NEW$ & VIEW$ (30 NOVEMBER 2012)


The FT’s headline: US talks to avert fiscal cliff sour  Republicans reject ‘unbalanced and unreasonable’ offer

From the WSJ and the NYT:

“No substantive progress has been made in the talks between the White House and the House over the last two weeks,” House Speaker John Boehner(R., Ohio) said after meeting with Treasury Secretary Timothy Geithner Thursday and speaking to Mr. Obama by phone Wednesday night. “The White House has to get serious.”

“Right now, the only thing preventing us from reaching a deal that averts the fiscal cliff and avoids a tax hike on 98% of Americans is the refusal of congressional Republicans to ask the very wealthiest individuals to pay higher tax rates,” said White House spokeswoman Amy Brundage.

“The country doesn’t need a victory lap, it needs leadership,” said Mr. Boehner.

“They took a step backward, moving away from consensus and significantly closer to the cliff,” said Senator Mitch McConnell of Kentucky, the Republican leader.

“This was almost insulting.”

Peggy Noonan stirs the pot:

Noonan: The Drawn-Out Crisis—It’s the Obama Way

The president seems to prefer frustration to good-faith negotiation.

(…) You watch and wonder: Why does it always have to be cliffs with this president? Why is it always a high-stakes battle? Why doesn’t he shrewdly re-enact Ronald Reagan, meeting, arguing and negotiating in good faith with Speaker Tip O’Neill, who respected very little of what the president stood for and yet, at the end of the day and with the country in mind, could shake hands and get it done? Why is there never a sense with Mr. Obama that he understands the other guys’ real position?

It’s not as if Mr. Boehner and the Republicans wouldn’t deal. They’ve been weakened and they know it. (…) Mr. Obama not only was re-elected, it wasn’t that close, it was a clean win. If the president was clear about anything throughout the campaign, it was that he wanted to raise taxes on those he calls the rich. So you might say that a majority of the American people just endorsed that move.

No one would know this better than Mr. Boehner, who has risen to where he is in part because he’s good at seeing the lay of the land and admitting what’s there.

Where to from here? No clue! Confused smile

U.S. Small-Business Owners Pessimistic Post-Election

U.S. small-business owners are pessimistic post-election, with the Wells Fargo/Gallup Small Business Index plunging to -11 in November from 17 in July. This is the most pessimistic that owners have been about their operating environment since July 2010, when the index stood at -28.

Wells Fargo/Gallup Small Business Index

Storm Weighed on Retailers

A burst of end-of-the-month holiday shopping couldn’t overcome the damage that superstorm Sandy did to U.S. retailers in November.

imageThe 17 retailers that report same-store sales, or sales at stores open more than a year, posted a 1.6% rise in same-store sales, missing the 3.3% growth expected, according to analysts tracked by Thomson Reuters. The figure doesn’t include drug stores. The results are through Saturday, which is when retailers closed their books for November and compare with a 3.5% gain a year ago.

Third-Quarter GDP Growth Revised Upward to 2.7%

Third-quarter growth in the U.S. gross domestic product was revised higher to 2.7%, compared with an initial reading of a 2% gain.

But the factors that led to the upward revision—growing inventories, strong federal spending and robust exports—may not persist. Add in other headwinds, and the economy could struggle to grow in the fourth quarter.

The increase in private inventories was the primary driver of the upward revision to third-quarter GDP. The new data show the change in private inventories contributed 0.77 of a percentage point to growth. Initially, the government estimated the change was a 0.1 percentage-point drag.

Consumer spending increased by 1.4% during the third quarter. However, that was a downward revision from the previous reading.

Click to View

(Chart from Doug Short)

Smile  Housing Demand Rose in October

The housing market saw demand hit its highest level in 2½ years in October, according to an index released Thursday that tracks the number of buyers who signed contracts to purchase previously owned homes.

The National Association of Realtors said Thursday that its pending home sales index increased by 5.2% in October from a month earlier, to a seasonally adjusted reading of 104.8. That was up by 13.2% from one year ago and marked the 18th straight year-over-year gain. (Chart from Haver Analytics)

New Home Sales down last month

Seasonally adjusted new home sales in October (contract signings) fell 0.3% month-over-month to 368,000 units annualized – breaking a recent trend of gradually improving housing data points. Importantly, the September sales numbers were also revised down 5% from prior estimates (from 389,000 to 369,000). Overall, this new data suggests that the seasonal pace of new home sales has not changed (up or down) in any meaningful way since May. As a result, the y/y growth rate in national sales has decelerated to +17% from the 20-25% range, as monthly comparisons are becoming more difficult. Unfortunately, we expect this trend in decelerating comps to continue in the near term, as several “speed bumps” in the housing recovery emerge early next year, including 1) a bevy of new Dodd-Frank regulatory changes that will impact the mortgage industry, 2) growing skilled labor shortages in specific trades, and 3) a dwindling supply of developed homesites in sellable locations. (Raymond James)

Lightning  Euro-Zone Data Show Weaker Picture

The euro zone’s annual inflation rate fell to its lowest in almost two years in November, while a rise in joblessness in the countries at the heart of the region’s fiscal crisis pushed unemployment to record levels.

Eurostat, the European Union’s statistics agency, said the annual rate of consumer price growth in the 17 nations that use the euro fell to 2.2% in November from 2.5% in October.

In a separate release, the agency said unemployment in the euro zone rose to 11.7% of the work-eligible population in October—the highest rate since records began in 1995—from 11.6% in September. Some 173,000 people lost their jobs in October, the biggest monthly rise since June.

Germany‘s Federal Statistics office said on Friday that retail sales fell sharply in October, ahead of the vital Christmas trading season, which traditionally starts in November. Retail sales suffered their largest monthly decline in almost four years as sales dropped 2.8% on the month in inflation-adjusted terms, more than reversing September’s 0.5% gain and far exceeding economists’ forecasts for a modest drop of 0.4%. In year-to-year terms, German retail sales fell 0.8%. Extremely cold weather in October may have deterred shoppers.

Greece‘s statistics agency Friday reported a 12.2% year-to-year fall in retail sales in September, steepening from an 8.8% drop in August. Portuguese retail sales fell 6.9% in October from a year earlier, again deeper than the prior month’s 5.9% drop, Statistics Portugal said.

Now, these are official stats for October. Here’s a preview for November:


Markit’s Eurozone Retail PMI rose slightly in November to 45.8, from October’s 45.3. The latest figure signalled a sharp fall in retail sales compared with one month previously, and the average for the fourth quarter so far (45.5) is the second-lowest since Q1 2009. Moreover, the trend for 2012 so far (45.6) is the lowest annual average of any year since the survey started in 2004. The previous record low was in 2008 (46.1).


By country, Germany registered another broadly flat trend in monthly retail sales revenues. The German Retail PMI has been above the neutral level 23 times in the past 26 months, but has averaged 50.0 in the second half of 2012 so far.

imageIn stark contrast, Italian retail sales declined for the twenty-first
successive month. The pace of contraction was rapid, and accelerated to the fastest in seven months. Meanwhile, French retailers posted the slowest fall in sales since June, and only a modest overall decline. (…)

The value of new purchases made by Eurozone retailers fell for the sixteenth month running in November. The rate of decline was sharp, and broadly in line with the average seen over the current sequence. Consequently, stocks of goods for resale at retailers declined at the fastest pace since August 2010.

Glimmer of hope in Europe’s debt tale

Immigration to Germany jumps as neighbours struggle

Immigration to Germany jumped 15 per cent in the first half of the year to about half a million people with most of them coming from other EU countries. Immigration to Germany from Spain, Greece and other crisis-hit southern states grew at an even quicker pace.

Pointing up  Current account balancesBut amid all the gloom, and beneath the fierce impact of austerity, the countries worst affected by the crisis have also been laying the groundwork for their economic renaissance after the crisis, according to a growing consensus among economists that is reflected in two studies published this week.

A study by Allianz, the insurer, and another conducted jointly by Berenberg Bank and the Lisbon Council, a think tank, concluded that these and other structural reforms were beginning to bear fruit. (…)

Both studies rank eurozone countries against each other using several indicators to measure how well they are adjusting and both give high marks to Greece, Spain and Portugal for making significant progress in structural adjustment, with Italy lagging behind in both cases. Ireland scores highly on its adjustment progress in the Berenberg report and less well in Allianz’s assessment.

“By and large, we find a major rebalancing within the eurozone,” the Berenberg study says. “Almost all countries with serious fundamental problems are changing their ways rapidly.” (…)



Surprise Gain in Japan Production

Japan’s industrial production posted a surprise 1.8% gain in October, but the growth was narrowly concentrated in the electronics sector, suggesting a broader recovery may not be at hand yet.

Japan unveils $11bn stimulus package
Noda government acts ahead of December 16 election

On Friday the cabinet announced that it would tap reserve funds to spend Y880bn ($10.7bn) on a variety of measures, including rebuilding areas hit by the March 2011 earthquake, employment support and aid to cash-strapped small businesses. The plan is roughly double the size of a package announced in late October, which was also drawn mostly from reserves and aimed at reconstruction efforts.

Indian growth slows to 5.3%
Faltering economy adds to government’s problems

In estimates released on Friday, the Central Statistics Office said year-on-year growth in manufacturing was a meager 0.8 per cent, while agriculture expanded just 1.2 per cent. The most buoyant sector was finance, insurance, real estate and business services at 9.4 per cent, while construction rose 6.7 per cent.

The Indian economy has now expanded at less than 6 per cent for three successive quarters, a sustained slowdown from earlier growth rates of more than 8 per cent that will hamper efforts by the Congress-led coalition to rein in the budget deficit and create jobs.

The IMF predicts growth of just 4.9 per cent for this year, while economists at CLSA are forecasting growth of 5.5 per cent for fiscal 2013, ending in March, rising to 6-6.5 per cent for 2014.

Brazil GDP Grows at Half Forecasted Pace as Investment Dives

Gross domestic product grew 0.6 percent in the third quarter, the national statistics agency said today in Rio de Janeiro.

Growth on an annualized basis was 2.4 percent in the third quarter, below a government forecast this month of 4.7 percent and the worst performance in the BRIC group of major emerging markets that includes Russia, India and China.

Even though quarterly growth was the fastest since the first quarter of 2011, investment fell 2 percent in the July- September period to 18.7 percent of GDP. That’s the steepest decline in five quarters. Consumer spending rose 0.9 percent, while the services sector was flat. Agricultural activity led all industries, expanding 2.5 percent.

At the current level of investment, the government will have trouble reaching its goal of delivering 4 percent growth next year.

Polish Growth Slows More Than Forecast on Weak Demand

Gross domestic product climbed 1.4 percent from a year earlier, the slowest pace since the second quarter of 2009 and compared with a 2.3 percent increase in the previous three months, the Warsaw-based Central Statistics Office said today.

Domestic demand dropped 0.7 percent in the third quarter after declining 0.4 percent in the second quarter, according to the report. Individual consumption rose 0.1 percent, the lowest rate since 2003, while fixed investments declined 1.5 percent, the office said.


Via Mauldin Economics:

(…) A Pew survey shows the high levels of skepticism and hostility toward
capitalism on the part of the emerging Democratic majority. Insofar as the liberal coalition succeeds in electing senators and representatives who share those views, the business community will have increasing difficulty in winning approval of its deregulated market and free trade agenda.
As Obama negotiates with Republican House and Senate leaders to prevent a dive over the “fiscal cliff,” he will be under strong pressure from his reinvigorated liberal supporters to take a tough stand in support of tax hikes on the well-to-do and to more firmly limit spending cuts.


This will impact the economy in coming years and, potentially, the Democrats longer term:

Recession Big Factor as Birthrate Falls  A steep decline in births among immigrant women hard hit by the recent recession is the driving force behind the record low U.S. birthrate, according to the Pew Research Center.



Immigration has propelled demographic changes in the U.S. for several decades, so any sustained decline in birthrates among immigrants could affect the pace of growth of the minority population. The U.S. population is poised to reach “majority-minority” status, when less than half of the population is white, around 2040, demographers say.


2 thoughts on “NEW$ & VIEW$ (30 NOVEMBER 2012)

  1. The US has had its highest growth rates when marginal income tax rates on the 1% and 0.01% were their highest–well over 50%. The Republican argument to not raise taxes on the highest incomes is specious, and the emerging Democratic majority is becoming more aware of this.


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