “experts” will finally predict the future. Then again, as we – with the help of the IMF – have been showing, global trade is crashing thanks to global QE where one no longer needs to trade: instead one can simply print whatever “money” one needs…

The happy ending there is absolutely assured.


    



via Zero Hedge http://ift.tt/1dORDuC Tyler Durden

The "Sick Man Of Europe" Is Back – German Economy Barely Grows In 2013

Everyone knows that without the German export-driven growth dynamo, the European economy would quickly wither and disappear into nothingness. Which is why today’s report that the German economy grew by just 0.4% last year, its worst performance since the global financial crisis in 2009, with strong domestic demand only partially offsetting the continued negative impact of the euro crisis, should be reason for significant concern to all especially since all the artificial, goalseeked GDP readings from the periphery are just that, and are completely meaningless in the grand scheme of things – should Germany’s growth falter, as it clearly has been over the past two years, may as well put the lights out.

For the past three years we have been hearing how Germany is about to turn the corner and its GDP will surge… any minute now. Instead what happened was that growth slowed to 0.7% in 2012 and the economy barely skirted a recession at the start of 2013. Luckily, soon thereafter Europe revised its GDP definition and all was well, if only for the time being. Still, excluding 2009, when the economy shrank by 5.1 percent, its biggest contraction of the post-war era, 2013 proved Germany’s weakest since 2003 when it was dubbed the “Sick Man of Europe”.

Reuters reminds us that the events of 2003 prompted then-chancellor Gerhard Schroeder to unveil far-reaching reforms of the welfare state, which are now being diluted by the new right-left coalition of Angela Merkel’s conservatives and the Social Democrats (SPD).  Investments took 0.1 percent off GDP last year as companies held off on investing due to uncertainty over the euro zone crisis. Foreign trade, which had underpinned growth for the previous three years, subtracted 0.3 percent. The fact import growth outpaced that of exports could tame criticism of Germany’s traditional reliance on exports and suggests it is contributing to recovery among its euro zone trading partners by buying up their products.

Prespun excuses aside, when it comes to Germany, it is all about exports. Recall that net trade accounts for nearly 40% of German GDP – the highest of any developed world economy!

And while the Euro means Germany is competitive within the Eurozone (since the dreaded DEM is no longer around), it still has to export outside the monetary union. Which is what seems to not be happening.

Reuters puts this print in the context of analyst expections: “The preliminary gross domestic product (GDP) estimate from the Federal Statistics Office, released on Wednesday, fell just short of the consensus forecast for a 0.5 percent expansion in a Reuters poll of 18 economists.” It adds the following color:

Germany faced international criticism earlier in 2013 for not doing enough to reduce its high trade surpluses. The U.S. administration reprimanded Germany in October in its semi-annual report to Congress for its economic imbalances.

 

Private and public consumption rose 0.9 and 1.1 percent respectively in 2013, helping domestic demand contribute 0.7 percent to GDP despite the drag from investments.

 

The private household savings rate dropped to its lowest level since 2001 as low interest rates and a robust labor market encouraged traditionally thrifty Germans to spend.

 

The public sector budget swung to a slight deficit of 0.1 percent after posting a surplus of 0.1 percent in 2012.

 

The BGA trade association has said it expects exports, the cornerstone of the Germany economy for decades, to grow by up to 3 percent in 2014.

Good luck: maybe this time will be different and “experts” will finally predict the future. Then again, as we – with the help of the IMF – have been showing, global trade is crashing thanks to global QE where one no longer needs to trade: instead one can simply print whatever “money” one needs…

The happy ending there is absolutely assured.


    



via Zero Hedge http://ift.tt/1dORDuC Tyler Durden