Japan, China and US economies

Recent economic data released by Japan, China and the US  creates an interesting paradigm.

For me the real question is how these challenges impact our clients, customers and us directly.

The recent economic data is not necessarily bad news but interesting.  The data is presented to create meaningful thought on how this data can impact you and those you service.

Specifically we will look at Japan’s mild recession, China’s fight to keep its economy moving, and some insights into the US market.

Inventories decline in Japan creating negative economic results, China continues to struggle with over expansion and declining growth, and  some yellow lights blinking on the US economy.

Japan’s Economy slips into recession

japan recession 2015

Yet the contraction was relatively mild, and a decline in inventories was the biggest factor. Japanese government officials highlighted the positive, expressing confidence that a recovery was already under way.

aimed at the poor and child-care facilities for the working families.

Sorry not sophisticated enough to understand how this is going to “stimulate” their economy even considering Japan’s need for more workers.

The economy shrank but just under 1% on an annual basis following a similar reduction in the second quarter creating a technical recession.

A drop in inventories cut 2.1 percentage points from total growth, outstripping positive contributions from private consumption and exports.

They must have shipped all the goods to the US as our inventories are up.

Question: Is this a real contraction in inventories or a season adjustment in cars and other big ticket items put on boats for the holiday shopping season?

an annualized 5.0% during the quarter, a second-straight decline, as a global slowdown weighed on corporate earnings. Steel makers and machinery appear to be seeing head winds

Is Japan’s long struggle to exit zero interest rates and create growth bogged down by the global slowdown.

Have their mature technology companies missed the market?

China’s Economy continues to struggle

A rising Yuan has pushed down producer prices as it did in Japan 25 yeas ago

china 2015

China’s economy now genuinely needs both lower interest rates and a lower exchange rate. Can failure to execute cause China to enter into a deflationary era?

Maurice Obstfeld, the International Monetary Fund’s chief economist, recently remarked.

“For the past decade, American officials have correctly accused China of using capital controls to hold its currency, the yuan, down to boost exports and punish imports. Chinese officials have long been wary of repeating Japan’s mistakes and thus resisted pressure for rapid rises in the yuan. Nonetheless, in the past year, it has jumped 9% on a trade-weighted basis largely because it is still closely pegged to the dollar, which has itself gone up.

The IMF no longer considers the yuan undervalued. Some economists think it’s overvalued.

slumping industrial output is pushing down prices.

Though the central bank has cut the baseline lending rate to 4.35% from 6% early last year, inflation has dropped to 1.3% from 2.5%, so real (i.e. inflation-adjusted) rates have dropped by far less. Meanwhile, slumping industrial sales are pushing producer prices down at a 5.9% annual rate.

Separate gauges of China’s property market and its vital-but-murky shadow-banking system both showed more weakness, as the country’s economic growth engine continues to sputter.

Net profit for the whole trust sector was also down 30% from a quarter earlier.

China’s real estate market overall remains in oversupply yet prices continue to rise in 70 cities.

to a 6.9% growth rate in the third quarter, its slowest since 2009 despite pro-growth efforts taken by Beijing to prop up the world’s second-largest economy.

US continued slow growth

Inventories Rise

inventory 2015

lots and shelves with more goods, a welcome development for one measure of third-quarter economic growth but a potential drag if consumers don’t start snapping up more merchandise.

Question: is this really growth since the US is a major importer of goods?

Is this part of the holiday season inventory increase, in light of holiday goods on full display as I write this blog?

It’s mostly retailers, which includes auto dealers, but manufacturers’ and wholesalers’ inventories also have been creeping up. But the figures aren’t wildly out of line with prerecession norms.

Soft Sales

aoft sales 2015

In basically a zero inflation environment to see monthly sales greater in 2015 than in 2006 through 2008 boom period creates a question – how.

On the surface it would appear to be related to population increases as personal consumption is down.

Is it a cumulative impact of low inflation over a 10 year period?

It is a little surprising to see 2015 sales softer than 2014 on an economy that is purported to be improving.

is the economy improving?

Surge in Subprime Lending

high risk auto 2015

Over the six months through September, more than $110 billion of auto loans have been originated to borrowers with credit scores below 660, below good.

Of that sum, about $70 billion went to borrowers with credit scores below 620, scored that are considered “bad.”

raising questions about the health of the nation’s auto-lending portfolio and drawing uncomfortable comparisons to the rise in subprime mortgages
Still, housing and auto debt have key differences—in the case of default, cars can be quickly and easily repossessed and the bad loans erased from the system.

The presence of GPS technology in cars can make them easier for repo men to track down. Mortgages, by contrast, can linger in foreclosure for years in a lengthy legal process.

Really!

By | 2017-03-06T12:04:50+00:00 November 23rd, 2015|business advisory|0 Comments

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