Mish's Global Economic Trend Analysis |
- Reader Question: Is China a Currency Manipulator?
- China Joins Currency War With Surprise Devaluation, Biggest One-Day Move on Record
- Productivity Remains Weak; Spotlight on Retail Store and Trucking; Are Productivity Measurements Accurate?
- Household Spending Projections Decline Again: Does the Fed Believe Its Own Surveys?
Reader Question: Is China a Currency Manipulator? Posted: 11 Aug 2015 03:59 PM PDT In reference to China Joins Currency War With Surprise Devaluation, Biggest One-Day Move on Record reader Martin writes ... Hi Mish,Significance The significance of Congress labeling China a currency manipulator is the likelihood that president Obama would have to hike tariffs on a number of Chinese imports. This would likely result in a tit-for-tat response by China. No one wins trade wars. Instead trade suffers. Manipulators
No one should point fingers here. They are all guilty Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
China Joins Currency War With Surprise Devaluation, Biggest One-Day Move on Record Posted: 11 Aug 2015 10:19 AM PDT Surprise Devaluation In a move sure to heighten trade tensions with protectionists in US Congress, Surprise China Devaluation Marks Escalation of Currency War. According to conventional wisdom, wars are easy to start and difficult to end. Similarly Beijing's devaluation, the biggest one-day currency move since 1993, represents the latest skirmish in an emerging battle which, analysts warn, may be hard to reverse.Yuan vs. US Dollar That may not look like much but it is a surprise 2% move. And it comes amidst a persistent trade deficit with China. I talked about the trade deficit on Sunday, in China's Exports Plunge 8% in July; Spotlight on US Trade Imbalance With China. Will protectionists in US Congress again threaten China with potential legislation to label China a currency manipulator? They shouldn't, but I expect the howls any minute now from Congress, the steel industry, and others. By the way, this desperate move by China's central bank is more proof of the weakness of the entire global economy. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Posted: 11 Aug 2015 09:26 AM PDT Economists expected bounce in productivity, and got one, but it was a bit weaker than than the Bloomberg Consensus Estimate of 1.6%. A bounce back for output gave first-quarter productivity a lift, up a quarter-to-quarter 1.3 percent vs a revised decline of 1.1 percent in the first quarter. The bounce in output also held down unit labor costs which rose 0.5 percent vs 2.3 percent in the first quarter.Productivity vs. Unit Labor Costs Productivity Dry Spell MarketWatch reports Productivity Dry Spell Looks Worse in Latest Report The dry spell of productivity in this economic expansion is even worse than previously thought, according to new data released Tuesday.Workers Learn Not to Work Hard? The above comments on productivity are incredibly funny. The most ridiculous notion is the Fed will hike because low productivity means higher inflation. Good grief. The Fed wants higher inflation. And inflation (as measured by the CPI) has consistently been under the Fed's 2% target. Of course the CPI measurement is a piss poor measure of inflation in the first place, but it is what the econo-clowns at the Fed believe in. And what about notion "workers learn not to work hard"? That seems ridiculous as well. What if the workers simply are not any good, or are good and cannot get much better? Retail Store Productivity Have retail stores expanded so much that companies have to hire marginal workers just to staff them? How many in retail have totally useless college degrees and a lack of real skills? What skills are even needed to take an order for a burger, or scan an item at the register? That question we can answer: almost none. Productivity would go up if a scanner could ring up an entire basket at one, and the person behind the register was made redundant. Trucker Productivity On June 21, I noted the Most Common Job in 29 States is Trucking. The NPR claims the most common job in 29 of 50 US states is truck driving. This seems a bit overboard, and depends on how jobs are categorized, but here is the chart. As with retail, short of automating trucks and firing truckers, there is scant room for increased productivity. Software mapping of the best routes is not likely to get much better. When trucks are fully automated, productivity will soar, but the industry will lose millions of jobs. Are Measurements Accurate? Many question the measurements. So do I. But which way do they go? Up or down? With so many working in retail and trucking, until masses of people are fired, productivity just may stagnate. Alan Greenspan said Monday that weak productivity is the most serious problem that confronts the U.S. I disagree. The most serious problem clearly is a debt overload everywhere one looks (students, households, subprime auto loans, corporations going into debt to buy back their own shares, etc.) For that blame the Fed. One can also blame the Fed for its loosey-goosey monetary policy and nonsensical 2% inflation target. Increases in productivity are inherently price-deflationary: More goods produced quicker should result in falling prices as well as higher standards of living. That's a good thing. But the Fed does not want falling prices. It wants unit labor costs to rise. The catch is the higher the unit costs, the more incentive there is to get rid of workers. The Fed just may not want the next major advancement in productivity because of what it will do to jobs and prices. But that is just around the corner led by fully automated trucks, buses, and cabs. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Household Spending Projections Decline Again: Does the Fed Believe Its Own Surveys? Posted: 11 Aug 2015 01:28 AM PDT Economists in general, but especially those at the Fed, continue to state a belief that the current economic weakness is transitory. And the near-universal economic forecasts predict increases in consumer spending due to wage increases and low gasoline prices. However, if you ask consumers what they believe they will spend, that answer is in sharp contrast to what economists expect. As I did in May, I downloaded household spending projections from New York Fed's Survey of Consumer Expectations. Here is a chart from the downloaded data. Let's take a look. Household Spending Projections click on chart for sharper image Month to Month Changes
The absolute numbers are not that important because month-to-month numbers swing a bit. Yet, it's easy to see a change starting late last year in the median and low projections. The high end projections have been in decline for even longer. These trends are very recessionary looking, but the Fed does not believe its own surveys. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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