NEW$ & VIEW$ (13 April 2012)



China’s Growth Slows to 8.1%

China’s first-quarter economic growth slowed to a lower-than-expected 8.1%, the lowest since the first quarter of 2009 and a marked slowdown from 8.9% in the fourth quarter of 2011.

Pointing up  China, finally, provides quarterly growth numbers but the media this morning paid little attention to this other sign of a slowdown: on a quarterly basis, China’s economy grew 1.8% in the first three months. That’s a 7.4% annualized growth rate.

We also got a slew of economic data for the quarter and for March:

  • Power generation rose 7.2% in March vs 7.1% in Jan/Feb.
  • imageFixed asset investment , the main economic driver, rose 20.4% in March, down from 21.5% in the first two months. But Q1’12 FAI growth accelerated to 18.2% from 14.7% in Q4’11.
  • China’s industrial value-added output up 11.6% in Q1  China’s industrial value-added output grew 11.6 percent year on year in the first quarter of this year. In March alone, the industrial value-added output was up 11.9 percent from a year earlier.
  • China’s retail sales up 14.8% in Q1
  • China’s retail sales grew 14.8 percent year-on-year to 4.9319 trillion yuan ($783.03 billion) in the first quarter of this year, the National Bureau of Statistics (NBS) said Friday. March retail sales grew 15.2 percent, an increase of 14.7 percent from the January to February period.

    Urban residents’ per-capita disposable income reached 6,796 yuan, up 14 percent year-on-year. After deducting inflation, actual growth was 9.8 percent.

    The growth of per-capita cash income of rural residents hit 17 percent to reach 2,560 yuan. The actual growth after factoring in price adjustments was 12.7 percent

    Pointing up   Combined real income growth rose 9.8% in Q1 vs 10.3% in Q4.


Storm cloud   The housing risk intensifies:

Surprised smile   New residential starts were -10.0% YoY in March after being flat in Jan/Feb. For Q1, new starts declined 5.2% while residential sales were down 15.5%. Surprised smile

Pointing up   Look at these scary charts from CLSA:






FT Alphaville posted this chart yesterday:China property inventories - 35 cities - Standard Chartered

CEBM Research explains the challenges facing the government:

The rapid recovery of property sales often causes a price recovery or even a price surge and it was the case of the property market in 2007, 2009 and 2010. However, the property market in 2012 will likely be very different due to two factors: first, property inventories hit a historical high and exert downward pressure on property prices; second, property developers’ cash flow is worse than ever and is likely to worsen in 2012.

According to our estimates, nationwide property inventories-to-sales ratio hit a historical high and developers may need more than 20 months to sell down their inventories. NBS data may have some reporting issues, but for Tier-1 cities, local government data (we consider it more reliable) show the inventory-to-sales ratio rising above 20 months.

National stats:


Tier-1 cities in worse shape:


Construction has just started to slow:



But Wen keeps fighting inflation:


China faces inflation, growth risks: Premier Wen

Chinese Premier Wen Jiabao said China faces rising inflation risks even as its economy fights growth headwinds, hours after data showed the world’s second-biggest economy grew at its slowest pace in nearly three years in the first quarter.

Wen said Beijing would continue to improve and fine-tune macroeconomic controls and policy in a timely way to deal with the challenges, but he reiterated that the government would keep its restrictions on the Chinese property market.


While China manufacturing remains weak and weakening:

image image

Fingers crossed   Hope: banks are back lending:


Hot smile  And the inflation watchdog has been unleashed:

Govt and industries to keep prices low  The National Development and Reform Commission has demanded efforts to stabilize prices from key consumer sectors.

Guilds invited cover beverage, dairy, sugar, grain, meat, alcohol and vegetables. Heads of the Ministry of Commerce also attended the meeting.

A cooking oil giant said Wednesday it was asked to suspend price rises for at least two months.

“In fact, the price of edible oil has started to hang upside down since November last year,” said its director at the meeting, “but we will keep prices down as required to show our social responsibilities despite big cost pressures.”

Last Friday, Wilmar, a small-packaging cooking oil manufacturer, was reported to have been told not to raise its price.

Relevant enterprises have been required to delay price rises since last November, the report said.




Storm cloud   Italy, Spain Bond Yields Rise

Italian 10-year bond yields climbed 0.06 percentage point to 5.43%, while Spanish yields were up 0.08 percentage point at 5.86%.

Lightning   Spanish Banks’ ECB Borrowing Hits High

According to data released Friday by the Bank of Spain, gross borrowings stood at €316.3 billion ($417.1 billion) in March, up from €169.86 billion in February. The March figure represents almost 28% of the gross borrowings by all euro-zone lenders, which last month stood at €1.138 trillion.

Excluding funds placed in the ECB’s deposit facility, net borrowings were €227.6 billion in March, up from €152.4 billion in February.


Storm cloud   Turnaround? Not so fast. Energy IP jumped 7.7% MoM in February on very cold weather. IP for goods of all sort was down significantly as can be seen from the table. Industrial production accounts for almost a fifth of the euro-zone economy.



Lightning   Greek unemployment rose to a fresh record-high rate of 21.8% in January from 20.9% in December.

Storm cloud   India Factory Output Rises 4.1%

Industrial output rose 4.1% from a year earlier in February, missing the 6.6% median estimate in a poll of 15 economists, as manufacturing growth remained weak. For January, the government revised the output growth number to 1.1% from 6.8%, blaming inflated sugar production data in the previous print.


Pointing up   Hmmm!

The Ceridian-UCLA Pulse of Commerce Index® by UCLA Anderson School of Management is based on real-time fuel consumption data for over the road trucking and serves as an indicator of the current state and possible future direction of the U.S. economy. By tracking the volume and location of diesel fuel being purchased, the index closely monitors the over the road movement of produce, raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumers. Working with economists at UCLA Anderson School of Management and Charles River Associates, Ceridian publicly releases the Index monthly.

image imageimage


Rainbow   Pressure on Oil Supply Eases

A surprising boost in global oil inventories is blunting the possibility that sanctions against Iran will drive up oil prices on the eve of nuclear talks with the West.

Global oil inventories grew by as much as 1.2 million barrels a day in the first quarter, meaning that the oil market could remain balanced this summer even as almost one million barrels a day of Iranian oil is taken off the market by sanctions, the IEA said.


In a sign the U.S. thinks its measures are working, Secretary of State Hillary Clinton said on Thursday in Washington that, heading into this weekend’s talks, the U.S. is “receiving signals that [the Iranians] are bringing ideas to the table.”

Confused smile   How OPEC clouds the issue of oil production

The cartel  has started publish two different sets of output data

(…) According to its monthly oil market report, OPEC either produced about 31.2 million barrels a day in February, or a much higher 32.1 million b/d. (…)

But OPEC, having relied only on secondary sources since 1986, has this month started to publish a new set of production data, based on “direct communication” from member countries. The new estimates based on official data from OPEC countries point to much higher production than the one based on secondary sources. (…)

The truth is that oil traders and policy makers put more trust in the secondary source estimates than the official data, even if they are far from perfect.


J.P. Morgan Profit Slips

J.P. Morgan Chase profit fell 3.1%, beating Wall Street expectations but masking a surprise increase in revenue. The bank also raised its dividend and unveiled a $15 billion stock buyback.

The bank’s retail-services business, which handles consumer and small-business clients, reported a profit of $1.75 billion, compared with a $399 million loss a year earlier and $533 million profit in the fourth quarter.

Wells Fargo reports higher first-quarter profit

Wells Fargo, the nation’s fourth-biggest U.S. bank, said net income was $4.25 billion, or 75 cents a share, in the quarter, compared with $3.76 billion, or 67 cents, a share in the same period a year earlier.

Google earnings meet expectations

Net revenue, excluding fees paid to partner websites, totaled $8.14-billion in the three months ended March 31, compared with $6.54-billion in the year-ago period and analysts’ average estimate of $8.15-billion according to Thomson Reuters I/B/E/S.

Google reported earnings of $10.08 per share, excluding certain items, surpassing the $9.65 that analysts had predicted – another source of relief after the previous quarter’s earnings miss.

Carrefour Tweaks Prices to Aid Sales

In its home market, where the retailer generates more than 40% of its annual revenue, sales edged up 0.8% to €9.36 billion, helped by higher revenue from its filling stations, two extra weekend days and the leap-year effect in February. Excluding fuel, sales in France in the first quarter fell 0.5% from a year earlier. (…)

He said the company’s price position in France is in line with its previously announced plan, under which it said it would roll out price promotions on 500 supplier-branded everyday products. (…)

Pointing up   But in China, sales continued to fall, down 1.5% to €1.66 billion at a constant foreign-exchange rate. Mr. Sivignon said that the company plans to return to positive comparable sales “as quickly as we can,” adding that the effects of restrictions on markdowns and the end of Chinese government subsidies on home appliances will likely level out in the second quarter—”definitely” in the third quarter.

After issuing several profit warnings in 2011, the world’s No. 2 retailer by sales after Wal-Mart Stores Inc. said it would give no guidance for earnings or margins this year.


Doug Short produces great charts. Doug writes:

If a picture is worth a thousand words, this chart needs little additional explanation

My own charts are not as beautiful and complex. This one only seeks to remind you that earnings did play a role in the last 3 years. Obviously, to the extent that the Fed’s interventions have helped support the economy, they have impacted corporate earnings and equity markets. Keep in mind that a significant part of the earnings recovery since 2009 came from cost cutting and productivity gains, none of which being impacted by monetary policy.  Given that there is no apparent overvaluation of equities, I do not think that QE1 nor QE2 liquidity flushes have had a direct impact on stocks other than supporting the economy and investor hopes at crisis time.



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