MacroScope

Spanish sums

Spanish third quarter GDP figures tomorrow are likely to confirm the Bank of Spain’s prediction that the euro zone’s fourth largest economy has finally put nine quarters of contraction behind it, albeit with growth of just 0.1 percent.

Today, we get some appetizers that show just how far an economy with unemployment in excess of 25 percent has to go. Spanish retail sales, just out, have fallen every month for 39 months after posting a 2.2 percent year-on-year fall in September, showing domestic demand remains deeply depressed. All the progress so far has come on the export side of the balance sheet.

Spain’s public deficit figures, not including local governments and town halls, are also on the block. The deficit was 4.52 percent of GDP in the year to July and the government, which is aiming for a 6.5 percent year-end target, says it is on track.

Spanish borrowing costs have been falling and outperforming those of Italy but yesterday, Italian two-year yields hit a five-month low at an auction of zero coupon bonds, so there is no sign of debt-raising problems there either despite all the country’s economic and political troubles. Today, Rome is back with up to 8 billion euros of Treasury bills. On Thursday, it will auction up to 6 billion euros of five- and 10-year bonds.

It would be a mistake to take that as a sign of smooth running. After Silvio Berlusconi’s failure to pull down the government, Prime Minister Enrico Letta has some time to push through economic reforms, cut taxes and spending in an effort to galvanize activity. But already the politics look difficult.

Fed on guard over low U.S. savings rate

As Federal Reserve Chairman Ben Bernanke delivered what may have been his last testimony on monetary policy before Congress, most of the world’s attention was focused on what hints he might give about the timing of an eventual reduction in the pace of asset purchases.

Tucked in the actual semi-annual monetary policy report Bernanke delivered to lawmakers on Capitol Hill was a little-noticed reference to growing worries about the potential for an extended period of low savings, associated in part with long-stagnant wages, to thwart long-run economic progress.

Total U.S. net national saving – that is, the saving of U.S. households, businesses, and governments, net of depreciation charges – remains extremely low by historical standards.

Here come the downward U.S. GDP revisions again

It’s become an uncanny, almost seasonal pattern over the last few years: The economy perks up as a new year kicks into gear only to flail again by the time summer comes around.

It must be that time of year. A very weak U.S. retail sales report for June forced economists to again take an axe to their already meager forecasts for economic growth this year. Stephen Stanley at Pierpoint Securities, suggests the figures are beginning to dip dangerously close to contraction.

I have been near the bottom of the range of estimates on Q2 GDP for the last month or two and it seems like we are all chasing the data lower. Before today, I had about 1% for Q2 real GDP. The awful retail sales figures coupled with somewhat higher-than-expected inventories tally takes me down to +0.6%.

U.S. retail sector perks up

One month’s data may not a trend make. Even so, this morning’s batch was pretty solid. U.S. retail sales rose 1.1 percent in February, the biggest gain in five months, and January’s numbers were revised up. Some of the rise reflected higher gas prices, but much of it appeared to be real.

The National Federation of Independent Businesses’ small business optimism index also rose, for a sixth straight month.

Eric Green at TD Securities says that as far as potential revisions to GDP forecasts, he’s keeping his powder dry for now:

Spy-in-the-Sky Data

Tuesday’s release of U.S. retail sales data could be more interesting than usual. Of course, it will give a hint about latest U.S. consumer spending patterns. But it may also give some idea of the effectiveness of a decidedly 21st century economic model — satellite data collecting. MallThomson Reuters Proprietary Research reported in late November that remote sensing metrics of U.S. shopping mall car parks correlate well with same-store sales data. Essentially, looking down on malls and seeing how many cars there are could give an early view of what the sales are likely to be. The conclusion from looking at the 10 weeks prior to the Black Friday, post-Thanksgiving weekend and comparing it with 2008 and 2009,  was that car park traffic in November points to stronger same-store sales. The monthly fill rate — the percentage of car park places – peaked at 53.0 percent on Black Friday, compared with 46.6 percent a year earlier. An index used by the Thomson Reuters team to gauge retail sales, was up 3.5 percent for November, compared with 0.5 percent a year earlier and -7.8 percent in November 2008.

Economy signs: Better-than-expected means what?

A customer counts his cash at the register while purchasing an item at a Best Buy store in Flushing, New York March 27, 2010.  REUTERS/Jessica Rinaldi Better-than-expected retail sales data eased recession fears today but not by much. The lukewarm reaction from many analysts doesn’t exactly paint a clear picture for the economy.

“I think the number is OK. Sentiment had gotten so negative that a more mediocre number like this isn’t terrible,” said James Dailey, portfolio manager for TEAM Asset Strategy Fund.

Retail sales data beat expectations but an analysis by Anooja Debnath and Emily Kaiser points out that even the expectation water-mark is not as clear as it once was. Economic forecasts are all over the map and the consensus forecast does not necessarily represent what most economists think.

Crouching Buyer, Hidden Bargain

The terrible U.S. retail sales  racked up in December — called a “horror show” by ING — were all the more gruesome because of the sales on offer to customers in the run up to Christmas. Shops weren’t exactly giving things away, but their generosity knew few bounds.

Consider the experience of one visitor to a heaving handbag department in a Maryland Macy’s.
 
    Customer: “I would like to buy this handbag please. Oh dear, it appears to be the only one that is not on sale.”
    Salesman: “So it is. Tell you what, sir, I’ll give you 15 percent off anyway.”

Happy customer, happy new handbag recipient, unhappy sales figures.

Jack’s shoes

Florsheim mens shoes are reasonably classy. They were imortalised, for example, by snappily dressed Jack Nicholson in Roman Polanski’s “Chinatown“. He was rather distressed, film buffs will recall, by what a flood drainage canal did to them.

So it was something of a sign of the times last week that a visitor to a normally genteel Florsheim shoe shop in a Maryland mall got the hard sell from two salesman. Simply popping in to ask a question, our hero was essentially told — firmly — that he could not afford to leave without purchasing some footwear. The price was right, he was told.

No shoes were purchased, as it happens, but the pitch was nonetheless enlightening as a sign of desperation. The mall was relatively empty, despite cut down sales at nearly every shop. Very few people were buying, judging by the shopping bags. Sales staff everywhere looked pretty lonely.