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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (1287)	3/5/2004 11:43:28 AM
From: mishedlo	Respond to of 116555

Total borrowing in U.S. skyrockets March 4, 2004, 11:36PM New York Times The Federal Reserve reported Thursday that the nation's debt, including both household and government borrowing, grew last year at a pace not seen since the late 1980s. According to the quarterly federal funds report, the total national debt, excluding the obligations of banks and other financial institutions, grew by 8.1 percent last year, its fastest pace since 1988. Households threw caution to the wind, mortgaging and re-mortgaging their homes and expanding their debt by 10.4 percent, the biggest percentage gain since 1987. Federal government borrowing expanded by 10.9 percent, the fastest rate since 1992. Only businesses pulled back. Still hobbled by credit overhangs from the investment boom of the late 1990s, corporate borrowing inched ahead by 3 percent. Overall, the nation's debt grew by some $1.7 trillion last year to $22.4 trillion, the Fed said. The federal government accounted for about 18 percent of the total, local governments for roughly 7 percent, households for 42 percent and businesses for 33 percent. Creditors abroad financed about a third of the year's borrowing, equivalent to 5 percent of the nation's total output of products and services. A deep recession put a sour end to the 1980s credit bender, when huge federal budget deficits fueled double-digit annual growth in the federal debt. But economists are not willing to call how the current borrowing binge might play out. "There's a time-bomb issue," said Allen Sinai, head of Precision Economics, a consulting firm. "There are potential adverse consequences, but we don't know when." Even Fed Chairman Alan Greenspan declared himself at a loss to explain how a corrective could be applied to the current financial imbalances. "Can market forces incrementally defuse a worrisome buildup in a nation's current account deficit and net external debt before a crisis more abruptly does so?" the Fed chairman asked in a speech to the Economic Club of New York on Tuesday. Debt could hobble the economy. Sinai said household balance sheets seemed sound only because the price of household assets, like homes and stocks, were high and interest rates were low. But if interest rates were to rise sharply, for example, because businesses started borrowing again or a depreciating dollar primed inflationary pressures, "the picture could turn nasty in a hurry," Sinai said.

To: CalculatedRisk who wrote (1287)	3/5/2004 11:58:40 AM
From: mishedlo	Respond to of 116555

Germany: Slowing recovery Manufacturing orders went down by 2% m/m in January, posting their first monthly decline since May 2003, and their biggest decrease since March 2003. This drop was mainly due to the 6.8% m/m fall in orders for consumer goods (-6.6% for domestic orders and -6.9% for foreign orders). Other categories of orders declined as well in January, but to a lesser extent. Foreign orders recorded a sharp correction in January(-2.8% m/m), falling for the first month since July. In December, they surged by 4.6%, recording their sharpest increase since January 2003. Admittedly, the strength of the euro remains a downward risk to exports’ growth. Nevertheless, statistics of orders are very volatile and January results should not be interpreted as a reversal of the trend. Moreover, orders are translated into production and exports with a certain lag. Therefore, as foreign orders increased by 4.1% q/q in Q4-03 (their biggest quarterly rise since Q2-00), exports are expected to keep on rising in the first quarter of 2004. The internal situation is more worrying. Domestic orders fell again in January (-1.2% m/m after -0.9% in December and only +0.2% in November). The sharp fall in domestic orders for consumer goods underlines that prospect should remain cautious as concerns a potential rebound in private consumption. As we said earlier, the decline in unemployment observed between May and December 2003 does not indicate that the labour market situation has improved. Instead the registration of unemployed has become more selective. Employment continued to fall in December (-175,000 on a year-onyear basis) and unemployment picked up in January. The seasonally adjusted unemployment rate rose from 10.2% to 10.3%. Therefore, the rebound in retail sales recorded in January (+1.5% m/m in real terms according to Bundesbank data) does not mean that household have become more confident. In this context, the income tax cuts are still likely to have little impact on private consumption, which is expected to rebound only marginally in 2004. The weakness in private consumption and the underlying risks weighing on exports started to deteriorate business confidence. Leading indicators, like ZEW and IFO xpectations) fell back in January and February. This in turn weighs down on investment prospects. Domestic orders for capital goods fell for the second straight month in January. Thus, despite encouraging signs at the end of 2003 (investment in machines and equipment rebounded for the first quarter since Q3-00), investment is expected to pick up only moderately in the first half of 2004, delaying hopes of a major rebound in employment. All in all, even if the economic recovery is still on track, last set of statistics confirmed that the improvement of German economy will remain very modest this year. We still forecast GDP to rebound by 1.5% in 2004, after -0.1% in 2003, but this estimate could be downward revised, should exports prove less robust than expected. economic-research.bnpparibas.com

To: CalculatedRisk who wrote (1287)	3/5/2004 12:02:12 PM
From: mishedlo	Respond to of 116555

Payrolls disappoint again money.cnn.com M

To: CalculatedRisk who wrote (1287)	3/5/2004 12:05:37 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Clock is Ticking for Bush and Economy research.cibcwm.com

To: CalculatedRisk who wrote (1287)	3/5/2004 12:15:25 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Another Shocker Dr. Sherry Cooper, Chief Economist sherry.cooper@bmonb.com This morning's employment report for February was much worse than expected, rising only 21,000 rather than the 130,000 expected. Even the household survey, which has been much stronger for the past year, showed a net job loss of 250,000 and all historical revisions were downward. Manufacturing employment, at -3,000, was weaker than the buoyant Institute for Supply Managers surveys would have predicted, but at least the factory workweek was up and the unemployment rate was unchanged at 5.6%. This marks the fourth month in a row when the economists' consensus for payrolls was much too optimistic. And, it is certainly bad news for the Bush Administration, as John Kerry will no doubt hammer home the disappointment, repeating everywhere that George W. Bush is the first President since Herbert Hoover and the Great Depression to preside over a net job loss (of 2.3 million jobs). This also postpones the timing of any Fed tightening, as evidenced by the enormous rally in bonds. U.S. ten-year yields have fallen to their lowest level in 8 months, currently just over 3.86%. Business hiring surveys have pointed to imminent job growth for some time. Layoffs are down, and so are initial unemployment insurance claims. Purchasing managers report strong order books and employment gains, and inventories are at a record low level relative to sales. With chain store sales strong in February, and productivity growth slowing in the fourth quarter, you would have to expect that job growth will "pop", as Alan Greenspan says, any time now - unfortunately, not yet. Consumer sentiment surveys have trended downward since the beginning of the Democratic primaries. With the Democrats and the media reminding us daily of the weak job picture and offshoring of jobs to China and India, consumers report that jobs are hard to get. No doubt, this is true. Businesses are clearly using their existing labour forces more intensively as hours worked rise. But there is only so much longer that this can go on. No question, however, the Bushies must be very nervous. This can't be good for the U.S. dollar, which has posted three consecutive weeks of gains, nor is it good for the stock market. In the meantime, however, bonds are rejoicing and the Fed remains on the sidelines. bmonesbittburns.com

To: CalculatedRisk who wrote (1287)	3/5/2004 12:27:37 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Roach The last paragraph is the key paragraph. Here goes: With risks of new asset bubbles rising, there is a growing urgency for a normalization of US interest rates. Unwinding an ever-dangerous carry trade is a small price to pay to avoid the most treacherous endgame of all. America, in my view, is probably only one bubble away from outright deflation. Paul Volcker had the courage to stand up to inflation in 1979. Now it’s up to Alan Greenspan to wage an equally heroic battle. morganstanley.com =================================================================== Unfortunately the "remedy" he suggests would quickly bring it on. Mish

To: CalculatedRisk who wrote (1287)	3/5/2004 12:36:15 PM
From: mishedlo	Respond to of 116555

Yet another Snow Job Snow: Economy improving HOLLYWOOD, Fla. (Reuters) - Economic activity is gathering steam, but excessive reliance on imported oil poses a threat not only to growth but also to national security, Treasury Secretary John Snow is set to warn Friday. money.cnn.com ====================================================================== Let's get our blame in first. gggg Where is that $18 oil from Iraq anyway? Perhaps we need to invade Saudi Arabia, since Iraq did not help things much. Mish