More Encouraging Economic Trends Around the World

November 12, 2009

In Japan, machinery orders are one of the most important forward-looking indicators.  When growth staggers, this statistics gives one of the first indications of trouble.  Domestic core private machinery orders, in particular, lead future trends in business investment, and these fell just 0.9% last quarter (or 3.6% at an annualized rate) after a slump of 4.9% in the second quarter.  Moreover, their level in September was already 6.9% greater than the third-quarter average, suggesting a rise of at least 30% annualized in the current quarter if each month is no lower than it was in September.  Officials conservatively predict a fourth quarter-over-third quarter increase of just 1.0%.  Meanwhile, foreign machinery orders leaped 303% annualized last quarter and were 9.7% greater in September than the quarterly average.  Because of such spectacular growth, officials project a 10.6% decline in 4Q09, but that implies fairly significant reductions in the final months of 2009, which seems improbable given the robustness of Japan’s Asian neighbors.

Chinese retail sales and industrial production each accelerated to on-year advances of more than 16% in October.  Indian industrial output of 9.1% in the year to September was greater than expected.  Australian labor statistics are improving sooner than than expected.  Generally they lag economic activity.

In Euroland, industrial production rose 9.1% at an annualized rate last quarter (2.2% not annualized).  If output in each of the final three months of 2009 matched September’s level, the third-quarter 9.1% annualized increase would be replicated in the final quarter.

The Bank of England revised projected economic growth in 2011 to an above-trend 4.0% from a forecast of 3.0% made as recently as August.  British labor statistics, like those in Australia, are improving sooner than thought.  Britain’s property market is also getting better.

It is the U.S. labor market that is lagging other aspects of the economy, which is the pattern one normally observes, but even in the U.S. one finds relatively good news.  New jobless claims peaked seven months, and such dropped by about 50K over the past three months to 519-3/4K in the four weeks to November 7 from 571K per week in the four weeks to August 15.  Extrapolating that forward, new jobless claims would dip below the 400K level around March or April.  When the economy weakens, a rise up that threshold often coincides with the onset of recession.  Hope prevails that perhaps the jobless rate might peak in early spring, too, but I suspect that the top will happen later than that.  Nonetheless, things are getting worse at a slower rate.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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