Investing Curiouscatblog

Tag: economic data

  • House Prices Seem to be Stabilizing

    Home prices in the United States rose 0.3% on a seasonally-adjusted basis from June to July, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.5% increase in June was revised downward to a 0.1% increase. For the 12 months ending in July, U.S. prices fell 4.2%. The U.S. index is 10.5% below its April 2007 peak.

    The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. Read the full press release. The Case-Shiller Home Price Indices also have increased (10 and 20 city indices) for June and July.

    I am still not convinced we have seen the bottom of the housing price declines nationwide. The economy is still in very fragile territory. But the data does show the declining prices have been stopped in many locations, at least for a while. If job losses continue housing prices may well resume the decline. The commercial real estate market seems to be even weaker than housing.

    Related: The Value of Home Ownership – Housing Prices Post Record Declines (April 2008) – posts on economic data – real estate articles

  • Why China’s Economic Data is Questionable

    There are several issues with economic data, as I have mentioned before. These issues have to be considered when analyzing economic data and being financially literate requires an understanding of the problems with economic data. The political pressures for manipulating the data to appear good exist is every country. The practical difference is the other forces that push for data that is more accurate (businesses, investors, economists… need accurate data to succeed) and practices that have been adopted to provide accurate data.

    Foreign Policy magazine takes a look at problems in How China Cooks Its Books

    Pressure to distort or fudge statistics likely comes from up high — and it’s intense. “China announces its annual objective of GDP growth rate each year. In Chinese culture, the government has to reach the objective; otherwise, they will ‘lose face,’” said Gary Liu, deputy director of the China Europe International Business School’s Lujiazui International Financial Research Center. “For instance, the government announced that it wanted to ensure a GDP growth rate of 8 percent in 2009, and it has become the priority for government officials to meet that objective.”

    But local and provincial governmental officials are the ones who actually fiddle with the numbers. They retain considerable autonomy and power, and have a self-interested reason to manipulate economic statistics. When they reach or exceed the central government’s economic goals, they get rewarded with better jobs or more money. “The higher [their] GDP [figures], the higher the chance will be for local officials to get promoted,” explained Liu.
    …
    Last October, Vice Premier Li Keqiang said in a speech after inspecting China’s Statistics Bureau, “China’s foundation for statistics is still very weak, and the quality of statistics is to be further improved” — a brutally harsh assessment coming from a top state official.
    …
    China’s economy grew at an annualized 6.1 percent rate in the first quarter, and 7.9 percent in the second. Yet electricity usage, a key indicator in industrial growth and a harder metric to manipulate, declined 2.2 percent in the first six months of the year. How could an economy largely dependent on manufacturing grow while its industrial sector shrank? It couldn’t; the numbers don’t add up

    My guess is China’s data is highly questionable and still China’s economy is fairly strong. But because the data is so questionable it does make the risks of being wrong on that guess fairly high. Even the US government data is flawed: it is no surprise China’s data is less reliable.

    Related: Is China’s Recovery for Real? – Misuse of Statistics – Mania in Financial Markets – Manufacturing Employment Data – 1979 to 2007 – The Long-Term USA Federal Budget Outlook –
    Data Shows Subprime Mortgages Were Failing Years Before the Crisis Hit

  • Consumer Debt Declined a Record $21.5 Billion in July

    Last November USA consumer debt fell, by a then record of $8 billion. In July, 2009, consumer debt was reduced another $21 billion, which is a good sign.

    April of 2008 USA consumer debt stood at $2.54 trillion. Based on a population of 300 million people that would mean $8,467 for every person in just personal debt. Living beyond your means is not a good thing. After the July decrease of $21.55 billion, the total consumer debt stood at $2.47 trillion, a decline of $70 billion over the last 15 months.

    Decreasing this debt level was (and is) necessary. If that means we have some suffering today to pay for living beyond our means for years the ‘fix’ is not to continue to live beyond our means. The ‘fix’ is to accept the consequences of past behavior and build a more sustainable economy now for the future.

    Consumer credit down record amount in July

    This is the sixth straight monthly drop in consumer credit — the longest consecutive string of declines in credit since the second half of 1991.

    Consumers have retrenched since the financial crisis hit in full force last September. Credit has fallen in every month except January. In percentage terms, the drop in credit is the biggest since June 1975.

    And on a year-on-year basis, credit is down 4.3%, the biggest drop since June 1944. The retrenchment was much more than expected. Economists surveyed by MarketWatch expected consumer credit to decline by $4.3 billion. There were also sharp downward revisions to June data.

    Economists said shrinking credit might strangle the recovery. “There is no real way to put a positive spin on these data. Credit is still shrinking and that is going to have an impact on consumption,” wrote Charmaine Buskas, senior economics strategist at TD Securities, in a note to clients.
    …
    credit-card debt fell $6.11 billion, or 8.5%, in July to $905.58 billion. This is the record 11th straight monthly drop in credit card debt. Non-revolving credit, such as auto loans, personal loans and student loans fell a record $15.44 billion or 11.7% to $1.57 trillion.

    Here is a positive spin on it. We owe $21.5 billion less than we did last month. How lost are we that there is no positive way to spin owing less money than you used to owe?

    Related: Personal Saving and Personal Debt in the USA – Americans are Drowning in Debt

  • China May Take Car Sales Lead from USA in 2009

    China’s economy continues to grow quickly. It looks as though that, along with the slump in US car sales, likely will lead to China taking the world sales lead for cars (I would imagine for the first time ever the USA has not held this title). China 2009 Vehicle Sales May Rise 28% on Stimulus:

    Full-year sales may reach as high as 12 million vehicles, Chen Bin, chief director of the industry coordination department at the National Development and Reform Commission, said today at a conference in Tianjin. U.S. sales will likely be around 10.5 million, according to both General Motors Co. and Ford Motor Co.

    China has boosted auto sales this year through tax cuts and subsidies as a part of a wider 4 trillion yuan ($586 billion) stimulus that has shielded the country from the worst of the global recession. U.S. sales have slumped 28 percent, pushing the old GM and Chrysler LLC into bankruptcy. Last year’s total was 13.2 million, compared with 9.4 million in China.

    Partially due to the strong internal Chinese demand (and partially due to Chinese regulation) India actually exports more cars than China. 5 times as many cars are purchased in China as are bought in India.

    Indian Car Exports Beat China’s

    [In India] Total exports, including vans, sport-utility vehicles and trucks, rose 18 percent to 229,809.
    …
    In contrast, China’s exports slumped 60 percent to 164,800 between January and July, according to government data. Vehicles produced in Thailand for export declined 43 percent to 263,768, according to the Thai Automotive Club.

    South Korean exports dropped 31 percent to 1.12 million units, according to the Korea Automobile Manufacturers Association. Japan, the world’s largest automobile producer and exporter, shipped 1.77 million cars, trucks and buses.

    Related: The Relative Economic Position of the USA is Likely to Decline – Manufacturing Cars in the USA – Rodgers on the US and Chinese Economies

  • Unemployment Rate Increases to 9.7%

    The unemployment rate in the USA continued the climb toward 10% in August in the aftermath of the credit crisis. Nonfarm payroll employment decline in August, by 216,000 more jobs, and the unemployment rate rose to 9.7%, the U.S. Bureau of Labor Statistics reported today. Since December 2007, employment has fallen by 6.9 million jobs.

    In August, the number of unemployed persons increased by 466,000 to 14.9
    million, and the unemployment rate rose to 9.7%. The unemployment rates for adult men (10.1%), whites (8.9%), and Hispanics (13.0%) rose in August. The jobless rates for adult women (7.6%), teenagers (25.5%), and blacks (15.1%) were little changed over the month.

    The civilian labor force participation rate remained at 65.5% in August. The employment-population ratio, at 59.2%, edged down over the month and has declined by 3.5 percentage points since the recession began in December 2007.

    In August, the number of persons working part time for economic reasons was little changed at 9.1 million. These individuals indicated that they were working part time because their hours had been cut back or because they were unable to find a full-time job.

    In August, manufacturing employment continued to trend downward, with a decline of 63,000. The pace of job loss has slowed throughout manufacturing in recent months. Employment in health care continued to rise in August (28,000), with gains in ambulatory care and in nursing and residential care. Health care has added 544,000 jobs since the start of the recession.

    In August, the average workweek for production and nonsupervisory
    workers on private nonfarm payrolls was unchanged at 33.1 hours.
    The manufacturing workweek and factory overtime also showed no
    change over the month (at 39.8 hours and 2.9 hours, respectively).

    Related: Unemployment Rate Drops Slightly to 9.4% – posts on employment – May 2009 Unemployment Rate Jumps to 9.4% – California Unemployment Rate Climbs to 10.5 Percent (March 2009)

  • Government Debt Compared to GDP 1990-2007

    Government debt as percent of GDP 1990-2007Chart showing government debt as a percentage of GDP by Curious Cat Investing Economics Blog, Creative Commons Attribution, data from OECD, Sept 2009.

    For 2007 most countries slightly decreased their government debt to GDP ratio – as economic growth exceeded debt growth. The OECD is made up of countries in Europe and the USA, Japan, Korea, Australia, New Zealand and Canada. The overall OECD debt to GDP ratio decreased from 77% in 2005 to 75% in 2007. The USA moved in the opposite direction increasing from 62% to 63%: still remaining far below the OECD total. Most likely 2008, 2009 and 2010 will see both the USA and other OECD national dramatically increase the debt burden.

    Compared to the OECD countries the USA is actually better than average. The chart shows the percentage of GDP that government debt represents for various countries. The USA ended 2007 at 63% while the overall OECD total is 75%. In 1990 the USA was at 63% and the OECD was at 57%. Japan is the line way at the top with a 2007 total of 171% (that is a big problem for them). Korea is in the best shape at just a 29% total in 2007 but that is an increase from just 8% in 1990.

    Related: Government Debt as a Percentage of GDP Through 2006 – Oil Consumption by Country in 2007 – Federal Deficit To Double This Year – Politicians Again Raising Taxes On Your Children – True Level of USA Federal Deficit – Top 12 Manufacturing Countries in 2007
    (more…)

  • Loan Delinquency Rates Increased Dramatically in the 2nd Quarter

    chart of loan default rates 1998 to 2009Chart showing loan delinquency rates for real estate, consumer and agricultural loans for 1998 to 2009 by the Curious Cat Investing Economics Blog, Creative Commons Attribution, data from the Federal Reserve.

    Delinquency rates on commercial (up another 151 basis points) and residential (93 basis points) real estate continued to increase dramatically in the second quarter. Credit card delinquency rates increased but only by 20 basis points.

    Real estate delinquency rates exploded in 2008. In the 4th quarter of 2007 residential delinquency rates were 3.02% by the 4th quarter of 2008 they were 6.34% and in the 2nd quarter of this year they were 8.84% (582 basis points above the 4th quarter of 2007). Commercial real estate delinquency rates were at 2.74% in the 4th quarter of 2007, 5.43% in the fourth quarter of 2008 and 7.91% in the 2nd quarter of 2009 (a 517 basis point increase).

    Credit card delinquency rates were much higher than real estate default rates for the last 10 years (the 4-5% range while real estate hovered above or below 2%). Now they are over 200 and 300 basis points bellow residential and commercial delinquency rates respectively. From 4.8% in the 3rd quarter 2008 to 5.66% in the 4th and 6.5% in the 1st quarter of 2009.

    The delinquency rate on other consumer loans and agricultural loan delinquency rates are up but nowhere near the amounts of real estate or credit cards.

    As I wrote recently bond yields in the last few months show a dramatic increase in investor confidence for corporate bonds.

    Data from the Federal Reserve

    Related: Loan Delinquency Rates: 1998-2009 – The Impact of Credit Scores and Jumbo Size on Mortgage Rates – 30 Year Mortgage Rate and Federal Funds Rate Chart

  • 2nd Quarter USA GDP down 1%

    chart of 2005-2009 quarterly gdp changesChart from the Bureau of Economic Analysis showing the quarter to quarter growth in real GDP from 2005-2009.

    Current-dollar GDP — the market value of the nation’s output of goods and services — decreased 1.0%, or $34.7 billion, in the second quarter to a level of $14,143.3 billion. In the first quarter, current-dollar GDP decreased 4.6%, or $169.3 billion.

    More details on 2nd quarter, 2009 GDP.

    Related: First Quarter GDP 2009 down 6.1% – Economists Raise Projections for Second Half of 2009 – What the Bailout and Stimulus Are and Are Not

  • Oil Consumption by Country in 2007

    The largest oil consuming countries (and EU), in millions of barrels per day for 2007. China increased use by 1 billion barrels a day, the USA and Europe decreased use by 100 million barrels a day from our post last year on Oil Consumption by Country.

    Country consumption % of oil used % of population % of World GDP % of oil used in 2006
    USA 20.7 24.3 4.5 21.0 25.9
    European Union 14.4 16.9 7.4 21.9 18.1
    China 7.9 9.2 19.9 10.8 8.6
    Japan 5.0 5.8 1.8 6.5 6.7
    India 2.7 3.1 17.3 4.5 3.0
    Russia 2.7 3.1 2.0 3.1 3.6
    Germany 2.5 2.8 1.2 4.2 3.3
    Brazil 2.4 2.7 2.9 2.8 2.6
    Canada 2.4 2.7 0.4 1.9 2.9
    Mexico 2.1 2.4 1.6 2.0 2.6
    South Korea 2.1 2.4 0.7 1.8 2.7

    Data is from CIA World Factbook 2009 (downloaded August 2009). GDP calculated using purchasing power parity from 2008 fact book with estimated 2007 data.

    Related: Government Debt as a Percentage of GDP – Global Manufacturing Production by Country – Manufacturing Contracting Globally (March 2009)

  • Is China’s Recovery for Real?

    China’s recovery: Is it for real?

    according to John Makin of the American Enterprise Institute, the country’s official economic figures — we’re talking the Chinese government’s numbers here and not those reported by individual companies — systematically overstate the speed of the country’s economic recovery.
    …
    Investors don’t need to answer or even be interested in those philosophical questions. But they do need to consider the possibility that China’s huge acceleration in its growth rate is merely an artifact of the way the country keeps its books.

    Economic data is often messy and confusing. The data itself often has measurement error. The actual aim is often not exactly what people think. And the data is often delayed so it provides a view of the situation, not today, but in the past and guesses must be made about what that says about today and the future.

    And on top of those factors many countries feel significant internal pressures to report numbers that make the current economy look good. This is just another factor investor must consider when looking to make investments and evaluate economic conditions.

    It seems to me the Chinese recovery does look real. How strong the economy will be 6 months from now is less clear but right now things look positive to me.

    Related: posts on economic data – What Do Unemployment Stats Mean? – China Manufacturing Expands for the Fourth Straight Month (Jun 2009) – A Bull on China