9/1/2014: Danske EM: Russian Economic Outlook 2014

Danske Emerging Markets out with their outlook for Russian economy for 2014. Here are two core snapshots with my brief comments (click on the image to enlarge):

All good. Concern is that credit growth (consumer credit) is still high, although from relatively low levels. On optimism for 2014 side, there might be a rebound. Certainly the projections for oil and energy prices and basic commodites are better and improving. But 'Sochi Effect' is questionable. See here on the timings of the economic impact of the London Olympics: http://trueeconomics.blogspot.ie/2012/10/18102012-some-tough-love-from-stats-for.html and here's something on the Olympics Effect in the longer run (aka no effect): http://trueeconomics.blogspot.ie/2012/08/282012-bit-of-olympic-bubble.html

And a spot-on bit on monetary policy:

One bit - I do not think there will be a dramatic fall-off in inflation.

Here are two core charts:

9/1/2014: Public Lecture in Biochemisty and Immunology

Fascinating stuff:

The School of Biochemistry & Immunology in TCD:  public lecture in Biomedical Frontiers series. 

Professor Ken Mok, "Who da mule? - Smuggling molecules across (biological) borders
" 

Key topics:

• Why is basic research important? 
• Can we really predict which 'horses' (= specific application areas) to bet on in the long run? 
• Telling "a factual story in protein folding/misfolding research where a potential drug-transporting 'mule' - rather than 'horse' - was serendipitously found through basic studies. Widespread interest in this protein-fatty acid complex is growing due to its remarkable properties of selectively killing cancer cells while leaving healthy, differentiated cells intact."

Event details
:

Date: Wednesday 15th January  
       

Time: 6:30pm
       

Venue: Stanley Quek Theatre, Trinity Biomedical Sciences Institute, Pearse Street
       

All welcome and admission is free

Details: http://www.biochemistry.tcd.ie/news/publiclectures.php

9/1/2014: New vehicles licenses in 2013

New vehicles licenses for December 2013 were published yesterday, so we can now update figures for full year 2013.

In 2013, number of all vehicles (new and used) licensed in the state rose 13.12% compared to 2012. 2012 marked the trough of the crisis period licensing and 2013 marked the best year for the Motor Trade since 2008. However, compared to peak, all vehicles licenses were still down 50.88% in 2013.

Of the above, new private cars licenses declined 6.44% y/y, although these were up 31.1% on crisis period trough. New private cars licensed in the State posted their second worst year since the onset of the crisis in 2013 and are currently down 68.3% on peak.

New goods vehicles licenses rose 1.56% in 12 months through December 2013 compared to full year 2012, potentially signalling some improvement in the business activity in the economy. These are now 9.68% above their crisis period trough, but are still down 76.1% on pre-crisis peak.

Chart to illustrate:

8/1/2014: Weakness in Retail Sales extended into November 2013

Retail sales data was out for November 2013 today. Here's the top of the line analysis:

• On seasonally-adjusted basis, core retail sales (ex-motors) posted a slight rise in value of sales from 95.5 in October to 96 in November. 
• Year-on-year value of retail sales (ex-motors) are down 0.1%.
• Core retail sales in volume terms stood at 101.4 in November, up of 100.1 in October.
• Year-on-year volume of retail sales index rose 1.6%
• Meanwhile, the ESRI Consumer Confidence indicator declined to (still massively optimistic) 71.0 in November from 76.2 in October. A year ago, the CCI was at 63.8.

3mo period through November 2013 compared to 3mo period through August 2013:

• Value index marginally down at 95.6 against 96.1 prior;
• Volume index marginally up at 100.5 against 100.4;
• Consumer confidence index up robustly at 73.4 against 68.5 prior

Thus, in the nutshell, Consumer Confidence rose over the year, while retail sales  basically stagnated. 

My own Retail Sales Activity Index:

• On 3mo basis up at 105.6 in September-November 2013 against 103.9 in June-August 2013;
• Up 0.54% mom - in line with 0.52% rise in Value index and up 2.75% y/y

It is worth noting that stripping out motor trade, automotive fuels and bars,

• Value of retail sales fell 0.98% in the 3mo through November compared to 3mo through August
• Volume of retail sales rose 0.06% in the 3mo through November compared to 3mo through August

The above suggests that p[rice reductions in there entail sector in September-November 2013 had no effect on increasing retail sales, compered to the 3 months of June-August 2013.

6/1/2014: Services PMI: December 2013

Markit/Investec Services Sector PMI for Ireland for December 2013 is out today, showing accelerated pace of growth in the sector. Per release: "The rate of growth in Irish service sector activity picked up at the end of 2013 as strengthening economic conditions contributed to a sharp rise in new business. The rate of job creation also accelerated during the month. Part of the strength in new orders was reflective of output price reductions, with discounts offered in spite of a faster increase in input costs."

The release goes on to note that "The rate of expansion in new business quickened for the third month running and was the sharpest since February 2007."

Overall, Q1 2013 average PMI in Services stood at 54.2,basically identical to 54.27 average for Q2 2013. This rose to 58.67 in Q3 and to 59.67 in Q4 2013. Year on year, Q4 2013 is now up from 56.0. Q4 2013 average is the strongest in 4 years running.

The PMI index is now above 50.0, adjusting for statistical significance, for 7 months in a row.

Charts to illustrate:

More analysis to follow, so stay tuned.

5/1/2014: Best Books of 2013

My book of the year for 2013 choice is covered on BusinessInsider here: http://www.businessinsider.com/wall-streets-reading-list-2014-1#constantin-gurdgiev-trinity-college-dublin-europe-the-struggle-for-supremacy-from-1453-to-the-present-by-brendan-simms-11

Hint: it is about euro area and Germany...

5/1/2014: An interesting case study in one University transformation

An interesting article in the Slate about the use of new teaching platforms and strategies to increase student graduation rates for part-time students and boost financial position at one US university:
http://www.slate.com/articles/life/education/2014/01/southern_new_hampshire_university_how_paul_leblanc_s_tiny_school_has_become.html#!

It is worth (in light of acrimonious nature of debate about academic and teaching models in Ireland) to note that I do not suggest this is a template for transforming or reforming the entire Irish system of higher education.

When you cut through the opening lines, you get the core point of the change:

"“The business models implicit in higher-ed are broken,” he says. “Public institutions will not see increasing state funding and private colleges will not see ever-rising tuition.”

His solution was to tackle what colleges were doing poorly: graduating students. Half the students who enroll in post-secondary education never get a degree but still accumulate debt. The low completion rate can be blamed partly on the fact that college is still designed for 18-year-olds who are signing up for an immersive, four-year experience replete with football games and beer-drinking. But those traditional students make up only 20 percent of the post-secondary population. The vast majority are working adults, many with families, whose lives rarely align with an academic timetable.

“College is designed in every way for that 20 percent—cost, time, scheduling, everything,” says LeBlanc. He set out to create an institution for the other 80 percent, one that was flexible and offered a seamless online experience."

5/1/2013: Euro periphery in CDS markets: 2013

One of the core improvements in the Irish economic conditions over 2012-2013 period relates to the decline in Government bonds yields and associated reduction in the Credit Default Swaps spreads (CDS spreads). In particular, bonds and CDS spreads have been referenced often enough as showing Ireland's 'divergence' from the euro area peripherals.

Here are some stats and charts based on CDS data and implied cumulative (5-year) probability of default (CPD) for the euro area peripheral states:

Summary table first, showing changes in CDSs and CPDs over 2013

The table above shows that Irish CDS performed well, but not as strongly as those of all other peripheral states, save Portugal and Italy. In fact, Ireland CDS decline over 2013 at -81.8 was slightly slower than the average for Italy, Portugal and Spain (-87.3), while our CPD decline of -5.16 percentage points was slightly faster than the average CPD decline for Italy, Portugal and Spain (-5.02 percentage points). The reason for the latter outperformance is made clear in the last bullet point of this post.

In absolute terms, however, Irish CDS are signalling stronger sovereign performance when it comes to risk of default:

But Spain is catching up in terms of CPD and in terms of CDS spreads.

Here is Ireland's progression in 2012-2013 showing that most of the improvement was priced in 2012, rather than over the last year:

And looking at the year-end position puts forward several core points about our sovereign debt risks:

• Irish CDS have shown strong declines since the beginning of 2012
• Irish CDS declines do not warrant a conclusion that we are distinct from other peripheral countries. Instead, the conclusion should be that we (alongside Spain and Italy) are distinct from Portugal and Greece. This is intuitive, given that Italy did not have to raise bailout funding, while Spain raised bailout funding solely for banks recapitalisations. Recall that Ireland was tipped into the bailout by the banking crisis and that absent banking crisis, we could have, potentially, sustained Exchequer funding without the need to resort to a bailout. This is not to downplay very substantial deficit pressures that we had ex-banks. But it is to point out that we are different from Portugal and Greece, both of which had to raise funds to shore up almost exclusively sovereign funding.
• Irish CDS since the beginning of 2012 are carrying heavier weighting on probability of default estimates: in the last two charts, our CPD is priced along the mid envelope of (CDS, CPD) quotes, while Greece implies underpricing of the probability of default (along the lower envelope). Our probability of default is slightly over-estimated compared to Portugal and Spain, but is in line with Italy. This potentially relates to the point raised above in relation to speed of our CPD declines over 2013: we might be experiencing an over-due repricing (very slight) in the relationship between the CDS levels and implied estimates of the probability of default.

Less drama-prone interpretation of data than what the thesis of 'Ireland has decoupled from the peripherals' suggests...

4/1/2014: Small downgrade for Russia in ECR survey

Euromoney Country Risk survey update for Russia out today is not a pleasant reading. Here are the details:

Overall score is down, signalling rising risk:

The risk factoring is still more benign than for a number of EU and some Euro area countries:

Recent trend is relatively stable, with some mild improvement on mid-2013:

But sub-scores and sub-factors are largely pointing South:

Overall, not a nice change... All scores in the above below 5.0 are of concern and those below 3.75-4.0 are of significant concern.

4/1/2013: Irish Private Sector Deposits: November 2013

Central Bank of Ireland published series of data today covering deposits and credit in Irish banking system through November 2013. Here are the highlights on deposits. Credit side was covered in the previous post here: http://trueeconomics.blogspot.ie/2014/01/312013-irish-private-sector-credit.html

Here, we cover deposits and loan/deposit ratios:

• Private sector total deposits fell in November 2013 to EUR180.2 billion from EUR180.417 billion in October, but deposits are up EUR13.696 billion (+8.23%) y/y. 3mo average through November 2013 is up EUR13.259 billion on a year ago.
• However, private sector non-financial deposits (deposits by households and non-financial corporations) show much weaker performance than total deposits, rising only EUR1.357 billion (+1.11%) y/y in November and up just EUR969 million (+0.79%) year on year on 3mo average basis.
• The main reason total deposits are up is down to Insurance corporations, pension funds and other financial intermediaries booking a rise of EUR12.339 billion in deposits in November 2013 compared to November 2012.
• Households' deposits are down EUR1.013 billion (-1.1%) y/y in November and down EUR567 million compared to October 2013. 3mo average through November 2013 is down EUR975 million (-1.06%) y/y.
• Non-financial Corporations' deposits are up EUR2.37 billion y/y in November (up EUR1.944 billion on 3mo average basis) and are up EUR99 million on a monthly basis.

With private non-financial sector (households and NFCs) loans at EUR188.892 billion (down 0.59% y/y and down 0.79% m/m) and private non-financial sector deposits at EUR123.731 billion (up 1.11% y/y and down 0.38% m/m):

• Loans to deposits ratio in November 2013 stood at 153%, basically unchanged since August 2013 and marking the lowest level since October 2003.

Note: The data for both deposits and loans is  severely distorted by changing composition of banking institutions (exits by a number of banks from the market) and by regulatory changes (inclusion of new institutions, e.g. credit unions).

3/1/2013: Irish Private Sector Credit: November 2013

Central Bank of Ireland published series of data today covering deposits and credit in Irish banking system through November 2013. Here are the highlights.

Overall, household credit outstanding at the end of November 2013 stood at EUR107.763 billion, down EUR1.354 billion on October 2013 and up EUR2.547 billion on November 2012. Compared to November 2011, outstanding credit to Irish households is down EUR3.069 billion (-2.77%). On a more stable, 3mo average basis, Q4 2013 average credit outstanding was EUR2.886 billion ahead of the same period in 2012.

Monthly decline in overall credit supplied to Irish households can be broken down into a decline of EUR1.226 billion in loans for house purchase, EUR119 million decline in consumer credit and EUR9 million decline in other loans. In other words, monthly decline was broad across all three categories of household credit.

Year on year, credit to households fell EUR1.336 billion for consumer credit, and is down EUR110 million for credit extended via other loans. There was a rise of EUR4.680 million for loans for house purchase. However, this increase itself is fully accounted for by a massive EUR6.233 billion jump in credit for house purchase extended in just one month: December 2012. Since December 2012, however, credit remained slightly lower, averaging EUR 83.978 billion over 11 months of 2013 as compared to EUR84.973 billion back in December 2012.

In summary: house purchase loans are slightly down over the 12 months from December 2012 through November 2013, Consumer credit loans are down over the same period, and other loans are also down. In all three cases, declines were moderate, implying that over December 2012-November 2013, overall credit to Irish households declined from EUR111.076 billion to EUR107.763 billion.

Compared to H1 2008:

• Household credit overall was more than 30% down in November 2013 compared to H1 2008 average;
• Credit for house purchases was more than 32% down in November 2013 compared to H1 2008 average;
• Consumer credit was more than 39% down in November 2013 compared to H1 2008 average;
• Other loans were 139% up in November 2013 compared to H1 2008 average.

Non-financial corporations total credit outstanding in November 2013 stood at EUR81.129 billion, down EUR143 million on October 2013 and down EUR3.676 billion on November 2012. Q4 average stock of credit to non-financial companies in Ireland declined in Q4 2013 y/y by some EUR3.734 billion (-4.38%). Compared to November 2011, credit to NFCs in Ireland is down EUR7.225 billion (-8.18%). More than half of this drop took place over the last 12 months.

In summary: credit to NFCs extended in the Irish system is down y/y in November and over Q4 2013 overall and the rate of decline did not decline over the last 12 months, compared to previous 12 months.

Compared to H1 2008:

• Credit to NFCs overall was more than 50% down in November 2013 compared to H1 2008 average.

Next post will cover deposits and loan/deposit ratios.

3/1/2013: BRIC PMIs signal nasty end to 2013

Via Markit Economics:

The above shows the problem with the BRIC grouping: general lack of growth momentum, albeit driven by two different sets of forces.

For Brazil and Russia: domestic economic expansions are starting to fizzle out as debt (Brazil), public spending (Brazil) and consumer spending (Russia) are no longer capable of sustaining previous rates of growth. For India and China, growth is also a challenge, but here core drivers are lack of consumer demand growth in advanced economies (China), too much debt and late stage development of assets bubble (China), reduced capacity for services exports growth (India) and dysfunctional domestic markets (China and India). Note that India's relative outperformance in the group comes on foot of longer and deeper contraction in more recent past.

This is uglier than the Euro area effects when it comes to global growth. Core point is: who will be driving growth around the world in 2014?.. Unless the above momentum is reversed, the answer to that question is: no one in particular...