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Economy in Brief

UK IP Turns Up In December: Is It Worth A Lot Of Fuss?
by Robert Brusca  February 9, 2012

The chart puts a good perspective on the turn up in UK yearend IP...nothing special. The rise in December is sharp and does pull IP out of a deepening nose dive of Yr/Yr growth rates headed below zero. But as we often like to remind people, it is only one month and until we see more supporting evidence it is good to remain wary of alleged trend reversals. The PMI (CIPS) data have been upbeat as well and those data are a bit fresher than the official IP data that actually count up the quantities (or try to). But PI data are sensitive and changes in speeds can affect them. We would like to see a bit more real growth from them to be sure of their message.

The PMI data are a bit rougher and readier and they serve as indicators rather than as measures. As diagnostics go, the Zone wide PMI results for MFG have showed some rebound. But even for a strong economy like Germany IP and trade flows continue to show weakness. Germany has only one month of rebounding orders for good news and that was based on fast-expanding foreign orders (and ...who are those strong foreigners anyway?).

The UK report on output shows a reversal in consumer nondurables weakness in December as well as a turnaround in intermediate goods weakness. Capital goods actually post a second large gain in a row- that one is truly encouraging. By sector food and drink as well as motor vehicles show two months in a row of output gains.

Still, for the first quarter (at least preliminarily) output in MFG is off at a 3.2% annual rate. Only motor vehicle output is up in the quarter is up strongly. Food and drink output is net lower as are textiles and leather and mining and utilities output, the later which often serves as a proxy for overall demand.

On balance the gain in IP is much better than a drop. But it is encouraging more than it is reassuring. Several sectors show some promise but many others do not. Europe still has serious issues even if there is some sort of Greek deal in the offing.

The bank of England’s step to increase its securities purchases is not really an attempt to make the markets ‘gilt-free.’ But the move now can take some one-quarter of the outstanding issues out of the market for support. That is a lot of support and as with the Fed it also begins to raise questions about the ability of the banks to turn things around when it is time to do it.

With global markets so synchronized we will likely have both the Fed and the BoE trying to unwind their policies of monetary largesse at the same time. That does not mean their efforts will fail but it should cause some of us to wonder exactly how it will work.

SAAR Except M/M Mo/Mo Dec
3M 3M 6M 6M 12M 12M Q4
MFG 1.1% -0.2% -0.8% 0.0% -4.5% -1.2% -3.9% 0.7% -1.0% -3.2%
C-Durables -0.9% 0.9% -0.1% -0.5% -7.1% -13.1% -11.2% -4.6% 0.1% -8.5%
C-Non-durables 1.1% -0.2% -0.6% 1.2% -10.9% -3.3% -4.5% 0.1% -0.8% -6.5%
Intermediate 1.0% -1.5% -1.2% -6.8% -8.6% -4.1% -6.3% -2.2% -5.2% -7.5%
Capital 0.9% 1.3% -1.0% 4.7% 9.2% 4.3% 2.1% 5.7% 4.2% 5.6%
Memo: Detail 1M% 1M% 1M% 3M 3M 6M 6M 12M 12M Q4
Food Drink & tobacco 1.3% 1.3% -0.7% 7.6% -5.7% 0.7% -2.5% 1.8% 1.0% -1.9%
Textile & Leather 1.1% -1.0% 0.5% 2.6% 4.4% -8.8% -8.1% -0.1% -1.3% -1.1%
Motor Vehicles & trailer 4.1% 0.4% -2.1% 9.2% 37.2% 36.3% 14.2% 10.3% 9.5% 23.7%
Mining and Quarry -2.1% -1.7% 0.0% -14.2% -12.5% -6.1% 0.0% -14.6% -15.0% -7.7%
Electricity, gas&H2O 0.4% -1.3% -4.5% -19.9% -22.6% -13.4% -9.2% -15.5% -9.8% -18.8%
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