Global Investing

Olympic medal winners — and economies — dissected

The Olympic medals have all been handed out and the athletes are on their way home.  Which countries surpassed expectations and which ones did worse than expected? And did this have anything to do with the state of their economies?

An extensive Goldman Sachs report entitled Olympics and Economics  (a regular feature before each Olympic Games) predicted before the Games kicked off that the United States would top the tally with 36 gold medals. It also said the top 10 would include five G7 countries (the United States, Great Britain, France, Germany and Italy), two BRICs (China and Russia), one of the developing countries it dubs Next-11  (South Korea), and one additional developed and emerging market. These would be Australia and Ukraine, it said.

Close enough, except that Hungary took the place of Ukraine as the emerging economy in the Top 10 and the United States actually took 46 gold medals — more than Goldman had predicted.

Goldman Sachs quite rightly pointed out in its report that progress and improvement in economic growth have historically equaled progress in sport  –check out South Korea’s 13 golds in London compared with none in Munich 40 years ago; its per capita income is now $23,000 compared with $2,300  back then.  Clearly wealth is key: hence 9 of the top 20 medal winning nations also have among the highest per capita incomes.

Second, countries with a socialist past (or present) also usually put up a strong showing even if the people are poorer — 8 of the top 20 from London are either communist (China, Cuba and North Korea)  or ex-Soviet bloc (Russia, Hungary, Kazakhstan, Ukraine and the Czech Republic).

Three snapshots for Thursday

The Bundesbank is preparing to stomach higher German inflation than it likes, above the European Central Bank’s target level, because of the euro zone crisis, a source at the central bank said on Thursday.

Although the Bundesbank still wants stable prices across the euro zone, its latest comments show the bank recognises that upward pressure on German wage costs and property prices suggest its inflation is likely to rise above the bloc’s average.

As this chart shows, historically the Bundesbank was quick to react to any signs of inflation:

from MacroScope:

UK recession in charts

Britain's economy slid into its second recession since the financial crisis after official data unexpectedly showed a fall in output in the first three months of 2012:

Starting real GDP at 100 in 2003 for the UK, U.S. and euro zone shows UK GDP flat since mid-2010 and well below the 2007 peak.

Survey data had been suggesting a stronger GDP number and perhaps points to upwards revisions to come.

Three snapshots for Wednesday

Spanish house prices fell 7.2 percent in the first quarter from a year earlier while Spanish banks’ bad loans rose to their highest level since October 1994 (see chart).

The Bank of England is poised to turn off its money-printing press next month. Minutes of the Bank’s April meeting, combined with a stark warning on inflation from deputy governor Paul Tucker on the same day, signalled a sharp change in tone that could bring forward expectations for interest rate rises.

Does the E in PE need a reality check too?

 

Three snapshots for Wednesday

Markets starting to worry about an end to QE/LTRO liquidity?

 

Forward looking PMI data is starting to show a divergence between the UK and the euro zone:

German factory orders, which tend to lead GDP growth, fell 6.1% in February from the previous year.

Three snapshots for Tuesday

A good sign for UK growth – activity in Britain’s construction sector unexpectedly accelerated in March, the Markit/CIPS  Purchasing Managers’ Index rising to 56.7 from February’s 54.3.

An update on cross-asset performance this year as we head into the 2nd quarter:

Equity risk premium by region:

 

Three snapshots for Wednesday

Spanish stocks jump out as the only only major equity market to miss out on the strong first quarter:

Euro zone money supply growth picked up in February but growth in private sector loans dipped.

The UK faces bigger hill to climb after fourth quarter GDP cut.

Three snapshots for Wednesday

Saudi Arabia has repeated publicly it would prime its pumps to meet any shortfall in exports from fellow OPEC member Iran, this chart shows their production since 1980:

Unwelcome news for British finance minister George Osborne ahead of today’s budget – February public sector borrowing comes in at £15.2bn against expectations for £8bn.

Along with the rise in bond yields, expectations for interest rates at end 2013 and 2014 have started to pick up: