Tuesday, April 17, 2012
Alrighty, Time To Wade Through It
New Home construction wasn't as bad as it looked - it's really the seasonal adjustments. It looks like +12 - 12% for the year. That wouldn't be bad, except that other forms of construction are tailing off.
Industrial Production is at 0% for the second month. There was a late 2012 surge that carried over to January - it looks like auto production is near to peak. Non-energy Ex-MV was -0.4% in March, which is less encouraging. The recent gains are strong enough so that the quarterly net is good. Utilities YoY are now down only 4.6%, and there was a gain in March.
Motor vehicle production should continue to be pretty strong over the next quarter, but while auto production may increase, we have probably peaked on trucks, and I expect the net to weaken somewhat on heavy trucks next quarter.
India is cutting interest rates. Their central bank is most doleful over their fiscal problems, focusing on their current-account deficit. Also RBI warned that there was a limit on rate cuts due to the inflation problem, and begged for an increase in energy prices:
In the budget on March 16, the administration announced record borrowing needs to plug a fiscal shortfall estimated at 5.1 percent of gross domestic product in 2012-2013. The current- account deficit reached $19.6 billion in the three months through December, the worst quarterly performance on record.They appear to be trying to give the government room to hike energy prices. Europe is in a nice stagflationary recession with CPI at 2.7%, right where it has been for months. The core rate accelerated to 1.6%.
“From the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true cost of production,” the Reserve Bank said.
The Australians will probably be cutting soon. That economy is so deeply tied to China that you have to expect growth to drop, and household indebtedness has been putting pressure on consumer spending.
Spain did fine at its auction today, but it paid high yields to move the debt. Right now the shorter-term stuff can move, of course, because there are still hundreds of billions of Euros left from the ECB Euro toss unplaced. So there are buyers for the shorter maturities at high yields. 2.6% for a year is an attractive rate, and what risk can there really be?
There's an Argentine-Spanish fracas developing over the announced seizure of Repsol's YPF unit. It is difficult to attract foreign investment when you seize the assets of foreign countries, and under the circs, this is going to be a very hot issue in Spain.
Since Argentina can't get the capital to develop the resources, look for China to try to move in, but if and when it does, it will probably move in troops. Is Fernandez is trying to reproduce the Venezuelan economic miracle? Mexico is also fried, because it owns a chunk of Repsol's unit.
They have over 20% inflation in Argentina, although the government statistics do not show it. To understand why foreign investment has been dropping so much, one must read stories like this. When the government resorts to threatening independent economists, the atmosphere is not friendly to business:
The government has gone to extraordinary lengths, involving fines and threats of prosecution, to try to stop independent economists from publishing accurate inflation numbers. The American Statistical Association has protested at the political persecution faced by its Argentine colleagues, and is urging the United Nations to act, on the ground that the harassment is a violation of the right to freedom of expression.That article is from the end of February. The people's crusade against the actuaries logically leads to such actions as seizing YPF, because the government desperately needs to stop importing oil to control inflation and boost their current-account surplus. The problem, as Chavez has demonstrated, is that once you seize it the money you need to reinvest comes directly out of the people's pockets, and they are not willing to reinvest profits because they are hungry now.
At the government’s request, last year the IMF sent experts to help it plan a new national CPI. Ms Edwin says that the new index will not be ready until early 2014.
The longer this deception goes on, the trickier it is for the government to end. Faced with deteriorating fiscal accounts, Ms Fernández has begun to trim subsidies amounting to 5% of GDP. Their removal will push prices up further—as would a weakening of the peso. So Mr Moreno’s latest wheeze involves responding to a vanishing current-account surplus with strict import controls, which will undermine growth. Argentina has created a statistical labyrinth that might have been dreamed up by Jorge Luis Borges, the country’s greatest writer. This story is unlikely to have a happy ending.
This entire series of events is unfortunate for South America. Venezuela and Argentina ought to be bright spots for future SA growth, but it looks as if they will continue to be a drag, and Fernandez may be stupid enough to let China in.
The tragedy of democratic Socialism is that it only really works for small homogenous countries with a relatively wealthy population (no significant portion of the population in actual need), high average IQs, high education levels, a culture that has evolved a strong accounting tradition combined with an ingrained hostility toward corruption, and a population skewed toward the math/tech side of things. In other words, a nation either run by Aspergers or Jews who vote rationally and can understand the limits and the issues, which are generally mathematical. The northern Europeans are pretty much the Aspergers, but the danger there is that they can flip. And when they flip, they flip big-time and go utterly berserk without much warning. That means their societies can't withstand major pressures without reverting.
There are very few nations in the world that match that description. None of them exist in the Americas, but Canada is by far the closest, although it yet may fail due to high immigration which will dilute the basic culture.
Adding Utilities graph:
Still very intimidating!
Europe is in a nice stagflationary recession with CPI at 2.7%, right where it has been for months.
Hold on now! We don't need to be starting a witch hunt.
I am in no way, shape, or form responsible for any stagflationary events in the world. I'm just an anonymous blogger on the Internet. ;)
I was there in January. The people love Fernandez de Kirchner almost as much as they loved Evita.
Kind of mass insanity or something. Also, the desire to have Las Malvinas (The Falklands) back is bsed on the new offshore oil discovery there.
At least she sees oil as something that creates wealth, even if they have to steal it. Would that our President recognized the huge bounty beneath our feet.
Argentina is like a drug addict. It keeps trying to recover from socialism , but keeps relapsing. Sigh!
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