10/9/15: 2Q 2015 National Accounts: Sectoral Growth Analysis

So Irish National Accounts data for 2Q 2015 was released today. Brace yourselves for series of blog posts here and a torrent of congratulatory waffle across the media.

Starting, as I always do, with sectoral composition of growth, using GDP at Factor Cost figures. All referenced here are in real terms (inflation-adjusted) and seasonally unadjusted so we can look at what matters most: annual rate of growth (y/y).

And we are off:

• Agriculture, Forestry and Fishing sector contribution of GDP in 2Q 2015 was EUR1.341 billion (yeah, that's right… just that much). And this figure represents a decline of 1.18% y/y. Ugh… growth it ain't. But good news is, sector output grew 5.57% y/y in 1Q 2015, so for the year to-date we are still up cumulative EUR32 million in the sector (+1.44%). Still, a year ago in 2Q 2014 the rate of growth in the sector was 23.8%.
• Industry (inclusive of Building & Construction) output contribution to GDP was EUR13,711 billion. Aha… more than ten times that of Agriculture Forestry & Fishing sector. But never mind, we don't call Ireland the Widgets Island… So the sector grew 4.36% y/y in 2Q 2015 which adds to 10.52% growth in 1Q 2015. Healthy numbers all even though 2Q was a slowdown. And a year ago, in 2Q 2014 things were even more heated - then sector grew at 14.7% y/y. But 1H figure is pretty healthy all around: up EUR1.739 billion in 1H 2014 (+7.18%).
• Take some decomposition of growth in Industry. Transportable Goods Industries and Utilities sub-sector (aka Pharma MNCs Central) grew at a hefty rate of 11.2% in 1Q 2015 and this fell to 4.64% y/y growth in 2Q 2015. Again, sub-sector growth was weaker in 2Q 2015 than in 2Q 2014 (+14.71% y/y). However, Transportable Goods Industries sub-sector was the biggest contributor to growth in 2Q 2014 of all Industries, but more on this below. Meanwhile, Building & Construction sub-sector expanded by 4.41% in 1Q 2015 and this sub-sector managed to grow only 1.52% in 2Q 2015. For all the ink expended by irish media pushing revival of the Construction sector stories in recent months, 1H 2015 cumulative y/y growth in the sub-sector was just EUR64 million (+2.87%). Still, growth is growth, right? 
• Distribution, Transport, Software and Communications sector (aka non-Pharma MNCs Central) was the booming one this quarter. In 1Q 2015 this sector expanded output by 9.64% and in 2Q 2015 this rose to 11.40% y/y. Yes, folks, things are doubling in this sector faster than every 7 years (pretty soon, all Beemers in the world will be made in Drogheda and all Mercs will be stamped out in Wexford). Back to numbers: this sector is now almost as large as the entire Industrial sector in Ireland at EUR12.398 billion 2Q 2015 contribution to GDP. Over 1H 2015 the sector added EUR2.335 billion in growth to the GDP, more than any other sector in the economy and its output was up 10.52% y/y.
• Public Administration and Defence sector continued to shrink in 2Q 2015, falling 4.05% y/y after having posted a 5.45% contraction in 1Q 2015. The sector managed to subtract from GDP growth some EUR147 million (-4.74%) y/y over 1H 2015.
• Other Services, including rents, sector was up steady 4.35% y/y in 2Q 2015 having previously grown 4.42% y/y in 1Q 2015. Over 1H 2015, compared to 1H 2014, the sector contribution to GDP expanded by EUR1.48 billion (+4.39%).

Here is a chart illustrating evolution of GDP art Factor Cost:

The above shows that GDP at factor cost grew by 6.52% y/y in 2Q 2015 down slightly on 6.77% growth in 1Q 2015, but still fast. GDP at factor cost expanded by EUR5.576 billion in 1H 2015 compared to 1H 2014 (+6.64%). Very fast. Which is good news.

Trends are illustrated in the chart below:

As chart above shows very clearly, level of GDP at factor cost came in as a slight surprise above the simple polynomial trend line, but growth rate in GDP has both moderated in 2Q 2015 compared to 1Q 2015 and came at below the trend line. Which begs a question: what are all those analysts who underestimated GDP growth use for a model?.. But never mind - forecasting Irish economy is a hazardous task.

Now, here's an interesting bit:

As the chart above shows, lion's share of growth in 2Q 2015 came in from the MNCs-dominated sectors:

• Industry (ex-Building & Construction) contributed almost 1/5 of the entire growth
• Distribution, Transport, Software and Communications sector (aka non-Pharma MNCs Central) contributed whooping 45%; and
• Other Services contributed 26%.

Everything else mattered not.

The same picture, pretty much, holds for 1H cumulative growth contributions:

Summary: so what has been happening over 2Q 2015 and 1H 2015? 

1. Yes, we have growth and fast growth at it. Mostly, it is broadly-based across various sectors. 
2. But dominant sectors that act as two leading (by a mile) sources of growth are  Industry (ex-Building & Construction) dominated by Pharma and Chemicals, plus Distribution, Transport, Software and Communications sector, dominated by non-Pharma MNCs. Interestingly, last year, 1H 2014 growth y/y involved much shallower expansion of output in Distribution Transport Software and Communication sector (+4.62% against this year's +10.53%), which possibly signals amplified tax optimisation and exchange rates effects of MNCs activities in the sector. 
3. Growth was much stronger in domestic sectors a year ago than in 1H 2015: Agriculture (+20.87% y/y in 1H 2014 against +1.44% in 1H 2015) and Building & Construction (+12.5% y/y in 1H 2014 against +2.87% y/y in 1H 2015) sectors.
4. Y/Y 2Q 2015 growth was slower than 1Q 2015 across all sectors other than Distribution, Transport, Software and Communications sector. Annual contraction rate moderated slightly in Public Administration sector in 2Q 2015 compared to 1Q 2015.

We can't say much about quality of growth beyond that... But stay tuned for more detailed analysis of National Accounts data later.

10/9/15: Building & Construction: 2Q 2015 y/y & historical compratives

Having looked at the relationship between PMI and actual activity in Irish Building and Construction sector in the previous post, now, let's take a closer look at the CSO series for actual activity in the sector.

As a starter, consider the current consensus view of the ongoing strong recovery in the sector.

All data not seasonally adjusted, so we are looking at y/y changes here.

First in terms of Volume of Production (excluding inflationary effects):

• Total volume index for production in Building & Construction sector in Ireland was at 106.0 in 2Q 2015. This represents a rise of 8.72% y/y, second strongest increase in last 4 quarters. Compared to 1H 2011 the index is up 39.47%, seemingly confirming the overall story of strong recovery. However, the problem is that this recovery has been off horrific lows. Compared to series peak, activity in the sector was still 72.9% lower in 2Q 2015, and current levels of Building & Construction volumes are 53.7% below their 2Q 2000 levels. For the sake of another comparative, today's reading of 106 compares to 2000-2001 average reading of 234.6.
• Residential Construction volume index stood at 112.6 in 2Q 2015, up massive 45.7% y/y, and up 58.9% on 1H 2011. Again, levels of activity are still weak: the index is still down 88% on pre-crisis peak and is 77.7% below 2Q 2000 reading.
• Non-residential building volume index reached 113.3 in 2Q 2015, up 7.9% y/y and 26% ahead of 1H 2011. The index is still down 41.4% on pre-crisis peak and activity in non-residential building sub-sector is 33.4% below 2Q 2000 reading.
• Civil engineering is the only sub-sector of the Building & Construction sector that is posting activity above 2000 levels. Current index at 92.6 for 2Q 2015 is, however, marking a decline in activity compared to 2Q 2014 (down 14% y/y). Compared to peak activity, the index is 43.9% lower today, but it is 16.2% ahead of activity registered in 2Q 2000.

Now, in terms of Value of Production (including inflation):

• Total value index for production in Building & Construction sector stood at 107.1 in 2Q 2015, up 9.85% y/y, marking, once again the second highest rate of growth in the last 4 quarters. The index is still 71.3% below its peak reading, and is down 34.6% on 2Q 2000. Current reading of 107.1 is well below 2000-2001 average of 177.2.

Chart to illustrate:

Conclusions: overall, the recovery rates in the sector have been driven (to-date) by the low base from which the recovery is taking place. Double-digits growth is hardly inspiring when it happens in an environment where actual levels of activity are massively below where they were 15 years ago. That said, growth is better than contraction. 

10/9/15: Building & Construction: 2Q 2015

Production indices for Building & Construction sector in Ireland, covering 2Q 2015, were out yesterday. Here is the run through the numbers:

All building & construction sector activity by volume rose to 106.2 in 2Q 2015, up 5.46% q/q and 7.16% y/y (I am using seasonally-adjusted basis numbers here).

Much of this increase was down to a 8.78% rise in Building ex-Civil Engineering, which was itself primarily driven by a 14.6% q/q uplift in Residential Building.

Two charts, showing links to Construction sector PMIs:

Charts above illustrate continued decoupling in trends between PMIs-signalled growth and actual activity in the sector. While PMIs have signal strong expansion, the rate of growth in actual activity has been much more modest. As the result, negative correlation between PMIs and CSO index has moderated, but it remains negative on a historical basis.

9/9/15: MSCI World EV/EBITDA ratio: Happy Bubbly

In the lightness of being inhabited by the world's investors, no valuation is a bubble, until it is officially declared to not be a bubble. And so it has been since the start of the year, just as EV/EBITDA (Enterprise Value ratio to Earnings before interest, tax, depreciation and amortisation) ratio of MSCI World Index for 23 Developed Markets economies peaked at levels ahead of all previously recorded ones:

Source: @zerohedge

But never mind, for that promised growth rebound is just around the corner... where it has been for the last seven and a half years... just one period ahead forecast from today...

Note: h/t and thanks to Rouben Indjikian for spotting EBITDA definition missing reference to interest.

9/9/15: That poverty of low [Euro area GDP growth] expectations…

So, apparently, "strong eurozone growth" for 2Q 2015 is fuelling hopes for economic recovery and pushing markets up. Which makes for some funny reading, considering the following:
1) Eurozone GDP grew by a mind-blowing… 0.4% in 2Q 2015 in q/q terms. Which, hold your breath there, matey… was a decline on 0.52% (revised) growth in 1Q 2015.
2) It gets better, yet: growth 'improvement' was down to a rise in exports due to devalued euro (err.. now, who would have thought that to be a reason to cheer?). Exports increase accounted for 0.3% of the total 0.4% of 2Q growth. Full details are here.

The glorious achievement of the Great Patriotic Eurozone Economy under the wise stewardship of [insert a name of a Brussels Directorate or one of the EU Presidents here] was so blindingly obvious that one can't miss it using a mapping of historical past growth rates.

Yes, yes… that is right - the "strong" rate of eurozone growth in 2Q 2015 was exactly the same as that attained in Q4 2014 and identical to Q3 2010 (remember, that was 'blistering' too). 1Q 1999 - 1Q 2008 average quarterly growth rate in the eurozone was 0.56% and that was the period when the euro area was actually showing structural weaknesses compared to other advanced economies. Over the period of 12 months through 2Q 2015, average growth is 0.4% and we call this… err… "strong".

That poverty of low expectations…

8/915: Five Years of Dodd-Frank Act: Two Posts on Reforms Impact

Five years ago, on July 19, 2010, President Barak Obama signed the most far-reaching regulatory reform of the U.S. financial system since the end of the Great Depression – Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Act has three core pillars:

• enhanced protection of consumers;
• expanded regulatory reach over risk management (including the markets for derivatives), and
• the Too-Big-To-Fail (TBTF) safeguards.

Given its ambitious scope, the Act was designed to shape American response to the Global Financial Crisis, both in terms of addressing some of the underlying causes, and mitigating future systemic risks. Not surprisingly, the passage of the Act was lauded at the time as a historic moment

My first post, covering Consumer Protection and Derivatives regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act is available here.

My second post on Dodd-Frank Act, covering regulation of TBTF banking and financial institutions is available here.

5/9/15: Remittances, Foreign Aid & other Capital Flows

So globally, remittances by migrants are now worth more than double the total flows of foreign aid and more than portfolio flows (financialised investment). In fact, remittances are now second in importance to only FDI.

Source: Economist; H/T: @RonanLyons 

The latter fact is not surprising as remittances already were second largest source of capital inflows for developing countries at the start of the century and even before (see more on this here covering data until 2000). Interestingly, at variance with the above chart, evidence before 2000 suggests that remittances were negatively (though not statistically significantly) correlated with private capital flows. It appears this negative correlation has been substantially reversed in post-2000 period.

Another study looked at the effect of remittances in Sub-Saharan Africa - the world's poorest region overall, where foreign aid is a very important driver of 'official' development. The study (link here) found that "remittances, which are a stable, private transfer, have a direct poverty mitigating effect, and promote financial development. These findings hold even after factoring in the reverse causality between remittances, poverty and financial development." Globally, the same was established based on pre-2000 data (link here).

A 2009 paper ties remittances (positive effect on long-term growth in the receiving economy) to the degree of development of financial services in the economy (a factor that positively reinforces growth effects of remittances) - details of the study here. Which is sort of a good thing, as remittances themselves promote financial services development (see a study covering 1975-2003 period here).

Given Latin America's experience with emigration and brain drain, data on remittances effects in these countries is interesting in itself. More interesting, however, is the following study that looked at links between remittances, poverty reduction, education and health in recipient countries. "The main findings of the study are the following:

1. regardless of the counterfactual used remittances appear to lower poverty levels in most recipient countries; 
2. yet despite this general tendency, the estimated impacts tend to be modest; and 
3. there is significant country heterogeneity in the poverty reduction impact of remittances' flows.

...While remittances tend to have positive effects on education and health, this impact is often restricted to specific groups of the population."

In contrast to the above studies and many others that reference or identify positive growth effects of remittances, a 2009 IMF study found no positive links between remittances and growth (see link here). So, thankfully for us, economists, Economic Ambiguity prevails...

To make things a little better for the case of remittances v growth, another study (like IMF reliant on modern econometric techniques) looked at the causal links between remittances and growth in Latin American countries. The conclusion (see link to the study here) is that "remittances have a positive and significant effect on economic growth in both groups of countries. ...the impact of remittances is more pronounced in the presence of the financial development variable." The latter bit confirms evidence referenced earlier. 

IMF study is also (weakly) contrasted by the 2006 paper (link here) that found that controlling for endogeneity "...remittances exert a weakly positive impact on long-term macroeconomic growth."

One of the common criticisms of official foreign aid is that it fuels corruption and graft. Surprisingly, there is some evidence that remittances too achieve the same impact on key institutions in the recipient country. IMF study (see link here) found that "a higher ratio of remittances to GDP is associated with lower indices of control of corruption, government effectiveness, and rule of law."

In short, there is huge amount of interesting research on remittances... 

5/9/15: Updating America's Scariest Chart

As you know I rarely post on the U.S. economy. But recently I was updating a presentation involving the state of financial flows for retail investors and savers around the world and had to check up on my old chart that I labeled America's Scariest Chart Redux (see previous update here).

Keep in mind the dominant media meme: the U.S. economy has been growing at a robust rate and the Great Recession has been officially over now for 74 months.

So where does the current unemployment duration (in terms of average duration in weeks) stand?

Err... average duration of unemployment in the U.S. is currently at 28.4 weeks.  Over 12 months period before the onset of the Great Recession, duration averaged 16.8 weeks. Which means that even today, a full 87 months after the start of the Great Recession, average duration of unemployment is 11.6 weeks longer than it was before the crisis. Current deviation from pre-crisis levels in average duration of unemployment is consistent with this measure of labour markets performance in months 17-18 of the crisis.

Worse, we are now (still) in a situation where people on unemployment benefits are staying in unemployment longer, on average, than in any other recession on record.

Now, let's revisit the 'official' former Scariest Chart - the index of employment also plotted by each recessionary period. This chart used to be published regularly, but since end of March 2014, U.S. employment index has finally reached pre-crisis levels of employment and everyone forgot the said chart. Too bad. Here it is, updated to the latest data:

And guess what? The chart above clearly shows that the current period of 'recovery' is still the worst in terms of employment performance than any previous recovery on record.

Just thought you would like an update...

4/9/15: Russian Inflation: Forget CPI, Look at Bribes Pricing

On a 'light' Friday night note, a cheering report of inflation found somewhere (not in the ECB land, alas). Per Interfax report (link here) average bribe extended in Russia rose almost 3-fold to over RUB600,000 in Ruble terms. Between September 1, 2014 and August 31, 2015, according to the independent report prepared by anti-corruption organisation "Clean Hands", rose to RUB613,700 or USD9,440. A year ago, average bribe extended in  Russia stood at RUB218,400 or USD5,600.

That's USD inflation of 40.7% y/y or more than 2.5 times the rate of CPI in Russia.

Top 3 areas where bribery is rampant are: judiciary (>61% of all registered cases), police (39.3% of cases) and prosecution authorities (33.75%).

Perfect FX hedge... thus.


But in real news, inflation ticked up to 15.8% in August up on 15.6% in July. July push was down in part to new tariffs measures, which were supposed to be one-off, but now seemed to have fed into August too. That said, monthly increase was the second smallest this year and all of the inflation push up seemed to be down to Ruble poor showing - posting fourth straight month of declines against the USD. Next week CBR rate decision is now most likely going to come and go with rates remaining at 11%. Still, Ruble is trading within the Government 'comfort range' of RUB/USD65-70 (currently at around 68.495)

August inflation is a shocker less because of the level than because of the change in the momentum. This year, inflation peaked at 17% in March and was declining through June and rose again in July.

3/9/15: ECB Decides to Not Decide, but Reserves a Right to Decide More

ECB decision to hold rates unchanged at today's meeting was hardly of any surprise. This means there is little news in terms of actual policy actions coming from today's council. Instead, some surprises were delivered by Mario Draghi in his statement. Here is a summary.

Firstly, ECB cut GDP projections for the euro area economy. The ECB now expects euro area GDP to grow 1.4% in 2015 (down on previous forecast of 1.5%); 1.7% in 2016 (down of previous forecast of 1.9%) and 1.8% (down on previous forecast of 2.0%). The miracle of "2% growth next year or next after next" has now been abandoned. As the following tweet sums this up:

We also got revised outlook for inflation and a warning from Draghi that inflation can be low or that we might yet see deflation. ECB now projects HICP inflation at 0.1% in 2015 (previous forecast was 0.3%), 1.1% in 2016 (previous forecast at 1.5%) and 1.7% in 2017 (previous forecast was 1.8%). Which means that the ECB is still sticking to the miracle of "close to 2% inflation a year after next" target. Of course, both sets of revisions mean that declines in forecast growth in nominal incomes are going to be sharper than in real GDP. Which means euro area will get less income, more prices. That, presumably, remains the 'good side of inflation' in ECB's mind.

Draghi warned that the 'there are downside risks to September inflation projections'. Now, who could have guessed as much, given that I posted recently the 5yr/5yr swaps chart clearly showing that euro area inflation expectations in the markets have gone soft once again. Shall we repeat that again?

Source: @Schuldensuehner

Draghi's job today, however, was to talk down the euro. Which he did by simply stating that QE will be running at planned rate (EUR60bn purchases) through planned timeline (to September 2016) and can be extended and expanded if the need arises. Promptly, Euro dropped like a rock.

In a typical, by now ritualistic, referencing of the monetary policy transmission mechanism (still broken), Draghi referenced improved, but still poor credit conditions for euro area corporates. Chart illustrates:

Of course, there is little point of reminding all that growth in credit requires growth in demand. Unless, that is, you are a European policymaker who thinks (as they all seem to be required to do) that issuing loans to companies is a great idea to generate economic growth even if there is absolutely no need for new capacity creation in the economy with stalled demand.

In short, ECB has now reacted to the rot in the Emerging Markets (and in particular China). This is a reactive move with some serious wisdom behind it - the rot is not over yet, by all means and the ECB is out of the gates with signalling that it will continue priming the Government bonds markets pump to prevent any spiking in the rates or euro revaluations derailing already weak exports. With BRIC PMIs signalling ongoing and deepening deterioration in global growth conditions (link here), this is expected and wise. For now, doing nothing new, but promising to do it longer and more aggressively is the preferred response from Frankfurt. It might just be enough.

3/9/15: BRIC Composite PMI: August

Having covered Manufacturing (link here) and Services PMIs (link here) for BRIC countries, consider Composite PMIs next.

Note, to make series consistent with my previous indicator, I use x2 factor on composite PMI readings from Markit, going forward, so reference number here is not 50.0 but 100.0.

• Brazil Composite PMI firmed up marginally to 89.6 in August from 86.3 in July. This is the fifth highest reading in recent months, but sixth consecutive reading below 100. Per Markit: "Rising to a five-month high… the Brazil Composite Output Index pointed to a further, although weaker, decline in private sector output. Whereas manufacturing production decreased at a quicker rate, the reduction in service sector activity softened. … New business in the Brazilian service sector decreased for the sixth straight month in August. …Order book volumes at manufacturers dipped at the fastest pace in four years. Subsequently, the contraction in total private sector new work accelerated to the sharpest in three months."
• Russian Composite PMI was also soft, falling to 98.6 in August compared to 101.8 in July, returning the economy toward renewed recessionary momentum after fragile improvement in the first month of 3Q 2015. More on Russian Composite PMI here: http://trueeconomics.blogspot.ie/2015/09/3915-russian-manufacturing-services.html.
• China Composite PMI too posted sub-100 reading, falling to 97.6 in August compared to 101.6 in July. Per Markit release: "Though only modest, it was the fastest contraction of output seen since February 2009. The renewed decline in overall output was largely driven by a faster contraction of manufacturing production in August. Furthermore, the latest fall in manufacturing output was the quickest seen in 45 months. Meanwhile, slower growth in service sector business activity also weighed on the headline index. Consequently, total new business at the composite level fell for the first time since April 2014, albeit marginally. ...the latest expansion in service providers’ staff numbers was the weakest seen in the current two-year sequence of job creation and fractional. Job shedding persisted at manufacturing companies, with the pace of reduction quickening slightly since July. Overall, composite employment fell for the third month in a row and at a modest pace."
• India Composite PMI firmed up to 105.2 from 104.0 in July, marking improved growth outlook for the economy and breaking, once again, trend with the rest of the BRICs. Per Markit: "India’s private sector economy improved further in August. The seasonally adjusted Nikkei India Composite PMI Output Index rose to a five-month high… The uptick in growth was boosted by a quicker expansion of services activity, as the increase in manufacturing production softened in August. …New business across the private sector as a whole expanded at a moderate pace that was the quickest since March."

SUMMARY: As charts above show, BRICs as a block are now exerting negative drag on the global economy. This is extremely worrying especially as the core drivers for this weakness are now China and Brazil, opposed to Russia. While Russian economy remains in a recession, overall, it is responsible for lesser share of negative momentum in the BRICs index than the other two troubled economies since around the start of 2Q 2015.

3/9/15: BRIC Servies PMI: August

BRIC Services PMIs are out, so here is the summary of latest changes:

• Brazil Services PMI rose to 44.8 in August from July's 39.1. This marks seventh consecutive month of Services reading below 50.0. July fire was horrific and cam on top of abysmal 39.9 reading in June. August reading is still below 50, but is now the second highest in 7 months. In 12 months from August 2014, the index posted above 50 reading in only two months. This confirms deep-running recessionary dynamic in Brazil's economy.
• Russia Services PMI came in at 49.1, below 50.0 and down on 51.6 in July. Details covered here. As noted, this is a disappointing reading signalling weak contraction in the Services side of the Russian economy, compounding sharper contraction in Manufacturing.
• China Services PMI posted 51.5 in August, down from 53.8 in July. This index has never reached below 50.0 in its history, so 51.5 is a weak reading overall. In fact, this is the slowest pace of expansion signalled by the Services sector since July 2014. Taken together with rather sharp ongoing contraction in Manufacturing, the Services PMI for China suggests that current rate of economic growth in the country is well below the target of 7% annual rate of growth targeted by the Chinese Government. Most likely, stripping out financials (supported by the Government aggressive intervention in the stock markets in recent months), China's Services PMI would be in much worse shape.
• India Services PMI came in at 51.8 - signalling acceleration in growth from 50.8 in July. This marks second consecutive month of above 50.0 readings for this index. 

Some Markit comments on the above:

For China: "The Caixin China General Services Business Activity Index …signalled the slowest increase in activity in the current 13-month sequence of expansion. Total new order growth at service sector companies also weakened in August, with the latest increase in new business the slowest seen in just over a year. According to anecdotal evidence, relatively subdued market conditions had dampened client demand in the latest survey period."

For India: "The seasonally adjusted Nikkei Services Business Activity Index [pointed] to a faster, although modest, expansion in output. Activity growth was recorded in three of the six monitored categories, namely, Hotels & Restaurants, Post & Telecommunication and ‘Other Services’. Leading services activity to increase was a further rise in incoming new work. According to panellists, higher demand coupled with capacity improvements and increased marketing all had contributed to the latest expansion in new business. Despite quickening since July, the rate of growth was moderate. While manufacturing new work rose at a weaker pace than in July, growth nevertheless outpaced that seen at their services counterparts."

CONCLUSION: BRIC economies are suffering from the twin effects on internal structural weaknesses (domestic markets and policies) and from lack of external demand growth. These leading emerging market economies are now solidly in a recessionary dynamic (Brazil and Russia), and near hard landing territory (China). India continues to break trend with the rest of BRICs, although this remains to be seen how long its economy can sustain this decoupling.