25/12/2013: Eurocoin: Euro Area Growth Firmed Up in December

Merry Christmas to all!

Some good news from the euro area economy front on Christmas day: eurocoin - leading growth indicator for the euro area - posted another (6th consecutive month) improvement in December 2013, rising to 0.29 from 0.23 in November.

December reading marks the 4th consecutive month of the indicator above 0.0 (growth), although it remains in statistically insignificant range. This is the highest reading for the indicator since July 2011.

Latest forecast for Q4 2013 growth in euro area GDP, based on eurocoin, is 0.22-0.25%.

Chart below shows that 2013 marks the year of ECB policies starting to finally bear some fruit. The point here, of course, is that the ECB should have been much more aggressive earlier on - as this blog argued consistently since the beginning of the crisis.

However, the ECB policies are still not being able to generate the momentum strong enough to escape deflationary pressures. Chart below shows that over the last 24 months, monetary policy has failed to sustain moderate inflation and that overall policy trajectory is still driving euro area economy toward deflation.

But back to better news. Despite weaker industrial activity, eurocoin rise in December is based on broad improvements in the economy across household and business confidence.

24/12/2013: Christmas Eve WLASze: Weekend Links on Arts, Sciences and zero economics

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

For the evening we are in, here's timeless and epic Komar & Melamid project The Most Unwanted Music composed for DIA, NYC - a homage to… well… the Christmas Jingle starts at 8:35
http://www.wired.com/listening_post/2008/04/a-scientific-at/


A powerful visual of Christmas Eve around the world via The Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052702304475004579278183520964564


And on to truly sublime - a Christmas Poem by my favourite poet of all times: Joseph Brodsky:

***
DECEMBER 24, 1971

When it’s Christmas we’re all of us magi.
At the grocers’ all slipping and pushing.
Where a tin of halvah, coffee-flavored,
is the cause of a human assault-wave
by a crowd heavy-laden with parcels:
each one his own king, his own camel.

Nylon bags, carrier bags, paper cones,
caps and neckties all twisted up sideways.
Reek of vodka and resin and cod,
orange mandarins, cinnamon, apples.
Floods of faces, no sign of a pathway
toward Bethlehem, shut off by blizzard.

And the bearers of moderate gifts
leap on buses and jam all the doorways,
disappear into courtyards that gape,
though they know that there’s nothing inside there:
not a beast, not a crib, nor yet her,
round whose head gleams a nimbus of gold.

Emptiness. But the mere thought of that
brings forth lights as if out of nowhere.
Herod reigns but the stronger he is,
the more sure, the more certain the wonder.
In the constancy of this relation
is the basic mechanics of Christmas.

That’s what they celebrate everywhere,
for its coming push tables together.
No demand for a star for a while,
but a sort of good will touched with grace
can be seen in all men from afar,
and the shepherds have kindled their fires.

Snow is falling: not smoking but sounding
chimney pots on the roof, every face like a stain.
Herod drinks. Every wife hides her child.
He who comes is a mystery: features
are not known beforehand, men’s hearts may
not be quick to distinguish the stranger.

But when drafts through the doorway disperse
the thick mist of the hours of darkness
and a shape in a shawl stands revealed,
both a newborn and Spirit that’s Holy
in your self you discover; you stare
skyward, and it’s right there:

a star.
***

And another one from Brodsky: 50 years old today:

50 years since: Joseph Brodsky's Christmas 1963:

***
Рождество 1963

Волхвы пришли. Младенец крепко спал.
Звезда светила ярко с небосвода.
Холодный ветер снег в сугроб сгребал.
Шуршал песок. Костер трещал у входа.
Дым шел свечой. Огонь вился крючком.
И тени становились то короче,
то вдруг длинней. Никто не знал кругом,
что жизни счет начнется с этой ночи.
Волхвы пришли. Младенец крепко спал.
Крутые своды ясли окружали.
Кружился снег. Клубился белый пар.
Лежал младенец, и дары лежали.
***

What can I say, but that Christmas is, as Brodsky described it:
"Emptiness. But the mere thought of that
brings forth lights as if out of nowhere."


Merry Christmas to all!

24/12/2013: Should Government Do More on Credit Supply? Or Do Better?

We commonly hear about the need for the Government to do something about 'credit supply' to the real economy and 'fixing the bad loans' problem in the banks. Alas, as per the IMF assessment shown in the chart below, Ireland is already well ahead of the majority of its euro area counterparts (save Spain and Slovenia) in terms of policies aimed at supporting supply of credit. And we are way ahead of everyone else in terms of policies that are designed to address the issue of bad loans.

Given having policies ≠ having effective policies or allowing policies on the books to be implemented in the real world. So may be the Government shouldn't be 'doing more' to fix credit supply and demand, but instead 'do better'?

Note: Policies aimed at enhancing credit supply include: fiscal programmes on credit (e.g. credit support schemes, etc), supportive financial regulation, capital markets measures (e.g. funding via state agencies etc), and bank restructuring (that the IMF and the Irish Government often confuse for repairing). Supporting credit demand policies include policies aimed at facilitating corporate debt restructuring and household debt restructuring.

23/12/2013: Long term growth in Advanced Economies and Ireland

Long range growth figures are a fascinating source of insight into what is happening in the economies over decades. Here's the data on GDP growth in advanced economies (29 countries) for 1980-2013. All figures are computed by me from the IMF data.

Let's start with a long view.

Chart below shows growth in real GDP per capita cumulated over 1980-2013 period:

The chart above clearly shows that after 33 years spanning periods of growth and two crises, Ireland is well-ahead of all euro area and Western economies in terms of cumulated growth in real GDP (the series are based on GDP expressed in constant prices in national currencies).

What the chart above does not show is that:

• In the period of 1980-1989 Irish growth run at an annualised rate of 1.8% per annum, earning us 17th rank out of all 29 economies
• In the period of 1990-1999 Irish growth run at an annualised rate of 5.6% per annum, earning us 1st rank out of all 29 economies
• In the period of 2000-2009 Irish growth run at an annualised rate of 0.74% per annum, earning us 17th rank out of all 29 economies
• In the period of 2010-2013 Irish growth run at an annualised rate of 0.65% per annum, earning us 17th rank out of all 29 economies

What does the above suggest? One: it suggests that our 'catching up' period of the 1990s was very robust: we outperformed the group average growth rate by a factor of x2.66 times.
Two: it also suggests that the 'catching up' period was not followed by sustainable growth momentum, as our growth rates declined in 2000-2013 period to those below the rates recorded in the 1980-1989 period and once again fell below those for the majority of advanced economies average.
Three: With our catch-up growth still putting us well ahead of the average in cumulated growth terms, including the growth rates for comparable catch-up economies, it is unlikely that we are due another 'catching up' period of growth any time soon. In other words, we need to get organic, sustainable growth sources to continue expanding in the future.

Chart below shows our performance across the above metric by decade:

Our performance, once adjusted for FX rates and price differentials tells a slightly different story: once we control for currencies movements, it turns out that we were less exceptional than based on comparatives for GDP expressed in national currencies:

• In the period of 1980-1989 Irish growth run at an annualised rate of 5.6% per annum, earning us 17th rank out of all 29 economies. The average growth for all of the 29 economies was 6.4% and median was 5.8%, so we were below average, but not that much different from the median.
• In the period of 1990-1999 Irish growth in GDP per capita pop-adjusted run accelerated to an annualised rate of 7.6% per annum, earning us 1st rank out of all 29 economies. The average for the 29 economies fell to 4.0% and the median to 3.8%. This was the period of our catch-up. So instead of x2.66 rate of growth relative to the average, we got x1.90 times the average.
• In the period of 2000-2009 Irish growth in GDP per capita PPP-adjusted run at an annualised rate of 2.6%% per annum, earning us 21st rank out of all 29 economies, which averaged growth rate of 3.05% and median of 2.9% per annum. The period marked the end of our catching up and the on-set of our bubble-driven growth that still was less than average or median.
• In the period of 2010-2013 Irish growth run at an annualised rate of 2.7% per annum, earning us 17th rank out of all 29 economies, against their average of 2.2%, but a median of 3.0%. This confirmed the growth trends in 2000-2009.
• Beyond our own case, note the steady decline in the advanced economies average growth rates by decade.

Do note two interesting facts emerging from the above, based on both GDP in national currencies and GDP PPP-adjusted:

• By both metrics of GDP per capita growth, Ireland in 2000-2009 had growth lower than Ireland in the abysmal 1980s (that is the effect of the massive crisis covering years of 2008-2010).
• By both metrics of GDP per capita growth, 2010-2013 period (after we officially 'emerged' from the Great Recession) have been worse than the dreaded 1980s.

One last chart, showing evolution of GDP per capita over time:

22/12/2013: Most Important Charts of the Year: via BusinessInsider

A new set of The Most Important Charts from BusinessInsider.com is out, this time covering the full year:
http://www.businessinsider.com/most-important-charts-2013-12

My contribution is here: http://www.businessinsider.com/most-important-charts-2013-12#constantin-gurdgiev-trinity-college-dublin-85

The full chart:

Note: 2013 marks the fifth consecutive year of the European growth crisis. Amidst the recent firming up in global conditions, it is important to remember that per capita GDP (in US Dollar terms) in both the euro area and the UK remains below the pre-crisis peaks. In absolute terms, euro area cumulated 2008-2013 losses in GDP per capita range from EUR 1,311 for Malta to EUR 56,496 for Ireland, with the euro area average losses of EUR 20,318. No advanced economy within the EU27 has managed to recover cumulative losses  in GDP per capita to-date. On average, euro area GDP per capita in 2013 is forecast to be 9.7% lower than pre-crisis. Across other advanced economies, the GDP per capita is expected to be 8.4% higher in 2013. While this makes the euro area a strong candidate for growth in 2014-2015, absent apparent catalysts for longer term gains in value added, and TFP and labour productivity expansion, a European recovery can be a short-lived bounce-back, rather than a dawn of a New Age.

Sources: Author own calculations based on IMF data.

There is an earlier version of the same chart I prepared, covering also the duration of the crisis and its extent using as a metric GDP per capita in constant prices in national currency (not USD):

21/12/2013: WLASze: Weekend Links on Arts, Sciences and zero economics

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


BARBARA KRUGER show is out in Bregenz, Austria with a show "Believe + Doubt" through January 12 - an absolutely brilliant nostalgia for the 1980s art that still goes on primarily because of its capacity to contextualise reality without relying on referencing visual techniques that age (e.g. 1970s minimalism) or semiotics of neo-geometrism, neo-pop and much of free figuration that became quickly over-exposed and exhausted.

Last time I saw Kruger's work it was some years ago in Berlin. And although I prefer another Typographist - Jenny Holzer - Kruger's work still strikes me as fresh, powerful and well-balanced when it comes to the juxtaposition of the medium, exhibition space and context.

http://www.kunsthaus-bregenz.at/ehtml/ewelcome00.htm

Pdf of the catalogue:
http://www.kunsthaus-bregenz.at/kruger/Einladungsheft_BarbaraKruger.pdf



A fantastic Korean artis, Lee Jinju 
http://www.artistjinju.com/

Haunting paintings that visualise philosophical vignettes - brief, momentary contemplations over the remnants of memory of an event, infused with traces of emotions. Floating islands dissected in an almost quasi-scientific ways, the paintings are full of relics, artefacts of memory. A quote from the artist: "Life wanders, but memories remain" (http://www.artistjinju.com/Artist-s-Note).

And one more:

And a fragment of the above:

There is quiet, or rather icy elegance to her work.

In woods of Cate Marvin:
"You strip the cut, splice it to strips, you mill
the wind, you scissor the air into ecstasy until
all lawns shimmer with your bluest energy."



A very interesting work by Christian Zander aka the Emperor of Antarctica, blending graphic design and art into contemplation of texture and depth. Contemplation driven by endless continuity of image...
http://blog.houseandbike.com/

Drawing on the end of 2013, a retrospective video covering top stories from 2013 relating to exploration of the Cosmos: Exploring the Beyond: Top Space Stories in 2013 http://on.wsj.com/1kafjQL


And preparing for 2014, here's a DeZeen guide to top design shows in 2014: http://www.dezeenguide.com/?id=2014-40-London+Design+Festival

And Wallpaper's Graduate Directory 2014: http://www.wallpaper.com/v2/commercial/wbespoke/graduate-directory-2014

Again on the theme of 2014, this time moving history into the near-future: http://www.theartnewspaper.com/articles/Rush-to-remember-/31087
Russia is about to open a museum dedicated to WW1 (100th anniversary is due next year) and the concept of this museum will have (or at least promises to have) a twist…

20/12/2013: Q3 GDP: Is There a Domestic Recovery?

In previous posts, I covered:
1) top-level data on GDP and GNP growth in q3 2013 (here: http://trueeconomics.blogspot.ie/2013/12/19122013-good-gdp-gnp-growth-headlines.html)
2) expenditure components of GDP and GNP (here: http://trueeconomics.blogspot.ie/2013/12/19122013-qna-q3-2013-expenditure-side.html), and
3) 3-quarters aggregates changes in GDP and GNP (here: http://trueeconomics.blogspot.ie/2013/12/20122013-how-real-is-that-gdp-and-gnp.html)


Now, onto the Domestic Demand.

With both GDP and GNP now severely skewed by the transfer pricing going on in the ICT Services sectors in Ireland, it is no longer reasonable to look at either GDP or GNP for the signs of underlying activity gains in the real Irish economy. Instead, we should consider a combination of all three: changes in GDP, GNP and Final Domestic Demand. Final Domestic Demand is defined as a combination of:

• Government spending on goods and services (other than investment goods)
• Government and private investment in the economy, and
• Private household consumption of goods and services

Unlike Total Domestic Demand, Final Domestic Demand excludes stocks built up by businesses.


First, looking at the Q1-Q3 aggregates comparatives based on data that is not seasonally-adjusted and is expressed in constant euros. In Q1-Q3 2013, final domestic demand in Ireland fell 1.41% compared to the same period in 2012 (down EUR1,293 million y/y). Final Domestic Demand is now down 2.89% on the first three quarters of 2011 and is down 21.6% on the same period of 2007.

In other words, over Q-Q3 2013, on aggregate, there is still no recovery in the domestic economy in Ireland.

Second, let's take a look at q/q changes in the GDP, GNP and Final Domestic Demand. For this purpose, we consider seasonally-adjusted constant euros series.

In Q3 2013, Exports of goods and services fell 0.80% q/q on seasonally-adjusted basis. The decline was shallow compared to 4.63% rise in Q2 2013, but it replicates the pattern of 'quarter up, quarter down' established since Q3 2012.

Overall, since Q1 2011 (in other words since the 'adjustment programme' or 'bailout' started) Irish exports of goods and services were up over 6 quarters and down over 5 quarters. Exports-led recovery stacks ups s follows:

• In 1997-2007 average quarterly growth in exports of goods and services in Ireland stood at 2.445%;
• In 2008-present that rate was 0.281% and
• In 2011-present it is 0.4988%

In other words, massive increases in ICT services exports over the period of the crisis are not strong enough to generate significant uplift momentum in exports growth.

GDP at constant market prices rose 1.502% q/q in Q3 2013, marking a second consecutive quarter of growth. In Q2 2013 the rise was 1.023%. Since Q1 2011, GDP rose on a quarterly basis in 7 quarters and was down in 4 quarters. Overall recovery comparatives are:

• In 1997-2007 GDP growth average 1.630% on a quarterly basis;
• Over 2008-present the average is -0.353% and
• Over Q1 2011-present the average is +0.358%

So there is a longer-term recovery on average, based on GDP, but it is weak, consistent with annualised rate of growth of just 1.44%.

GNP at constant market prices rose 1.580% q/q in Q3 2013, marking the first quarter of growth. In Q2 2013 the GNP contracted 0.133%. Since Q1 2011, GNP rose on a quarterly basis in 6 quarters, it was flat at zero in one quarter, and was down in 4 quarters. Overall recovery comparatives are:

• In 1997-2007 GNP growth averaged 1.522% on a quarterly basis;
• Over 2008-present the average is -0.302% and
• Over Q1 2011-present the average is +0.171%

So there is a longer-term recovery on average, based on GNP, but it is weak, consistent with annualised rate of growth of just 0.68%.

Final Domestic Demand at constant market prices rose 2.412% q/q in Q3 2013, marking the second quarter of growth. In Q2 2013 the FDD was up 0.218%. Since Q1 2011, Final Domestic Demand rose on a quarterly basis in 7 quarters, and was down in 4 quarters. Overall recovery comparatives are:

• In 1997-2007 FDD growth averaged 1.621% on a quarterly basis;
• Over 2008-present the average is -0.961% and
• Over Q1 2011-present the average is -0.175%

So there is no longer-term recovery on average, based on Final Domestic Demand, with FDD contracting on average at an annualised rate of 0.70%. There is, however, good news of FDD rising for two consecutive quarters, clocking cumulative growth of just 2.64% over 6 months or 5.34% annualised. The problem is that the levels from which this growth is taking place are low.

As shown above, overall recovery is not yet taking hold in the domestic economy, although there are some gains recorded in the domestic demand that are encouraging and have been sustained over 2 consecutive quarters.

20/12/2013: How Real Is that GDP and GNP Growth in Ireland? Q3 data

In previous two posts, I covered top-level data on GDP and GNP growth in q3 2013 (here: http://trueeconomics.blogspot.ie/2013/12/19122013-good-gdp-gnp-growth-headlines.html) and expenditure components of GDP and GNP (here: http://trueeconomics.blogspot.ie/2013/12/19122013-qna-q3-2013-expenditure-side.html).

Now, let's take a look at 3-quarters aggregates. The reason why looking at 3 quarters aggregates makes sense is that q/q changes are volatile, while y/y changes are only reflective of quarter-wide movements in activity. 9-months January-September 2013 data comparatives to a year ago provide a better visibility as to what has been happening in the economy so far during this year.

All analysis below is based on seasonally unadjusted data in constant prices terms.

In 3 quarters (Q1-Q3) of 2013, Personal Consumption of Goods and Services fell 1.22% when compared to the same period in 2012. The series are down 1.93% on Q1-Q3 2011. In level terms, personal consumption is down EUR734 million for the first 9 months of 2013 compared to a year ago.

Expenditure by Central and Local Government on Current Goods and Services was down 0.96% for the 9 months January-September 2013 compared to the same period of 2012 and is down 5.03% on same period in 2011. In level terms, Government spending on goods and services is down EUR178 million in Q1-Q3 2013 compared to a year ago.

Gross Domestic Fixed Capital Formation for the nine months January-September 2013 has fallen 2.90% compared to the same period a year ago (in level terms, -EUR381 million). Compared to the same period in 2011, gross fixed capital formation is now down 4.42%. When we talk about 'big increases' in investment, keep in mind, Q1-Q3 cumulated Gross Fixed Capital Formation was down 55% on the same period for 2007.

Exports of Goods and Services for the nine months January-September 2013 were down 0.8% on the same period a year ago (-EUR1,013 million), but up 0.84% on the same period of 2011. This hardly shows 'robust growth' in exports. Exports composition has shifted once again in favour of Services. Goods exports shrunk over the last nine months by 4.51% compared to same period 2012 (-EUR2,809 million) and are now down 8.29% on Q1-Q3 cumulative for 2011 and down 2.47% on Q1-Q3 2007 too. Meanwhile, exports of services rose 2.77% in Q1-Q3 2013 compared to a year ago (+EUR1,796 million) as per 'Google-tax effect' and these are now up 10.69% on Q1-Q3 2011 and up 21.29% on Q1-Q3 2007. At the rate we are going, pretty soon Barrow Street GDP will exceed that of South Korea, which will make Poly's Pizza more economically important than Geneva.

Sarcasm aside, Imports of goods and services (another driver - via their collapse - of positive GDP and GNP news) are down 0.93% y/y in Q1-Q3 2013 (-EUR908 million) and are down 1.35% on same period 2011. Compared to Q1-Q3 2007 imports of goods and services are down massive 9.49% - the effect that contributes significantly to upside of GDP. Goods imports alone are now down 33.3% on Q1-Q3 2007 and these were down 4% (-EUR1,419 million) on Q1-Q3 cumulative for 2012.

So, let's add few things. In 9 months January-September 2013, relative to the same period of 2012:
1) Personal consumption fell EUR734 million
2) Government consumption fell EUR178 million
3) Domestic Gross Fixed Capital formation fell EUR381 million
4) Exports of Goods and Services fell EUR1,013 million
5) Imports of Goods and Services fell EUR908 million, and
6) Stocks of goods rose EUR503 million.

(1)-(4) subtracted from GDP growth, (5) and (6) added to GDP growth. Which means that the only two positive contributions to growth in our GDP came from: imports decline and stocks of goods held by businesses rise. This is hardly a good news, as both sources of growth are really not about increased/improved activity in the economy.

Thus, GDP at constant market prices fell over the period of Q1-Q3 2013 compared to Q1-Q3 2012 by 0.58% (or EUR706 million). Notice the word 'fell' - whilst there were rises in GDP in Q3 and Q2 in q/q basis, overall so far, 2013 total output in the economy is below that registered for the same period in 2012.

GDP is also down 0.04% on same period 2011 and is down 6.82% on the same period in 2007.

Let me know if you are spotting any positive growth in the above.

Next, the difference between GDP and GNP is formed by the Net Factor Income from the Rest of the World. This also fell in Q1-Q3 2013 compared to the same period of 2012 - down 14.37% y/y (or -EUR3,378 million), which 'contributed' a positive swing to the GNP in the amount of almost EUR3.38 billion. The reason for this? Well, growth-generating fall-off in activity in the phrama sector meant that MNCs were booking lower profits via Ireland and this, allegedly, has a positive effect on our economy… err… on our GNP.

GNP, propelled by stocks accounting tricks, hocus-pocus of transfer pricing and continued decline in imports rose 2.69% in Q1-Q3 2013 compared to Q1-Q3 2012 (up EUR2,670 million = decline in GDP of -EUR706million plus decline in factor payments of +EUR3,378 million). Seriously, folks, this is beginning to look like a joke!

Based on the same physics of transfer pricing miracles, Irish GNP is now 4.16% ahead of Q1-Q3 reading for 2011.

Recap: On expenditure side of the National Accounts, growth in 2013 is not exactly real (for GNP) and not present (for GDP).

Analysis of Total Domestic Demand (aka domestic economy) is to follow. Before then, charts to illustrate the above:

20/12/2013: Are the bondholders' bailouts off the table now?

From late 2008 on through today, myself (including on this blog) and a small number of other economists and analysts have maintained a very clear line that burning of Anglo and INBS bondholders would have been a preferred option for Ireland.

Not to speak for others, I still maintain that writing off the Government bonds held by the ECB is the only course of action open to us today and that it should be pursued.

The ex-IMF's official statements yesterday concerning the preference for burning senior unsecured bondholders in Anglo and INBS, and the claim that this option is no longer viable for Ireland,  are neither new, nor material. For three reasons:

1. Anglo and INBS bondholders should have been bailed-in in full regardless of their status. Those who held secured bonds should have been bailed-in via equity swaps after the full bailing-in of unsecured bondholders. The action would have saved Irish taxpayers tens of billions, not just billions as the ex-IMF-er claims.
2. Other banks: AIB and ptsb bondholders should have bailed-in as well.
3. ECB objections to such a course of action were exceptionally robust, but Ireland should have pursued more aggressive stance with respect to the ECB. Not quite a full exit, but possibly a combination of a threat, plus a concerted push alongside other 'peripheral' countries in the European structures to force ECB engagement.
4. It is never too late to do the right thing: the debts are still there, only in a different form. Anglo-INBS debts are now held by the Central Bank in the form of sovereign bonds, converted into the latter by the acts of the current Government. These bonds should not be repaid. There are many ways in which such non-repayment can be structured, including with cooperation of the ECB and European officials. One example would be converting the bonds into perpetual zero coupon bonds.

In other words, late admission by the ex-IMF employee of the wrongs, backed by the claim that 'nothing more can be done' are not good enough. We need real corrective action from the EU.

Report on actual statement is here: http://www.breakingnews.ie/ireland/imf-ireland-could-have-saved-billions-by-burning-anglo-bondholders-617688.html

Update: H/T to @aidanodr for the following:
http://www.independent.ie/irish-news/politics/eu-chief-barroso-no-backdated-bank-debt-deal-for-ireland-29854504.html

This pretty much sums up the EU Commission's stance on the 'seismic' banks deal 'negotiated' by the Irish Government in June 2012. It is also wrong, offensive and belligerent. Mr Barroso's comments are simply economically illiterate. Assume Ireland did cause the euro area crisis. Can anyone (Mr Barroso?) explain how the euro can be deemed sustainable if it can be destabilised by a crisis in one of the smallest nations members of the union? Alternatively, imagine the US Dollar being as vulnerable to a banking crisis in New Hampshire in a way that euro (per Mr Barroso's claims) was allegedly vulnerable to the Irish crisis?

19/12/2013: QNA Q3 2013: Expenditure Side and External Trade

QNA results came in strong at the headline levels for Q3 2013. These were covered here: http://trueeconomics.blogspot.ie/2013/12/19122013-good-gdp-gnp-growth-headlines.html

Now, let's take a look at the GDP decomposition by expenditure line. I am referencing throughout non-seasonally adjusted series for y/y comparatives. All in constant prices.

Year on year, personal expenditure on goods and services fell 0.98% in Q3 2013 and the series were up 0.79% on Q3 2011. This is not a good result, but it is an improvement on -1.52 y/y contraction recorded in Q2 2013.

Net Expenditure by Central & Local Govt. on Current Goods & Services rose 0.68% y/y in Q3 2013, after having posted a contraction of -1.73% in Q2 2013. Compared to Q3 2011, net expenditure by Government was down -3.25% in Q3 2013.

Gross domestic fixed capital formation jumped significantly in Q3 2013 up 8.30% y/y albeit from low levels. The series are now up 18.68% on Q3 2011. In Q2 2013, fixed capital formation rose 1.42% y/y, so Q3 2013 data shows some serious improvement.

Exports of Goods and Services (net of factor income flows) rose 0.58% y/y in Q3 2013 and are up only 0.94% on Q3 2011. This is poor given how much we have staked on an exports-led recovery. Worse news: in Q2 2013 exports grew 1.09% y/y, so we are seeing continued slowdown in the rates of growth.

Exports of Goods fell 2.37% y/y in Q3 2013 on foot of a decline of 1.61% in Q2 2013. Exports of goods are now down 7.64% on Q3 2011.

Exports of Services meanwhile picked the slack from Exports of Goods contraction. Exports of Services grew 3.32% y/y in Q3 2013 having previously posted growth of 3.63% y/y in Q2 2013. In other words, strong growth in Q3, but slower than in Q2. Compared to Q3 2011, exports of services are now up cumulative 9.89%.

Imports of Goods and Services fell 1.28% y/y in Q3 2013 and are now up only 0.73% on Q3 2011. The decline was primarily driven by a 3.4% drop in imports of goods and moderated by a decline of 0.11% in terms of imports of services.

Trade Balance grew on foot of stronger trade surplus in services (+EUR747 million in Q3 2013 compared to Q3 2012) and moderated by small decline in trade deficit in goods (-EUR93 million in Q3 2013). Trade balance overall grew by EUR654 million in Q3 2013 compared to Q3 2012, up 6.56% y/y.

Thus, on the expenditure side of the National Accounts, Q3 2013 gains in GDP were supported by 

• Growth in the Net Government Expenditure on Current Goods and Services, Gross Domestic Fixed Capital Formation, and Exports of Services
• Contraction in Imports of Goods and Imports of Services

The GDP dynamics were adversely impacted by declines in:

• Personal expenditure on goods and services,
• Decline in Exports of goods.

Volatility remains a dominant theme in quarterly data analysis, so it is worth looking at the figures for the first 3 quarters of the year. This will be done is the next post.

19/12/2013: Good GDP & GNP Growth Headlines for Q3 2013

Quarterly National Accounts for Ireland were relaxed today by the CSO. The headline numbers are good:

For seasonally-adjusted (allowing for q/q comparatives), constant prices data:
1) GDP at constant market prices rose 1.50% in Q3 2013 compared to Q2 2013, having posted 1.02% growth in Q2 2013 compared to Q1 2013.
2) GNP grew by 1.58% in Q3 2013 compared to Q2 2013, having broken the previous period q/q contraction of 0.13% in Q2 2013 compared to Q1 2013.

For not seasonally-adjusted series (allowing for y/y comparatives), constant prices data:
1) GDP expanded 1.74% y/y in Q3 2013, posting significant improvement on -1.64% y/y contraction recorded in Q2 2013.
2) GNP also posted solid rise, beating increases in GDP. GNP was up 3.87% y/y in Q3 2013 and this is a massive jump on -0.69% contraction recorded in Q2 2013.
3) Q3 2013 marks the first quarter when growth in GDP (q/q terms, seasonally adjusted, constant prices) posted second consecutive quarter growth since Q1-Q2 2011. This is welcome, as the GDP series have been exceptionally unstable in recent years: since Q1 2010 through Q3 2013, there were only two episodes of GDP quarterly growth being consecutively above zero for two quarters period.

In y/y terms, GDP finally broke a string of contractions that lasted 4 consecutive quarters between Q3 2012 and Q2 2013.

CHART 3 to illustrate:

It is also worth noting that GNP expansion was fuelled by decline in MNCs transfers of profits abroad. This is most likely due to a decline in pharma sector profits on foot of patent cliff and, possibly, due to some 'parking' of profits on the side of other MNCs. Retained earnings reflected in the Financial Account of the Balance of Payments rose EUR6.27 billion in Q3 2013.

Two core points, however, so far continued as a trend in the data is that we are still witnessing erratic pattern in growth. The recovery is not convincing, yet, when it comes to trend, but there are some positive signs emerging. These are to be explored in the subsequent posts when I deal with composition of growth sources.

On the net, rebound is encouraging and coupled with expectation for growth in Q4 2013, we might be able to pull off a positive expansion for the year.

18/12/2013: TrueEconomics' 5th Anniversary

For the day this was: True Economics blog marked its 5th anniversary today, so many thanks to all of the readers and all who contributed their comments to this blog. Thanks to hundreds of journalists who quoted from the blog and cited it, and even to some academic and policy researchers who did the same. Thanks to all students who found some of the ideas discussed here worthy of learning about. Thanks to a small number of contributors and friends who on some occasions posted on the blog.

And special thanks to the person who talked me into starting this blog.

Here's to many more years and many more readers!