NEW$ & VIEW$ (17 MAY 2013)

Posted on May 17, 2013 by Denis Ouellet

PHILLY FED SURVEY: ANOTHER WEAK REGIONAL PMI

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 1.3 in April to -5.2 this month. The current activity index has shown no pattern of sustained growth over the past seven months, generally alternating between positive and negative readings. The number of firms reporting decreased activity this month (29 percent) edged out those reporting increased activity (24 percent).

The demand for manufactured goods remained weak, with the current new orders index declining from -1.0 to -7.9. The shipments index also indicated weakness, decreasing more sharply from 9.1 to -8.5. Firms reported a notable increase in inventories this month: The current inventories index increased from -22.2 to 4.1.

Labor market conditions showed continued weakness, with indexes suggesting lower employment overall. The employment index decreased 2 points to -8.7, its second consecutive negative reading. The percentage
of firms reporting employment decreases (22 percent) exceeded the percentage reporting increases (14 percent). The workweek index declined 10 points to -12.4, remaining negative for the fifth consecutive
month.

Jobless Claims Spike by 32,000

The number of U.S. workers seeking new unemployment benefits jumped last week after trending down much of the spring, showing the uneven nature of the job market’s recovery.

It was the largest one-week gain in new benefit requests since November 2012. The prior week’s level was revised up by 5,000.
The four-week moving average of claims, which smooths week-to-week volatility, increased by 1,250 to 339,250. The prior week’s average, which was revised up slightly, was the lowest level since January 2008, just after the most recent recession started.

(Bespoke Investment)

Executives upbeat on world economy

Positive trend continues from start of year

Of the more than 1,600 business people polled, 27 per cent expected conditions to improve, against 21 per cent who expected the outlook to worsen. The rest thought conditions would stay the same.
The figures continue the positive trend that began earlier this year, when executives were more upbeat on the global outlook than gloomy for the first time since mid-2011. In February, 29 per cent thought conditions would improve and 22 per cent thought they would deteriorate.

Strangely, I don’t read the story with quite the same “upbeat” suggested by the title. Given that current world conditions are nowhere near good, the fact that only 27% expect them to improve is nothing to write home about. It also seems to me that the ratios have deteriorated some since February. World shippers were likely not among the upbeat folks in this survey. Read on:

Maersk Warns of Subdued Demand

“Global demand for seaborne containers is expected to increase by 2% to 4% in 2013, lower on the Asia-Europe trades but supported by higher growth for imports to emerging economies,” the company said.
Indications for the first quarter of 2013 “show modest improvements in the global demand for container transport, reflecting the weak economic situation, especially in developed countries.”
“Demand is expected to stay subdued in 2013 while capacity will grow significantly. Accordingly, conditions for the container industry remain challenging and managing supply will be even more important this year,” it said.

Japanese machinery orders see monthly rise

Companies more confident about investing in equipment

Japanese core machinery orders jumped a bigger-than-expected 14.2 per cent in March, the quickest monthly pace in eight years, in a sign a weaker yen and surging stock prices are making companies more confident about investing in equipment.
Manufacturers surveyed by the government expect core orders to fall 1.5 per cent in April-June from the previous quarter after flat growth in the first three months of this year, the Cabinet Office data showed.

Growth shows signs of fatigue in Mexico

Estimates suggest worst quarterly figures since 2009

Spain Posts First Trade Surplus on Record

Imports dropped 15 percent in March from the same month a year ago while exports rose 2 percent.

Europe Car Sales Post First Gain in 19 Months on Germany

Registrations in April increased 1.8 percent to 1.08 million vehicles from 1.06 million cars a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a statement. Four-month sales fell 7 percent to 4.18 million vehicles. (…)

Car sales in the region fell 8.7 percent in January and 10 percent in February and March.
Regional car sales last month were helped by the most of the Easter holiday shifting to March this year from April in 2012. The decline may resume for the rest of this year, though at a slower rate than in the earlier months, according to estimates by IHS Automotive Research.
Auto sales in Germany, Europe’s biggest economy, rose 3.8 percent in April, ending five months of drops. Registrations surged 15 percent last month in the U.K., the only car market of Europe’s top five to grow in 2012, and 11 percent in Spain. French auto sales fell 5.3 percent and demand in Italy dropped 11 percent. (…)

S&P affirms negative outlook on India; warns of downgrade risk

Storm cloud Finally, this China update from CEBM Research:

The conclusion from our mid-month steel trader survey is that actual sales remained weak and the traditional peak season was almost non-existent this year. Furthermore, nearly all respondents do not expect a strong rebound in the steel market next month. (…)

The cement market has continued to recover over the past two months.

Most construction machinery dealers surveyed mentioned that sales in the first half of May were lower than their expectations. It is likely that construction machinery sales in May will achieve only modest Y/Y growth. In general, the peak season for construction machinery sales has passed, and the market in May has become tepid.

Bank credit has been tightened. Respondents from Shanghai mentioned that since a contract scandal involving false inventories was revealed recently, banks have tightened mortgages and some have even raised lending rates by 30% to 40%.

In summary (chart from ISI)

U.S. INFLATION

US consumer prices drop most in four years

The labour department’s consumer price index edged 0.4 per cent lower, the largest decrease since December 2008 when the US was suffering some of the darkest days of its financial crisis. The decline was greater than the 0.2 per cent dip in March and economists’ expectations of a 0.3 per cent decline.
Much of April’s drop was driven by an 8.1 per cent slide in petrol prices, the most since December 2008, following a less severe 4.4 per cent fall in March. The average price for a gallon of unleaded petrol fell by about 13 cents in April, ending the month at $3.51, according to AAA.
This drove overall energy prices down 4.3 per cent in April, following a 2.6 per cent drop in the previous month. Food prices rose 0.2 per cent.
This weakness extended to the measure for core prices, which excludes the volatile food and energy segments. Core prices increased 0.1 per cent, less than projected.

Data Quirks May Ease Fed’s Mind on Inflation Slowdown

One set of inflation measures, which Fed watches very closely, is down a lot more than another set of inflation measures, which the public watches closely.

The disparity between core PCE (1.13%) and core CPI (1.70%) is especially striking. (…)

There’s reason to be cautious about the PCE number. Though Fed officials favor it — because they believe it does a better job reflecting changes in the economy — there have been some quirks in it lately.
One of them is a measure known as “financial services furnished without payment.” This is the government’s way of tracking what households pay for bundled bank services like access to ATM machines or check-writing. “This would be any service provided by a bank for which there is no explicit payment,” says Brent Moulton, the associate director of the Bureau of Economic Analysis. Without a market price to go on, the Commerce Department imputes a cost to consumers for these services based on complex formulas that move as interest rates shift.
It turns out that right now interest rates are shifting in a way that drives down the imputed value of this service. In the first quarter the price of this service fell 2.2% from a year earlier and since the second quarter of 2011 it has fallen on average by 1% annually, according to the Bureau of Economic Analysis. These measures are down largely because interest rates are falling, Mr. Moulton said, not necessarily because the actual cost of the service is going down. Strip out the quirky number and the decline in core consumer prices was 0.2 percentage points less severe in the first quarter than the official figure, according to Bureau of Economic Analysis data. A measure which strips out all imputed prices in the core consumer price index was up 1.31% in March, again more than the 1.13% number.
Underlying inflation, in other words, perhaps wasn’t slowing quite as much as the Fed’s favored measure suggested.
Because the Labor Department’s consumer price index doesn’t perform these kinds of imputations, its consumer price measures warrant close monitoring right now. The CPI index has its own quirks — including the heavy weight it places on home rental costs. Still, it might be telling a meaningful story about the true underlying inflation trend. Up 1.7% from a year earlier, the core consumer price index change suggests that inflation has indeed slowed, but not to the alarmingly low levels that the PCE numbers imply.
That — along with stable inflation expectations — helps explain why Fed officials themselves haven’t yet expressed too much concern about inflation getting too low or deflation threats growing.

There’s more: US INFLATION IS ACTUALLY STUCK AT 2.0%

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (1.8% annualized rate) in April. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.0% annualized rate) during the month. The BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.4% (-4.3% annualized rate) in April. The CPI less food and energy increased 0.1% (0.6% annualized rate) on a seasonally adjusted basis.

Over the last 12 months, the median CPI rose 2.1%, the trimmed-mean CPI rose 1.6%, the CPI rose 1.1%, and the CPI less food and energy rose 1.7%

Pointing up However you slice it, U.S. inflation is 2.0% so far in 2013. Core CPI, median CPI and the 16% trimmed-mean CPI have all rise at a 2.0% annualized rate since December 2012. The 0.5% jump in core CPI in Jan-Feb has not been followed by a decline. Rather, core prices have kept rising by 0.1% per month. The median CPI has gained 0.2% monthly in all of the last 6 months but one. All this to say that, in spite of strong desinflationary trends across the world, U.S. core inflation is showing no signs of slowing below 2.0%.

Housing-Permit Surge Suggests Blip

Housing starts fell 16.5% in April to a seasonally adjusted annual rate of 853,000 units, the lowest level since last November but still up 36% from the level of a year earlier.

Multifamily homes with at least five units plunged 37.8%. Single-family home construction dropped by 2.1% to an annual rate of 610,000 units in April, the second straight monthly drop and the lowest level reported this year. Housing starts can be volatile, due in part to weather, and can be subject to large revisions.

Building permits, which are less volatile and serve as a leading indicator of future construction, rose to the highest level since June 2008. They increased 14.3% to an annualized rate of 1.02 million in April. (…)
The pullback in housing construction comes amid reports from home builders that they are deliberately slowing their rate of expansion in order to boost prices at a time when inventories of homes for sale are already extremely low. Rising land costs in some markets, higher costs of building materials, and difficulty in finding skilled workers have also cut into their margins.

Nearly 60% of builders in April said that they had slowed their sales pace in at least one new-home community by limiting the release of new homes or boosting prices, according to a survey released earlier this week by research firm Zelman & Associates. That dynamic isn’t limited to solely California and other Western markets that have witnessed the strongest price growth, according to the Zelman report. Builders in less-heated markets from Texas to the Carolinas to Detroit have also been managing sales.

Tepid Earnings Season Doesn’t Sway Investors

A so-so first-quarter earnings season hasn’t dented investors’ enthusiasm for stocks.

Of the 458 companies in the Standard & Poor’s 500-stock index that have reported results, 70% have beaten forecasts for earnings, in line with the average for the past four years. If results continue as projected, first-quarter earnings will rise 3.4% from the previous year, according to FactSet.
Meanwhile, sales have come in below forecasts, declining 0.2%, while analysts had expected 0.5% growth. Among companies that have reported, 48% beat Wall Street’s projections for sales, below the average of 52% from the past four years, according to FactSet.

China Wages Rose Sharply in 2012 Wages in China continued to climb at a double-digit pace last year despite a slowing economy, with inflation-adjusted wage growth actually accelerating from 2011.

Average wages for employees at non-private enterprises were up 11.9% from the year before in nominal terms, to 46,769 yuan ($7,543), the National Bureau of Statistics said in a statement Friday, compared with a 14.4% pace in 2011.
Non-private enterprises include state-owned companies, listed companies and joint ventures.
Average wages for employees at private companies were up 17.1% to 28,752 yuan, compared with an 18.3% pace in 2011.
With inflation taken into account, wages of employees at nonprivate companies were up 9% in 2012 from a year earlier, exceeding 2011′s 8.5% pace. Real wages in the private sector were up 14%, accelerating from 12.3% in 2011.

Bergsten Warns of Currency Wars in Peterson Valedictory Speech In his valedictory speech as the head of one of the most respected economic think tanks in the world, Fred Bergsten issued a clarion call about “a clear and present danger” that continuing “currency wars” represent to the U.S. economy, global trade and the international monetary system.

“Virtually every major country is seeking depreciation, or at least non-appreciation, of its currency to strengthen its economy and create jobs,” he said in prepared remarks to the Peterson Institute of International Affairs Thursday afternoon.
Those currency tensions, and the policies that are fueling them, are costing the U.S. economy millions of jobs and threatening to create the kind of global problems that contributed to the Great Depression, he said.

NEW$ & VIEW$ (16 MAY 2013)

Posted on May 16, 2013 by Denis Ouellet

U.S. Industrial Production Moves Lower

Activity in the factory sector is weakening. Industrial production fell 0.6% during April following a 0.3% March increase, earlier reported as 0.4%. Declines in activity were broad-based amongst industries last month. Factory sector production fell 0.4% (+1.4% y/y) following its unrevised 0.2% March slip. Utility output reversed course and fell 3.7% (+3.4% y/y) following a 6.4% March owing to warmer-than-normal temperatures.
The drop in factory sector output reflected across-the-board industry weakness. Consumer goods production fell 0.6% (+2.3% y/y) as motor vehicle output dropped 1.2% (+5.2% y/y). Elsewhere, appliance, furniture & related goods production fell 0.8% and was unchanged y/y. In the nondurables area, apparel output fell 1.6% (-2.9% y/y) while paper production dropped 0.6% (-1.9% y/y). For business equipment, output fell 0.5% (+3.5% y/y). Output of information processing and related equipment fell 0.5% (+3.2% y/y) and transit equipment production fell 0.5% (+5.9% y/y). Excluding the output of high tech products & motor vehicles, production fell 0.5% (+1.8% y/y) during April.
The capacity utilization rate fell to 77.8% from a downwardly revised 78.3% in March.

Pointing up Everything is slowing! Might it be because of the following?

Currencies react to Bank of Japan’s recent monetary moves

These are big, big moves!

The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, has advanced 6% since the start of the year. The rise again the yen is even stronger.

EMPIRE STATE MANUFACTURING TURNS SOUTH

The general business conditions index fell four points to -1.4, its first negative reading since January. The new orders index also edged into negative territory, and the shipments index fell to zero. Employment
indexes were mixed, showing both a modest increase in the number of
employees and a slight decline in the length of the average workweek.

New orders have been weakening for 3 months before crossing below the zero line (-1.17)in May.

Interesting:

After Prices Paid, the next largest decline came in the Average Workweek, which fell from 5.7 in April to negative 1.1 in May. The decline in the average workweek comes on the heels of the Non-Farm Payrolls report two weeks ago, where the average workweek also showed a sizable decline. It is still early, but this could be an early indication that employers are cutting hours in an effort to stay below the thresholds that would require providing health coverage under the Affordable Care Act. (Bespoke Investment)

Home-Sales Expectations Hit 5-Year High

The National Association of Home Builders said Wednesday that its housing-market index was 44 in May, up three points from April. All three components of the index rose, with builders’ expectations of sales for the next few months hitting the highest level since February 2007.

High five Curb your enthusiasm:

A reading above 50 in the NAHB index means that more builders view conditions as good rather than poor. The overall gauge hasn’t been in positive territory since April 2006. At the height of the building bubble, readings were in the high 60s and low 70s.

(Charts from Haver Analytics)

Look at this next chart from BMO Capital remembering that Canada is the U.S. main trading partner.

JAPAN, the only growth game in town:

Japan Reports Growth Surge

The country’s gross domestic product, the broadest measure of goods and services produced across the economy, grew at an annualized pace of 3.5% in the first three months of the year, as consumers loosened their purse strings and exports to the U.S. picked up, lifted by a weaker yen.
The figures reported by the government early Thursday marked a sharp improvement from the tepid 1% growth rate at the end of last year, which followed six months of contraction.

A government official said the GDP data showed consumers spent more overall, particularly on recreation, cars and dining out, and exports were lifted by stronger car exports to the U.S.

The price of imported goods from Japan fell 0.6% during April, the largest monthly decline since September 2008. The fall in import prices from Japan over the past three months parallels a drop in the Japanese yen relative to the U.S. dollar, the Labor Department said. Japan, the fourth largest trading partner with the U.S., is an important supplier of consumer goods and vehicles.

Baring teeth smile It will not take much more before U.S. manufacturers start complaining about the weak Yen.

Of course, quite a lot happened after the end of Q1 as well.
It was just in early April that the BoJ announced open-ended QE and promised to double the monetary base, while prime minister Shinzo Abe pledged to boost competition in the quasi-monopolistic power sector. Since then the yen broke 100, the stock market continued soaring, and in recent days Japanese government bond yields have sold off. Even activist investors from the US are taking notice.
But it is early days yet. The unexpectedly strong first quarter growth numbers were driven mainly by exports — to be expected given the yen’s continued decline. (FT Alphaville)

How long will the ROW allow Japan to poach?

CHINA

Foreign Investment in China Lags

Foreign direct investment in China sputtered in the first four months of the year, despite renewed signs of strength from the U.S. and the European Union, showing only a modest 1.21% rise from a year ago.

Foreign direct investment in China was $38.3 billion in the January to April period, including $8.4 billion in April, for a feeble 0.4% rise from April 2012. (…)
Investment from the U.S. was up 33.2% over last year in the four-month period, inflows from the EU rose 29.7%, while Japanese investment climbed 9.2%. But investment from the rest of Asia was very weak, rising just 0.21% from a year earlier.

More signs of weakness: China’s freight traffic was unchanged MoM in April, +7.8% YoY, same as in March. YTD to April: +8.7% YoY, down from +12% in 2012. Looks slower to me. April coastal container throughput was up 8.6% YoY, +8.4% YTD.

China Signals Concern at Yen Weakness as Japan Growth Quickens

Japan’s policy of monetary easing “makes it hard for China to increase exports to Japan,” Shen Danyang, a ministry spokesman, said at a briefing in Beijing today. The rising yuan is eroding profit margins of Chinese exporters, he said. (…)

A survey by the ministry found that the profit margins of 78 percent of exporters are narrowing, and 73 percent will report flat or lower profits for 2013, Shen said. Exporters at the Canton Trade Fair in April and May didn’t want to accept long-term orders because of concerns that the yuan will gain, he said.

Beijing signals concern at rising jobless

Li warns on challenge of finding work for graduates

(…) In a nationwide teleconference on Monday that was widely reported in state media on Wednesday, Mr Li said that nearly 7m tertiary students would enter the job market in July in China, the largest number in the country’s history.
He said it was an “important task” to find jobs for all these graduates, who make up a demographic considered potentially threatening to Communist Party rule if they become disaffected in large numbers.
“In the first few months of the year, as economic growth has slowed the employment trend has remained stable but employment pressures remain and the problem of employment for tertiary students is particularly prominent,” Mr Li said, according to a transcript of his speech.
But Mr Li also disappointed many investors by ruling out a large government-directed stimulus or investment boom this year.
“To achieve this year’s development targets the room to rely on stimulatory policies and direct government investment is not big and we will need to rely on market mechanisms,” Mr Li said. Relying on government efforts to boost growth “is not only difficult to sustain but also creates new problems and risks”. (…)
Disgruntled students have played a powerful destabilising role throughout modern Chinese history, leading enormous social movements in 1919, in the 1966-1976 Cultural Revolution and in the Tiananmen Square movement in 1989. (…)
Of the nearly 7m students who graduate in July most of them have not yet found jobs and the employment rate for these people is lower than in the past, according to state media reports.
By late last month, just 28 per cent of graduating students in Beijing had been hired while the rate was 29 per cent in Shanghai and 47 per cent in southern Guangdong Province.
The official urban unemployment rate in China was just 4.1 per cent by the end of March but the figure is regarded as deeply unreliable because it does not capture many demographic groups such as fresh graduates.

EUROPE

European Recession Is Longest Since War

The euro-zone debt crisis has mutated into Europe’s longest slump of the postwar era, with no recovery in sight for a broad swath of the continent.

(…) Depression-like conditions in Southern Europe, combined with slowing global growth, are dragging down the core economies: Germany is barely growing and France is steadily contracting.

The 17-nation euro zone, which accounts for 17% of world GDP, remains the weakest link in the global economy, mired well below its level of economic activity before the 2008 financial crisis. Social strains, political paralysis and rising debt burdens are reigniting doubts about its economic future. (…)
Business surveys for April suggest the euro-zone economy could well shrink again in the second quarter. (…)

Sustained Pain

Italy airs pessimistic view on recovery

Government has little room for stimulating growth

(…) “I don’t see any signs of recovery at the moment,” commented Emma Marcegaglia, president-elect of Business Europe.
“The credit crunch is strong, internal demand and the construction sector are very bad, exports are slowing and investments have stopped. The recession is very severe,” she told the Financial Times.
At best, she said, the eurozone’s third-largest economy might see a bottoming out of its longest postwar recession in the final quarter of 2013. On the bright side, analysts noted the pace of contraction was declining more slowly than in the final quarter of 2012 when GDP shrank 0.9 per cent. (…)
By July the government needs to find a further €2bn to avoid a scheduled increase in sales tax although declining tax revenues put that goal in doubt, with Rome promising Brussels that it will stick to its budget targets in order to escape from the European Commission’s excessive deficit procedure. (…)
Bankers are starting to sound rather more upbeat however. Reporting quarterly results in recent days, the heads of Italy’s largest banks share the view that the recession is bottoming out.
The strongest indicator came from loan loss provisions which fell in the first three months of the year from the end of 2012 at UniCredit, Italy’s largest bank by assets. Intesa Sanpaolo, its largest retail bank, said inflows of bad loans were down by a third, quarter on quarter.

Euro Zone Runs Record Trade Surplus

Adjusting for seasonal effects, exports grew 2.8% from February, while imports fell 1.0%, to give a surplus of €18.7 billion, up from €12.7 billion in February.

March is really the first solid month in a while. Let’s see a couple more months, given that the EZ export markets all seem to be slowing now, perhaps because their own exports to the EZ are collapsing.

Slovenia Premier Bratusek Defies Markets With No-Aid Vow

(…) Bratusek says time is what she needs to fix the banks — by deploying a rescue package she opposed before she came to office — and that her nation won’t need an international rescue. By next month, she promises, her coalition government will begin swapping as much as 4 billion euros ($5.2 billion) in bad bank loans for government-guaranteed debt. After eight weeks in office, investors are questioning whether she can deliver.

“Talk is cheap,” Egon Zakrajsek, a Slovenian-born Federal Reserve economist in Washington, said in an e-mail. Slovenia needs “fundamental economic and social reforms” to restore market confidence and “neither the current government nor any of its predecessors has been able to deliver.” Zakrajsek said he was commenting in a private capacity. (…)
Slovenia’s overhaul drive has “failed to deliver on transparency and thus credibility, consistent with our concerns about implementation risks,” Mai Doan, an emerging-markets economist at Bank of America Merrill Lynch in London said in a note to clients today. The program could “disappoint the European Commission, which would probably prefer more rigorous measures and transparency.”
Opening the door to a bailout would expose Bratusek to the risk of having to impose Greece-like austerity measures in return for aid.

EARNINGS WATCH

Wal-Mart Second-Quarter Forecast Trails Estimates

Wal-Mart Stores Inc., the world’s largest retailer, forecast second-quarter profit that was less than analysts estimated as shoppers struggle amid the slow U.S. economy and higher taxes.
Earnings per share will be $1.22 to $1.27, the Bentonville, Arkansas-based company said today in a statement. Analysts had projected $1.29, the average of 24 estimates compiled by Bloomberg.
Sales at U.S. Wal-Mart stores open at least 12 months excluding fuel fell 1.4 percent, the first decline after six straight gains. Analysts estimated a 0.1 percent decline.

Look at the rare long flattening in earnings. The tail wind to equities from rising profits has disappeared. Hmmm….

NEW$ & VIEW$ (15 MAY 2013)

Posted on May 15, 2013 by Denis Ouellet

Euro-Zone Recession Drags On Economic output contracted in the euro zone for a sixth-straight quarter, as a slight recovery in Germany failed to offset recessions in France and Italy.

Gross domestic product fell 0.2% in the first quarter from the final three months of 2012, according to a report Wednesday from the European Union’s statistics office Eurostat. In annualized terms, which is how the U.S. and some other countries report output, GDP fell 0.9%.

GDP fell 2.3%, in annualized terms, in the fourth quarter. The current downturn in the euro zone has now stretched for longer than the 2008-2009 recession, though the cumulative 1.5% drop in output since the summer of 2011 isn’t yet as severe as the nearly 6% that was sliced off of GDP four years ago. (…)

French GDP fell 0.7% in annualized terms from the fourth quarter due to drops in consumer spending and exports, its second-straight contraction.

(Chart from Bloomberg via Zerohedge)

The FT adds:

Italy, the bloc’s third-largest economy, saw GDP shrink 0.5 per cent in the first quarter, after a fall of 0.9 per cent in the fourth quarter, according to its national statistics office. (…)

Germany, by contrast, managed to return to growth, but only barely. First-quarter GDP grew 0.1 per cent, up from a downwardly revised contraction of 0.7 per cent in the fourth quarter of last year, according to a preliminary estimate by the Federal Statistics Office.
Dutch GDP shrank 0.1 per cent and Spain has already reported a 0.5 per cent contraction in the first quarter.

Chart

MEANWHILE IN CHINA

That sighing sound you hear from China

… is strategists everywhere cutting their GDP forecasts.

China - Freight and investment to April 2013 - StanChart

China - Electricity and construction starts - StanChart

Li Signals Reluctance on Stimulus to Boost China Growth

“To achieve this year’s targets, the room to rely on stimulus policies or government direct investment is not big — we must rely on market mechanisms,” Li said in a May 13 speech broadcast to officials around the country, according to a transcript published last night on the central government’s website. Relying on government-led investment for growth “is not only difficult to sustain but also creates new problems and risks,” he said. (…)

Li’s strategy for growth includes a call to unleash private investment by simplifying bureaucratic procedures. “Private investors have money but no place to invest; they want to enter certain areas but they can’t find the way,” Li said. A company has to spend six to 10 months seeking approvals at 27 government departments to start a new investment project, he said.
The central government will delegate more power to local governments in approving new projects, he said. “Not every matter has to come to Beijing for approval,” he said.

Malaysia’s Growth Slows to Below 5% First Time in Seven Quarters

Gross domestic product rose 4.1 percent in the three months through March from a year earlier, after a revised 6.5 percent gain in the previous quarter, the central bank said in a statement in Kuala Lumpur today. That is lower than all 22 estimates in a Bloomberg News survey. The monetary authority kept its full-year growth forecast at as much as 6 percent. (…)

Malaysian exports have fallen in four out of six months through March. (…) Net exports of goods and services slumped 36.4 percent in the first quarter from a year earlier, after falling 9.3 percent in the final quarter of 2012, today’s report showed.

CHINA ELECTRICITY CONSUMPTION

One of the few reliable Chinese indicators ticks up in April. Total electricity consumption came in at +6.8% YoY in April, from +2.1% in March. This is the best number this year. It is better than the 2012 average of +5.5% and the +4.2% of Q1’13. Yet, the March-April average is but +4.4%, down from the 5.3% Jan-Feb average. The trend remains weak. Northern Trust’s view that “Negative economic surprises set the stage for improving sentiment” may just be wishful thinking (see chart below).

While I’m at it”:

EUROZONE INDUSTRIAL PRODUCTION UPTURN?

Yesterday’s IP stats from the Eurozone seemed to cheer markets. Markit explains why we should be careful before rejoicing:

Eurozone industrial production rose surprisingly strongly in March, but divergent trends within the region and recent weak business surveys suggests there is scant evidence to suggest that the region is staging any sort of sustained industrial-led recovery.

Official data showed Eurozone industrial production rising 1.0% in March, well above expectations of a mere 0.4% increase, according to a Reuters poll. The March rise in production was the largest since July 2011, but was in part buoyed by a 3.8% surge in energy production. The upturn also masked worryingly strong variations within the single currency area: production surged 1.7% higher in Germany but fell by 0.9% and 0.8% in France and Italy respectively.

The upturn nevertheless pushes eurozone production 0.2% higher over the first quarter as whole, which compares well with a 2.1% decline in the fourth quarter. The data therefore bode well for GDP to show a significantly weaker decline than the 0.6% contraction seen at the end of last year, and even raises the possibility of the recession having ended.

However, any improvement or respite from recession looks likely to be short-lived, as the business surveys have already started signalling a renewed weakening.

Most importantly, Markit’s PMI data had indicated a German-led easing in the industrial sector’s woes earlier in the year, but have more recently signalled that the downturn deepened again at the start of the second quarter. The PMI surveys are now once again registering contraction in all major eurozone countries. Although some easing in the rate of decline was signalled for Italy, Spain, France and Greece, Germany saw the steepest deterioration for four months in April, contrasting with the growth seen in the region’s largest economy earlier in the year.

EUROPE’S BIG HOPE:

Crude Futures Down as Inventories Soar

(…) “The body language from Brent at the moment suggests a contract ready to take another look at the territory below $100/bbl,” they wrote.

High five However, the language from the Saudis is that $100 is the floor.

Pay rise of 3.4% agreed for German engineering workers

Deal will avert strike in country’s manufacturing sector

The two-phase wage increase will give workers a 3.4 per cent rise in July this year, followed by a further 2.2 per cent increase in May 2014. The whole agreement will last for 20 months.
If it is followed in the rest of German industry, the agreement should provide some eagerly awaited stimulus to domestic demand in Germany, given the initial rise of more than 3 per cent, compared with an inflation figure of just 1.15 per cent.

HSBC Plans Cost Cuts

HSBC, laying out its next three-year strategy, said it plans to achieve further cost cuts of $2 billion to $3 billion by 2016, including eliminating 14,000 more jobs.

INFLATION DECELERATES JUST ABOUT EVERYWHERE:

Strong U.S. Dollar Keeping Import Prices in Check

The price of goods imported to the U.S. has fallen, on annual basis, in 11 of the past 12 months. While that reflects the declining cost of oil, it also indicates that an increasing value of the dollar is improving America’s purchasing power abroad. (…)

The Wall Street Journal Dollar Index, which tracks the dollar against a basket of currencies, has advanced 6% since the start of the year. The rise again the yen is even stronger.
The price of imported goods from Japan fell 0.6% during April, the largest monthly decline since September 2008. The fall in import prices from Japan over the past three months parallels a drop in the Japanese yen relative to the U.S. dollar, the Labor Department said. Japan, the fourth largest trading partner with the U.S., is an important supplier of consumer goods and vehicles.
Prices from China, the second-largest trading partner, are down 0.9% from a year earlier, and import costs from the U.K. have fallen 6.1% during that time.

Actually, most commodity prices are weak, leading to slower inflation across the world (e.g. 1.2% in Germany, 1.1% in Italy, 1.4% in Spain, 4.9% in India…)

EARNINGS WATCH

S&P’s latest update to May 9 covers 453 companies: 66.5% beat and 25.4% missed. The late comers must have been shy to disclose their results: of the 48 companies that reported in the last week, only 46% beat and 48% missed. The miss rate has seriously risen as time went by: up to March 28, the miss rate was 21%; the following week, it was 28% and last week it jumped to 48%.

Curiously, earnings estimates for Q1’13 are now $25.96, up $0.18 from the previous week. Estimates for the next 3 quarters edged down but not enough to cut 2013 estimates which are now $109.94, up $0.05 from last week’s estimate.

Trailing earnings post Q1 should come in at $98.54, up 1.8% from 3 months ago but still below the $98.69 reached post Q2’12.

Quarterly sales are up only 1.4% YoY in Q1, down from 5.6% in Q4’12.

SHORT SELLERS SCRAMBLE

(…) The combination of wobbly fundamentals and zippy prices has murdered short sellers. If one had bought the 30 most shorted stocks in the S&P 500 at the start of the year, as measured by the proportion of total shares shorted, one would be up 28 per cent, 11 percentage points ahead of the index itself. Much of the outperformance has come from volatile and financially unsteady companies such as First Solar, Netflix, AMD and Best Buy. (…) (FT)

FYI from Bespoke Investment:

NEW$ & VIEW$ (14 MAY 2013)

Posted on May 14, 2013 by Denis Ouellet

Retail Sales Gain Shows Resilient American Consumer

The U.S. retail sales report showed that figures used to calculate growth, which exclude categories such as gasoline and automobiles, climbed 0.5 percent for the second time in three months.

Nine of 13 major retail sales categories showed gains last month, led by a 1.2 percent advance at clothing stores, the biggest in more than a year, according to today’s report. Receipts at general merchandise outlets, which include department stores, climbed 1 percent, the most since March 2012.

Cars and light trucks sold at a 14.9 million annual pace in April, down from a 15.2 million rate the prior month, according to data from Ward’s Automotive Group. The average for the first quarter was 15.3 million, the strongest since the same period in 2008 and a sign the longer-term outlook remains positive. (Chart from Haver Analytics)

Markit provides more details:

US retail sales rose 0.1% in April, according to official data, representing a welcome improvement after sales had dropped 0.5% in March (revised from -0.4%). Core sales, which exclude building materials, car dealers and gasoline, were even perkier, rising 0.5% after a 0.1% increase in March.

Core retail sales in the three months to April were up just 0.9% on the previous three-month period; the weakest rate of expansion since last October and down from 1.3% at the start of the year.

However, weekly chain store sales actually peaked at the end of April and have declined 3% sequentially during the last 2 weeks. Not new for this volatile series but the 4-week moving average has clearly rolled over and is now only up 2.0% YoY.

Small Business Optimism Up in April

The Index gained 2.6 points, rising to 92.1. That beats falling, but it is
barely above the recovery average of 90.7, making it another very poor
reading. Four Index components rose, 2 fell, 6 were unchanged, a lot of
“noise”, no clear direction. Owners are very pessimistic about the
economy, with a net negative 15 percent expecting business conditions to
be better in 6 months. As bad as that sounds, it was a 13 percentage point
improvement over March.

Economists Cut China Forecasts

Many economists are cutting their forecasts for China’s economic growth this year after a fourth month of disappointing data prompted fresh looks

A survey of 18 economists by The Wall Street Journal late last year showed the median forecast for economic growth in 2013 at 8%, up from the 7.8% rise China’s economy posted last year.
But now the numbers are telling a different story. A new survey of 12 economists this week showed that the median forecast has since fallen to 7.8%.

The chart illustrates what I pointed out yesterday.

Industrial production up by 1.0% in euro area

In March 2013 compared with February 2013, seasonally adjusted industrial production grew by 1.0% in the euro area (EA17) and by 0.9% in the EU27, according to estimates released by Eurostat, the statistical office of the European Union. In February production increased by 0.3% in both zones.

A turn? Only very cold weather that boosted energy production in February and March. Still, cap. goods and durable cons. goods, though volatile, are perking up.

German Investor Confidence Rose Less Than Forecast in May

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 36.4 from 36.3 in April.

ZEW’s gauge of the current situation fell to 8.9 from 9.2 in April.

EARNINGS WATCH

Updated Q1 Earnings Season EPS and Revenue Beat Rates

About 500 companies reported earnings last week, pushing the total number of companies that have reported this season up to more than 2,100. And while the market is up on the week, earnings haven’t been great. At the start of the week, the percentage of companies that had beaten earnings estimates this season stood above 59%. The additional 500+ companies that reported this week only beat earnings at a 52% rate, pushing the overall earnings beat rate down to 57.6%. As shown below, this would be the weakest reading of the entire bull market if earnings season ended today.

Guidance Spread Negative But Inching Higher

More than 2,000 companies have reported earnings so far this season, which ends next Thursday when Wal-Mart (WMT) reports. So far this season, the spread between the percentage of companies raising guidance minus those lowering guidance has been -2.9 percentage points. This means that more companies have lowered guidance than raised guidance, and if it holds in negative territory, it will be the seventh straight quarter with a negative guidance spread. As shown in the chart below, the spread this season is much better than it was in the prior three quarters. If we hear positive things from companies next week before earnings season ends, the spread could get a little better even. That being said, it’s pretty amazing that companies have had a negative slant regarding the future for nearly two years now, and over this time period the market has soared. What would the market be doing if companies were actually optimistic? Who knows with so much attention paid to Bernanke and his easy money policy.

And this from ISI: revisions remain negative.

That equities/commodities disconnect

The moves are logical. Stocks are up because of rampant QE, which is squeezing investor flows out of bond markets and into equities. And the reason we’ve got rampant QE is the continued lack of near-term economic recovery globally, which is manifestly bad for industrial commodities.

I thought QEs were supposed to lift all asset classes. Well, there is something called supply in the demand/supply equation…

OIL: This is now a front page story (see Facts & Trends: The U.S. Energy Game Changer):

IEA: North American Oil to Dominate World Supply Growth North American oil production will dominate world-wide supply growth over the next five years, the International Energy Agency predicted, the result of growing production from “fracking” and other technologies.

In its most recent analysis, which takes a five-year view of the oil market, the IEA said U.S. production is rising much faster than previously forecast as a result of sustained high prices and more-efficient operations.
The latest forecast marks a shift in the IEA’s previous thinking, which saw supply growth split between OPEC and non-OPEC countries in the medium term. The fast U.S. supply growth has diminished U.S. demand for oil from OPEC members like Nigeria, and in the long term, growing U.S. exports of oil and natural gas could further weaken OPEC, says Amy Myers Jaffe, who studies energy and the oil industry at the University of California at Davis but didn’t know the contents of the IEA report. (…)
According to the IEA, average North American production is expected to grow by 3.9 million barrels a day between 2012 and 2018, accounting for more than half of the increase in non-OPEC production for the period.
(…) the IEA expects demand for OPEC oil to fall below 30 million barrels a day—the organization’s self-imposed production ceiling. IEA expects that trend to endure until 2018. (…)
According to the IEA’s projections, average OPEC production capacity will rise by 1.75 million barrels a day between 2012 and 2018 to reach 36.75 million barrels a day by the end of the period. The previous estimate pegged OPEC production capacity between 2011 and 2017 to grow 3.34 million barrels a day to 37.54 million barrels a day in 2017.
These changes coupled with the continuing rise in Asian demand will have a profound impact on the market over the next five years, the IEA said.
“There is hardly any aspect of the global oil supply chain that will not undergo some measure of transformation over the next five years, with significant consequences for the global economy and oil security,” the IEA said.

SENTIMENT WATCH

IPOs Set to Raise Most Cash Since Crisis

U.S. companies are on track to raise the most money through initial public offerings since before the financial crisis, driven by the same thirst for risk among investors that has pushed the stock market to new highs.

Already this year, 64 U.S.-listed public offerings have raised $16.8 billion, according to Dealogic. In the same period in 2012, the biggest year in dollars since the financial crisis, 73 companies raised a total of $13.1 billion. Last week alone brought 11 U.S.-listed IPOs, making it the busiest week for such deals since December 2007.

The largest 25 IPOs this year have risen on average 22% from their initial prices, according to Dealogic, versus a 15% gain for the Standard & Poor’s 500-stock index since the beginning of the year.

NEW$ & VIEW$ (13 MAY 2013)

Posted on May 13, 2013 by Denis Ouellet

Europe Tries to Boost Economy After Pressure From U.S.

The bloc’s finance ministers and central bankers left weekend talks of the Group of Seven signaling that they’re poised to scale back austerity, are open to increased monetary aid and looking to unfreeze bank lending. European officials will meet in Brussels today to discuss the economy and review aid payments for crisis-struck nations from Greece to Spain. (…)

Authorities are keen to rally lending at banks, which account for about 80 percent of corporate financing in the euro area, compared with less than 20 percent in the U.S. Small companies in the periphery are especially starved of cash, hurting a traditional engine for hiring.

But there’s this problem as FT Alphaville explains:

(…) Bad debts consume capital and make banks more risk averse, especially with respect to lending to higher risk borrowers such as SMEs [...]
It is not surprising that the periphery is exhibiting a rising pattern in terms of NPL ratios. What is worrying is the speed of increase, at 2.5% per year. Within the periphery, Greece is the outlier with a NPL ratio of 25%, and no signs of that abating yet. Ireland follows with a NPL ratio of 19%. Italy (at 13.4%) is above Spain and Portugal (at close to 10%) but this reflects the reporting biases mentioned above. (…)
The German divergence is making the task of the ECB very difficult both in terms of setting monetary policy for the whole region, but also in terms of dealing with an impaired transmission outside Germany. Draghi clarified in its latest press conference that it is not the ECB’s role to clean up banks’ balance sheets, meaning that the ECB is unlikely to deal itself with the €500bn large non-performing loan problem in periphery. (…)
However, the problem of NPLs may require more targeted solutions. This leaves the onus on sovereigns, or the ESM or other supranational bodies to deal with the more important problem of cleaning up bank balance sheets from non-performing loans and bad debts. (…)

G-7 Intensifies Japan Focus Signaling Acceptance of Yen Drop

While signaling acceptance of the yen’s decline through 100 per dollar for the first time since 2009, G-7 policy makers said they examined Japan’s strategy and that they will monitor its impact on currencies. The yen has fallen 15 percent against the dollar this year and 13 percent versus the euro as the Bank of Japan stepped up monetary stimulus.
“Everybody watches exchange rate developments,” German Finance Minister Wolfgang Schaeuble said after the meeting. “We had a very intense discussion about Japan with our Japanese colleagues.”
The yen weakened past 102 per dollar for the first time since October 2008 today. (…)
Canadian Finance Minister Jim Flaherty said that there were “expressions of concern” about exchange rates, although “all the countries in the G-7 consider themselves to be free-trading.”
A U.S. official said there had been an in-depth discussion on Japan, a day after Treasury Secretary Jacob J. Lew told CNBC Television that he had “made it clear that we’ll keep an eye on” ensuring countries aren’t trying to devalue exchange rates.
While ministers discussed recent stimulus efforts by central banks, “there is close attention that there are no unintended consequences on other countries both via capital flows or exchange rate movements,” Italian Finance Minister Fabrizio Saccomanni said in a Bloomberg Television interview with Francine Lacqua after the talks.
Schaeuble said finance ministers told the central bankers that they’re “increasingly concerned” about “relative high liquidity.”

Yen at Four-Year Low Prompts Fujitsu to Raise PC Prices

Fujitsu Ltd., a Japanese maker of personal computers, plans to raise domestic prices as the yen’s drop to a four-year low boosts the cost of importing components.
The price increases will take effect by July and apply to models released in the summer, Chief Financial Officer Kazuhiko Kato said in an interview at Fujitsu’s Tokyo headquarters. The company may also curb discounts on existing lines, he said.

China Makes Gains, But Doubts Persist

China recorded a modest improvement in its industrial output and retail sales in April but the slight gains were not enough to erase concerns over a weak recovery for the world’s second-largest economy.

Data released on Monday showed that industrial output in April came in at 9.3% over a year ago—a tally that was better than the weak 8.9% reading in March but below expectations of 9.5%, according to economists polled by The Wall Street Journal. Nomura analyst Zhiwei Zhang noted that April 2013 had two more working days than 2012; accounting for the difference, he figures that industrial production “likely slowed.”
The property sector showed continued signs of strength, despite the government’s crackdown on speculators. Investment in real estate development in the first four months of the year was up 21.1% to 1.92 trillion yuan ($312.3 billion), an acceleration from a low of 15.4% in the first 10 months of last year, the data released Monday showed.
Retail sales were 12.8% higher than a year ago in April, accelerating from a 12.6% increase in March, data from the National Bureau of Statistics showed Monday. But consumer reluctance to spend kept sales increases below the 15.2% mark recorded in December. Economists say that reflects in part the government’s campaign against corruption, which has hurt the restaurant and tourism industries among others.

CHINA’S MYSTERIES

China’s recent trade data surprised most observers but nevertheless cheered equity markets. Trade data are possibly the worst set of stats coming out of China (fake invoicing is a national sport there). Considering that most other data are pretty bad…A reader (tks Frank) sent me Eric Sprott’s view on Chinese imports and exports data. In the same vein, here is CLSA’s Andy Rothman’s analysis of the recent data related to Chinese consumers:

Consumption growth disappointed during 1Q, largely because nominal urban wage growth slowed to 8.3% YoY compared to 13.8% a year ago, according to the National Bureau of Statistics. This is, however, a bit of a mystery, given that firms we have spoken to reported that wages for both unskilled and skilled workers rose faster in 1Q than in the previous quarter, and that labor markets were tighter in 1Q than in the previous quarter.

As a result of slower wage growth, NBS reported that in 1Q, urban household disposable income rose by 6.7% YoY in real terms, down from 9.8% in 1Q12 and the slowest pace since 2001. To put the 1Q13 rate of 6.7% in context, the average annual growth rate for the last decade was 9.3%.

Real per capital rural cash income also rose at a slower pace in 1Q, 9.3% YoY compared to 12.7% a year ago, due in part to slower growth in food prices.

One positive sign is that despite slower income growth, real retail sales growth was 10.8% YoY in 1Q13, down only 0.1ppt from the first quarter of last year.

More troubling is that real household consumption growth was 7.3% YoY in 1Q, down from 10.6% a year ago and 7.8% in 4Q12.

Among all these peculiarities, Andy does not explain why retail sales growth was stable while consumption growth decelerated so significantly. To me, the important things to consider are:

Domestic demand cannot be very strong when income growth is slowing so significantly and the party is so vigorously attacking corruption.
Exports cannot be much stronger when most of China’s important trade partners are showing few, if any, signs of reacceleration.
Most important, growth in electricity consumption, a more trustworthy stat, remains pretty weak.

Zerohedge adds this:

EARNINGS WATCH

Factset:

Of the 451 S&P 500 companies that have reported earnings to date for the quarter, 70% have reported earnings above estimates. This percentage is in-line with the average of 70% recorded over the past four quarters. However, only 48% of companies have reported sales above estimates. This percentage is below the average of 52% recorded over the past four quarters. If 48% is the final percentage, it will mark the third time in the last four quarters that the percentage of companies reporting revenue above estimates finished below 50%.
The blended earnings growth rate for Q1 2013 is 3.2% this week, unchanged from last week’s growth rate of 3.2%. On March 31, the Q1 earnings growth rate for the index was -0.7%. All ten sectors have witnessed an increase in earnings growth rates since that date, led by the Financials and Telecom Services sectors.
Corporations and analysts are lowering earnings expectations for Q2 2013. In terms of preannouncements, 69 companies have issued negative EPS guidance for Q2 2013, while 18 companies have issued positive EPS guidance. Analysts have taken down EPS estimates also, as the estimated earnings growth rate for Q2 2013 has dropped to 1.6% today from an expectation of 4.5% on March 31.

We should get the official S&P data pretty soon.

Lufthansa says April passenger traffic stagnant

German airline Lufthansa said on Monday that April passenger traffic in terms of revenue seat kilometers was flat from a year earlier.

Food-Stamp Use Rises From Year Ago

Food-stamp use rose 2.7% in the U.S. in February from a year earlier, with 15% of the U.S. population receiving benefits. (See an interactive map with data on use since 1990.) (…)
Food stamp rolls increased on a year-over-year basis, but were 0.4% lower from the prior month, the U.S. Department of Agriculture reported. (…)
The number of recipients in the food stamp program, formally known as the Supplemental Nutrition Assistance Program (SNAP), reached 47.6 million, or nearly one in seven Americans.

Alan Abelson: 1925 to 2013

[image]

Financial journalism lost one of its leading lights today when Alan Abelson died at the age of 87. Alan had served Barron’s as a writer, editor, and chief columnist the past 57 years.

(…) During his career, Alan trained dozens of journalists to be skeptical, to be exacting, to help average investors, and to be on the lookout for Wall Street’s crooks. About 10 of these fine journalists still work at Barron’s, I’m happy to say. Others have gone on to do ground breaking work at The New York Times, Bloomberg BusinessWeek, and numerous financial newsletters.
One of the unique things about Alan was that his keen knowledge of Wall Street was matched by his love of artful writing. Before Alan began his newspaper career in 1947, he earned a bachelor’s degree in English and Chemistry from The City College of New York and a master’s degree from the prestigious Writers’ Workshop at the University of Iowa, which counts among its alumni Flannery O’Connor, Jane Smiley, and John Irving. In our view, Alan ranks among them. (…)
Alan’s quest for truth and justice greatly enriched the traditions begun by Clarence Barron, who bought Dow Jones & Co. in 1902 and founded this magazine in 1921. A year earlier, Clarence Barron’s stories had exposed Charles Ponzi, the Boston swindler who gave rise to the phrase “Ponzi scheme.”
In 2001, thanks in large part to editors who trained under Alan, Barron’s published the first major story that questioned the investment claims of Bernie Madoff. Seven years later, Madoff was charged by the government and proved to be the Ponzi of our era.

NEW$ & VIEW$ (10 MAY 2013)

Posted on May 10, 2013 by Denis Ouellet

Housing Rebound Grows as Prices Climb Sharply

Home prices in metropolitan areas saw their biggest year-over-year gains in more than seven years in the first quarter, evidence that the housing recovery is spreading across the nation.

The National Association of Realtors said Thursday that the national median closing price for an existing single-family house was $176,600 in the first quarter, up 11.3% from the first quarter of 2012. That was the largest year-over-year gain since the end of 2005. Of the 150 metro areas tracked by the NAR, sale prices rose in 133 and declined in 17.

“The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” said NAR chief economist Lawrence Yun.

Poor Weather Pressures Retailers

U.S. retailers continued to be stymied by cool weather, leading to generally lukewarm same-store sales for April.

The retail industry has now marked its fiscal first quarter—February, March and April—weighed down by temperatures that kept shoppers away from malls, forcing steep discounts.
The showing doesn’t bode well for the first-quarter results retailers will release later this month.

Jobless Claims in U.S. Unexpectedly Fall to Five-Year Low

Applications for unemployment insurance payments decreased by 4,000 to 323,000 in the week ended May 4, the fewest since January 2008, Labor Department figures showed today. The four-week average declined to 336,750, the lowest since November 2007, the month before the start of the worst economic slump since the Great Depression.

(Bespoke Investment)

Midwest leads US manufacturing revival

Jobs increase fuelled by resurgent car industry

The bulk of US manufacturing jobs gained since the labour market troughed three years ago have been concentrated in a handful of rust belt states, a positive sign for a region that has long seen employers flee for far-flung markets with lower labour costs.
Fuelled by a resurgent car industry, states such as Michigan, Illinois, Indiana, Ohio and Wisconsin, along with Tennessee and Kentucky, account for more than half of the more than 500,000 manufacturing jobs the US gained between March 2010 and March 2013, labour department statistics show. (…)
Mr Syverson estimates that 123,000 of the half million net new manufacturing jobs gained since early 2010 are directly attributable to the recovery of the auto industry, boosted by a government bailout and renegotiated labour contracts between the industry and the United Automobile Workers union. The rest have predominantly come from the machinery and fabricated metals sectors, producing for the domestic market as well as for export.

Fuelled by the car industry

Pointing up Nice, but:

Car sales seem to have stalled;
Import share may be bottoming (read on Yen below)

Yen’s Slide Percolates Japanese Economy The yen’s fall fuels hopes for a more ground breaking shift in Japan: the reversal of nearly two decades of stagnation, weak demand and declining prices.

Just over a month after Japan’s central bank vowed to reignite economic growth by flooding markets with yen, the currency fell to ¥100 to the dollar for the first time in four years, a milestone in efforts to end nearly two decades of economic stagnation.
The weaker yen’s impact—the dollar has climbed 16% against the currency this year—is already trickling through the Japanese economy, pushing up prices of imported food and gas and drawing a flood of tourists whose currencies now buy more goods in Japan. It is bolstering sales and profit at exporters whose goods can be produced at lower prices for global markets. Early Friday in Tokyo, the dollar bought ¥101.12, compared with ¥100.60 late Thursday in New York and ¥99.02 late Wednesday. (…)
In new signs of the impact of Abenomics, Japanese domestic institutional money started flowing overseas in pursuit of higher yields while bank lending rose at the fastest pace in four years, data released Friday showed.
Japanese investors bought Y514.3 billion more foreign bonds than they sold for the two weeks through May 4, government data showed. Such flows could weaken the yen further, and are a key part of the Bank of Japan’s strategy for beating deflation by getting some of the trillions of yen Japanese investors have stashed in low-yielding government bonds put to better use.
In a sign that domestic economic activity may also be picking up, Japanese bank lending rose 2.1% in April from a year earlier as big banks extended loans to utilities, and for mergers and real-estate related transactions, the BOJ said. (…)

But there are many “buts”. Is this a zero sum game or not?

Yen weakens past 100 to dollar, may fan talk of currency war

Kittiratt Urges Thai Rate Cut Exceeding Quarter Percentage Point

Sri Lanka Lowers Key Interest Rates to Spur Economic Growth

Vietnam Cuts Interest Rates as Global Monetary Easing Spreads

Japan investors switch into foreign bonds

Yen extends slide against dollar beyond Y100

Japan Data Suggest Strengthening

Official figures released Friday showed bank lending in April up 2.1% from a year earlier, the largest percentage gain since July 2009. Separate data showed the country’s current account, the broadest measure of trade with the rest of the world, stood at ¥1.25 trillion ($12.4 billion) in March before seasonal adjustment, the largest surplus in the last 12 months, despite a sharply wider trade-deficit component.

The BOJ said Friday that outstanding loans at Japanese banks, excluding locally operated credit unions, rose to ¥405 trillion in April as mergers and real-estate transactions increased.

India Car Sales Fall for 6th Month

In April, sales fell 10% from a year earlier to 150,789 cars, according to data issued Friday by the Society of Indian Automobile Manufacturers.
The decline is due partly to high ownership costs, SIAM Deputy Director General Sugato Sen said, referring to high interest rates and fuel prices.

India Factory Output Growth Accelerates

India’s industrial output rose for the third straight month in March, raising hopes that the economic slowdown may have ended and a gradual recovery could be under way.

The index of industrial production rose 2.5% from a year earlier, benefiting from a stronger expansion in manufacturing output, government data showed Friday. This followed a 0.5% expansion in February, as interest rate cuts from the central bank and government reforms so far this year have improved business confidence.

High five India’s composite PMI fell from 51.4 in March to 50.5 in April…

Hong Kong Economy Grows Less-Than-Forecast 0.2% as China Slows

The increase from the previous three months compared with a revised 1.4 percent gain in the fourth quarter, the government said today.

China April New Yuan Loans, Money Supply Exceed Estimates

Lending was 792.9 billion yuan ($129 billion) in April, the People’s Bank of China said in Beijing. That compares with the median estimate of 755 billion yuan in a Bloomberg News survey and 1.06 trillion yuan in March. M2 money supply rose 16.1 percent from a year earlier, compared with the median economist forecast of 15.5 percent. Aggregate financing, a broader measure of credit, was 1.75 trillion yuan compared with a record 2.54 trillion yuan in March.

Portugal and Greece joblessness hits highs

Greek unemployment among 16- to 24-year-olds reaches 64%

In Greece, the jobless rate hit 27 per cent in February, up from 26.7 per cent the month before, while the rate among 16-24 year-olds climbed to 64.2 per cent.

In Portugal, whose economy has been contracting sharply for three years, the jobless rate rose to 17.7 per cent in the first quarter of 2013, up from 16.9 per cent in the final three months of last year.

Italy’s One-Year Borrowing Costs Fall to Record Low at Auction

In Italy industrial production fell more than economists expected in March, indicating there is little sign the country’s longest recession in two decades is easing. Output decreased 0.8 percent from February, when it fell a revised 0.9 percent, national statistics office Istat said.

U.K. Construction Output Declines to Lowest Since 1998

Output dropped 2.4 percent from the previous three months to its lowest since the fourth quarter of 1998, the Office for National Statistics in London said today.

Construction, which accounts for 6.8 percent of the economy, has been hit hard by government budget cuts and the credit famine. Output has fallen by about a fifth from its pre-recession peak five years ago, double the decline in manufacturing.

The fall in U.K. construction in the first quarter was led by a 3.2 percent drop in new work, with all sectors posting declines with the exception of private housing and repair and maintenance, the ONS said.

EARNINGS WATCH

Fed Bridges Gap to Earnings Pickup in Modest U.S. Growth

(…) With modest economic growth weighing on results, revenue for companies in the Standard & Poor’s 500 Index has missed the aggregate analysts’ estimate by about 0.7 percent, according to data compiled by Bloomberg, even though earnings have been better than projected. Through yesterday, 452 of the benchmark-index members have reported for quarters ending between Feb. 16 and May 15. (…)

High Yield Rally Is Running Low on Fuel (Moody’s Capital Markets Research)

Our preferred measure of core business sales ― which equals the sales of retailers, manufacturers and wholesalers less sales of identifiable energy products ― rose by merely 3.0% yearly in Q1-2013, which was down from Q4-2012’s 3.5% and Q1-2012’s 6.2%.

The yearly increase previously ebbed to 3.0% in Q2-2008, Q4-2000, and Q3-1998, where each earlier deceleration was associated with a high yield bond spread significantly above its latest 410 bp. Thus, if expenditures do not quicken, what is now the narrowest high yield bond spread since October 16, 2007 could widen substantially. (Figure 2.)

The lackluster state of the world economy has curbed the growth of business sales. The US high yield bond spread has shown a strong inverse correlation with the JPMorgan/Markit global composite PMI index of world economic activity. Ordinarily, the high yield bond spread widens as the global composite PMI falls.

Nevertheless, despite how April 2013’s global composite PMI of 51.9 is well under its long-term median of 54.6, May 7’s high yield bond spread of 411 bp was well under its comparably measured median of 583 bp. Moreover, the statistical record suggests that the high yield spread ought to be closer to 700 bp, as opposed to approaching 400 bp. In fact, when the high yield spread last narrowed to 411 bp in December 2003, the global composite PMI approximated 60.0.

Notwithstanding both lackluster sales growth and the subpar pace of global activity, the recent high yield bond spread of 411 bp is very much consistent with the benign outlook for the US high yield default rate. (…)

Notwithstanding the subpar pace of business activity both domestically and globally, an abundant supply of financial liquidity will help to rein in defaults. Furthermore, until stocks are viewed as being significantly overvalued, the latest equity rally ought to enhance the business sector’s access to funds.

Martin Feldstein: The Federal Reserve’s Policy Dead End

(…) despite the Fed’s current purchases of $85 billion a month and an accumulation of more than $2 trillion of long-term assets, the economy is limping along with per capita gross domestic product rising at less than 1% a year. Although it is impossible to know what would happen without the central bank’s asset purchases, the data imply that very little increase in GDP can be attributed to the so-called portfolio-balance effect of the Fed’s actions. (…)

In short, it isn’t at all clear that the Fed’s long-term asset purchases have raised equity values as the portfolio balance theory predicted. Even if it did account for the entire rise in equity values, the increase in household equity wealth would have only a relatively small effect on consumer spending and GDP growth. (…)

Mr. Bernanke has emphasized that the use of unconventional monetary policy requires a cost-benefit analysis that compares the gains that quantitative easing can achieve with the risks of asset-price bubbles, future inflation, and the other potential effects of a rapidly growing Fed balance sheet. I think the risks are now clear and the benefits are doubtful. The time has come for the Fed to recognize that it cannot stimulate growth and that a stronger recovery must depend on fiscal actions and tax reform by the White House and Congress.

Loonie to sink to 90 cents by early 2014: TD

Another major bank is forecasting a big drop in the Canadian dollar.
Toronto-Dominion Bank says the loonie, now at near par, will tumble to 90 cents by early next year, before recovering to 93 cents by the end of 2014.
The bank blames the loss of Canada’s “growth advantage,” lower commodity prices and the rebounding might of the U.S. dollar for the reversal.
(…) the report points to harder evidence: An economy that is expected to grow more slowly than the U.S. this year and next, lower prices for oil, base metals and precious metals, and a further rise of 4 to 5 per cent in the trade-weighted value of the U.S. dollar.

NEW$ & VIEW$ (9 MAY 2013)

Posted on May 9, 2013 by Denis Ouellet

China’s Inflation Quickens

The CPI edged up to 2.4% from a year earlier, faster than a 2.1% on-year rise in March and ahead of the median forecast of 2.2% by 13 economists surveyed by The Wall Street Journal. (…)

Food prices were up 4% in April, a cause of concern for the government. Premier Li Keqiang was quoted by the official Xinhua News Agency as saying late Wednesday that the government will put a focus on stabilizing food prices. (…)

Non-food prices increased just 1.6% YoY in April, lower than their average rise in the first quarter.

The Producer Price Index, which measures wholesale and materials prices, has been declining for more than a year. It fell further into negative territory in April, with a year-to-year decline of 2.6%, compared with a 1.9% drop the month before, data from the National Bureau of Statistics showed Thursday.
The deflation in the industrial sector reflects overcapacity in a number of major Chinese industries including steel, coal, glass, aluminum, solar panels and cement.

Inflation is falling everywhere

China April Passenger-Vehicle Sales Rise 13% on New Models

Wholesale deliveries of cars, multipurpose and sport-utility vehicles climbed to 1.44 million units in April, according to the state-backed China Association of Automobile Manufacturers.

Total sales of vehicles, including buses and trucks, gained 13 percent to 1.84 million units last month, the association said.
For the first four months of the year, auto sales gained 16 percent to 5.86 million units, CAAM said.
Commercial vehicle sales rose 15 percent to 400,300 units in April.

CEBM China Survey May Summary

Review of April Industrial Activity: Further Recovery Observed Among Industrial Sectors. In April, industrial demand improved further among up- and midstream sectors, slightly above respondents’ expectations. For instance, cement sales were stronger than the same period last year in general. Surveyed copper refineries reported strong M/M and Y/Y growth. Furthermore, in addition to demand recovery in construction machinery, demand for machinery tools also showed signs of bottoming. Auto sales were also above respondents’ expectations. The recovery, however, was still closely related to local infrastructure projects. For instance, cement demand was one of the strongest among industrial materials. The demand was mostly driven by infrastructure projects in a number of provinces such as Gansu and Shaanxi. This is also true for copper and construction machinery demand. In other words, demand in the real economy remains weak.

Emerging market growth slows in April

The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI™ surveys, fell to 51.3 in April, from March’s 52.5. That signalled a slowdown in economic growth in global emerging markets, to the weakest for over a year-and-a-half. Data broken down by broad sector showed similarly weak growth rates for manufacturing output and services activity.

Three of the four BRIC nations registered slower output growth in April, most notably in China. The exception was Brazil, although its rate of expansion remained modest overall. Elsewhere, manufacturing output
growth slowed in the majority of economies covered.

New business growth slowed to the weakest since last August. Notably, the rate of expansion in the service sector slowed to the weakest since May 2009, the start of the current growth sequence.

Employment barely rose in April, with the rate of growth the joint-weakest in the post-crisis period. Meanwhile, the volume of outstanding business declined for the twelfth month in a row.

Asia Wrestles With a Flood of Cash

Central banks throughout Asia are ratcheting up moves to deal with an influx of capital that is keeping currencies strong and complicating efforts to manage growth.

New Zealand’s central bank said Wednesday it intervened in foreign-exchange markets to blunt the rise of its currency and would continue to do so, a day after Australia’s central bank cut interest rates to a record low and noted the stubborn strength of the Australian dollar. Elsewhere, China is moving to curb bets on the rising yuan, while Thailand is considering efforts to curb the strongest baht since the 1997 Asian financial crisis.

In a surprise move early Thursday, South Korea cut interest rates by a quarter of a percentage point, as the country grapples with a slowing economy. The cut in borrowing costs comes a day after a government official voiced concern about “one-sided” moves in foreign exchange, code for a rise in the value of the currency. (…)

A World Bank analysis of flows to emerging markets globally shows an increase through April of 42% from a year earlier, to $64 billion.

Another measure: Asia’s central banks are again scooping up capital inflows and putting them into foreign-currency reserves. World Bank data show that developing Asian economies have added $120 billion in foreign-exchange reserves this year, bringing total reserves to nearly $4.3 trillion.

While attracting investment from overseas is often a good thing, left unchecked, inflows make local currencies stronger, which causes a country’s goods to become less competitive on the global market. And government policy makers worry that money that arrives quickly can leave just as fast, destabilizing local banking, stock and currency markets.

But

(…) compared with 2010, when Asian central banks routinely intervened in currency markets, this year has been less dramatic.
It is too early to assess the full extent of the flows, but some analysts figure the amount of money coming to Asia is less than in 2010. And unlike then, the U.S. is performing well and is attracting money from many investors.

WHATEVER IT TAKES

You really need to remember Draghi’s pledge when you read the following from Absolute Return’s Niels C. Jensen:

Many of our banks are effectively bankrupt but the ostrich principle applies – with the apparent blessing of the authorities. Bury your head in the sand and hope for the problem to go away before anyone notices.
Over the past several months there has been a rather heated debate across Europe as to how far Germany is prepared to go, and should go, to keep the eurozone afloat. I would suggest very far. Here is the reason: Only a few days ago it was revealed that Deutsche Bank’s gross notional deriatives exposure now stands at a whopping €55.6 trillion (not a misprint) – more than 20 times the size of German GDP (chart 4).

Many will argue that Deutsche’s net exposure – which is only a tiny fraction of its gross exposure – is what matters, and that is theoretically correct. However, as Zero Hedge points out, the netting out works fine only to the extent the chain is not broken. The moment there is discontinuity in the collateral chain, all bets are off (see here). As many of Deutsche Bank’s counterparties are other European banks, it – and the rest of Germany – simply cannot afford for the European banking industry to come clean.

DOUCE FRANCE

Yields on Junk Bonds at New Low

Issuance of high-yield bonds hit records in 2012. This year has started in the same vein, with high-yield volumes rising at the fastest-ever clip. So far this year, more than $150 billion in high-yield bonds have been issued in the U.S., according to Dealogic.

EARNINGS WATCH

Meanwhile,corporate America is getting more cautious as this BMO Capital chart shows:

NEW$ & VIEW$ (8 MAY 2013)

Posted on May 8, 2013 by Denis Ouellet

Americans Pick Up Borrowing

America’s credit crunch is easing. For the past six years, consumers and businesses have struggled to borrow money, but slowly, things are getting easier.

(…) Large U.S. companies are taking advantage of low interest rates to borrow record amounts of capital in bond markets. Banks are opening the spigots for commercial and industrial firms, and loans grew at an 11% annualized rate in the first quarter of this year, the sixth double-digit percentage increase in seven quarters, Federal Reserve data show.

According to the Fed’s survey of senior bank-lending officers released Monday, 28% of banks lowered the cost of credit lines early this year to smaller firms like Mr. Aaron’s that have annual sales of less than $50 million. Residential lending began edging up last year, and even people with bad credit can get a loan to buy a car these days.

In all, some $713 billion in credit flowed to U.S. households and nonfinancial businesses last year, double 2011′s $336 billion, according to the Fed. That is still a fraction of the $2.2 trillion in credit that lifted American consumers and businesses in 2007. (…)
Even borrowers with patchy credit can now qualify for “subprime” car loans, which were 43% of auto loans made in the fourth quarter of 2012, according to Experian, a credit-reporting firm.
Home-equity loans, which allow homeowners to tap their homes for cash, are creeping back. It is the same story with jumbo mortgages, usually taken out by affluent people. The bottom line is that banks are dipping their toes back into riskier territory.

There also are signs traditional mortgage lending is picking up: Residential home loans from banks expanded at an annualized rate of 1.4% in the first quarter, after contracting in the final months of last year, Fed data show. The Fed’s latest survey of bank lending officers showed nearly 10% of banks polled said they were easing standards on “prime,” or low-risk, mortgages, compared with less than 5% in a previous survey. (…)

Credit-Card Debt Declines for First Time in 2013 Americans cut their credit-card debt in March, a sign some consumers are cautious about the sluggish economic recovery. But total debt increased due to jumps in student and auto loans.

While total consumer borrowing increased slightly during the month, revolving credit, a category dominated by credit card debt, fell 2.4% in March at an annual rate, the first decline this year, a Federal Reserve report showed Tuesday. (…)
Credit card debt now only accounts for 30% of total consumer borrowing other than home loans, its lowest level since 1991, O’Keefe’s research showed. Before the financial crisis, credit card debt accounted for more than 37% of consumer credit. (…)
Total consumer credit, defined as lending to consumers excluding home mortgages, increased by $7.97 billion to a seasonally adjusted $2.807 trillion, the Fed report said. Revolving credit shrank by $1.7 billion during the month, contributing to the smallest gain in total credit since July.
The gain was entirely due to an increase in nonrevolving credit, which includes student loans and auto financing. That borrowing increased 6% in March at an annual rate compared with an 11% jump in February.
The smaller increase largely comes from auto lending, which eased in March after consistent growth over the prior year, O’Keefe said.
The student-loan market, now dominated by the government, has expanded steadily during the economic recovery. Federal education lending rose by $3.9 billion in March to $560.8 billion. That number is reported without seasonal adjustments.

U.S. Gets Free Cash in Sale of 4-Week Bills

Short-term Treasury bills sold at auction for zero yield as the U.S. borrowed less than expected amid a surge in tax receipts.

China Trade Surplus Draws Doubts China’s trade swung to a surplus in April after showing a small deficit in March—but analysts cautioned that the 14.7% growth in exports may have been a bit too good to be true.

(…) analysts cautioned that the 14.7% growth in exports during the month, after a rise of 10% in March, may have been a bit too good to be true, with some of the gains due to overinvoicing by exporters claiming higher payments than they actually receive from their customers. (…)
Another telltale sign of problems with China’s trade data is the weakness of tallies from other key exporters in the region such as South Korea, which saw exports rise only 0.4% over a year ago in April, and Taiwan, which showed a downturn of 1.9%.
Key markets have shown weak demand this year. Exports to the U.S. in the January-April period were up 5% from a year earlier while those to the European Union were down 0.9%, according to customs data released Wednesday.
Imports in April alone were stronger than expected at 16.8% after a 14.1% rise in March, giving some encouragement about China’s appetite for global commodities.

China Taiwan trade data SocGen

(SoGen via FT Alphaville)

CURRENCY WARS

Borg Joins Wheeler in Escalating Response to Currency Gains

Sweden’s government abandoned its hands-off stance on the krona and New Zealand announced it sold the kiwi, joining a growing band of countries to escalate their response to strengthening currencies.
In Sweden, Finance Minister Anders Borg said the krona’s appreciation warrants central-bank consideration. The won’s advance prompted Kim Seong Wook, a director in South Korea’s finance ministry, to say the government will closely monitor any “unnecessary movement” that increases exchange-rate volatility.

Wheeler Sold Kiwi to Weaken World’s Best-Performing Currency

The New Zealand dollar plunged after Reserve Bank Governor Graeme Wheeler said the central bank sold the kiwi and can do so again to protect economic growth.
“There has been some intervention,” Wheeler told parliament’s finance and expenditure select committee in Wellington today, driving the New Zealand currency down as much as 1.1 percent to 83.60 U.S. cents, the lowest level since April 1. The central bank last confirmed a currency intervention in June 2007, when it sold New Zealand dollars. (…)
Policy makers from Zurich to Tel Aviv and Tokyo have sought to limit currency gains even as the Group of 20 last month affirmed pledges to avoid deliberately weakening exchange rates. Wheeler’s action contrasts with Australian counterpart Glenn Stevens, who has said he’d need to be convinced the Aussie dollar is “seriously overvalued” before intervening to weaken it and is using interest rate reductions instead. (…)
The central bank is “on-the-record that it is prepared to intervene in the exchange rate,” Wheeler said. The currency, which he described earlier today as significantly overvalued, needs to be lower to boost exports, which make up 30 percent of the economy, he said.

SNB’s Danthine Says Cap on Franc Remains ‘Indispensable’

Bears Weigh Bets Against Canada

(…) Speculative traders held a net short position on the Canadian dollar of $6.7 billion last week, according to the Commodity Futures Trading Commission’s weekly report on the commitment of traders, a larger short position than for any major currency, except the yen. The positions, which are down from an all-time high reached in mid-April, have yet to be rewarded with a major selloff. The Canadian dollar has fallen 1.2% against the U.S. dollar this year. Late Tuesday in New York, the Canadian dollar was at $0.9955, compared with $0.9932 late Monday.

Meanwhile, short positions on Canada’s two main exchanges have risen 11% from a year earlier, a higher increase compared with the 3% rise in short positions on the New York Stock Exchange during the same period. (…)

Poland Cuts Interest Rates to Record Amid Lack of Recovery Signs

Inflation slowed to its weakest in more than six years and manufacturing shrank the most in 45 months in April. Poland is fighting against the steepest slowdown in more than a decade.

German Recovery Signs Mount as Industrial Output Rises:

Production increased 1.2 percent from February, when it gained 0.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.1 percent decline, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, production fell 2.5 percent when adjusted for working days.

Production increased 0.2 percent in the first quarter from the fourth, the ministry said, adding that improving order books and an expected rebound in construction “should lend impetus to industrial production in the coming months.”
Factory orders rose 2.2 percent in both February and March.

High five On the other hand, Markit’s April Manufacturing PMI for Germany was not that good:

Germany’s manufacturing sector started the second quarter of 2013 with declines in output, new orders and employment. As a result, the final seasonally adjusted Markit/BME Germany Purchasing Managers’ Index® (PMI®) – posted below the neutral 50.0 mark in April. At 48.1, down from 49.0 in March, the latest reading indicated a moderate worsening of overall business conditions, and the rate of deterioration was the most marked since December 2012.

April data indicated that manufacturing production levels decreased for the first time so far this year. Although only a moderate overall reduction in output levels, the decline was broad-based across the three market groups monitored by the survey.

Manufacturers recorded a fall in new orders for the second month running during April, and the rate of decline was the fastest in 2013 to date.

High five And Germany’s Services PMI was also weak:

Adjusted for seasonal influences, the headline Markit Germany Services Business Activity Index dipped back below the 50.0 no-change value in April. At 49.6, down from 50.9 in March, the index signalled the first reduction in business activity since November 2012.

Europe’s Job Seekers Flock to Germany

(…) Data released Tuesday by the German statistics agency showed immigration hit a 17-year high last year, with the increase from Europe’s crisis-riddled nations “particularly evident.” (…)

Last year, Germany took in a record 690,937, according to provisional German data. Just from Greece, Portugal, Spain, Italy and Ireland, the number was 134,151—more than twice the level before the euro crisis began.