Time period: 16 – 22 October 2021
Top news story. The main news of the week is the very sad statistics of industrial production in the US. The main indicator – industrial production – with a growth forecast of 0.1%:
As we can see, that’s the lowest value in seven months. Capacity utilization is also difficult, with a higher forecast of 76.4%:
Start of new construction in September: -1.6% m/m up to 1,555 thousand houses according to forecast: 0% m/m (i.e., 1,615 thousand houses). Similar situation with new dwelling approvals -7.7% m/m up to 1,589,000 houses with a forecast -2.4% m/m (1,680 houses). Let’s note that there are always more permits than actually started construction, and this is a very serious indicator of the fall of new orders for industry. I recall that in a September review we noted that current data do not support seasonal autumn growth, which raises doubts about official GDP growth figures. The September figures confirm that we were right, and official statisticians were seriously wrong (though most likely consciously). However, the relatively positive forecast for September shows that the methods of estimating the state of the economy among official government experts are so disruptive that even in the forecast they cannot compensate for their own errors. With consequences for clients.
Let us note that in China (a long time ago, about 15 years ago, M. Khazin wrote that the US and Chinese economies are two sides of the same coin, and that the fall will be a joint one) the data is also getting worse. Gross Domestic Product (GDP) of China is only +0.2% per quarter:
And +4.9% per year, except for the COVID-19 failure in the first quarter of 2020, which was the lowest since 1990:
Industrial production +3.1% per annum, which was weaker than the worst rate of previous decades:
Investment also slowed down:
Note that these figures (both for China and for the US in the previous section) are official, that is, calculated on the basis of official inflation. If the plausible hypothesis (for the US it is not even a hypothesis, we have written a lot about it) about underinflation is true, the real data is even worse, both in terms of GDP and industrial production.
Annual growth in house prices in the 70 largest cities in China (+3.8%) is the weakest since February 2016:
The balance of industrial orders in Britain is the worst in six months:
And industry optimism is weakest in three quarters; the share of firms intending to reduce output and facing labor shortages has peaked since 1974/75:
United States Philadelphia Fed Manufacturing Index has become slightly weaker:
PMI (an expert index describing the state of the industry; its value below 50 means stagnation and decline in the corresponding industry) of the German service sector on a semi-annual trough (52.4 points):
The same situation in the Euro Area as a whole:
Here, the point made earlier is true: if real inflation is higher, then, correspondingly, the performance of the industry will get worse and worse. They’re already on the verge of recession. The leading indicators (the integrated index, which measures the state of the economy) in Australia fall from month to month for five consecutive months, and the project of activity for half a year went down for the first time in a year:
Sales in Canada’s manufacturing industry -3.2% per month – the worst performance since April 2020:
Canadian new buildings at the trough in 9 months:
Mortgage applications in the United States -6.3% per week after 0.2% earlier and -6.9% two weeks ago, though the loan rate only rose by 0.05%:
Britain’s budget deficit is rising again:
Not surprisingly, British pessimism peaked in eight months:
CPI (Consumer Price Index) of New Zealand in the 3rd quarter + 2.2% in the quarter – the highest since 2010. And +4.9% per year, this is the peak since 2011:
The Euro Area CPI +3.4% per year, the highest since 2008:
Excluding food, tobacco, alcohol and fuel (highly volatile components) +1.9% per year – also the top since 2008:
CPI of Canada +4.4% and per year – peak since 2003:
Without fuel and food + 3.7% per year – a record since 1989:
PPI (Producer Price Index) Germany 14.2% per year – a record since 1974; just a little more and a 70-year peak:
UK PPI +6.7% p.a., highest since 2011:
PPI of South Korea +7.5% per year, this is the peak since 2011:
The British retail sales suddenly collapsed – that’s the fifth negative monthly figure in a row:
Because of what the annual decline at the 7-month peak (-1.3%):
The Central Bank of China has left the rates in place, but intensifies the monetary pumping of the economy. The Central Bank of Indonesia has left everything as it was.
The Bank of Russia raised the rate by 0.75% to 7.50%. And the Central Bank of Turkey has cut the rate by 2% to 16%.
Summary. By the end of the summer, the world economy is moving downwards rather than upwards. This contradicts and is partly justified by the preliminary data provided by the statistical agencies of most countries: nothing makes the overall situation worse than general pessimism. But the real data was so bad that by mid-autumn they had to be acknowledged. Although the extent of this deterioration is far from clear.
We can only point out that what justifies government statisticians does not absolutely change the need for entrepreneurs to know the truth. It is for this reason that we are pleased to note that our assessments of the situation have been entirely adequate. And for that reason, we expect our clients to stay with us!
We wish all readers a productive work week and overcoming all kinds of problems!