NEW$ & VIEW$ (14 JANUARY 2013)


Earnings holding well so far. Here’s Factset’s tally:

Of the 27 companies that have reported earnings to date for the quarter, 70% have reported earnings above estimates. This percentage is about equal to the average of 69% recorded over the past four quarters. In terms of revenues, 70% of companies have reported sales above estimates. This percentage is well above the average of 50% recorded over the past four quarters.

The blended earnings growth rate for Q4 2012 is 1.5% this week, below last week’s growth rate of 2.3%. The decline in the growth rate this week can mainly be attributed to downward revisions to estimates for Bank of America, due to the settlement with Fannie Mae announced on January 7. On December 31, the earnings growth rate for the index was 2.6%.

FYI, BAC’s announcement resulted in Q4 estimates to be slashed from $0.19 to $0.02.

Ghost  Retailers Fear Payroll Tax

American workers are finding that the government’s cut of their paychecks has increased. That threatens to affect businesses such as restaurants, department stores and consumer-goods makers as shoppers remain frugal.

Roberton Williams, a tax economist and the Sol Price Fellow at the Tax Policy Center in Washington, said the expiration of the payroll-tax cut will leave the average American household with $18 to $20 less to spend each week, or $900 to $1,000 a year.

For the country’s consumers as a whole, Mr. Williams said, that is a decline of $120 billion from last year. The total comes to about 0.8% of U.S. gross domestic product.

Smile  Ford to Hire 2,200 Workers

Ford Motor Co., which turned in one of its most profitable years ever in North America in 2012, said it plans to hire 2,200 salaried workers in 2013, primarily in product development, manufacturing and information technology.

The planned increase in white-collar workers is the largest in more than a decade, the Dearborn, Mich., auto maker said in a statement. The company currently has roughly 28,000 salaried employees in North America.

OECD Composite leading indicators point to stabilising economic growth in most major economies

In the United States and the United Kingdom, the CLI continues to point to economic growth firming. In China and India, signs of a turning point are more marked than in last month’s assessment.
The CLIs for Italy, Germany, France and the Euro Area as a whole point to a stabilisation in growth prospects. Likewise, in Brazil and Japan, tentative signs of stabilising growth are emerging. On the other hand, the CLIs for Canada and Russia continue to signal weak growth prospects.




Lightning  Euro-Zone Output Falls

Euro-zone industrial output declined the most in three years in November, pulled lower by countries in the region’s south facing recession as they attempt to cut debt and deficits through austerity policies.

[image]Eurostat, the official European statistical office said Monday. Industrial output fell 0.3% in November compared with October, the third consecutive slide on a month-to-month basis. (…)

Ireland, Greece, Spain, Italy and Portugal all saw production decline in November compared with October.

Italy also published its full industrial production release Monday. Output fell 1.0% on the month and by 7.6% on the year in November last year, a bigger fall than expected. Output has declined for six straight months in monthly terms, and 15 consecutive months on an annual basis.

Eurostat also reported that Germany saw a meager 0.1% monthly increase in November, while in France, output grew 0.5% over the same period.

Eurozone production unexpectedly drops

The above headline is from the FT and shows how ill-informed people can be. Why would the November drop in the Eurozone IP be so surprising. Nobody reads the all-important PMI reports (which I religiously publish in separate posts)? Here’s Markit’s comments on the December PMI so that you don’t get surprised next month:

The Eurozone manufacturing sector ended the year on a weak footing, with levels of production and new orders both contracting further in December. Rates of decline accelerated slightly over the month and were stronger than the earlier flash estimates.

And, for good measure, here’s the chart showing the PMI still substantially below 50.


And, by the way, new orders keep falling:

The latest decline in new export orders took the current sequence of contraction to one-and-a-half years, despite the rate of reduction easing slightly to a nine-month low.

French Employers Win New Labor Flexibility

(…) Under terms of the agreement, business associations secured a victory that will allow companies to cut working hours and wages when times are tough, as German businesses have done during the global economic crisis to ensure their survival. Employees will have their jobs guaranteed during those periods of flexible wages and hours.

Employers made progress on lifting legal uncertainties related to layoffs and limiting the time within which employees can appeal redundancy decisions to two years, from up to five years previously.

Businesses also made concessions to unions, agreeing to extend private health-insurance benefits to workers on temporary contracts and the rights to carry earned unemployment benefits from one job to another. The negotiators also agreed to increase charges paid by employers on temporary contracts to encourage companies to hire people in permanent jobs. (…)

High five  Analysts say the deal secured in France, while a positive step, still leaves the country lagging behind its peers.

Angry smile  Saudi Arabia Says Oil Production Cut Not Designed to Boost Price

Saudi Arabia reduced output in December by 4.9 percent to 9.025 million barrels a day, the lowest level in 19 months, a Gulf official with knowledge of the country’s energy policy said last week.

Some recent media reports were “categorically wrong” for interpreting the decrease in Saudi output last month as a “deliberate attempt” to push oil prices higher, Al-Muhanna said. “Production is primarily driven by customer requirements, not by price levels. It is the market which sets the price of oil.”

But, doesn’t the market set prices based on supply and demand? Clearly, the Saudis are reacting to the surge in U.S. oil production, protecting their needed $100 oil price (Brent oil chart from FT).


Too bad Super Mario can’t do anything about that. Lower oil prices would be of great help to the Eurozone economy.

China Data Suspected Says 75-Year-Old Theory: Cutting Research

A mathematical tool devised by an American physicist in the 1930s underscores doubts about the quality and reliability of Chinese economic data, according to research by Australia & New Zealand Banking Group Ltd. (ANZ)

The results are based on “Benford’s Law,” which holds that in any series of numbers, certain patterns will be found only if the statistics are naturally generated. The rule, created by former General Electric Co. (GE) engineer Frank Benford, suggests patterns for the first and second digits in a numeric series and can be used to detect phony data, Li-Gang Liu, ANZ’s chief economist for Greater China, and colleague Louis Lam said in a Jan. 8 report.

Benford’s work has already been adapted to show Greece should have been suspected of manipulating its data before the European debt crisis and that now-jailed financier Bernard Madoff was overstating investment returns.

The ANZ economists studied China’s annual nominal gross domestic product data from 1952 to 2011 to measure how frequently numbers from one to nine appeared as the first digit. While the 24 occurrences of “one” is higher than the 18 suggested by the rule, the economists said the statistics largely abide by what Benford’s Law allows. The same is true of industrial production data.

Suspicions emerged when the data was probed more deeply and reported in percentage terms, the ANZ report said, adding that the guilty party was often the second digit. An examination of the quarterly GDP growth rate from December 1991 to September 2012 shows zero occurred as the second digit 21 times, much higher than what Benford would calculate and suggesting a rounding-up to achieve a bigger leading digit. One through four also appeared more regularly than the law reckons, while seven through nine featured less.

Inflation reported on a percentage basis also failed to fit the law.

“Non-conformity to the Benford’s law does not always indicate data manipulation, but nevertheless it raises doubts about the quality of Chinese data,” the authors said. “Our statistical analysis seems to have confirmed the long-rooted suspicion on quality and reliability of Chinese data.”

Winking smile  No need to do such analysis. The simple fact that Chinese stats are never revised makes them entirely suspicious…


One thought on “NEW$ & VIEW$ (14 JANUARY 2013)

Leave a Reply

Your email address will not be published. Required fields are marked *