3/1/2013: Irish Income Par Capita at 1998-1999 levels

On foot of the post on the US household incomes (see here), I took a look at CSO series for Ireland's per capita national income. Here's a chart:

As the chart shows, Ireland's current per capita national incomes stood at EUR27,105.6 in 2011, down 19.74% on peak and below 1999 level. Irish per capita national disposable income at EUR26,575.7 in 2011 was down 20.2% on peak levels and was below 1998-1999 average.

Using IMF projections for personal consumption and private investment for 2012, Ireland's 2012 per capita national income can be expected to remain below 1998-1999 averages in 2012.

Put in different terms, as the result of the current crisis, Ireland's real economy has already lost not a decade but over 14 years worth of growth. Assuming disposal incomes per capita grow at 2.5% per annum into perpetuity, Ireland will regain 2006 peak levels of real income per capita by 2022, at 2% by 2024 and at 1.75% - by 2026, implying that the 'lost decade' for Ireland's economy is likely to last not 10 years, but between 16 and 20 years.

2/1/2013: Euro area PMIs - dire state of economy persists through December

More on PMIs trail: euro area PMI for Manufacturing, per Markit, implies that "Eurozone manufacturing ends 2012 mired in recession, as demand from domestic and export markets remains weak".

Details:

• Final Eurozone Manufacturing PMI at 46.1 in December (flash estimate 46.3), down from 46.2 in November. Effectively, the rate of contraction continues unabated and we are in the seventh consecutive month of contracting output.
• Downturn remains widespread, with all nations bar Ireland reporting contractions (I will update Ireland database once I am back in Dublin).
• Cost caution leads to job losses and further scaling back of inventory holdings.
• Downturns accelerated in Germany, Spain, Austria and Greece, but eased in France, Italy and the Netherlands. 
• Greece remained bottom of the PMI league table, still well adrift of the next-weakest performing nations France and Spain.
• Eurozone manufacturing production declined for the tenth successive month in December, as companies were hit by reduced inflows of both total new orders and incoming new export business.
• However, over Q4 2012 as a whole, the average rates of decline in both output and new orders were the slowest since the opening quarter of the year.
• The latest decline in  new export orders took the current sequence of contraction to one-and-a-half years, despite the rate of reduction easing slightly to a nine-month low.
• Only Spain, the Netherlands and Ireland saw increases in new export orders during December, although the trend in Italy also moved closer to stabilising. In contrast, Germany, France and Greece all reported substantial declines in new export business.
• Employment in manufacturing is now in contraction for 11 consecutive months.
• Selling prices were unchanged, although this was nonetheless an improvement on the discounting reported in the prior six months. 
• Input cost inflation eased and was the weakest during the current four-month sequence. 
• Profit margins continued to shrink.

2/1/2013: Netherlands Manufacturing PMI for December: Not Pretty

Regular readers of this blog know that I like referencing the Netherlands as the 'leading' indicator for the Euro area growth for a number of reasons:

1. The Netherlands have a stable, even 'boring' economic make up, combining (despite a relatively small size) healthy drivers of domestic demand and investment with robust exporting economy;
2. The Netherlands supply side of the economy is also relatively well balanced with strong domestic and exports oriented manufacturing and services;
3. The Netherlands are a major entry port for the Euro area imports and the shipping and logistics hub for its exports;
4. The Netherlands are well-positioned to serve as lead indicators for household investment cycles changes.

With that in mind, yesterday's PMI for Manufacturing is disappointing:

Several things come to view:

• Dutch manufacturing posted a "broadly flat output in December. This reflected a combination of a slower fall in new orders and a further reduction of backlogs. Jobs were cut at a weaker rate, while input price inflation eased and output charges were raised at a faster pace. 
• NEVI  PMI rose to 49.6 in December from 48.2 in November, marking the highest reading in three months. Despite this, the index remained below 50.0, implying stagnation-to-reduction in activity. The index is compounding, which means that December decline came on top of declines in November and October.
• New orders fell for the third month running in December, although at slowest rate of decline.
• Export sales rose for the sixth consecutive month, although the increase was the slowest in 6 months period.
• Input prices eased, but remained in strong inflationary territory, while output prices rose modestly. This means profit margins shrunk.

Not quite ugly, but certainly not pretty.

2/1/2013: The Bitter ATRA Fudge

Some say never shall one let a good crisis go to waste... US Fiscal Cliff 'deal' of December 31st is an exact illustration. Here is the list of pork carriages attached to the Disney-styled 'train' of policies the US Congress enacted.

Have a laugh: http://www.nakedcapitalism.com/2013/01/eight-corporate-subsidies-in-the-fiscal-cliff-bill-from-goldman-sachs-to-disney-to-nascar.html

And to summarise the farcical output of the Congressional effort:

• The American Taxpayers Relief Act (ATRA) has raised taxes on pretty much everyone. Taxes up means growth down. Now, recall that the US economy is not exactly in a sporting form to start with (link here).
• The payroll taxes cuts are not extended into 2013 so every American is getting whacked with some 2% reduction in the disposable income, taking out $115 billion per annum (the largest revenue raising measure in the ATRA) out of households savings, investment and consumption, or under 1% of annual personal consumption.
• The super-rich (or just filthy-rich, take your pick, but defined as those on joint incomes at or above $450K pa) will see income tax rising to 39.6% and will have to pay an additional 0.9% in Medicare tax to cover that which they will not be buying - the Obamacare. They (alongside anyone earning above $250K pa) will also pay 3.8% additional tax on 'passive' income - income from capital gains and dividends for same Obamacare.
• Dividends and CGT are raised from 15% to 20% (again for joint earners above $450K pa).

Meanwhile, the US has already breached the debt ceiling and the ATRA has done virtually nothing to address the deficit overhang. So in a summary, the 'deal' is a flightless dodo flopping in the mud of politics. There are no real cuts on the expenditure side, there are loads of tax hikes that are likely to damage demand and investment and lift up the cost of capex funding for the real economy. And there is simply more - not less - uncertainty about the future direction of policy, as the White House and the Congress are going to be at loggerheads in months to come dealing with the following list of unaddressed topics:

1. Spending cuts
2. Budget deficit
3. Further tax hikes
4. Debt
5. Reforms of the entitlements system
6. Growth-retarding effects of ATRA and Obamacare.

Obamanomics have delivered fudged recovery, fudged solutions to structural crises and real, tangible increases in taxation. The latter is the 'first' since 1993.

1/1/2013: Recovery in Asia? Well... not so fast, folks

The Year is only 1 day old (almost) and the trigger-happy Bulls' headlines are all around. Forget the 'Fiscal Cliff' non-solution in the US (it kicked the can of excessive deficits by about 1 month out, before uncertainty about the longer term outlook returns with renewed 'negotiations' and it failed completely and spectacularly in even approaching any workable solution to the US debt overhang). The chirpy sound of 'optimism at any cost' is now coming out of Asia.

Today, we saw Korean and Taiwanese PMIs released. Here are the facts:

• HSBC South Korea PMI for manufacturing sector rose from 48.2 in November (outright recessionary levels) to 50.1 in December. Now, 50.1 sounds like being above 50 (the 50 points mark identifying level of activity consistent with zero growth on previous month), statistically it is not significantly distinct from 50.0 or, for that matter, from 49.9. In other words, since May 2012, PMI registered continuous consecutive contractions in the manufacturing sector, compounded over time. In December, there was effectively zero growth from the bottom levels of November. And this some media heralded as the 'return' to growth. Worse, new export orders - the staple of Korean economy, continued to contract in December for the seventh consecutive monthly period.
• Taiwanese PMI did pretty much the same, rising from an outright contraction of 47.4 in November to 50.6 in December. Taiwanese level of activity (at 50.6) was probably statistically significantly above 50, but hardly anywhere near the levels consistent with a definitive growth trend. This was the first above-50 reading in 7 months and was underpinned (positively) by expansions in both new orders and exports orders. Importantly, input prices rose in Taiwanese manufacturing sector, while output prices shrunk - profit margins, therefore, have dropped - a trend established for at least 3 months now.

Meanwhile, unreported by the Bulls:

• Vietnam manufacturing PMI sunk to 49.3 in December from 50.5 in November, with 8 out of last 9 months posting contracting activity.
• Indonesia's manufacturing PMI remained above the 50.0 line at 50.7 in December, but growth fell from 51.5 in November.
• Earlier report from China showed December manufacturing PMI at 51.5 up from 50.5 in November, "signalling a modest improvement of operating conditions in the Chinese manufacturing sector. Moreover, it was the highest index reading since May 2011." But new export orders actually fell in December after a 'modest increase in November', which implies that China's manufacturing 'revival' is driven most likely by state spending boost, not by any 'resurgence in global economic activity'.
• And Australian manufacturing PMI was continuing to tank in December: "Manufacturing activity contracted for a 10th consecutive month in December, with the seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index recording a level of 44.3, unchanged from a slightly upwardly revised reading of 44.3 one month ago. The slump in manufacturing new orders also extended into the 10th month albeit at a slower rate, reflecting weak global demand and a softening Australian economy. The new orders sub-index rose 1.6 points to 45.7 in December."

So, pardon me, but what 'resurgence in Asia'?

1/1/2013: US Household Income: down 7.8% on January 2000

Sentier Research have published analysis new series on the US Household Income data (see report here).

Topline analysis, quoted directly from the report (emphasis mine):

• According to new data derived from the monthly Current Population Survey (CPS), real median annual household income in November 2012 was  $51,310, statistically unchanged from the October 2012 median of $51,134. 
• This is the second month in a row that real median annual household income has failed to show a statistically significant change. I
• With the exception of a 0.7 percent increase between April and May, all of the other month-to-month changes in real median annual household income since January 2012 have not been statistically significant. 

But wait, things are even worse:

• The November 2012 median annual household income of $51,310 was 4.4 percent lower than the median of $53,681 in June 2009, the end of the recent recession and beginning of the “economic recovery.” 
• The November 2012 median was 6.9 percent lower than the median of $55,093 in December 2007, the beginning month of the recession that occurred more than four years ago. 
• And the November 2012 median was 7.8 percent lower than the median of $55,650 in January 2000, the beginning of this statistical series. 
• These comparisons demonstrate how significantly real median annual household income has fallen over the past decade, and how much ground needs to be recovered to return to income levels that existed more than ten years ago.

And two charts to illustrate: