Given that this week’s job-related (Claims) and consumer-related (Dec Sales) releases were disappointing, could it be that the party’s over, that anchors set earlier to provide a tether for clients’ trading or planning activities are now skating over the seabed, useless? No. Economists world wide will continue to miss relative strength in consumption, jobs and manufacturing activity, Q1. Knowing this up front provides a considerable leg up to desk operations.
First, unemployment applications are at their lowest level in three years. A bounce now and then can be forgiven, as long as we recognize it is not trend. And it is not. From a recent news story,
“Boeing is bringing in more than 100 union machinists a week for a 60 percent boost in output by 2014. Nissan Motor Co. (7201) will expand in Tennessee with 1,000 people making lithium-ion batteries. And a GE executive was at a Kentucky appliance plant before dawn this month to greet some of 500 new employees.” Bloomberg concludes, “The hiring reflects optimism among CEOs that the economy will continue to strengthen and more workers will be needed to meet demand.”
Next, has the consumer decided to withdraw? No. December was a dud but after all, 2011 was an all time record year for retailers. That doesn’t sound too bad. In a couple of regions, as the Fed noted, consumer activity is down right robust; in most areas it is not but it is more active than most ever imagined given poor wage gains. The consumer is optimistic. The consumer has moved the E-Z mess to the “norm” category. It is key for observers to understand this. Finally, the consumer will be cheered as wage gains follow better employment soon to come.
Next, we saw some evidence this week that Canada will do just fine, H1. Part due to her policy of energy development, part, linkage to the US and a good chunk is an administration which supports lower corporate taxes, fiscal discipline and free trade. And Canada surprised most analysts this am as she posted a trade surplus of $1 bln+ in November; exports jumped to a three-year high on booming energy shipments.
We saw further evidence this week that the E-Z will fall far behind the US and Canadian economies, 2012. (Even Germany will put in a surprisingly weak Q4, something we had predicted earlier.) Political solutions or not, the E-Z is going nowhere because bank credit will be withdrawn, H1, and likely beyond. We saw evidence of that this week as potential borrowers complain of bank reticence to lend. Of course they won’t lend; they’ll shrink their books to make way for the 9% tier 1 capital requirement set to be met by mid year.
Robert Craven
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