Is Japan recovering from the VAT rate hike of April the 1st? Clearly it doesn’t

Is Japan recovering from the VAT rate hike of Avril the 1st? Not really when we look at July numbers on retail sales. (see here for a detailed analysis of Q2 GDP drop). Retail sales are down again in July and the current sales profile is clearly weaker than in 1997 during the previous VAT rate hike: sales were up in July 1997, down in 2014.
In 1997 the rate hike led a to a long recession. With a weaker dynamics the probability of a long recession is clearly above 50%. The drop in households purchasing power continues and in the absence of structural reforms there are no reasons for a rapid upturn. Continue reading

Three Graphs on the German Labor Market

The number of unemployed has slightly increased in August (1 000). Compared to August 2013 this number has decreased by -45 000.
Employment is on a positive trend. During the last 3 months (May – July) it was up by 0.9% at annual rate. But surveys this summer have cast a doubt on such a momentum for the coming months. Continue reading

Three graphs on People Registered at Pole Emploi in France

On August 27, data were released on the French labor market for July.
There are three points to mentioned

1 – Monthly net inflows to Pole Emploi (the French institution that manages unemployment) has increased rapidly in July. Except for the technical bug in August 2013,  the number pf people registered at Pole Emploi was always up during the last 6 years (with the exception of October 2010 no explanation).
On the graph the monthly change of people registered is presented. It shows people from category A who are looking for a job but have no activity, category B no job but reduced  activity and category  C no job but with long activity.
During the last four months on the chart the number of new registered has increased rapidly. This is consistent with the low growth momentum seen for the French economy (I made a comment here on a French survey today) Continue reading

Three graphs on the French Economy after the INSEE survey

The French survey published this morning by INSEE shows a drop in economic activity in August. The index level is now 91 (with an historical average at 100 and a standard error at 10). It is the same level than in August 2013.
These figures can be consistent with a small GDP contraction in the third quarter. As European surveys appeared weaker in August, it is not possible to expect an short term positive impulse coming from French main trading partners. The French economy must be boost from inside to gain some autonomy in its growth process.
The new economy minister, Emmanuel Macron, have a huge task in front of him. Continue reading

The French Cabinet Reshuffling

The French cabinet reshuffling has consisted of the exit of 3 important ministers: Arnaud Montebourg who was economy minister, Benoit Hamon minister of education and Aurélie Filippetti minister of cultural affairs.
The minister of education and the minister of cultural affairs have been taken by two women whore were already ministers.
The main change is the nomination of Emmanuel Macron as the economy minister. He replaces Arnaud Montebourg. He is a young civil servant who has worked at the prestigious Inspection General des Finances at the economy ministry. He has also worked with the bank Rothschild. But what is interesting is that he was Francois Holland advisor on economic affairs from the beginning of Hollande mandate until June 2014. He was then replaced by Laurence Boone who was chief economist Europe at Bank of America Merril Lynch. Continue reading

Four Graphs on the World Economic Momentum

Data on the world production index and on world trade (in volume) have just been released by the CPB Netherlands Bureau of Economic Policy Analysis. It’s an independent research institute in the Netherlands

Industrial Production Profile
The first graph shows the industrial production index since 2002. There are 4 distinct phases:
One from 2002 to summer 2008 during which the trend growth rate was 4.5% (annualized growth rate). The second phase is the break of 2008/2009 clearly seen on the graph. The third phase is the recovery from 2009 to January 2011. The trend growth rate was 8.3%. During this period every government had an accommodative fiscal policy to support the economic activity. Since the beginning of 2011 the trend is lower. It’s average growth rate is just 2.8%, well below the figure seen before the 2008 crisis.
Figures in spring 2014 are not far from the trend (green) seen on the graph. Survey data on the manufacturing sector (Markit) for the world economy in July and August do not suggest a change in trend. Continue reading

Mario Draghi’s speech in Jackson Hole? A game changer

In his speech in Jackson Hole, Mario Draghi has launched new thinking for a new economic policy in the Euro Area.
His starting point is the analysis of unemployment (major theme this year in Jackson Hole) which has short-term and more structural explanations. He said that in such an environment, monetary and fiscal policies must be coordinated in the short run to support demand and that at a mid-term horizon structural reforms were needed in order to improve competitiveness and growth autonomy (his text is here)

Short term issues
Mario Draghi is clearly worried as the Euro Area can be characterized by its low economic momentum, its high structural unemployment rate and its low inflation rate (0.4% in July)
Continue reading