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Economy in Brief
UK Consumer Sentiment Hits Lowest Reading since 1996
(when the GFK survey began; also lowest reading 'ever')
Of these 13 readings eight of them declined on the month in May three of them improved and two of them were unchanged...
U.S. Existing Home Sales Continue to Fall in April as Houses Become Less Affordable
The combination of soaring home prices across the nation and rising interest rates is making homes less affordable...
U.S. Index of Leading Indicators Fell in April
Five of the index's components fell in April, one was unchanged and four increased...
U.S. Unemployment Claims Rose in the Latest Week
The state insured rates of unemployment in regular programs vary widely...
CBI Gauge in the UK Continues to Be Upbeat
The global economy has a lot of challenges...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
Profits and Margins Plunge In Q1: Expect More Margin Contraction As Fed Squeezes Inflation
The Many Links of Inflation Cycle: Hard Landing Is Needed to Crack Them
Peak Inflation and Fed Policy: A Relationship which Should Worry the Fed and Scare Investors
Why Have the Yields on TIPS Been Negative in the Past Two Years?
by Louise Curley June 11, 2012
The Central bank of China reduced its benchmark, one year lending rate 25 basis points to 6.31% and its one year deposit rate to 3.25% on June 7th. This was the first rate decrease since 2008. In the past few years, while inflation was often a problem, China has used open market operations and changes in required reserve ratios to keep their economy on a relatively even keel. However, inflation as measured by the year to year change in the Consumer Price Index has fallen significantly since July 2011 from 6.1% to 3.0% in May of this year. With the threat of inflation easing, the Central Bank may be less reluctant to use interest rates to manage the ups and downs of the economy.
The slowdown in the Chinese economy that prompted the rate cut is evident in data on fixed investment, industrial production, retail sales and foreign trade. Although the year to year increase in fixed investment was 20% in May of this year, the monthly increase has been falling since May of 2011 when it was 25.8%, as can be seen in the first chart.
In China, Industrial Production is measured by Real Gross Value Added. In May, Real Gross Value Added was 9.6% above May, 2011, but here too, the year to year monthly increases have been declining, in this case, since June, 2011, when the year to year increase was 15.1%, as shown in the second chart.
Retail sales held up better than fixed investment and industrial production, but they, too, have shown signs of decelerating since December of last year. From a year to year increase of 18.1% at that time, the year to year increase in May of this year was 13.8%, as shown in the third chart.
Finally, May's foreign trade data were encouraging. Although the increase in Imports, 17.1%, from April to May was greater than the increase in Exports, 9.6%, these were substantial increases.& Exports at $181.9 billion are at an all time high. Imports at $161.37 in May are only slightly below the all time high of $161.47 in February, 2012. These data are shown in the fourth chart and in the table below.
May 12 |
Apr 12 |
May 11 |
M/M Chg |
Y/Y Chg |
2011 | 2010 | 2009 | |
---|---|---|---|---|---|---|---|---|
Exports (Billions US$) | 181.9 | 166.0 | 158.2 | 9.6% | 15.0% | 1890.3 | 1573.5 | 1193.0 |
Imports (Billions US$) | 161.4 | 137.8 | 143.3 | 17.1% | 12.6% | 1742.0 | 1394.8 | 1001.3 |
Balance (Billions US$) | 20.6 | 28.2 | 14.9 | -7.7 Bil $ | 5.7 Bil $ | 148.3 | 178.7 | 195.6 |