The global outlook in 8 graphs

In April, there are still a lot of questions related to the strength of the global economic activity for the coming months.
Companies’ surveys in April from ISM and Markit do not show an improvement in the manufacturing sector. Nevertheless the momentum is stronger in the non manufacturing sector. The first point is worrisome as a slow dynamics in the manufacturing sector will lead to a poor performance in world trade. We cannot expect an impulse from this sector and therefore no spillover can be anticipated to the non manufacturing sector. The main source of improvement in the economic momentum always comes from a change in the manufacturing sector profile. This is not the case yet. Continue reading

My Macroeconomic column in 8 points: Will employment change the Fed’s strategy?

The main issue this week was the US employment figure as it may change the Fed’s mind on monetary policy. Nevertheless, employment is not the only aspect to mention to catch the US economy momentum. Another important issue, this week, is the rapid and deep drop of German industrial orders from outside the Euro Area. It’s a source of concern for the global investment dynamics. The last important point is the non-null probability of a rate lift-off at the Bank of England in 2016. Mark Carney has mentioned this possibility after the Monetary Policy Committee Meeting of the Bank. It’s not the first time that the BoE and Carney take this kind of commitment.

Eight points this week to follow the macroeconomic environment

1 – There was impatience to get the number of jobs creation in October in the US as it could be a trigger for a Fed’s rate move at its December meeting.
The number was strong at 271 000, way above expectations at 185 000. Nevertheless, the employment rate was almost unchanged for all classes of age and was unchanged for the 25-55 years of age. In other words, there were no supplementary pressures on the labor market even with employment surprising on the upside.
This figure comes after August and September during which the number of jobs creation was low. As a consequence, the average number of new jobs in the last 3 months is below the average of the 3 previous months: +187 000 in August, September and October versus 243 000 from May to July. Continue reading

My Macroeconomic column in 8 points (October the 26th)

Published in French on October the 26th – Data expected this week but already published are briefly discussed.

8 points to keep in mind this week to highlight the macroeconomic momentum

1 – The improvement of the French economy is the real good news
The business climate index, published by INSEE the French Statistical Institute, is above its historical average for the first time since August 2011.
It shows how deep and persistent was the negative shock that has hit the French economy since this period. Looking at the different sectors, building construction is the only one being still on the weak side. Services, Industry and retail trade contribute positively to growth.
france-2015-october-business climateFor the French economy we also notice in the INSEE quarterly survey that expected demand is improving rapidly. Continue reading

My Weekly Column – September the 28th

It was initially published in French here

Different elements must be noticed this week to understand the macroeconomic outlook

The first element is Janet Yellen’s speech. She talked one week after the press conference following the last Fed’s monetary committee. In her discussion of the US monetary policy, everyone was able to find what he wanted to find. Pros and cons of a rate hike have arguments in her speech to feed their own perception. The situation remains highly uncertain on monetary policy side

The second point is related to the French economy. With the second GDP estimate for the second quarter, we have details on behaviors. Before that, we note that the French profile is marginally stronger. The first quarter GDP growth is still at 0.7% (non-annualized rate) and the second at 0% but the carry over growth for 2015 is higher at 0.87% versus 0.83%. To converge to 1% which is the government target, a mere 0.18% is needed in each of the two remaining quarters of this year. Before the new estimate it was 0.25%. Continue reading

My Weekly Column – September the 7th

Several issues this week

The first point is the downward revision by the ECB of its GDP and inflation forecasts for 2015, 2016 and 2017.

Three things to notice
1 – For 2015 the forecast is almost stable close to 1.5% and 1.8% for 2016. In spite of a very accommodative monetary policy, there is no improvement in the growth momentum in the forecasts’ profile. The pace is not so strong and slows moderately with the last publication (in September 2015)
ecb-gowth-forecasts2 – Inflation expectations are revised downward; for 2016 the expected inflation rate is just 1.1%. As there is no strong acceleration on economic activity, this figure could be lower. In this situation, can we expect a convergence to the 2% inflation target before 2020? Continue reading

2 graphs to illustrate the poor economic outlook in China

The Markit/Caixin index was at 47.1 in August, its lowest level since March 2009. It’s another piece showing that the downturn of the Chinese economy is not over. That’s why I think that the adjustment seen on the Chinese currency is not over.
In the second graph, orders indices are trending downward and do not let expect a rapid U-Turn on economic activity.  There is a need for a shock to change the economic profile. A 10% depreciation of the Renminbi is necessary to create a real shock on the economy

Euro Area: Robust but not accelerating outlook (Markit surveys)

Since February 2015 the Markit synthetic index for the Euro Area remains at the same level. At the end of 2014 to February this year there was  an acceleration of the index, but since then, it is in a corridor between 52.4 to 52.7.
This index level remains consistent with a 1.5% GDP growth in 2015. Signals from sub-indices (new orders, employment) give the same information.
In other words, growth is robust in the Eurozone but doesn’t accelerate. Continue reading