MacroScope

Spain’s early bath a surprise to economists

worldcup.jpg

Much the same as economists often struggle to accurately predict data releases, their initial thoughts on how the soccer World Cup will pan out also appear to have been misguided.
While Brazil, the clear favourite to win in a Reuters poll of over 120 football-loving market analysts, is clinging on after a nil-nil draw with Mexico on Tuesday it’s a different story for Spain.

 

They were a firm favourite to appear in the final against the home nation but crashed out of the tournament in spectacular style on Wednesday after a shock 2-0 defeat by Chile.

“It was very disappointing last night,” said Tom Rogers at Oxford Economics, who had picked the Spaniards to lose in the closing match to Brazil.

 

Don’t stop fighting inflation, banks tell Brazil policymakers

Brazil's Central Bank President Tombini reacts during a ceremony to announce Measures of Consumer Protection at the Planalto Palace in Brasilia

A small piece of good news on Brazil’s inflation rate last week probably gave the central bank its best pretext yet to finally stop raising interest rates after more than one year of non-stop increases. But economists still think it’s too early to proclaim “mission accomplished”.

Keeping interest rates at the current 11 percent will do little to reduce inflation in the months ahead, economists at Itau Unibanco, Santander and Bank of America Merrill Lynch said, despite a smaller-than-expected increase in consumer prices last month.

Their pessimistic outlook contrasts with the central bank’s, which has signaled it is willing to stop raising rates soon by saying that the 375-point increase since April last year was “sizable” and is yet to have a meaningful effect.

from Global Investing:

Which BRIC? Russia scores late goal for 2010

How quickly times change. Russia's stock market, unloved for months, last week overtook India to be the best-performing of
the four BRICs.  The Moscow stock index jumped 5 percent last week, posting its biggest weekly rise in seven months, bringing
year-to-date gains to 17.5 percent. Fund managers such as Goldman Sach's Jim O'Neill, creator of the BRICs term, are predicting it will lead the group next year too.

SOCCER-WORLD/

So what's with the sudden burst of enthusiasm for Moscow? One catalyst is of course soccer body FIFA's decision to award
the 2018 Soccer World cup to Russia. Investors are piling into infrastructure stocks, with steel producers especially tipped to
benefit as Russia starts building stadia, roads and hotels.  But the bigger factor, according to John Lomax, HSBC's head of emerging equity strategy, is the optimism that has started creeping in about U.S. -- and world economic growth.

Some of that may have been dampened by Friday's lacklustre U.S. jobs data. But overall, checks of U.S. economic vital signs show the economy looking sturdier than it was six months ago and most banks, including the pessimists at Goldman Sachs, have upped 2011 growth forecasts for the world's biggest economy. And China and India are continuing to grow at rates close to 10 percent.  All that is great news for the commodity and oil stocks -- the mainstay of the Russian market. Merrill Lynch, for instance, expects oil prices to be $10 higher by next December than now.

Did the World Cup stimulate German growth?

 Did the World Cup stimulate economic growth in Germany?
 SOCCER WORLD/
That’s the $3.6 trillion question on the minds of economists after the Ifo institute reported on Friday  that business sentiment in Europe’s largest economy surged by a record margin in July — a month of fun in the sun for tens of millions of enthralled Germans who cheered their team’s improbably strong run to the semi-finals of the World Cup in South Africa.
 
Can a soccer tournament half a world away really have a notable impact on Germany’s 2.5-trillion euro ($3.6 billion) economy? Can a few exciting wins in the international soccer tournament really turn notoriously tight-fisted Germans into free-spending consumers? When I posed those questions at the start of July — just after Germany had thrashed England 4-1 in the round of 16 — I ran into some  scepticism. 
 
But there were also a few contrarian economists out there who also thought the good mood spreading across the country thanks to the lopsided victories in South Africa — and especially the exciting way the young team filled with immigrants to Germany — might lead to slightly higher growth. I’ve lived in Germany for over 20 years and long watched the way so many of them so diligently squirrel away  such significant chunks of their money — as if the next world war or great depression were looming around the corner.

Debt is a four-letter word for many Germans, who it seems would rather save than spend. But every once in a great while, they let loose. And you could feel that happening as the World Cup fever swept the country in June and early July.
 
So after Germany then brushed Argentina aside 4-0 in the quarter-finals with another magnificient display of attacking football that sent the 42 million Germans watching on TV and at giant public viewing venues into fits of euphoria, I cabled in this story “World Cup fever fuels German growth hopes” to the head office in London on July 5: “Germany’s strong run in the World Cup may be the catalyst for a growth spurt by Europe’s largest economy, as consumers riding the ‘feelgood factor’ of national success dip into their savings and start spending again.”
 
I managed to find a few economists who thought GDP could indeed be boosted by one to three percentage points thanks to the World Cup-induced positive sentiment prevailing. Germany lost their next match in the semi-finals to Spain. But it didn’t really matter any more because the party was still roaring back home in Germany.
 
On Friday, the prestigious Ifo economic research institute announced that its business climate index in July rose to 106.2 from 101.8 in June, its highest level in three years and the biggest one-month gain since Germany reunited 20 years ago. It was also the first time since early 1997 — more than 13 years ago — that the Ifo gauge of morale among retailers broke into positive territory.
 
“Germany is in a party mood,” said Ifo President Hans-Werner Sinn.  A report by my colleague Dave Graham (link here) quoted Commerzbank economist Ralph Solveen saying: “These numbers are just insane.”
 

The octopus and the economists

What do an eight-legged creature in an aquarium in Germany and 74 economists have in common? The consensus view that Spain would claim the World Cup — until the economists, as they so often do, changed their minds.

worldcup.jpgIf World Cup 2010 goes down as one of the most unpredictable and exciting competitions in recent history, bringing underdogs Holland and Spain to the final showdown, what was hopelessly routine was watching so-called expert opinion converge around the safest bet. At least among financial professionals, who have done so well of late predicting the future.

When Reuters first surveyed economists and forecasters in May on which team would be kissing the golden grail on July 11, 2010  in South Africa, it made for interesting reading. Spain would take it — by a narrow margin, it has to be said — followed by Brazil, Argentina and England. Improbable probability analysis, perhaps, but not boring.

Pass Jean-Claude Trichet a vuvuzela

Give European Central Bank President Jean-Claude Trichet a vuvuzela.
Having previously confessed ignorance on all things soccer the ECB chief finally appears to have been bitten by the World Cup bug.
He did a Ronaldo-style double step-over when asked who he would cheer for in Sunday’s final between Spain and the Netherlands but admitted he enjoyed Spain’s slick defeat of Germany the previous evening.
“The last match was beautiful I have to say,” Trichet enthused at the bank’s news conference.
The comments were greeted with laughter by the clutch of international journalists in the audience. Realising that he may have sounded a little too happy about Germany’s loss he quickly backpedalled.
“I don’t have any judgment on the result of the match. I said that it was a beautiful match obviously. And the two teams were very beautiful on the field.”
Germans called for Paul the now infamous “the oracle” octopus to be thrown on the BBQ after he predicted the defeat. Mr Trichet could be next in line. Then again there are economists who would argue that Spain needs ECB support at the moment.

from Shop Talk:

World Cup is no March Madness in sapping productivity

cup1It may be the World Cup, but when it comes to sapping productivity in the United States the global soccer tournament still has a thing or two to learn from March Madness and the National Football League.

Outplacement firm Challenger, Gray & Christmas, which often measures lost workplace productivity, said many U.S. fans will tune in for the quadrennial soccer tournament, which kicks off Friday in South Africa, but the event still trails the NCAA men's basketball tournament, dubbed March Madness, and other events.

"Soccer simply has not caught on with the majority of American sports fans, Challenger CEO John Challenger said in a statement.