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Macro Indicators : US and China

  • US Industrial Production Plunges As March Auto Manufacturing Tumbles Most Since 2008
  • The Economic Confidence Index  Gallup´s survey for the week ending April 10th came in at -14.
  • UMich consumer sentiment: sliding from 91 to 89.7
  • China Just Flooded Its Economy With A Record Amount Of New Debt


When China reported its economic data dump yesterday,  was modestly better than expected (one has to marvel at China’s phenomenal ability to calculate its GDP just two weeks after the quarter ended – not even the Bureau of Economic Analysis is that fast), the investing community could finally exhale: after all, the biggest source of “global” instability for the Fed appears to have been neutralized.

But what was the reason for this seeming halt to China’s incipient hard landing? The answer was in the secondary data that was reported alongside the primary economic numbers: the March new loan and Total Social Financing report.

As the PBOC reported last night, Chinese banks made 1.37 trillion yuan ($211.23 billion) in new local-currency loans in March, well above analyst expectations.

“As the central bank scrambled to keep the economy engorged with new loans “to keep policy accomodative to underpin the slowing economy” as Reuters put it.

Outstanding yuan loans grew 14.7 percent by month-end on an annual basis, versus expectations of 14.5 percent.

If one adds up the Total Social Financing injected in thefirst quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China’s economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing “debt reform.” Quite the contrary, China has once again resorted to the old “growth” model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.

And to put it all together, the PBOC also reported that the broad M2 money supply measure grew 13.4% in March from a year earlier, or precisely double the rate of growth of GDP. This means that it took two dollars in new loans to create one dollar of GDP growth.

With China’s debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue? ( Officially, it is a small number: 41%.  Unofficially, nobody knows.  Yes, nobody knows. For a good reason: piles of loans from government-owned banks to government owned enterprises.)



Industrial ProductionThe US economy has never – ever – seen Industrial Production drop YoY for seven months in a row without being in a recession. Down 2.0% YoY in March, the weakest since December and down 0.6% MoM (weakest since Feb 2015) the decline in factory output is driven a 1.6% plunge in vehicle production (2.8% collapse in motor vehicles specifcally) in March. This 1.76% drop is the worst for a March since 2008.



Industrial output in the United States declined 0.6 percent in March of 2016 from the previous month, following an upwardly revised 0.6 percent drop in February. Figures came worse than market expectations of a 0.1 percent decrease, as mining shrank the most since September of 2008 when production was curtailed because of hurricanes and utilities and manufacturing also contracted. For the first quarter as a whole, industrial production fell at an annual rate of 2.2 percent. Industrial Production Mom in the United States averaged 0.28 percent from 1919 until 2016, reaching an all time high of 16.60 percent in May of 1933 and a record low of -10.40 percent in August of 1945. Industrial Production Mom in the United States is reported by the Federal Reserve.

Auto production is hitting the wall, inventories are extreme…price and sales weakness is occurring amid a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years…


According to the latest Weekly Economic Confidence poll released by Gallup, Americans’ confidence in the US economy is getting worse. The poll asks people to rate the economy as of today, and whether or not the economy as a whole is getting better or worse.

Digging a little deeper into the detail, Gallup reveals that people are viewing the economic outlook to be much worse than current conditions. While both components are getting worse, the economic outlook plummeted. The score of -22 reflects 37% of US adults saying the economy is “getting better”, while 59% say it’s “getting worse.”


Moments ago the official print came out and it was not pretty: sliding from 91 to 89.7, not only did the print miss expectations of a rebound to 92.0, but was the lowest print since September 2015, as well as the fourth consecutive drop.

The reason for the drop? Consumers reported a slowdown in expected wage gains, weakening inflation-adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation.

But perhaps most troubling for the Fed is that while 1 year inflation expectations remained unchanged at 2.7%, the 5 year forward forecast dropped from 2.7% to 2.5%, implying that whatever the Fed is doing to boost expectations of rising prices is not working.



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