Investing Curiouscatblog

Tag: economic data

  • Manufacturing Output as a Percent of GDP by Country

    In previous posts I have shown data for global manufacturing output by country. One of the things those posts have showed is that manufacturing output in China is growing tremendously, but it is also growing in the United States. The chart below shows manufacturing production by country as a percent of GDP. China dominates again, with over 30% of the GDP from manufacturing.

    chart of manufacturing output as percent of gdp by country 1980-2008

    Chart showing manufacturing output, as percent of GDP, by country was created by the Curious Cat Economics Blog based on UN data* (based on current USA dollars). You may use the chart with attribution.

    For the 14 biggest manufacturing countries in 2008, the overall manufacturing GDP percentage was 23.7% of GDP in 1980 and dropped to 17% in 2008. I left India (15% in 1980, 15% in 2008), Mexico (20%, 18%), Canada (17%, 13%), Spain (25%, 14%) and Russia (21% in 1990 [it was part of USSR in 1980], 15%) off the chart.

    Over the last few decades Korea, and to some extent China, are the only countries that have increased the percent of GDP from manufacturing. China has not only grown manufacturing activity tremendously but also other areas of the economy (construction, mining, information technology). The countries with the largest manufacturing portions of their economies in 2008 were: China 32%, South Korea 25%, Japan and Germany at 21%. The next highest is Mexico at 18% which declined slightly over the last 15 years (with NAFTA in place). Globally, while manufacturing has grown, other areas of economic activity have been growing faster than manufacturing.

    The manufacturing share of the USA economy dropped from 21% in 1980 to 18% in 1990, 16% in 2000 and 13% in 2008. Still as previous posts show the USA manufacturing output has grown substantially: over 300% since 1980, and 175% since 1990. The proportion of manufacturing output by the USA (for the top 14 manufacturers) has declined from 31% in 1980, 28% in 1990, 32% in 2000 to 24% in 2008. The proportion of USA manufacturing has declined from 33% in 1980, 29% in 1990, 36% in 2000 to 30% in 2008. While manufacturing output has grown in the USA it has done so more slowly than the economy overall.

    Related: The Relative Economic Position of the USA is Likely to Decline – Manufacturing Data, Accuracy Questions – Top 12 Manufacturing Countries in 2007 – Manufacturing Employment Data: 1979 to 2007 – USA Manufacturing Output Continues to Increase (over the long term)

    * I made edits to the 1980 Brazil manufacturing data and 1980, 1985 and 2008 China manufacturing data because the UN data only showed manufacturing data combined with mining and utility data. And I am using older UN data that had manufacturing separated from mining and utility figures for China in the other years.

  • USA New Homes Plunged in May to Record Low

    Sales of new single-family houses in May 2010 were at a seasonally adjusted annual rate of 300,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 33% below the revised April rate of 446,000 and is 18% below the May 2009 estimate of 367,000.

    The median sales price of new houses sold in May 2010 was $200,900; the average sales price was $263,400. The seasonally adjusted estimate of new houses for sale at the end of May was 213,000. This represents a supply of 8.5 months at the current sales rate.

    300,000 is a new all time low annual rate of new home sales (data has been reported since 1963). This follows the end of the federal governments tax credit for those buying their first home. New houses sold:

    2003 1,086,000
    2004 1,203,000
    2005 1,283,000
    2006 1,051,000
    2007 776,000
    2008 485,000
    2009 375,000

    This is not a good sign for the economy. At the same time, we have to absorb the overbuilding bankers financed a few years ago. The damage that caused is still being dealt with. The low number of new home sales provides us some bad news on how bad things were. Until new home sales rebound to over 600,000 a year this will be a large drain on the ability to grown jobs and the economy. You have to go back to 1991 to find a year with fewer than 600,000 (other than the last 2, of course).

    Related: Most Vacant New Homes Since Records Kept (1973), from March 2008 – Mortgage Foreclosure Rate Reaches Record 4.63% – Housing Rents Falling in the USA (Feb 2009)

  • Defaults Pare USA Consumer Debt

    Default, Not Thrift, Pares U.S. Debt

    As of the end of March, the average U.S. household’s total mortgage, credit-card and other debt stood at 122% of annual disposable income
    …
    That sounds like a lot, but it’s better than it was before: At its peak in the first quarter of 2008, the debt-to-income ratio stood at 131%. Economists tend to see 100% as a reasonable level, so we’re almost a third of the way there.
    …
    Since household debt hit its peak in early 2008, banks have charged off a total of about $210 billion in mortgage and consumer loans, including credit cards. If one assumes that investors suffered at least that much in losses on similar loans that banks packaged and sold as securities (a very conservative assumption), then the total – that is, the amount of debt consumers shed through defaults – comes to much more than $400 billion.

    Problem is, that’s more than the concurrent decrease in household debts, which amounts to only $372 billion, according to the Federal Reserve. That means consumers, on average, aren’t paying down their debts at all. Rather, the defaulters account for the whole decline, while the rest have actually been building up more debt straight through the worst financial crisis and recession in decades.

    Interesting data, and not good news. We need to reduce consumer debt levels by reducing the borrowing we are doing. This is not a new need. We have been living beyond our means for far too long. That is not a solid base for an economy. It does boost current GDP but only by consuming future productive capacity (when you borrow from external sources – other countries – as we have been doing).

    Related: USA Consumer Debt Stands at $2.44 Trillion – How a Family Shed $106,000 in Debt

  • USA Consumer Debt Stands at $2.44 Trillion

    Consumer debt grew by about $100 billion each year from 2004 through 2007. In 2009 it has fallen over $112 billion so far: from $2,561 billion to $2,449 billion. Through April of 2010 total outstanding consumer debt $9 billion (so essentially it has been at a standstill). This still leaves over $8,000 in consumer debt for every person in the USA and $20,000 per family.

    The huge amount of outstanding consumer and government debt remains a burden for the economy. At least some progress is being made to decrease consumer debt.

    Those living in USA have consumed far more than they have produced for decades. That is not sustainable. You don’t fix this problem by encouraging more spending and borrowing: either by the government or by consumers. The long term problem for the USA economy is that people have consuming more than they have been producing.

    The solution to this problem is to stop spending beyond your means by even increasing levels of personal and government debt. Thankfully over the last year at least consumer debt has been declining. Government debt has been exploding so unfortunately that problem has continued to get worse.

    Data from the federal reserve.

    Related: Consumer Debt Declined a Record $21.5 Billion in July – The USA Economy Needs to Reduce Personal and Government Debt

  • Unemployment Rate Drops to 9.7% But Job Gains Disappoint

    Total nonfarm payroll employment grew by 431,000 in May but that total includes the hiring of 411,000 temporary employees to work on Census 2010, the U.S. Bureau of Labor Statistics reported today. Private-sector employment changed little (+41,000). Manufacturing, temporary help services, and mining added jobs, while construction employment declined. Economists were predicting over 500,000 job gains (given the large number of temporary census hires).

    In order to substantially increase the job prospects going forward we need to average over 250,000 new jobs a month to make up for the lost jobs due to the credit crisis. The economy needs to gain about 125,000 jobs a month to keep up with population growth. The temporary census jobs help but those jobs are temporary so can’t be counted on for long term improvement in the job picture.

    The number of unemployed persons was 15.0 million in May. The unemployment rate edged down to 9.7 percent, the same rate as in the first 3 months of 2010. The unemployment rates for adult men stand at 9.8%, 8.1% for adult women and 26.4% for teenagers.

    In May, the number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged at 6.8 million. These individuals made up 46.0 percent of unemployed persons, about the same as in April.

    In May, the civilian labor force participation rate edged down by 20 basis points to 65%. The employment-population ratio was about unchanged over the month at 58.7%.

    Among the marginally attached, there were 1.1 million discouraged workers in May, up by 291,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.1 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

    Manufacturing employment has risen by 126,000 over the past 5 months. Within manufacturing, both fabricated metals and machinery added jobs in May. Temporary help services added 31,000 jobs over the month; employment in the industry has risen by 362,000 since September 2009.

    Government employment rose by 390,000 in May. The Federal government hired 411,000 temporary workers for Census 2010, bringing total temporary census staffing during the payroll survey reference period to 564,000. Employment in state government excluding education decreased by 13,000.

    In May, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.2 hours. The manufacturing workweek for all employees increased by 0.3 hour to 40.5 hours. The average workweek for production and nonsupervisory employees on private non-
    farm payrolls increased by 0.1 hour to 33.5 hours over the month.

    Average hourly earnings of all employees in the private nonfarm sector increased by 7 cents, or 0.3 percent, to $22.57 in May. Over the past 12 months, average hourly earnings have increased by 1.9 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents, or 0.2 percent, to $18.99.

    The change in total nonfarm payroll employment for March was revised from +230,000 to +208,000, while the change for April remained at +290,000.

    Related: USA Added 290,000 Jobs In April – Unemployment Rate Reached 10.2% (Nov 2009) – Another 663,000 Jobs Lost in March, 2009 in the USA

  • Buffett Expects Terrible Problem for Municipal Debt

    Buffett Expects “Terrible Problem” for Municipal Debt

    “There will be a terrible problem and then the question becomes will the federal government help,” Buffett, 79, said today at a hearing of the U.S. Financial Crisis Inquiry Commission in New York. “I don’t know how I would rate them myself. It’s a bet on how the federal government will act over time.”

    Berkshire’s investment portfolio included municipal bonds valued at less than $3.9 billion as of March 31, down from more than $4.7 billion at the end of 2008. The company had a maximum of $16 billion at risk in derivatives tied to such debt, according to the company’s annual report for 2009.
    …
    Buffett said last month that the U.S. may feel compelled to rescue a state facing default after the government committed $700 billion to bail out financial firms and automakers. “It would be hard in the end for the federal government to turn away a state having extreme financial difficulty when they’ve gone to General Motors and other entities and saved them,”
    …
    About $14.5 billion of municipal bonds defaulted in 2008 and 2009… Many those were securities backed by revenue from nursing homes, property developments and other projects without claim to government tax revenue.
    …
    Defaults by local governments with the power to raise taxes are less common. Jefferson County, Alabama, defaulted on more than $3 billion of bonds backed by sewer fees after the deals grew more costly in the wake of the credit crisis in 2008. Vallejo, California, filed for bankruptcy in 2008 after its tax revenue tumbled.

    Related: USA State Governments Have $1,000,000,000,000 in Unfunded Retirement Obligations – Buffett on Need to Reduce Government Deficits – Politicians Again Raising Taxes On Your Children

  • India Grew GDP 8.6% in First Quarter

    While Europe’s financial crisis continues India grew GDP by 8.6% in the first 3 months of 2010. China continues to grow quickly as do many emerging countries, including Brazil. India’s Q4 GDP grows at 8.6% y-o-y

    The 8.6 percent expansion in the fourth quarter of the fiscal year 2009/10 was broadly in line with a median forecast of 8.7 percent in a Reuters poll and lifted the annual average growth rate for the full fiscal year to a slightly better-than-expected 7.4 percent.

    India’s economy had grown 6.7 percent in 2008/09, and the Jan-March 2009/10 growth rate matches the revised data for the second quarter of 2009/10.
    …
    Manufacturing output grew 16.3 percent on year in the quarter as consumers bought more cars and other goods, while farm output grew an annual 0.7 percent helped by a good winter harvest. The government expects the economy to grow 8.5 percent in the current fiscal year that started on April 1 on the prospects of a better farm output and a global recovery
    …
    The farm sector, which forms nearly 17 percent of the economy but is dependent on monsoon rains, is expected to do well in 2011 as the weather office has predicted a normal monsoon for the country. Prime Minister Manmohan Singh last week said an annual economic growth rate of 10 percent is needed in the medium term to address the problems of poverty and malnutrition.

    Even as Singh aims for high economic growth, inflation has come to haunt his government and appears to be undermining its support base. Wholesale prices, the most closely watched inflation gauge in India, rose 9.59 percent in April from a year earlier amid the government officials claim that headline inflation had peaked.

    Headline inflation numbers have been consistently higher than the official forecasts. The wholesale price inflation vaulted above the RBI’s end-March 2010 inflation forecast of 8.5 percent in January and crossed the 10-percent mark in February.

    Although food price inflation has eased from its peak of 20 percent in December, it is still above 16 percent. Rising cost pressures are also dragging down the pace of manufacturing growth, as evidenced by a second-straight monthly decline in the HSBC Market Purchasing Managers’ Index in April. The rapid acceleration in the world’s second-fastest growing major economy after China is boosting consumer demand far ahead of what can be met by existing supply capacity.

    The economies of India, China, Brazil, Mexico, Thailand, Vietnam… are still a fairly small fraction of global GDP but their share continues to grown. And the next few years look to continue this trend. Keys to how quickly they grow their share of global GDP are avoiding bubbles (which then burst), avoiding excessive government debt, continuing to build strong infrastructure for continued development and to what extent growth slows in Europe, USA and Japan due to the credit crisis and excessive consumer and government debt.

    The emerging economies have done a good job avoiding the credit crisis failures visited by the large banks on the wealthiest economies but the dangers of slipping up are large and costly. The largest economies have lots of wealth even after allowing bankers and wall street to siphon off huge amounts for themselves. Less wealth economies will suffer much more than the wealthiest countries if they fall prey to the same political and economic failings. And those special interest (crony capitalism) favors are no less (I would say even more, in fact) likely in those countries than they are in the richest countries.

    Related: The Relative Economic Position of the USA is Likely to Decline – Easiest Countries for Doing Business 2008 – Why Investing is Safer Overseas

  • Increasing USA Foreign Oil Dependence In The Last 40 years

    In his presentation Mike Milken explores foreign oil dependence for the USA and presidential statements:

    President Richard Nixon (in 1974 with 36.1% of oil from foreign sources): “At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need.”

    President Gerald Ford (in 1975 with 36.1% of oil from foreign sources): “We must reduce oil imports by one million barrels per day by the end of this year and by two million barrels per day by the end of 1977.”

    President Jimmy Carter (1979, 40.5%): “Beginning this moment, this nation will never use more foreign oil than we did in 1977 – never.”

    President Ronald Reagan (1981, 43.6%): “While conservation is worthy in itself, the best answer is to try to make us independent of outside sources to the greatest extent possible for our energy.”

    President George Bush (1992, 47.2%): “When our administration developed our national energy strategy, three principles guided our policy: reducing our dependence on foreign oil…”

    President Bill Clinton (1995, 49.8%): “The nation’s growing reliance on imports of oil… threatens the nation’s security… [we] will continue efforts to…enhance domestic energy production.”

    President George W. Bush (2006, 65.5%): “Breakthroughs…will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025.”

    President Barack Obama (2009, 66.2%) “It will be the policy of my administration to reverse our dependence on foreign oil while building a new energy economy that will create millions of jobs.”

    See slides.

    Related: Oil Consumption by Country in 2007 – Google’s Energy Interests – South Korea To Invest $22 Billion in Overseas Energy Projects

  • Mortgage Foreclosure Rate Reaches Record 4.63%

    The fallout of the credit crisis continues. The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.1% percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.4% in the fourth quarter of 2009 to 9.40% this quarter.

    The percentage of loans on which foreclosure actions were started during the first quarter was 1.23%, up 3 basis points from last quarter but down 14 basis points from one year ago.

    The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.63%, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high. The combined percentage of loans in foreclosure or at least one payment past due was 14.0% on a non-seasonally adjusted basis, a decline from 15.0%.

    The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 9.54%, a decrease of 13 basis points from last quarter, but an increase of 230 basis points from the first quarter of last year.

    “The issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down. Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement. Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which,” said Jay Brinkmann, MBA’s chief economist.

    “The seasonal models say it is not a fundamental improvement and that the seasonal drop should have been larger to represent a true improvement, hence the increase in the seasonally adjusted numbers. Yet there is reason to believe the seasonally adjusted numbers could be too high. Simply put, fundamental market factors may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time.

    “Since discerning what represents a fundamental improvement versus a simply seasonal improvement is probably more of an art than a mathematical science at this point, the seasonally adjusted numbers should be viewed with a degree of caution.

    The seasonally adjusted delinquency rate increased for all loan types with the exception of FHA loans. On a seasonally adjusted basis, the delinquency rate stood at 6.2% for prime fixed loans, 13.5% for prime ARM loans, 25.7% for subprime fixed loans, 29.1% percent for subprime ARM loans, 13.2% for FHA loans, and 8.0% for VA loans. On a non-seasonally adjusted basis, the delinquency rate fell for all loan types.

    The foreclosure starts rate increased for all loan types with the exception of subprime loans. The foreclosure starts rate increased six basis points for prime fixed loans to 0.7%, 17 basis points for prime ARM loans to 2.3%, 18 basis points for FHA loans to 1.5%, and 8 basis points for VA loans to 0.9%. For subprime fixed loans, the rate decreased nine basis points to 2.6% and for subprime ARM loans the rate decreased 39 basis points to 4.3%.

    Predicting is much harder than explaining past data. But I believe the odds for better reports on foreclosures and delinquencies over the next 12 months. Delinquencies may well rise. But it is certainly possibly things will get worse. And if the jobs added each month doesn’t average close to 200,000 things will likely not be very good. My guess is we will add over 2.0 million jobs in the USA in the next 12 months but that is far from certain.

    Related: Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Another Wave of Foreclosures Loom (July 2009) – Nearly 10% of Mortgages Delinquent or in Foreclosure (Dec 2008)

  • Bond Rates Remain Low, Little Change in Last 6 Months

    chart showing corporate and government bond yieldsChart showing corporate and government bond yields from 2005-2010 by Curious Cat Investing Economics Blog, Creative Commons Attribution, data from the Federal Reserve.

    Bond yields have remained low, with little change over the last 6 months. 10 year Aaa corporate bonds yields have increase 10 basis points to 5.29%. 10 year Baa yields have decreased 7 basis points to 6.25%. 10 year USA treasury bonds have increased 45 basis points (largely the effective of money scared into the safety of US treasuries leaving as the credit crisis eased. The federal funds rate remains under .25%.

    The United States economy appears to be gaining strength and if job growth can continue the Fed will likely reduce the amount giveaways to the banks by increasing the fed funds rate (though when this will happen is still very hard to judge). The Fed will also likely sell mortgages back to the market which will increase long term rates. The Fed will likely start by changing the wording that the economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” When this language changes rates may well go up 25 to 50 basis points quickly.

    Related: Bond Yields Change Little Over Previous Months (December 2009) – Chart Shows Wild Swings in Bond Yields in Late 2008 – Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Government Debt as Percentage of GDP 1990-2008 in OECD: USA, Japan, Germany…