MacroScope

from Raw Japan:

Spring blossoms or just a break from winter?

It's official: Japan's economy shrivelled at a record pace in the first quarter.

Needless to say the 4.0 percent contraction in GDP (an annual rate of 15.2 percent, if you speak American) from January to March was not pretty -- especially when you see that the pain has spread from Japan's big autos and tech factories to the broader economy.JAPAN-ECONOMY/

Much has been written about Japan's heavy dependence on exports from its powerful manufacturers and how the slide in orders from the United States and Europe has forced factories to curb output, lay off staff and slash capital investment.

But that GDP figure is looking backwards to a time we know was bleak for the economy.

Just as the West is looking for signs of "green shoots" of new growth to see if the worst is over, so Japan is looking to see if its economy is now starting to sprout cherry blossoms -- the traditional sign of spring in this part of the world.

The good news is that companies are starting to see a tentative pick-up in sales.

What goes down must come up

Like every recession before it, this slump will end. Some day. JPMorgan economist Bruce Kasman thinks that day may come sooner than expected.

“In what feels like the first time since the Babylonian era, we are making an upward revision to our U.S. GDP forecast,” he wrote in a note to clients.

He now sees the economy contracting at a modest rate in the current quarter, which ends in June, with growth resuming in the third quarter. By the middle of next year, he thinks GDP will be growing at a 4 percent rate. That ought to be strong enough to generate jobs (although JPMorgan made no change to its unemployment forecast, which shows the rate peaking at 9.5 percent in the fourth quarter).

Don’t let ‘green shoots’ stop the stimulus

The Federal Reserve should not interpret signs of moderation in the U.S. recession as a reason to stop its emergency measures to heal the economy and financial markets, according to Payden & Rygel economist Thomas Higgins.

“An often overlooked danger is that policymakers may cut back on monetary and  fiscal stimulus too soon. This is what happened in Japan in the mid-1990s and in the United States during the Great Depression of the 1930s,” he wrote in a research note.

In that context, Higgins said the Fed missed a chance to stay ahead of the curve by not announcing an increase in its purchase of Treasuries, thereby allowing benchmark bond yields to climb above 3 percent.

Recessions are so hard on the rich

The global recession is taking a severe toll on luxury goods, with LVMH — owner of Dom Perignon, Louis Vuitton and De Beers — reporting sharp declines at its wines, spirits, watches and jewellery divisions.

However, not all luxury goods are suffering. LVMH’s fashion and leather goods enjoyed a rise in sales while Italian fashion house Prada closed 2008 in line with the previous year and said it planned further retail investments.

Luxury eating continues to suffer still. Over the past year a London Michelin-starred restaurant was put into administration and a celebrity chef’s restaurant holding was also placed into administration.

Welcome to the “He-cession”

As men bear the brunt of the economic downturn, could the so-called “he-cession” hold a silver lining for the opposite sex?

Men make up 82 percent of all recessionary job losses in the United States, according to a recent New York Times article, mostly due to declines in traditionally male fields like construction, where the unemployment rate skyrocketed from to 21 percent in March, from 12 percent a year earlier.

The unemployment rate for adult men was 8.8 percent in March compared to 7 percent for adult women.

More Americans expect to work until they die

If you were wondering what two years of wealth destruction have done to the American psyche, the Employee Benefit Research Institute has your answer.

They have conducted surveys asking (among other things) when people expect to retire. Back in 1991, a full 19 percent thought they’d be in full-time relaxation mode before age 60. The latest survey? Only 9 percent think they’ll be that lucky.

Just 17 percent now say they expect to retire at age 60 to 64, down from 31 percent in the 1991 poll. Nearly a third think they’ll be older than 66 before they stop working, up from 11 percent in 1991.

Green shoots, Easy Rider edition

OK, so a nearly 10 percent drop in U.S. sales is nothing to crow about, but it sure beats a 19.6 percent fall. Harley-Davidson’s stock is jumping today — and has more than doubled since March — because of stronger-than-expected earnings and a much smaller sales decline in its biggest market.

Sure, some may disagree, but a new Harley isn’t exactly a necessity. If Americans are a little more willing to buy one, that does lend support to the idea that the recession is at least loosening its grip on the world’s biggest economy.

So tell us, how are things looking where you live? A little spring green popping up or are those green shoots about to get trampled?

Of beige shoots and broken branches

Ben Bernanke has taken some flack for his argument that “green shoots” of economic activity might lurk around the corner. In one such swipe, Justin Fox of Time Magazine argued that the metaphor is flawed because what we’re really talking about is a moderation of contraction, not growth.

Today’s Beige Book, a collection of anecdotal economic evidence compiled by the Fed, showed only a few very faint positive signs. On housing, the report said the “number of potential buyers” was rising — not exactly a sure sign of a bottom.

But at least the New York Fed’s regional factory data suggested that the Fed chief’s green shoots might just see the light of day. Again, it was mostly a story about lesser deterioration, but an improvement nonetheless. Apart from a much better than expected reading on the overall index (which is still, it must be noted, at -14.65), there was a huge rise in the new orders index (Also still negative, but now at -3.88, from -44.76).

from Shop Talk:

Check Out Line: “Bipolar” sales could signal better April

Check out this deeper look at March's same-store sales results.

BLACKFRIDAY/Last week, retailers reported monthly sales that declined less than expected, a possible sign that shoppers may be regaining confidence to open their wallets after more than a year of recession.

On Monday, Lazard Capital Markets analyst Todd Slater offered his detailed take on the numbers, which he labeled as "bipolar"  -- with comp store sales more negative than expected, but earnings more positive.

"Many retailers raised guidance despite worse-than-expected March comps, an indication that analysts are now too negative and consensus estimates are low enough," he wrote. 

Canada dresses up for bears

For all the designer drinks and gourmet foods – from raw oysters to sushi, and the sea of men in expensive suits and bejeweled women in elegant gowns, the setting seemed fit only for celebration.

But dressed as they were to the nines, investors attending “A Night with the Bears” at Toronto’s upscale Elgin Theatre, were eager to hear the worst, on the edges of plush seats amid predictions of market doom from some of the continent’s savviest
financial minds.

“I only wish we’d sold tickets,” said a smiling Eric Sprott, arguably Canada’s best known hedge fund manager and chairman at Sprott Asset Management Inc, as he looked out at the 1,500 or so crowd.