Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Brazil BRIC Economic Growth and China Retail Sales Analysis

Economics / Emerging Markets Jun 11, 2010 - 07:31 AM GMT

By: Dhaval_Shah

Economics

Best Financial Markets Analysis ArticleThis week we examine the GDP results from last "BRIC" economy to report, Brazil, then we look at another one; China and see how international trade and retail sales are tracking. Then we analyze the recent US consumer credit data, and finish up with a review of four of the monetary policy decisions this week.


The themes are big ones this week; there's emerging markets leading the recovery, there's global imbalances and potential changes in the make up of the Chinese economy, and finally, monetary policy continues on a de-synchronized path in response to a de-synchronized global economic recovery.

1. Brazil GDP
Brazil reported year on year GDP growth of 9%, smashing the consensus forecasts for 7.6%, and accelerating from the 4.29% in the previous quarter, and -2.14% same time last year. Some of the large number is related to a lower base comparator, but much of it is related to an accelerating recovery in Brazil; highlighting risks of overheating. Indeed the Brazilian central bank ended up raising the Selic rate another 75bps a day or two after the GDP results were announced (see the piece on monetary policy below). So it is good news for the Brazilian economy, it's interesting to see it growing at China levels, but the question of sustainability remains.



2. China International Trade
The Chinese international trade figures for May produced additional ammunition for the yuan bashers, with the surplus growing from about $1 billion in April, to $20 billion in May, and pretty much proving that the March deficit was a one-off cyclical quirk. So exports rose 48.5% year on year, and imports rose 48.3% year on year (mind you, this time last year they were still reporting sub-100 billion dollar figures), month on month imports fell and exports rose. I'm going to repeat that this is going to be an interesting chart to watch in the coming years as the rebalancing of the Chinese economy commences. As I'll note below, the yuan part of it (while still relevant, and unhelpful to be fixed), may start to lose relevance in the case for Chinese economic restructuring driving sustainable growth...


3. China Retail Sales
China reported retail sales of 1.25 trillion yuan in May, up 18.7% year on year (compares to 1.15 trillion in April, with a y/y rise of 18.5%). As with the chart above this is going to be an interesting chart to watch as the Chinese economy begins to draw more and more growth from domestic consumption, and less from an export led strategy. Already there are some high profile wage rise increase stories in the media, with Foxconn being very notable, and the Honda case also being notable (especially given that it is a foreign company, thus there is a bit of a signaling effect that the authorities are allowing it to happen). The point I alluded to above is that as wages rise in China (and they will eventually, driven in part by inflation, driven in part by the new generation and cultural trends). This is probably even a preferable solution to yuan floating, but will eventually have the same effect as wage costs push up export prices and lower competitiveness on a price basis. Watch this space...



4. US Consumer Credit
US consumer credit rose by $1billion in April, matching consensus and beating the previous (downwardly revised) -$5.4 billion. The gain was driven by a $9.4 billion increase in non-revolving credit (reflecting strong car sales), off set by an -$8.5 billion decrease in revolving credit. The chart below shows what looks like a turning of the corner for consumer credit, and this lines up with the trend in the labour market. However arguably this number should still be contracting due to the need for consumer deleveraging to continue, the US personal savings rate was reported as 3.6% in April, which is towards the higher end compared to recent times for the US, but work still needs to be done in deleveraging, and increasing the savings rate (similar but in different direction to the China rebalancing above), for a more structural and sustainable recovery in the US.



5. Monetary Policy Review

In the past week the Reserve Bank of New Zealand increased the official cash rate 25bps to 2.75%, the Banco do Brasil increased the Selic rate 75bps to 10.25%, the Bank of England held at 0.50%, and the European Central Bank held at 1.00%. In a more detailed analysis, I identified that the key trend going on here is that monetary policy stimulus withdrawal continues to be uneven, with different paces matching different prospects, and rightfully so as the global economic recovery looks more and more uneven. So it's synchronised on the way down, just like the stock markets - highly correlated on the way down, but correlations will decrease as the recovery unfolds.



Summary
To re-cap, the Brazilian economy is showing strong growth and adding to the theme of strong growth in emerging markets; a recovery led by emerging markets. But at the same time it also points to the risks for emerging markets, including potential for overheating.

Similarly in China, the new data out this week seems to point in positive directions, but there's more to the surface numbers (if you believe them that is). There are forces in motion in the Chinese economy that will result in an eventual rebalancing of export lead growth to domestic consumption lead growth, and this could happen with or without the yuan if wage increases continue.

Meanwhile in the US, there are weak signs of potential continuation of consumer deleveraging and wealth rebuilding in the consumer credit and savings rate numbers. However it probably wont last, and as with the risk to China's rebalancing; old habits die hard.

Finally, monetary policy stimulus exit is commencing in more places and picking up, but is distinctly de-synchronised, but then so is the economic recovery. Already we've seen it confirmed, emerging markets are growing strong, developed economies are scarcely growing at all. But through all the recovery and stimulus exits, and so-on, it shouldn't be forgotten that with such a disruptive turn of events, there is the opportunity for structural change for a more balanced and sustainably growing global economy.

Sources:
1. Brazil Statistics Agency www.ibge.gov.br
2. China Customs www.customs.gov.cn
3. National Bureau of Statistics www.stats.gov.cn
4. US Federal Reserve www.federalreserve.gov
5. Bank of New Zealand www.rbnz.govt.nz & Banco Central do Brazil www.bcb.gov.br & European Central Bank www.ecb.int & Bank of England www.bankofengland.co.uk

Article source: http://www.econgrapher.com/top5graphs11jun.html

By Econ Grapher

Bio: Econ Grapher is all about innovative and insightful analysis of economic and financial market data. The author has previously worked in investment management, capital markets, and corporate strategy.

Website: http://www.econgrapher.com

Blog: http://econgrapher.blogspot.com

© 2010 Copyright Dhaval Shah - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

gAnton
11 Jun 10, 18:47
Political Indignation Is The Mother Of Much Stupidity

Of course, I'm talking about US politicians blaming China's currency policies for high US unemployment, which is indeed a bazaar explanation of its cause. According to our astute and currently highly esteemed politicos, the solution to our 9.5% unemployment figure is to put high punitive tariffs on imports from China. (A more reasonable definition of unemployment would put the true unemployment figure somewhere between 35 and 45%).

The US dollar is the current world currency, and when foreigners complain about Bernanke debasing the currency with his printing pressed, the typical US political response is, "It's our currency, and we'll do what we want with it". So the currency tirade against China is at best somewhat hypocritical!

China is well on the course to replacing the US as the number one world economic power, but they seem somewhat uncomfortable in this new role. But I think they would respond harshly to US imposed punitive tariffs. They have about two trillion dollars in US securities, and they could stop buying US bonds, and/or dump bonds on the world market. The result would be to put future US bond sales in deep trouble.

So what would the effect be on the US economy? There is a very large retail mark-up on Chinese inports, The result of impeding these imports would be much lower profit margins and total sales for the retail industry, a lowering of the consumer class standard of living, and highly inflated retail prices, all this placed on top of a sick economy.

Of course, I could be dead wrong. Perhaps the unemployment rate will fall to 5% in a year or so. Uh-huh!


John Smyth
12 Jun 10, 13:13
Political Indignation

The Chinese are probably laughing their asses off.

I expect the yuan to become the next reserve currency because the Chinese will not let it become a FIAT and follow the same path the US and Europe have chosen.

They are increasing their gold reserves and plan on becoming #2 in holdings (the US being #1).

The Chinese control their printing presses and don't need to turn them on to get elected.

They also have something the US and Europe don't have (patience).


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules