A structural crisis has begun

Источник: img3.stockfresh.com

Period: 10 – 16 April 2021

Top news story: As we have noted on many occasions in our reviews, the world is now in the midst of a structural crisis, as it did in 1930-32. The crux of it is that demand and investment are less and less in line with the structure of the economy at the onset of the crisis. A case in point is the decline in real household incomes, coupled with the increase in emission incentives that we noted in many previous reviews. Another example is the drop in investment in previously vibrant industries. A typical example is the shale industry in the US:

The reasons for this range from a decline in the funds that invest in the industry to a decline in the number of IPOs, but the gist of it does not change: the structure of the world economy and the economies of individual countries are changing, and quite rapidly. Since this is happening against the background of a general recession (inflation figures are given below), it is actually a case of closing a large number of enterprises. In contrast to the cyclical downturn, enterprises do not reduce output for a limited time, but close down permanently.


The decline in industrial production in India is the strongest in half a year

(-3,6% per year). In the Euro Area, -1,0% per month (10-month low), and -1,6% per year (4-month low):

Euro Area Industrial Production

Net machinery orders in Japan fell by 8,5% per month and 7,1% per year – a record low since April 2020, at the height of the pandemic:

Japan Machinery Orders

Although quarantine measures were not very extensive in Japan itself, given its involvement in the global economy, this is an extremely unpleasant situation.

Germany Zew Economic Sentiment Index has slowed to a 3-month low:

Germany Zew Economic Sentiment Index

As in the Euro Area as a whole:

Euro Area Zew Economic Sentiment Index

While it is at a high level, given the history of recent decades, the trend seems ominous, full recovery from the pandemic is not yet possible:

Euro Area Zew Economic Sentiment Index

Business confidence in Brazil is the worst in 9 months:

Brazil Business Confidence

Britain’s trade deficit is approaching record highs:

And separately for the goods, he almost repeated them:

United Kingdom Goods Trade Balance

United States export prices in March are +2,1% per month, +6,5% per quarter (peak 1983) and +9,1% per year (since 2011).

Import prices +1,2% per month, +4,1% per quarter (the highest since 2011) and +6,9% per year (2012).

PPI (Produce Price Index Index) of Japan in March +1,0% per year – maximum since early 2020:

Canada’s PPI (Producer Price Index) is the highest since 2008 and very close to a 40-year record (+ 9,4% per year):

Wholesale prices in Germany are at their peak for 4 years, 4,4% per year.

Wholesale prices in India at the top since September 2012, 7,4% per year.

CPI in Germany is the highest in 2 years (+ 1,7% per year):

And for the eurozone as a whole, 1.3% at most since January 2020.

CPI (Consumer Price Index) USA 0,6% per month – the highest since 2009:

And + 2,6% per year – at the top since 2018:

United States Inflation Rate

Consequently, inflation expectations in the US are at their highest in seven years (+3,2% per year):

China’s loans in the first quarter are record-high, so it is not surprising that the nominal performance of the economy in general, and of consumer demand in particular, is high:

China New Yuan Loans

Mortgage applications in the US have fallen for six consecutive weeks:

United States MBA Mortgage Applications

Despite the fact that lending rates have slightly fallen from annual peaks:

United States MBA 30-Yr Mortgage Rate

Unemployment in Turkey in February peaked in 7 months:

Turkey Unemployment Rate

The decline in retail in Brazil is the strongest in 9 months (-3,8% per year):

The Central Bank of South Korea has left the monetary policy unchanged. So has the Central Bank of Turkey despite the change of its head.

Summary: The findings, to a large extent, repeat the results of the previous week: the world has begun to experience a serious rise in inflation. Both producer and consumer. At the same time, it is very difficult to assess direct measures of economic growth, and it cannot be excluded that they are the result of under-inflation. This is clearly seen in specific countries (in the US good – the rise in gasoline prices, in Russia – the general level of consumer prices), but it should be taken into account that in all countries of the world, authorities blatantly underestimate actual inflation, sometimes very significantly.
This is particularly problematic for China, with official Chinese GDP and retail sales rising by a record 18,3% per year and 34,2% per year, respectively, in the first quarter, supported by higher consumer spending. But, given the data presented in the previous section of the Review, it is possible that this is simply a consequence of the redistribution of issuers’ money.
Given that inflation often lags far behind emissions, and stimulus programs are not going to stop, it is likely that the price increase has entered the world economy for a long time. This needs to be taken into account by all economic actors when planning their activities.
We wish all our readers a good weekend and a productive work week!


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