8/4/21: No Inflation Cometh?

 

Having written about strengthening signals of rising inflation globally and in the U.S. in particular before, here is today's note from Markit on the matter: https://ihsmarkit.com/research-analysis/global-price-gauge-hits-new-high-as-input-cost-inflation-accelerates-sharply-Apr21.html 

To quote: global inputs inflation pressures are at their highest since 2008:

By sector:

Factory gate prices are scaling up:

Manufacturing supply shortages at nearly historical highs:

Prices of all, but financial services and consumer services are up through the roof:

Profit margins are being demolished:

And consumer goods prices are going through the roof:

Which means that targeting 2-3% inflation at current monetary policies is plain bonkers. Unless Central Banks are willing to entertain inflation at +5-10 percent above current, the rates must go up. Keep leveraging, everyone. Credit cards, margin trades and mortgages are about to get 'uncertain'... 

7/4/21: Ireland PMIs for March: Growth and Inflation Pressures

 

Ireland PMIs for 1Q 2021 are out this week, so let's take a closer look at monthly activity data. 

• March services PMI came in at a surprising 54.6 - up on 41.2 in February and 36.2 in January. Given the country is in a phase 5 lockdown, and there has been little change on that in recent months, the new reading is a bizarre one. Per Markit: "Three out of four monitored sub-sectors registered higher business activity in March. The strongest rate of expansion was in Financial Services, followed by Business Services and Technology, Media & Telecoms respectively. Activity in Transport, Tourism & Leisure declined for the eighth month running, but at the slowest rate since last August." A lot of hope-for vaccines and 'getting back to normal' as well as exports rise behind these figures. Services PMI is now at its highest reading since February 2020.
• March Manufacturing PMI also performed well, rising to 57.1 from 52.0 in February. Manufacturing index has been more volatile in the pandemic than Services, so this rise is less of a surprise, given the global economic recovery and demand for Irish exports.
• We do not have full March data for construction sector PMI, which is reported mid-month, so all we do have is mid-March reading of 27.0. 

Official Composite PMI published by Markit was pretty upbeat in march 2021, rising to 54.5 - signaling strong growth, having previously posted 47.2 in February and 40.2 in January 2021. My own, Three Sectors Activity index - a weighted average of three sectors PMIs based on their share of gross value added - rose even more sharply: from 41.8 in January and 45.0 in February to 55.0 in March. If Construction sector PMI were to come in on-trend mid-April, the Three Sectors Index will be closer to 55.1-55.2 range.

As an aside, it is worth noting that Irish economic activity is showing similar trend to global activity when it comes to inflationary pressures (see: https://trueeconomics.blogspot.com/2021/04/5421-heating-up-inflationary-risks.html). Per Markit: "March data indicated soaring cost pressures. The Composite Input Prices Index posted a record one-month gain and signalled the fastest rate of inflation since July 2008. Cost pressures were much stronger at manufacturers than service providers." In other words, even small open economies with massive distortions coming from the multinationals' financial and tax engineering sides are now showing signs of heating up inflation. 

6/4/21: Edelman Trust Barometer: the Age of Cognitive Dissonance?

Some shocking, genuinely shocking data from the Edelman Global Trust Barometer for 2021. Let's take a look. 

Start with this: 

Welcome to the world where sociopaths like Jeff Bezos are both trusted to be competent and perceived to be ethical. 

Meanwhile, at least w are catching up with what is happening in the tech sector:

And with the Social Media...

But we can't be human without some serious cognitive dissonance... Healthcare is now the second most trusted sector of business in America. Yep, the same private healthcare that had to rely on public / State / Federal money and logistics to distribute vaccines. The same private healthcare that could not organize vaccinations. The same private healthcare that, effectively, bankrupted and overcharged millions of Americans for emergency treatments during the pandemic. 

Back to Social Media:

I am not quite sure what people 'trust' in terms of information delivered via 'search engines', exactly. A search engine provides access to information, but it does not provide  or produce information. So drop this daft category from the analysis and what you have? Traditional Media is barely above the water, when it comes to trust. Owned Media and Social Media are below the waterline. If you control for the partisanship divide in the U.S. political landscape, most likely the vast majority of those trusting Traditional Media are... well, Democrats. The vast majority of those who distrust Social Media are... well, Democrats. Converse holds for the Republicans. One way or the other, massive shares of American population do not have trust in anything relating to quality control or verifiability of information sources.

This year's barometer is a scary reading. In most basic terms, NGOs and Business are the only two sets of institutions that are perceived ethical. Business' perception in this area is dangerously close to being marginal. Perceived incompetency of the Government is vastly greater than perceived competency of Business.  Media is virtually the exact mirror reflection of business. We trust no one in terms of information we receive. And we love those who are making money by not caring for us - American Healthcare. We lap up anything our employers communicate, but we believe they are telling us bullshit when it comes to their social and environmental sustainability efforts or to the risks of us being displaced by them with AI and technology. 

Is there much 'social fabric' left that hasn't been torn up, yet?.. 

5/4/21: Heating up inflationary risks

 

No, hyperinflation and, in fact, high inflation, ain't coming, yet. But the concerns with both are rising... 

Both, input prices and output prices have accelerated in March, compared to February in Markit's Manufacturing PMIs. 

Headline Markit statement says: "Conditions in the global manufacturing sector continued to brighten at the end of the first quarter, despite the potential for growth to be stymied by rising cost inflationary pressures and supply-chain disruptions." (Emphasis is mine).  And more: "Demand outstripping supply also contributed to a marked increase in purchasing costs during March. Input price inflation surged to a near-decade high, the pass-through of which led to the steepest rise in output charges since data on selling prices were first tracked in October 2009."

The same is happening in the U.S.: "Supplier lead times lengthened to the greatest extent on record. At the same time, inflationary pressures intensified, with cost burdens rising at the quickest rate for a decade. Firms partially passed on higher input costs to clients through the sharpest increase in charges in the survey's history."

5/4/21: BRIC's Manufacturing PMIs: 1Q 2021

 

Given a lot of noise about economic re-opening and abatement of the late 2020 wave of the pandemic, we expected BRIC countries PMIs to improve significantly in 1Q 2021 compared to 4Q 2020. Alas, the opposite took place:

• Brazil Manufacturing PMI fell from 64.1 in 4Q 2020 to 55.9 in 1Q 2021. All three months of 1Q 2021 came in sub-60 (all three months of 4Q 2020 were above 60) and March 2021 was the lowest monthly reading since June 2020.
• Russia Manufacturing PMI slipped from 51.5 in February to 51.1 in March. On quarterly basis, Russia Manufacturing PMI actually managed to rise from a recessionary reading of 47.6 in 4Q 2020 to a weak recovery reading of 51.2 in 1Q 2021. This is the highest reading since 1Q 2019 and the first above-50 reading since the end of 2Q 2019. Russia was the only BRIC economy posting increasing PMI in Manufacturing sector in 1Q 2021, and at that, the improvement went to anaemic growth from pretty steep contraction.
• China Manufacturing PMI disappointed, falling from 53.8 in 4Q 2020 to 51.0 in 1Q 2021. Given structural importance of Chinese manufacturing globally, this implies a further build up in orders backlogs in the global supply chains, signaling more inflationary pressures down the line. On a monthly basis, March 2021 posted fourth consecutive decline in monthly PMIs, with March reading of just 50.6 - statistically, basically indistinguishable from zero growth conditions in the sector.
• India Manufacturing PMI fell from 57.7 and 57.5 in January and February 2021 to 55.4 in March 2021, marking the slowest monthly rate of growth since August 2020. On a quarterly basis, India Manufacturing PMI fell from a hard-to-believe rate of expansion of 57.2 in 4Q 2020 to still robust growth of 56.9 in 1Q 2021.

Brazil and India were the two BRIC economies that managed to outperform global manufacturing sector growth in 1Q 2021 which came in at 54.1, up on 53.5 in 4Q 2020.

Global GDP-weighted BRIC group Index of Manufacturing Activity that I calculate based on Markit data fell from from 54.8 in 4Q 2020 to 52.8 in 1Q 2021, reaching the lowest reading since 2Q 2020 when it was at 45.0. Whilst BRIC group Index of Manufacturing Activity outperformed Global Manufacturing PMI in every quarter between 1Q 2019 and 4Q 2020, it fell below the global measure in 1Q 2021.

5/4/21: The Coming Wave of Financial Repression

 

In a recent article for The Currency, I covered the topic of the forthcoming wave of financial repression, as Governments worldwide pursue non-conventional fiscal tightening in years to come: Make no mistake, financial repression is coming in the US: https://thecurrency.news/articles/36547/make-no-mistake-financial-repression-is-coming-in-the-us/. 

5/4/21: The Entrepreneurship Boom: Forced, Voluntary and Funded

 

My recent article for The Currency covering the ongoing global developments in entrepreneurship: The US is experiencing an entrepreneurship boom. So, what is going wrong in Ireland?: https://thecurrency.news/articles/40790/the-us-is-experiencing-an-entrepreneurship-boom-so-what-is-going-wrong-in-ireland/

2/4/21: America's Scariest Chart: U.S. Employment Situation

Now, the last of the series of posts on U.S. labor markets, concluding with America's Scariest Chart, plotting the index of employment (jobs) in the U.S. based on each recession-recovery cycle:

Despite some positive headline numbers on some labor market metrics, jobs creation in the U.S. is not  progressing well-enough to claim any end in sight for the Covid19-induced recession. Current reading for jobs index, relative to pre-recession highs is woeful. So woeful, today's state of U.S. markets ranks as the second worst jobs recession in modern history, so far, worse than the Great Recession. 

Good news is that in March, pace of recovery accelerated from a major slowdown experienced in the first two months of 2021. The bad news is, unless this pace is sustained, we are risking a scenario where unprecedented policy (fiscal and monetary) supports unleashed since the start of 2Q 2020 will be associated with a jobs recovery that is second-third worst in the modern history of U.S. recessions. Time will tell.

Note: 

• Post 1 covering continued unemployment claims is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-continued-unemployment-claims.html
• Post 2 covering labor force participation rate and employment-to-population ratio is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-labor-force-participation-and.html
• Post 3 covering non-farm payrolls is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-non-farm-payrolls.html.
• Post 4 covering new unemployment claims is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-new-unemployment-claims.html, and
• Post 5 covering duration of unemployment claims is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-duration-of-unemployment.html.

2/4/21: U.S. Duration of Unemployment

One of the America's Scariest Charts - a long-term running issue I have been highlighting for a number of years now - is roaring back to prominence as Covid19 pandemic crisis continues to impact U.S. labor markets across virtually all possible metrics of health.

Here it is: the average duration of unemployment spells:

Unemployment spells become short at the start of the recession as new vintage unemployed join the ranks of long term unemployed. As the recovery sets in, unemployment duration starts to take into the account a different and changing mix of those on unemployment: the share of total unemployed who are short-term unemployed shrinks, the share of the longer term unemployed rises. Secularly, however, virtually every past recession since 1970s on has resulted in a longterm increase in average duration of unemployment during the recovery phase of the business cycle. In other words, the longer term unemployed became even longer-term unemployed. And now, the Covid19 pandemic joins the line of past recessions with continuing on this trend. 

Chart next compares each recession and subsequent recovery period since the end of the WW2 through current:

Based on the average duration of unemployment, we are now (in the Covid19 pandemic recession) are tracking the worst recession on record: the Great Recession. Weeks ahead will tell us, if indeed this will be a new record-breaking recession, beating the length of average unemployment spell established in the Great Recession. But for now, with all the recovery going around, the unemployed are becoming longer and longer-term unemployed.

Not exactly a picture of robust health being restored in the U.S. labor markets.

2/4/21: U.S. New Unemployment Claims

Continuing with the coverage of core statistics for the U.S. labor markets performance. This post covers new unemployment claims through March 20, 2021, with the last two weeks of data being preliminary estimates.

In the week through March 20, 2021, new unemployment claims fell to 656,789, or four weeks running total of 2,892,799 dipping below the peak of the Great Recession levels of 4 weeks total of 3,313,000. This is the good news.

The bad news is that latest reading would rank 58th worst in the history of the weekly series, if we are to exclude the Covid19 period. Another part of the bad news is that last week's weekly rate of decline of 100,412, the fastest rate of decline in four weeks, is actually slower than average weekly rate of decline for the pandemic period. 

4 weeks running average rate of improvement in new unemployment claims is just 14,943. Which means that at this rate of labor market improvements, it will take 30.6 weeks to regain pre-Covid lows of new claims.

Things are improving. But they are improving at less than impressive rates.

Note:

• Post 1 covering continued unemployment claims is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-continued-unemployment-claims.html
• Post 2 covering labor force participation rate and employment-to-population ratio is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-labor-force-participation-and.html
• Post 3 covering non-farm payrolls is available here: https://trueeconomics.blogspot.com/2021/04/2421-us-non-farm-payrolls.html.

2/4/21: U.S. Non-Farm Payrolls

 In the first part of the series of updates on the U.S. labor markets, I covered continued unemployment claims (https://trueeconomics.blogspot.com/2021/04/2421-us-continued-unemployment-claims.html), followed by the second post covering labor force participation and employment-to-population ratio (https://trueeconomics.blogspot.com/2021/04/2421-us-labor-force-participation-and.html).

Now, consider total non-farm payrolls - a measure of jobs present in the economy:

Total non-farm payrolls rose in march 2021 to 143,400,000, up on 142,077,000 in February. However, the increase still leaves the payrolls 9,777,000 short of the pre-Covid19 highs. The rate of jobs addition rose in March to 1,323,000 from February growth rate of 1,097,000. Combined jobs expansions of February and March, however, are not sufficient to cover the jobs losses of 2,622,000 sustained in January 2021. Average monthly jobs recovery during the pandemic period is 1,195,000, which means that it will take ca 8 months at the average rate of jobs creation for the economy to regain its pre-Covid19 highs in jobs numbers.

2/4/21: U.S. labor force participation and employment to population ratio

 

In the previous post, I covered U.S. continued unemployment claims: https://trueeconomics.blogspot.com/2021/04/2421-us-continued-unemployment-claims.html, noting that decreases in unemployment counts are, in part, driven by workers dropping off unemployment rolls due to exits from the workforce and/or expirations of unemployment benefits. Here is the data on U.S. labor force participation rates and employment to population ratio through March 2021:

Things are still ugly when it comes to these two measures of labor markets health in the U.S: 

• Latest reading for U.S. labor force participation rate at 61.5 is just a notch up on February's 61.3, but is unchanged on November 2020. Pandemic period average labor force participation rate is woefully low at 61.7, which is still higher than March 2021 reading. March reading is equivalent to the average reading for the decade of the 1970s which was marked by stagflation and high unemployment.
• Latest reading for U.S. employment to population ratio is at 57.7 - an improvement on February reading of 57.3, and better than the pandemic period average of 56.9, but still comparable to the levels seen only in the early 1980s. 

Both metrics show the brutal nature of the current labor markets, where demand for skills is rising, including in manufacturing, while services jobs (and lower-skilled B2C services jobs in particular) are still hard to find.