NEW$ & VIEW$ (9 JANUARY 2013)

Money  Consumers Take on More Debt  U.S. consumers’ overall borrowing expanded in November at a quicker pace than the previous month, led by bank loans and student borrowing.

Consumer credit rose at a 7% annualized rate in November, after expanding 6.17% the previous month. That marks the fourth straight month of gains.

The rise was largely due to a 9.64% increase in nonrevolving credit, which includes student loans and auto financing. That rose $15.23 billion to $1.910 trillion in November.

Revolving credit, which includes credit-card debt, increased 1.14% in November, rising by $816.9 million to $858.39 billion. The gain was slower than the 4.83% rise in October.

Student lending rose by $4.9 billion in November to $521.3 billion. That number is reported without seasonal adjustments.

Loans held by the Department of Education have been rising since 2008 as student loans shifted to direct borrowing from the federal government. Demand for such loans could remain strong after Congress in late June froze the 3.4% interest rate for all new loans backed by the federal government.  (Chart from Haver Analytics)

US oil imports to fall to 25-year low
Nation will use less oil as production booms

(…) The EIA also said it expected increased US production to put downward pressure on oil prices. It forecast that internationally traded Brent crude would drop from an average of $112 per barrel last year to $99 in 2014, while US West Texas Intermediate dropped from $94 to $91.

US crude production hit a low point of 5m b/d in 2008, but rebounded to 6.43m last year and is expected by the EIA to rise to almost 8m in 2014.

At the same time, consumption has been falling, from 20.7m b/d, for all liquid fuels, in 2007, to 18.7m last year. The EIA expects it to rise very slightly over the next couple of years, but expects that the US will still use less oil in 2014 than in 2011. (…)


I have been writing positively about U.S. housing for over a year now (FACTS & TRENDS: U.S. Housing Mending). That story is now front page as this CNN Marketwatch story attests:

Take-off? Unlikely. Volatility will remain in a generally improving market. Read RJ’s comments:

  • Five Housing Predictions for 2013 from Raymond James:

1. New Dodd-Frank measures prove more disruptive than commonly believed, forcing the mortgage industry and homebuilders into an “adjustment period” that could take several months.

2. FHA’s financial situation grows increasingly precarious – forcing more fee increases, insurance hikes, and higher down payment requirements for low-income borrowers.

3. Lenders push harder for more short-sales in 2013. 3.8 million homes remain in the “shadow inventory” (seriously delinquent or in foreclosure) – 85% of which currently are not listed for sale.

4. The growing scarcity of well-located finished lots increasingly segregates homebuilder sales trends into “haves” and “have-nots.”

5. Existing home prices begin to close the historically wide pricing gap versus new homes.

Storm cloud  German Data Dent Growth Hopes

Industrial output in Europe’s largest economy grew slightly on the month in November but fell short of expectations, further weighing on fourth-quarter growth prospects, data from the country’s economics ministry showed Wednesday.

The 0.2% monthly rise in adjusted terms in November was below expectations of a 1.0% increase in a survey of economists published last week by Dow Jones Newswires. The October figures were revised to show the month wasn’t as severe for industrial firms as previously thought, with output having fallen by only 2.0% instead of the 2.6% drop initially reported.

The ministry said industrial output in the fourth quarter was “likely” below the level of the third quarter.


imageA steep fall in exports adds to evidence that the German economy slid into contraction in the final quarter of 2012. The business surveys suggest that the rate of decline eased in December, and the economy may return to growth in the first quarter of 2013, but weak eurozone demand is likely to impede the pace of recovery.

Data from the Federal Statistics Office showed exports from Germany dropping 3.4% in November. After rising just 0.2% in October and also slumping 2.4% in September, exports in the latest three months were
down 2.0% on the prior three month period, which represents the steepest quarterly rate of decline since June 2009.

The eurozone was the principal area of weakness as far as German exports were concerned, with export values dropping some 5.7% in November. Exports outside of the EU rose 5.6%, however, helping to offset the weakness of demand in austerity-hit European markets.

Imports also fell sharply, down 3.7% in November, suggesting that domestic demand deteriorated markedly in Germany towards the end of last year. (Markit)

imageFrench exports fell sharply in November, according to official data, matched by a similar steep fall in imports. Survey data suggest that a further decline in exports is on the cards for December, raising the prospect of a renewed economic downturn in the final quarter of 2012.

Data from INSEE showed exports down 2.8% in November while imports fell 3.4%, the largest falls for five and four months respectively. In year-on-year terms, however, a 2.5% fall in exports and 3.4% fall in
imports were the largest since December and November 2009 respectively, highlighting the extent to which trade volumes deteriorated over the course of 2012.

The weakening export trend has been highlighted in advance by the PMI survey, which also indicated a further steep decline in December. The Manufacturing PMI New Export Orders index fell from 46.6 in November to 43.3 in December, its lowest since May 2009.

The worsening export performance has contributed to a steep economic downturn. With the composite PMI climbing to just 44.6 in December, up from 44.3 in November, the PMIs also suggest that overall private sector economic activity continued to contract at sharp pace, broadly consistent with GDP falling by 0.5% in the fourth quarter after a surprisingly buoyant 0.2% expansion in the third quarter. (Markit)


The Euro area continues to face significant challenges. In our view, these challenges are unlikely to be overcome in the next 12 months, given their magnitude and (especially) the electoral timetable in Germany and Italy. Our forecast for 2013 therefore assumes continued ‘muddling through’ the Euro area turmoil, rather than achievement of the convincing resolution that would restore confidence and growth. As a result, the Euro crisis is set to evolve from acute to chronic. (FT Alphaville)

Alcoa forecasts boost in aluminium demand
Metal producer expects global figure to increase 7% this year

The company gave its forecast as it reported underlying earnings in line with analysts’ expectations at 6 cents per share for the fourth quarter of the year, on revenues slightly better than expected at $5.9bn.

Money  Button-Down Central Bank Bets It All

Switzerland, for decades a paragon of safety in finance, is engaged in a high-risk strategy to protect its export-driven economy, literally betting the bank in a fight to contain the prices of Swiss products sold abroad.

The nation’s central bank is printing and selling as many Swiss francs as needed to keep its currency from climbing against the euro, wagering an amount approaching Switzerland’s total national output, and, in the process, turning from button-down conservative to the globe’s biggest risk-taker.

Switzerland’s exposure stands out in character and scale: Its central bank is buying assets from other countries and its holdings of currencies, bonds, stocks and gold—nearly 500 billion Swiss francs, about $541 billion—are nearly the size of the nation’s gross domestic product. In contrast, the Fed’s buying of bonds and mortgages amounts to about 20% of U.S. national output, and the European Central Bank’s holdings stand at 30% of total GDP. (…)

“The SNB is acting very much like a leveraged hedge fund,” Bruce Krasting, a former currency trader, wrote on his blog. “It’s making currency ‘bets’ with the people’s money. It’s taking some very big risks.”

Switzerland’s central banker acknowledged the risks but said there was no alternative. “It’s not excluded that we could suffer a loss, but the risk of doing nothing was greater,” Mr. Jordan, the Swiss central banker, said in an interview. “The franc was so strong that we could have fallen into a deflationary spiral.” (…)

Fitch issues warning over growth model  China’s investment-led development model is facing increasingly serious constraints,although GDP growth is likely to reach 8 percent in 2013.

The agency announced on Tuesday a currency sovereign rating of AA- for China, on a negative outlook, while it kept its stable outlook of A+ for the country’s foreign debt holdings. Rapidly expanding credit may risk balance sheets, it said.

“China has been avoiding the so-called hard landing. However, rebalancing will be a long-term challenge,” Andrew Colquhoun, head of the agency’s Asia-Pacific Sovereigns section, said.

“Rebalancing is imperative but not optional, because the debt issue is tightening constraints on the old investment-driven growth model,” he said.

Pointing up  The total amount of credit in China’s economy is currently about 190 percent of GDP, up from 124 percent at the end of 2008, Colquhoun said. “So the debt level is increasing substantially.” Colquhoun predicted that China’s credit may expand at a pace of 15 percent year-on-year in 2013.

He also warned that the shadow banking system may increase potential risks for the stability of the country’s financial sector. (…)

Auto  India Car Sales Continue to Lose Speed  Car sales in India in December fell 12.5%, says industry body, while cutting fiscal year forecast.

Thailand Holds Key Rate a Second Time as Outlook Improves

The decision was unanimous, and forecasts for growth last year and this year will be revised upward after a better-than-expected expansion in the fourth quarter, the monetary policy committee said.

Australia’s Retail Slump Adds to Gloom

Retail sales were down 0.1% from a month earlier, to 21.5 billion Australian dollars (US$22.6 billion), the Australian Bureau of Statistics said Wednesday.

Spending on household goods fell 0.9% in November and clothing-and-footwear sales slid 0.6%, while department-store sales declined 0.4%, the ABS said. The food-retailing category was unchanged, while cafes and restaurants saw a 0.3% pickup.



Transports Closing in on All-Time High

More recently, the Russell 2000 has started the new year in a positive fashion by both breaking above resistance (red line) and making a new record high. (Chart of the Day)

Chart of the Day



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