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Economy in Brief
U.S. Initial Unemployment Insurance Claims Decline Sharply
Initial claims for unemployment insurance fell sharply to 209,000 (-17.1% y/y)...
U.S. Mortgage Loan Applications Are Little Changed; Rates Remain High
The MBA total Mortgage Applications Volume Index eased 0.2% last week (-1.9% y/y)...
Japan Shows Very Moderate Growth As Trade War Clouds Gather
Japan’s sector indexes showed a solid gain in February...
U.S. Consumer Confidence Unexpectedly Rose in April
The Conference Board Consumer Confidence Index rose to 128.7 in April from 127.0 (initially reported as 127.7) in March...
U.S. New Home Sales and Prices Strengthen
Sales of new single-family homes during March increased 4.0% (8.8% y/y) to 694,000 (SAAR)...
by Robert Brusca July 27, 2011
The Confederation of British industry (CBI) survey for industrial trades is showing a clear weakening profile
for orders, its cycle-leading component. These trends essentially confirm what the early, or 'flash,' UK
GDP reading told us: that GDP in the UK is withering and growth trends are eroding. With UK inflation over
the top of the BOE's range and stuck there for an extended period of time and with growth lagging the future
tradeoffs for policy are increasingly grim.
The chart showing sequential growth rates for orders makes it clear that any of the traditional growth rates for CBI orders produce negative trends. The Yr/Yr orders of turning sharply lower and the three-month annualized growth rates are in a dive as well.
Export orders produced a -8 net reading in July while stocks of finished goods are in a growing mode; that's not the best of things with sales (shipments) turning sour and shrinking.
However, the outlook for the volume of output remains steady at a +6 reading for August. But instead of that being good news it represents a sharp deviation from what had been much stronger numbers: +13 in June and +20 in May and +22 in April yes these are the earlier months of 2011. The outlook in the UK is being cut fast.
The percentile standings tell the story… The raw diffusion readings are not directly comparable across components
for relative strength as each component has a different intrinsic range of fluctuation and volatility. At a -10
reading orders stand in the 69th percentile of their range since 1990 while at +6 reading for 'volume over the
next three-months' the range standing lies in the 64th percentile of its historic range. Viewed on another
ranking metric, the position in their historic queue of values, we find that orders in July stand in the
70th percentile of their historic queue (top 30%) while volume expectations for the three-months ahead lie
in the 48th percentile of their queue. Thus the higher value number in the CBI survey actually translates
into greater relative weakness. This may reflect an 'optimism bias' on the part of producers who are 'hoping ahead'
as much as looking ahead. In short there is not much good news in this CBI survey and what may look to be a
'silver lining' in terms of the outlook for the volume of sales three-months ahead, is not even quicksilver.
Beyond that, the relationship between total orders and export orders shows that both series have run out of gas. Export orders still show a bit more strength, boosting the notion that export orders more than domestic growth has been the leading contributor to the UK industrial expansion. But now that point is moot as both series have flattened and are falling.
In brief there is not much good news from British manufacturing and perhaps the challenges to growth ahead will prove to be too much for the sector to overcome.
UK Industrial volume data CBI Survey | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Reported | Aug 11 |
Jul 11 |
Jun 11 |
May 11 |
Apr 11 |
12Mo Avg |
Pcntle | Max | Min | Range |
Total Orders | -- | -10 | 1 | -2 | -11 | -10 | 69% | 13 | -61 | 74 |
Export Orders | -- | -8 | 0 | -3 | -6 | -2 | 63% | 20 | -55 | 75 |
Stocks:FinGds | -- | 12 | 3 | 9 | 8 | 6 | 42% | 31 | -2 | 33 |
Looking ahead | ||||||||||
Output Volume:Nxt 3M | 6 | 6 | 13 | 20 | 22 | 16 | 64% | 36 | -48 | 84 |
Avg Prices 4Nxt 3M | 4 | 27 | 24 | 36 | 33 | 23 | 52% | 36 | -30 | 66 |
From early 1989 |