June 22-28, 2024
Big news. The final data on the GDP deflator for the first quarter of this year has been released. Recall that the GDP deflator is a measure of aggregate price changes in the economy:
Рис. 1
The result was quite decent, 3.1% in annual terms. But two things can be noted. The first one is that the deflator increased sharply compared to the previous quarter. The second is that the methodology was not changed and the assessments of Larry Summers and his group (https://fondmx.pro/en/weekly-wrap/no-signs-of-improvement-found/) were not taken into account in any way. And if you consider…
In fact, this study said that real inflation in the US is about 10% (we won’t get into the details, our estimate is even worse) or 2.5% per quarter. If inflation for the first quarter is 0.8%, then to correctly assess the growth of the US economy, you need to subtract 1.7% from the official value. GDP growth in the first quarter was 1.4%, which means the real value is approximately -0.3%. Or a decline of 1.2% per year…
If we take into account all other effects (increased GDP indicators and estimates of real inflation), we get exactly our estimate of -6% of GDP per year. By the way, it correlates with the indicators of the main countries of Western Europe. But even based on Summers’ data, the decline is quite substantial. And, most importantly, it has been running for almost three years, since the fall of 2021.
This means, by the way, that using the cyclical term “recession” to describe the phenomena occurring in the US economy is quite pointless; the review cannot continue for so long and it cannot be so, so to speak, “even” – a fairly stable rate of decline. This is a typical structural crisis, which Mikhail Khazin described in detail in the book “Memories of the Future,” which was published in 2019.
In general, for now we can only state that even according to official data, inflation is not going to decrease, and even according to the figures already legalized by the American establishment, there is a steady economic decline in the country.
Macroeconomics. Dutch GDP -0.1% per quarter, 4th minus over the last 5 quarters:
Рис. 2
And -0.7% per year, the 4th minus in a row and only 0.1% from the 11-year minimum (excluding covid):
Рис. 3
Argentina’s GDP -2.6% quarterly, 6-year low (not counting Covid):
Рис. 4
And -5.1% per year:
Рис. 5
Industrial sales in Italy -2.0% per year, 13th negative in a row:
Рис. 6
The balance of orders in British industry has been in the red for 23 months in a row; external demand at the bottom since February 2021:
Рис. 7
The index of industrial activity in the Texas Fed zone in the US has been negative for 26 months in a row (in 2007/09 it was 27):
Рис. 8
In the service sector of the same region there is a 25th minus in a row (and this is a record; in 2007/09 there were 24 months):
Рис. 7
Business confidence in Italian manufacturing is at its lowest for 11 years (excluding Covid):
Рис. 8
Very close to the same minimum is the same indicator for the eurozone industry as a whole:
Рис. 9
Sales of new buildings in the US -11.3% per month, the worst dynamics in 20 months:
Рис. 10
The indicator has dropped to the levels of 2017/19, as well as the 1960/90s; from covid peaks already -40%:
Рис. 11
Pending existing home sales in the US are the worst on record, not counting 1 month in the spring of 2020 (due to Covid):
Рис. 12
The trade deficit in the United States exceeded $100 billion per month and rushed to record highs:
Рис. 13
This is about the restoration of industry. It may be recovering in certain industries, but in general, domestic demand is increasingly being satisfied by imports. And taking into account the real decline in GDP, we can confidently speak about a fairly rapid decline in industry.
China’s current account surplus is the smallest in 4 years:
Рис. 14
Let me remind you that negative balance of payments indicators around 2019 against the backdrop of high trade balance indicators were evidence of the use of foreign exchange earnings to sterilize the excess money supply within China. Today we are again approaching a similar picture, which quite possibly indicates that the threat of high inflation has begun to grow in the country against the backdrop of growing domestic economic stimulation.
Credit in Norway +3.1% per annum, 29-year minimum:
Рис. 15
The number of unemployed in Germany has been growing for 18 months in a row and for 25 of the last 26 months:
Рис. 16
It updated the 9-year top (not counting Covid, although its peaks are already nearby):
Рис. 17
And the unemployment rate is the highest in 8 years:
Рис. 18
The number of unemployment benefit recipients in the US has reached its maximum since the fall of 2021:
Рис. 19
Applications for unemployment benefits in France +40.9 thousand per month; not counting covid surges, this happened the last time 10 years ago:
Рис. 20
The Swedish Central Bank left rates unchanged, but promises to cut them 2-3 times in the second half of the year. The percentage remains unchanged in Turkey, but there are threats of new increases there. In Mexico, everything simply remains the same.
Main conclusions. Political news in the US and EU overshadowed economic news this week (well, what about inflation against Biden and Trump). However, the picture of the structural crisis continues so close to the theoretical canons that one can only be surprised! In fact, today it can be noted that the optimistic official picture has no relation to reality; the unofficial optimistic one (according to Summers) corresponds to a slight but steady decline.
And the unofficial pessimistic one, corresponding to the calculations of the Mikhail Khazin Foundation for Economic Research, shows a serious (0.5% per month) decline. Who to believe is, of course, a personal matter, but over the past 20 years we have made virtually no mistakes in macroeconomic assessments (we have made mistakes in terms of timing).
By the way, there is another interesting effect. Consumer inflation and the GDP deflator turned out to be suspiciously close in the US (no subtleties, 3%). But in industry as a whole there is virtually no price increase:
The share of industry in US GDP is about 20%, the share of private demand is slightly less than 70%. If there is no price increase in industry, then this means that to get 3% in the GDP deflector, the growth in consumer prices needs to be higher, somewhere around 4%… But that’s okay, such contradictions emerge at every step when statistics are falsified.
In general, the holiday season is approaching and we wish our readers the most enjoyable holiday!