Economics 1/10/10: Retail sales data

Oh, let's cut the bull, folks. The retail sales data is making rounds the banks 'economists' notes with all the hoopla of the 'positive news' arguments. So things are turning corners?.. Actually, not really.

With motors:

• Value of sales rose 1.3% mom in August and a re down 1.7% yoy;
• Volume of sales was up 1.1% mom and 1.3% yoy

Conclusion, with motors included, we are still selling more stuff at ever-lower prices, though this time around declines in prices did not outpace increases in volume. Which means that no jobs are being created. If we take on board the fact that Euro remains relatively weak compared to last year vis-a-vis our main trading partners outside the Euro zone, implying we are buying imports at a higher price, the margins in retail sector gotta be shrinking even more than the volume/value gap above suggests. Which, in turn, implies that there aren't any new jobs being created in the retail sector on the back of the latest 'turnaround'. The whole thing about 'great news on retail sales front' is a damp squib.


And if you want to see even deeper into the official spin, take a look at ex-motors retailing:

• Value of core sales was flat mom in August and is down 3.6% yoy;
• Volume of core sales was up 0.2% mom and 1.4% yoy

So declines outpacing volume increases is clearly operative here.

Dig deeper and take a look at the breakdown of sales across main business lines.

• The largest increases in value took place in Books, Newspapers & Stationary (+4.7%). Given all the great news we've heard about Ireland in August, this is hardly surprising.
  
• Second largest value increase (ex-motors) mom took place in... errr... Fuel (+4.5%). That wouldn't be an indicator of our consumer confidence in the future, but the price increases in the sector where prices are controlled by the Government.
• Durables continued to tank: Electrical goods (-3.2% value and -2.5% volume mom), Furniture and Lighting (-1.% and -0.7% respectively) - again, not a great sign.

The worst part of this data is that it continues to show that there is no restart to household investment in sight. Before the households begin investing, they will usually start consuming more durable goods. This is clearly not happening.

Economics 29/9/10: IMF or EFSF hypotheticals

Hypothetical discussion of options for external assistance for Ireland in today's Irish Examiner - here, text link - here, associated publicity - here.

Economics 29/9/10: Agricultural prices

Last month I made a number of warnings concerning the price increases in some food sectors, specifically - milk and milk products. These warnings were based on my analysis of the figures for global commodities price trends and the newsflow from Russia and Central Europe. I also warned that Ireland is not insulated from these price changes due to the open nature of our trade.

The latest data from CSO today shows that my predictions are turning out to be right.

Per CSO (emphasis is mine): "Comparing July 2010 unadjusted sub-indices with July 2009 shows that:

• Milk, potatoes, sheep, vegetables, cattle and pig prices increased by 38.0%, 32.4%, 17.8%, 3.0%, 2.9% and 2.2% respectively, while cereal and poultry prices decreased by 28.9% and 2.8%.
• Energy prices increased by 15.5%, while seeds, feeding stuffs, fertilizers, plant protection products and veterinary expenses decreased by 9.3%, 8.1%, 5.2%, 0.9% and 0.1% respectively.

Of course, energy prices increases (driven by a 20.1% hike in motor fuels, year on year, but offset - before introduction of the new electricity price hikes and levy - by a -3.1% decline in the price of electricity) are reflective of our wonderfully consistent economic policies that see simultaneous:

• increases in state-controlled inputs prices and
  
• deflation of wages,

thereby undoing competitiveness gains in the private sector by overcharging in state-controlled sectors.

In monthly terms, unadjusted output prices in July were:

• Milk down -0.1%
• Cereals no change

These numbers are not yet pricing the full extent of August events, so expect uptick in Q3 figures to be significant.

Economics 29/9/10: Live Register

Live Register figures are out for September with the latest CSO numbers showing both an improvement and a deterioration in the labour market. Here are the details.

"On a seasonally adjusted basis there was a monthly decrease of 5,400 in the Live Register in September 2010. The number of persons on the Live Register now stands at 442,417 which represents an annual increase of 22,563 (+5.4%) in the unadjusted series. This compares with an increase of 30,198 (+6.9%) in the year to August 2010."

It is worth noting that the latest decline in the LR is not a "new event", in so far as there have been other events of declining LR (mom in seasonally adjusted series). It will require more than 1 month move down to establish any sort of confidence about the underlying trends reversals:

In terms of weekly and monthly changes, the latest results are certainly welcome:
But the underlying causes of the decline in LR are certainly continuing to point to further pressures in the job market. Per CSO (comments and emphasis are mine):
"In September there were 39,960 new registrants on the Live Register, which compares with 36,194 in the previous month [new registrants to LR rose significantly month on month in September, implying clearly that decline in overall LR was not driven by improvement in the labour market, but by exits from LR by workers who run out of benefits].

"New registrants consisted of 16,952 JB claims (42.4%), 21,276 JA applications (53.2%) and 1,732 other registrants (4.3%). It should be noted that the number of new registrants is not the same as the overall change in the number of people on the Live Register which is affected by
closed claims and the movement of people between schemes. [It is also worth noting that training schemes increases imply reduced LR, but hardly lead to actual jobs gains]

"On average 9,990 new registrants joined the Live Register each week in September, comprising 5,905 males (59.1%) and 4,085 (40.9%) females. By comparison, in March 2010 9,935 new registrants joined the Live Register each week, consisting of 6,340 males (63.8%) and 3,595 (36.2%) females."

These trends - reflecting in my view exits from LR, rather than new jobs gains - is reinforced by the data that in September there was a monthly decrease of 2,412 (-3.1%) in the number of non-Nationals on LR, which suggest strong outflow of workers due to net emigration.

Implied unempoloyment rate now stands at 13.7%, down from 13.8% in August.
This means I will not be changing my forecast for Q3 unemployment to reach 13.9%.

Economics 28/9/10: Live Register v QNHS measures of unemployment

As promised last night - here are comparatives on Live Register and QNHS measures of unemployment.

First raw data:
Pretty close?
Actually 98.8% close. But recall, QNHS is quarterly, LR is monthly, so what about average quarterly numbers for LR and QNHS?

So 99.2% close.

Economics 28/9/10: Anglo's bondholders must go

Reuters say Ireland should abandon the Anglo seniors

(emphasis mine)

"The Irish government will reveal the full horror of the cost of rescuing Anglo Irish on Sept. 30. It has already signaled bad news for the 2.5 billion euros of subordinated debt, but it is desperately trying to draw the line and support the 14.1 billion euros of senior debt.

"It's cosseting the bondholders because it fears further damage to its own creditworthiness if it walks away. But if the Anglo bill is as big as outsiders fear, its support will have the opposite effect. Even as the Irish prime minister talked on Sept. 28 of a "manageable plan," the spread on Irish sovereign debt widened to a record 475 basis points.

"The last official estimate of the rescue bill, 25 billion euros, looks hopelessly optimistic. Ratings agency S&P estimates it at 35 billion euros, while BarCap says 48 billion for the sector, or over a quarter of Ireland's 163 billion euro GDP. [My own estimate of 38.6bn on the upper side is now patently below external consensus, despite being branded 'outrageous' and 'outlandish' by several insiders in the past]

"The Sept. 30 statement is expected to contain a best estimate and a worst case. If the best estimate is near S&P's figure, further downgrades of Ireland's sovereign debt are likely. However, if the government were to abandon the senior bondholders, the saving -- equivalent to a tenth of Ireland's GDP -- would give the state the chance to work its way out of its economic hole."

Here we have: S&P, RBS, Barclays, Reuters, WSJ, FT, Sunday Times (Irish edition - hat tip to F.F.) and all genuinely independent analysts are now saying - shave the seniors, burn the subordinates. Government still resisting. For how long can it afford demolishing our own economy to prolong the inevitable?