12/12/2013: BlackRock Institute Survey: N. America & W. Europe, December 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region was covered here: http://trueeconomics.blogspot.ie/2013/12/12122013-blackrock-institute-survey.html.

Now, on to survey results for North America and Western Europe region:

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 71% of 115 economists expecting the world economy will get stronger over the next year, (6% higher than within the October report)."

Forward outlook:

• "The consensus of economists project a shift from early cycle to mid-cycle expansionary over the next 6 months."
• "At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen except Norway, where we currently have a low participation rate."

Euro area: "The consensus outlook for the Eurozone continued to improve, where the 6 month forward outlook shifted from 87% to 90% expecting the currency-bloc to move to an expansionary phase. Within the bloc, most respondents expect only Greece to remain in a recessionary phase at the 6 month horizon."

North America: "Over the Atlantic, the consensus view is firmly that North America as a whole is in mid-cycle expansion and is to remain so over the next 6 months."

Note Ireland's position: vis-à-vis euro area (weaker) in the first chart and overall (strong) in the second chart.

 Note: Red dot denotes Austria, Canada, Germany, Norway and Switzerland.

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

12/12/2013: BlackRock Institute Survey: EMEA, December 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region.


"With caveat on the depth of country-level responses, which can differ widely, this month’s EMEA Economic Cycle Survey presented a bullish outlook for the region. The consensus of respondents describe Slovenia, the Ukraine, Croatia, Egypt and Russia currently to be in a recessionary state.

Forward expectations:

• Over the next 6 months, "the consensus shifts toward expansion for Russia and Egypt and an even split between expansion and contraction for Croatia."
• "At the 12 month horizon, the positive theme continues with the consensus expecting all EMEA countries to strengthen or remain the same, with the exception of Slovenia and Ukraine."

Global economy view from the region: "Globally, respondents remain positive on the global growth cycle, with a net 74% of 58 respondents expecting a strengthening world economy over the next 12 months, unchanged from last month’s report. The consensus of economists project mid-cycle expansion over the next 6 months for the global economy"

Note: Red dot represents Slovakia, Poland, Romania, Israel, Kazakhstan, and South Africa

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

11/12/2013: Irish Patenting Activity: November 2013

Reading Pictet's latest monthly, covering the topic of Swiss competitiveness... it is awesome - with interviews from academics, watchmakers, artists, museums directors, company that makes engines for Mars rovers, biotech giant, and so on. And it reminded me to update the data set on Irish patenting activity from NewMorningIP for November.

Here are the results:

Monthly data shows that November 2013 patenting activity in Ireland fell to its third lowest level since the records maintained by NewMorningIP started in August 2012. At 183 patents filed, November 2013 is down on 197 a year ago. So far, Q4 2013 results are running at the lowest level for all quarterly results.

It is worth noting that the data can be throwing seasonal variation. We can't tell due to short nature of series.

Not spectacular numbers at any rate. Big overseas inventions fall-off to 100 in November, the third lowest month on record. Irish inventions are down also.

On annual basis, 2013 is shaping up to post around 2,600 patents, up on 2012. All increases are due to increased overseas patents activity, with Irish patents falling. We shall see how December plays out, however.

11/12/2013: Will Europe Have Any Firepower for Banks Bail Outs?

The Banking Union debate drags on and on and on and the further we travel in time into this debate, the more apparent is the pathetic nature of the undertaking, and with it, the pathetic state of leadership across Europe... Here's the latest instalment:
http://blogs.ft.com/brusselsblog/2013/12/eu-bank-bailout-fight-more-leaked-documents/

Key quotes in this latest instalment:

"Both the European Commission and the European Central Bank – along with most eurozone finance ministries – believe a “break in case of emergency” backstop needs to be in place to provide a safety net for the bank rescue fund since, even when it’s completely full, it will only have €55bn in it. Given the recent crisis experience, that might only be enough to bail out two or three mid-sized European banks."

Laugh! or Cry! or both. The entire circus is about EUR55 billion. Not enough to backstop another Ireland (based on the 2008-2010 crisis dimensions). Not enough to backstop the retail division of the Deutsche Bank alone (based on 5% loss over capital cushion). Not enough to backstop anything, really. Administration, compliance, enforcement and other bureaucratic functions associated with this backstop (and the necessary Banking Union spoking it to the ECB and the eurosystem) will be running at somewhere around 5-10 percent of the entire fund, annually. If this is a form of insurance, you might getter better quote on insuring Titanic in its current state for passenger traffic.

"In addition, the fund will take 10 years to completely fill through levees on European banks, meaning some kind of backstop needs to be in place in the interim. The “SRF Backstop” paper basically says: we need a backstop, but we’re still not sure what it should be or how it would work."

Two things. Unless euro area hopes to remain in the Great Stagnation for the next 10 years, we shall see growth in banks balancesheets. Over 10 years horizon (even if balancesheets grow at 1.5% = real GDP growth expectation for euro area + HICP target, so 3.5% nominal growth pa in balancesheets), the banking assets side (covered liabilities from the SRF perspective) will have expanded by 41 percent. In other words, to provide the same cover as today's EUR 55 billion the fund will require EUR 78 billion. Forget the idea that in its current vision SFR will only be sufficient to bailout two or three mid-sized European banks. We'll be lucky if it can bailout 1 or 2 of mid-sized European banks in 10 years time.

9/12/2013: Irish Construction Sector PMI, November

Irish Construction sector PMI (Ulster Bank & Markit) is out today for November. The numbers are good.

Overall Index is down to 58.8 in November from 59.4 in October, but the reading remains firmly above 50.0 and this markets the third consecutive month of above 50.0 readings. All readings since September are statistically significantly above 50.0.

Dynamics are good, indicating solid upward trend:

• 12mo MA through November 2013 is at 48.0 against 44.4 for the same period in 2012
• 6mo MA improved to 52.4 in November 2013 against 42.1 a year ago
• 3mo MA is up at 58.0 in November 2013 against 46.9 in 3mo through August 2013.

Total Activity Index is strongly driven by upward trends in Housing Construction:

• Housing Activity index is at 60.4 in November, which is down on massive 61.7 in October.
• 12mo MA is at 50.4 against 43.0 for the same period in 2012
• 6mo MA is at 55.4 against 41.7 12 months ago
• 3mo MA is at 60.5 against 50.3 for 3mo through August.

Another major driver for the upward momentum in overall Construction PMI was Commercial Activity - running in line with Housing (chart above):

• Commercial activity index moderated to 60.0 from 61.6 in October. Commercial and Housing Activity sub-indices have been running jointly above 50.0 for 4 months in a row; in statistically significant terms this dynamic is present for three months in a row.
• 12mo MA for Commercial Activity index remains below 50 at 47.9, but this marks a major improvement on 42.9 for 12mo average through November 2012.
• 6mo and 3mo MAs are outperforming y/y and period-on-period. 

Only disappointment is Civil Engineering sub-index which recorded accelerated rate of decline in November at 45.7, compared to October when the reading was 47.2. November marks second consecutive month of accelerating falls.

However, November rate of decline is much shallower than was recorded a year ago (31.1).

In general, strong news on PMI front. and This supports overall Manufacturing and Services trends (see here: http://trueeconomics.blogspot.ie/2013/12/5122013-services-and-manufacturing-pmis.html)

8/12/2013: Exiting EFSF: Check.

So it's official - today we exited EFSF http://www.efsf.europa.eu/about/operations/ireland/index.htm

As I said on twitter: this is a big first step for Ireland. There are many more to be taken in the future, long future... from EFSF's perspective - we are not free until 2042...

What is worth noting in the above table is the extent to which the EFSF has already managed to restructure our debts - maturities extensions mean that the earliest repayment date - previously falling on 04/02/2015 now falls on 01/08/2029. That is a massive restructuring of debt, which, taken together with other changes, explains why we were able to avoid an outright default to-date.

Another thing to note: from my personal perspective, there is a sizeable chance, I and many of my friends (for some that chance is even greater), will not be here to toast the day when Ireland finally repays (or rather rolls over) the full EFSF debt. That's a 'generation lost'... right there... touch it... give it a hug... its us.

8/12/2013: Is Ireland also a German (Federal) Not-a-Tax-Haven?

Irish tax system continues to percolate through international news. Here are two recent articles:

1. ZDNet coverage of Tech sector corporate tax payments in Ireland: http://www.zdnet.com/representation-without-taxation-tech-giants-and-their-loopy-business-of-innovative-tax-avoidance-7000023539/
2. Irish Times story on Germany official use of Irish tax system for balancing the budget: www.irishtimes.com/business/economy/german-ministers-used-irish-shell-firms-to-balance-budget-1.1613637

Which of course begs a suggestion: may be Ireland is not a corporate tax haven... afterall, Germany is not a corporation...

You can track series of articles featuring Irish tax regime in international media starting from this link: http://trueeconomics.blogspot.ie/2013/10/28102013-back-in-news-double-irish.html

8/12/2013: Forbes Claims v Reality

I wrote about Forbes' ludicrous 'rankings' relating to Ireland last week (here: http://trueeconomics.blogspot.ie/2013/12/5122013-that-forbes-folly-of-global.html). But there is more to it than what I covered in the first post.

Forbes makes an assertion that Irish labour costs have declined over time. Have they? Really?

Here's CSO latest data (through Q2 2013) based on occupation and sector of employment. Not perfect, but tells us two things:

1. Have earnings declined?
2. If yes, have they declined in areas that are of relevance to investors?

Here are some charts:

Key occupational level of skills, traditionally associated with foreign investment in Ireland (we are not a cheap manufacturing location, after all, and make a claim that we compete on high skills) are Managers, Professionals and Associated Professionals. Chart above shows that for all sectors in the economy, average weekly wages in this occupational category rose between Q2 2010 and Q2 2013. The rate of increase ranges from 11.1% for Business & Services, to 10.9% for Industry, to 10.4% for all sectors. Public Sector posted weakest increase of 5.2%.

So, Forbes: no, there was no relevant decrease in wages that investors can be concerned with in deciding that Ireland is Numero Uno...

But, may be investors reading Forbes are into lower skilled occupational categories? Call centres and generic sales? So, take a look at the Clerical, Sales and Service Employees category next:

 
Things are a bit volatile here, but trends are all up, with exception for Public Sector. Industry - up 7.6%, Business & Services up 1.7%, all economy: up 0.4%, as Public Sector is down 9.9%.

So, Forbes: no, there was no relevant decrease in wages that investors can be concerned with in deciding that Ireland is Numero Uno...

However, of course Forbes investors might look toward Ireland as a manual workers paradise? While I have no idea why they would do so, let's just entertain this possibility:

Forbes' investors won't be looking at employing Production, Transport, Craft and Other Manual Workers in Ireland in Industry were they concerned with wages inflation. In this category, Irish weekly wages rose, on average, 1.5% in Q2 2013 compared to Q2 2010. Across Business and Services sector, wages for this category of least-skilled workers fell over the last 36 months, but by only 0.6%. Not exactly spectacular 'gains in competitiveness'. And across all economy - these were down just 0.7%. In Public Sector we registered a significant decrease of 6.6% in this employment category, but it is unlikely to be a point worthy of consideration for Forbes' investors...

So can anyone from Forbes, perhaps, explain, how on earth can these trends suggest massive competitiveness gains?

Lastly, there is the actual claim made by Forbes: "Nominal wages fell 17% between 2008 and 2011, which helped keep labor costs in check." In Q1-Q3 2013, average weekly wage in Ireland stood at EUR687.87 against same for Q1-Q3 2008 of EUR702.34. In other words, average wages have declined (based on Q1-Q3 averages) only 2.06%. In Q3 2013 average weekly earnings were 3.04% lower than in Q3 2008. Where do 17% come from, one wonders?..

7/12/2013: WLASze: Weekend Links on Arts, Sciences & zero economics

This is WLASze: Weekend Links on Arts, Sciences and zero economics


Let's start with some art… Brilliant students work from the Bartlett School of Architecture of UCL who won the RIBA President's Medals Student Awards with a range of projects:
http://www.dezeen.com/2013/12/04/riba-presidents-medals-student-awards-2013-winners/
More here: http://www.bartlett.ucl.ac.uk/architecture/news/bartlett-sweep-2013-riba-presidents-medals
I love the Kizhi Island piece:

The timeline itself is a work of art:

While on deezen, a fantastic feature on 'liquid light'
http://www.dezeen.com/2013/06/28/the-liquid-light-of-diego-garcia-by-viktor-westerdahl/
also via Bartlett School of Architecture graduate - Viktor Westerdahl

Innovative, imagination-driven and utterly detached from utilitarian constraints…


Edward Burtynsky's 'Water' reviewed in GuernicaMag is worth reading - fantastic photographer with a deep obsession for human impact on landscape: http://www.guernicamag.com/art/edward-burtynskys-water/
Some images of his work:

 
And his iconic...

From his Water series:

And his webpage: http://www.edwardburtynsky.com/

A quote from GuernicaMag: "Landscape, here, meaning not just the genre of art, but—more importantly—the medium of exchange through which we conceive and represent the physical environment and our relationship to it. A landscape is that which we see and the way in which we see it—a natural scene mediated by culture."

A bit too much of 'academism' there. I prefer to describe this work as forcing the landscape into the frame: powerfully transformative and, thus, powerfully narrative. The visual literally screams at us, and there is not a moment of reprieve from its potent brutality. Which makes it all amazingly beautiful... a sort of hot-cold ice...


And in the same vein of human transformation of landscape, here's AtlasObscura story on Goats of Cingino Dam: http://www.atlasobscura.com/places/goats-of-the-cingino-dam

Having mentioned ice above, here is another landscape photographer: Michael Quinn, profiled in MyModernMet blog: http://www.mymodernmet.com/profiles/blogs/michael-j-quinn-greenland-reflection

Now onto science: given the beauty of surreal Earth-scapes, time to move to astronomy and get us some Saturn-scapes…
http://www.theguardian.com/science/video/2013/dec/05/saturn-north-pole-hexagon-jet-stream-nasa-video?CMP=twt_gu

Full story via NASA, absent annoying commercials: http://www.nasa.gov/jpl/cassini/saturn-north-pole-hexagon-20131204i.html#.UqOKMGRdVBw


What beats what: books vs films… I had a nice discussion with a friend recently about two films based on one same book… the merits of Stanisław Lem's original Solaris (the book) are indisputable. The merits of Tarkovsky's interpretation of Solaris (the movie) are of their own accord… and since no one remembers the first Solaris (the movie) by Boris Nirenburg, the debate was really about Steven Soderbergh's third version (the movie)… I am not a fan… my friend is… we had great breakfast chat about it…

Alas, in real life, merits of movies over books (unlike in the case of Tarkovsky's sheer genius) are dubious. And there is 'scientific' proof to this conjecture: http://www.shortlist.com/entertainment/books-vs-films-the-infographic


So WLASze advice for the weekend - switch off that TV and grab a book…

And don't forget to smile, while reading… or reading for the sake of smiling… here's a candidate:
"‘Beauty is in the eye of the beer holder’: People who think they are drunk also think they are attractive" http://onlinelibrary.wiley.com/doi/10.1111/j.2044-8295.2012.02114.x/abstract
That's right: we fancy ourselves as being hot, when we are drunk… which begs a question: what do we think about our beauty quotient when we are so drunk, we no longer believe we are drunk?..

Enjoy WLASze sensibly...

7/12/2013: Global Manufacturing PMIs: Summary for October-November

In previous posts I covered PMIs for Ireland for both services and manufacturing: http://trueeconomics.blogspot.ie/2013/12/5122013-services-and-manufacturing-pmis.html Also, detailed PMIs coverage is linked in the above.

Here is a neat summary of global Manufacturing PMIs via Markit:

5/12/2013: Services and Manufacturing PMIs for Ireland: November 2013

Yesterday, Markit and Investec released the second set of Purchasing Managers' Indices (PMIs) for Ireland covering Services sector. As usual, here is the analysis of combined Manufacturing and Services PMIs.

Detailed analysis of Manufacturing PMIs was covered here: http://trueeconomics.blogspot.ie/2013/12/2122013-manufacturing-pmi-for-ireland.html. Also, note, I covered actual services activity index (latest data through October) here: http://trueeconomics.blogspot.ie/2013/12/5122013-irish-services-index-october.html

Manufacturing PMIs in November 2013:
- Slipped to 52.4 (still in expansionary territory) from 54.9 in September.
- 3mo Average through August 2013 was 52.1 against 3mo average through November 2013 at 53.3.
- 6mo average through November 2013 is up 4.6% on previous.

Services PMIs in November 2013:
- Slipped to 57.1 from 60.1 in October.
- 3mo average for the period through August 2013 was at 55.4 and 3mo average through November is at 58.0
- 6mo average is up 6.6% on previous.

Both, Manufacturing and Services PMIs are now above 50 for 6 consecutive months. In statical terms, the two PMIs are above 50.0 for 6 months for Services and 3 months for Manufacturing.

Overall, the picture is consistent with upward sub-trend over 3 months for both series.

However, changes in 3mo averages warrant caution on sustainability:

Joint evolution of the series y/y is still encouraging:

And 24-months rolling correlation between series is rising once again - currently at 0.340, the highest since December 2011 when both series were in sub-50 territory.

So net is that the PMIs are still strong, trend is still upward and the short-run uplift continues. Big question is whether this is going to translate into real activity on the ground or mark another period of booming PMIs and stagnant economy. Time will tell...

5/12/2013: Irish Services Index, October 2013

So Services PMIs are booming… they are positively booming…

…while in the real world, per CSO:

"The seasonally adjusted monthly services value index decreased by 1.4 % in October 2013 when compared with September 2013 and there was an annual decrease of 1.2%."

M/m on September 2012:

• Accommodation and Food Service Activities (+1.6%) 
• Wholesale and Retail Trade (+0.8%) 
• Professional, Scientific and Technical Activities (-6.0%), 
• Other Services Activities (-3.5%), 
• Transportation and Storage (-2.9%), 
• Information and Communication (-2.5%) and 
• Administrative and Support Service Activities (-0.3%) 

On an annual basis to October 2012:

• Administrative and Support Service Activities (+15.4%) 
• Information and Communication (+0.9%) 
• Professional, Scientific and Technical Activities (-14.3%), 
• Other Service Activities (-7.0%), 
• Transportation and Storage (-3.0%), 
• Accommodation and Food Service Activities (-2.0%) and 
• Wholesale and Retail Trade (-0.8%)  

Oh, and do notice the 'Smart economy' bits... the Professional, Scientific and Technical Activities down -6.0% m/m and 14.3% y/y. And the area of growth in employment known as Accommodation and Food Service Activities down -2.0% y/y... this data is bizarre and will require confirmation once we have full quarter results to make any sense of... but one thing is clear: Irish Services PMI is just not that good at measuring anything that registers as Services sector in Ireland.