03/11/2011: Another shallow rise in unemployment

The Live Register figures are out for October with standardized (LR-implied) rate of unemployment inching up to 14.4%. Here are the details.

Live Register-implied Standardized Unemployment Rate (SUR) rose from 14.3% in September to 14.4% in October, matching the levels in July and August. 14.4% is the highest level SUR reached in 10 months through October 2011 and the third highest since the crisis began (note that 14.4% SUR was recorded in 4 months since the crisis began). October 2011 SUR is now identical to that recored in October 2010Chart below illustrates.

Overall, seasonally-adjusted LR rose to 447,100 in October 2011, up 2,700 on September 2011. year on year, LR fell 300 (-0.07%). In September 2011, LR declined 4,300 mom and fell 5,400 yoy (-1.2% yoy). 3mo average through October 2011 is down 0.31% yoy. As shown below, we have a virtually flat trend.

Seasonally-adjusted LR numbers for those 25 years of age and older rose 2,100, from 364,000 in September to 366,100 in October. Year on year the number of 25 years and older workers on LR is up 2,600 (+0.72%) and 3mo average through October is 1.4% above the same period yoy. The numbers of under 25-yo workers on LR increased 500 (+0.62%) from 80,400 in September to 80,900 in October 2011. However, year on year, the number of young workers on LR fell 5,700 (-6.6%) - a shallower fall than in September 2011, but a significant decline. Overall, this suggests that younger workers exits into education, emigration and general falling out of the benefits net can be a significant source for moderating trends in LR figures overall in recent months.

Casual and part-time workers counts on LR rose 1,012 (+1.2%) from 84,017 in September to 85,029 in October 2011. 3mo average through October is now 9.1% above the same period in 2010 and year on year October reading is 7,105 (+9.1%) ahead of October 2010 level. Chart below illustrates.

Numbers of non-nationals on LR fell 384 in October to 75,037 - a decline of 0.51% and are up year on year by 402 (+0.54%). Numbers of Irish nationals on LR declined 6,625 mom (-1.83%) and are up 477 yoy (+0.13%). For both series there were small (less than 0.22%) declines in 3mo average through october, yoy. Please remember - these are not seasonally adjusted.

Per CSO release, "in October 58.2% (250,659) of all claimants on the Live Register were short term claimants. The comparable figure for October 2010 was 65.6% (281,945)." The annual fall of 31,286 (-11.1%) was recorded in the number of short term claimants. "The number of long term claimants on the Live Register in October 2011 was 179,773", up  32,165 (+21.8%) yoy. "This rate of increase in long term claimants has been slowing through the year with an annual increase of 57,597 (55.9%) having been recorded in January 2011."

The rate of increase, however, can be slowing due to several factors not mentioned by the CSO, such as draw down in LR numbers due to training programmes participation, emigration and dropping out of unemployed second earners from the labour force and LR benefits.

02/11/2011: A DofF note on Anglo Bonds Repayments

Here's the bull***t that passes for 'advisory analysis' for politicians - the copy of the note sent out to Government TDs from a specific party based on the Department of Finance information. I am publishing it here without any specific comments - judge for yourselves reading it - my only general comment is that it is uses a number of deceitful tricks, false juxtapositions and selective omissions to present the case for repaying unsecured unguaranteed bondholders in Anglo Irish Bank / IBRC.

(You can click on the pages to enlarge the text. I am publishing it without an explicit HT so as not reveal my source).

01/11/2011: Manufacturing PMI for October

NCB Manufacturing PMI for Ireland is out this morning with some surprises to the positive side of things. Let's start from the top:

• Irish manufacturing production rebounded in October with new orders increasing for the time since May. The rebound was extremely shallow with PMI reaching just 50.1 (barely above 50 mark that denotes expansion). PMI reading has improved dramatically, however, rising from 47.3 in September. 12mo average remains above current levels at 52.0, 3mo average is however below at 49.0. Previous 3mo average was 49.9. 2010 average for the 3 months through October was 50.1. 
• It is worth noting that with the historical standard deviation of 4.6 and standard deviation for the crisis period of 5.9, the current expansion reading is really statistically meaningless. 

As chart above further highlights:

• Output expanded strongly to 52.7 in October, up from contractionary reading of 49.8 in September. The latest reading compares favorably against 3 mo average of 51.6 and is statistically significant for the entire history of the series, but is not statistically significant for the crisis period data. 
• New orders posted an expansion of 51.4 up from September contractionary reading of 45.8 - a considerable increase in mom terms, pushing the series well ahead of 3mo average of 48.3, but still below 52.7 12mo average. However, the new reading remains statistically insignificantly different from 50 both in historical terms, in terms of data since January 2000 and in terms of data for the crisis period (since January 2008). The increase in total new orders growth was solid, and the fastest since April.
• New export orders posted a slight slowdown in the rate of contraction moving to 49.8 in October from 49.2 in September. Obviously, both readings are not statistically significant from 50 as new exports sub-index is more volatile than majority of other components of PMIs. However, the new reading is still below 12mo average of 55.2, below 3mo average of 50.8 and below 3mo average through October 2010 of 53.0.
• The surprising factor here is that the overall PMI in manufacturing is now moving in the opposite direction to New Export Orders. According to NCB: "Anecdotal evidence suggested that uncertainty surrounding the eurozone had a negative impact on new business from abroad. Conversely, there were some reports that favourable exchange rate movements had helped to stimulate demand."

Chart above shows that profit margins have continued to shrink in October (more on this later in the week once we have Services PMI data as well). The contraction in profit margins was driven by significant increase in inputs price inflation and continued deterioration in output prices. stock of purchases and stocks of finished goods continued to contract.

Crucially, per chart above, employment sub-index posted another contraction in October at 47.1 against 46.5 in September. The index 12mo average is now at 50.5 and 3mo average through october is 48.2. 3mo average for the period to July 2011 is 49.1 and the current contraction is statistically significant.

So on the net - the slightly positive news on overall PMI and new orders fronts are clearly offset by negative readings on new exports orders, profit margins and employment. These suggest that we might be witnessing a 'dead cat bounce' effect. If the new trend toward cautious growth were to be supported by data, we need couple more data points to see this.

31/10/2011: IRL5 banks - no signs of real improvements in September

Few posts back I looked at the latest data for Irish banking system stability from the CBofI. Here, I complete my analysis by focusing on 5 covered institutions or IRL 5 (previously known as IRL 6 before the merger of Anglo & INBS into IBRC).

Here's the data:

• Borrowing from the euro system by IRL5 has risen from €68,430mln in August to €70,340mln in September. Year on year, this is still down 4.73% or €3,489mln, but at that rate of unwinding IRL6 liabilities to euro system will take, oh, some 20 years (!)... Mom, the increase in borrowing from the euro system was €1,910mln or more than 50% of the reductions achieved yoy.
• Deposits from Irish residents in IRL6 were up from €192,431mln in August to €193,929mln in September, prompting cheers from the Irish Times and Department of Finance, among others. Mom rise of 0.78% or €1,498mln contrasts a 22.22% decline yoy in very same deposits or €55,393mln loss. In other words, to get us back to September 2010 levels (not exactly healthy ones) at current rate of mom increase would take 37 months. In the last three months, on average, deposits were down €26,337mln compared to 3 months through June 2011 (-12.05%).
• The mystery of rising deposits is explained easily by looking at their composition: Monetary and financial institutions (aka other banks) have seen their deposits in IRL5 rising €1,298mln in September (+1.47%) mom, although these deposits are down €32,308mln or -26.53% yoy. This explains 87% of the entire increase in the overall deposits.
• In addition, General government deposits also rose €333mln in September (+16.28%) mom, explaining the remainder of the rise in overall deposits, heralded by our Green Jerseys as 'signs of improvement/stabilization' in Irish banks.
• In contrast to the above two sub-categories, private sector deposits in Irish banks (IRL 5) have shrunk in September by €133mln (-0.13%) mom and are down 18.12% (-€22,589mln) yoy. September marked 5th consecutive month of declines in private sector deposits, which have shrunk by €6,135mln since April 2011.

As mentioned above, borrowings from the euro system have gone up in September. In contrast, as shown in the chart below, total borrowing from the ECB & CBofI have declined slightly in September to €123,596mln from €124,379mln in August (a mom drop of 0.63%). Year on year, the borrowings are still up massive €28,572mln or 30.7%. Over the last 3 months (July-September), average borrowings from the euro system and CBofI declined 1.39% or €1,748mln compared to 3 months from April through June.

Loans to irish residents have contracted once again in September, reaching €294,224mln against August levels of €294,503. The declines were accounted by drops in loans to MFIs and increases in loans to the General Government (+€58mln) and Private Sector (+€95mln). hardly anything spectacular.

Now to the last bit - recall that the comprehensive reforms of the Irish banking sector envision deleveraging Irish banks to loans-deposits ratio of 125.5%. These targets were set in PCARs at the end of March 2011. back in march 2011, LTD ratios stood at 143.25% for all of the IRL6/IRL5 and 173.71% for private sector LTD ratio only. Since then, if anything was going up to the CBofI / Government plans, we should have seen at least some reductions in LTDs.

As chart above illustrates:

• Overall LTD ratio for IRL5 at the end of September 2011 stood at 151.72% - below August reading of 153.04%, but well ahead of March 2011 reading of 143.25% and certainly much ahead of the target of 125.5%.
• For private sector loans and deposits, LTD ratio was 174.61% in September - ahead of 174.29% in August and still above 173.71% back in March.

And the summary is: there's no real stabilization or improvement I can spot in the above for IRL5.

31/10/2011: Bailout-3: The Gremlins Rising premiers

What a day this Monday was, folks. What a day. Just 4 days ago I predicted that the latest 'Bailout-3: The Gremlins Rising' package by the EU won't last past January-February 2012. And the markets once again cabooshed my perfectly laid out arguments squashing my prediction.

As of today we had:

• Italian bonds auctioned last week at 6.06% yield for 10 year paper, the most since 1999. The yield was up from 5.86% at the auction a month ago which marked the previous record high. For Italy, given its growth potential and debt overhang, yields North of 5.25-5.3% would be a long-term disaster. Yields close to 6.1% are a disaster! But things were worse than that last Friday: the Italian Treasury failed to fullfil its borrowing target of €8.5bn to be sold. Instead, the IT sold only €7.9bn worth of new paper. Boom - one big PIIGSy gets it in the 'off-limits' region!
• Also on Friday, Fitch issued a note saying that 'voluntary' haircuts of 50% on Greek debt will constitute... eh... a default / credit event (see report here). Which kinda puts a boot into the softer side of the 'Bailout-3' deal. Boom - Greece gets it in the gut!
• Today, Belgians went to the bond markets and got rude awakening: Belgium placed €2.155bn worth of bonds along 3 maturities: 2014, 2017 and 2021. The country wanted to raise €1.7-2.7bn (with upper side being more desirable), so there was a shortfall on allocation. 10 year bond yields for September 2021 maturity are at 4.372% against 3.751% for those issued in September 2011. Belgium is yet to raise full €39bn planned for 2011 as it has so far covered €37.517bn in issuances to-date. it will be a tough slog for the country with revised deficit of 5.3% of GDP in 2012 (assuming no new austerity measures) and debt/GDP ratio of 94.3% expected in 2012. Boom - a non-PIGSy gets a kick too.
• Also today, Germany marched to the markets with €1.933 billion in new 12-month bubills at a weighted average yield of 0.346% and the highest accepted yield of 0.354%. On September 26th, Germany sold same paper at an average yield of 0.2418%. Today, Germans failed to allocate €67mln of bills despite an increase of 40% in yields in just 5 weeks. Big Boom - the largest Euro area economy gets smacked!
• And for the last one - per reports (HT to @zerohedge : see post here): Europe, hoped to issue €5 billion in 15 year EFSF bonds. Lacking orders, it cut issuance volume by 40% to €3bn and the maturity by 33% to 10 years. As @zerohedge put it: "But so we have this straight, Europe plans to fund a total of €1 trillion in EFSF passthrough securities.... yet it can't raise €5 billion?" Massive Boom, folks - mushroom cloud-like.

So here we have it, a nice start for the first week post-'Bailout-3: The Gremlins Rising'...

31/10/2011: Euro area Consumer Sentiment & Expectations: October 2011

In line with the latest inflation data (see the previous post), latest data for EU27 and Euro area consumer expectations continued to move in the direction of further weaknesses.

Data for October shows that for EU27:

• Consumer confidence fell from -19 in September to -20 in October, the lowest level since July 2009. A year ago, Consumer Confidence index stood at -12.
• Financial Situation sentiment for the last 12 months period remained at -18 in October, same as in September, down from -17 in August. A year ago, sub-index stood at -14.
• Financial Sentiment expectations for 12 months ahead has also remained at -9 in October, same as in September and down on -8 in August. In October 2010 the sub-index was at -5.

 As chart below illustrates:

• General Economic Situation perception index for next 12 months fell to -29 in October from -27 in September. The sub-index is now at the lowest level since May 2009 an is down on -12 reading in October 2010.
• Unemployment Expectations over the next 12 months sub-index rose from 32 in September to 36 in October - the highest level since March 2010. A year ago, sub-index stood at 26.

Euro area data was showing similar weaknesses to EU27:

• Consumer confidence fell from -19 in September to -20 in October, the lowest level since August 2009. A year ago, Consumer Confidence index stood at -11.
• Financial Situation sentiment for the last 12 months period improved to -16 in October, from -17 in September, but still down down from -15 in April-August. A year ago, sub-index stood at -14.
• Financial Sentiment expectations for 12 months ahead has also remained at -9 in October, same as in September and down on -7 in August. In October 2010 the sub-index was at -6.

• General Economic Situation perception index for next 12 months fell to -29 in October from -27 in September. The sub-index is now at the lowest level since May 2009 an is down on -10 reading in October 2010.
• Unemployment Expectations over the next 12 months sub-index rose from 30 in September to 33 in October - the highest level since May 2010. A year ago, sub-index stood at 22.

Much of this evidence is consistent with the latest unemployment figures reported today with Euro area unemployment up to 10.2% in September (EU27 figure at 9.7%) up from 10.1 in August 2011 (9.6% for EU27).