Mish's Global Economic Trend Analysis

Major Slowdown in Global Trade Coming Up; Think the U.S., China, Germany, or U.K. will Be Immune?
Portugal Car Sales Plunge 60% in December, 31% for Entire Year; Spain Car Sales Plunge 17.7% to 1993 Levels
Eurozone Manufacturing Contracts 5th Straight Month; New Orders Fall Faster than Output
Obama Signs Legislation Killing Bill of Rights; Ron Paul, Rand Paul, Rachel Maddow Skewer Obama; Road to Tyranny; Complete List of Senatorial Cowards Backing the Bill

Major Slowdown in Global Trade Coming Up; Think the U.S., China, Germany, or U.K. will Be Immune?

Posted: 02 Jan 2012 09:41 PM PST

Starting with events in the U.K., the Eurozone, and then on to China and Japan, this post will tie together various idea all suggesting a major slowdown in global trade is on the way.

U.K. Retailers Squeezed to Extinction

Sales reports from retail associations are subject to spin in any direction depending on whether their motive is positive to encourage shopping because "everyone else is", or negative, hoping to get tax breaks or other concessions from politicians.

In this case, the director of the UK's retail federation says retailers face being "squeezed to extinction". Given several retail bankruptcies and more expected, the story rings true.

Please consider Retailers face being "squeezed to extinction"

As many as 40,000 are expected to lose their jobs, with more forced to work on reduced hours, as the full force of the consumer slowdown starts to makes its effects felt on the high street.

After the collapse of Barratts Priceless, the shoe chain, Hawkin's Bazaar, the toy shop and D2 Jeans last week, a clutch of other names are expected to go to the wall, said Stephen Robertson, the director general of the British Retail Consortium.

"This feels, talking to retailers, that there is more pressure than there was back in 2008. Back then there had been a relatively good run up until that point, and sales were certainly down, but margins were holding up.

"This time, it's not just about the poor sales performance it's about the underlying profitability. We have seen a blizzard of deals and promotions, so gross profit margins will have been punished."

"It might not be an official recession, but we are in a retail recession," he said. Last month De Mello predicted 20,000 retail job losses in 2012, based on a 1pc rise in shop vacancy rates.

"Dear George" Ritual Lies About Price Inflation

Every few months, Mervyn King, Governor of the Bank of England has been forced to write to Chancellor George Osborne to explain why UK inflation is so much above target.

And every time, Mervyn King has trotted out the same set of excuses, proving the BOE (central bankers in general) do not really care about inflation mandates, they simply do what they want.

For a humorous analysis please consider Inflation: The truth about those Dear George letters

Many cultures have bizarre ceremonies which once had a function but become mere empty rituals. One of Britain's goes by the name of 'inflation targeting'.

Every year the Chancellor stands before the House of Commons and in his Budget statement declares he is instructing the Bank of England that consumer price inflation should be two per cent.

He does this in the full knowledge that he has no desire whatsoever that the Bank should actually try to get inflation to two per cent – because that would mean increasing interest rates to a level he thinks might threaten growth.

Every few months the Bank's Governor, Sir Mervyn King, writes to the Chancellor. His letters say, roughly: 'Inflation is above target, because we didn't try to get it to the target, because meeting the target would have been a bad idea.'

Chancellor George Osborne then sends a reply, which amounts to the following: 'Good. I'm glad you didn't try to meet the target I set you. You are quite right in thinking that would have been a bad idea.'

The arrangement has become a farce. In fact, during the past 45 months the consumer price index has been below two per cent in only six of them.

UK Price Inflation Peaks, Deflationary Pressures Mount

If Mervyn King hits his inflation target, he will not care much for the reasons why:

UK Retailers are in a massive price squeeze, unable to pass on costs
Huge numbers of layoffs are coming up
UK Manufacturing is in contraction second straight month
All of Europe is headed for a nasty, prolonged recession

By the way, the impacts of the above four points on the UK deficit will not be pretty, However, if it's any consolation, I believe UK price inflation peaked in October at 5%.

Official Recession Coming Up

The recession many not be "official" just yet, but it has likely already started with the UK PMI in a second straight month of contraction.

Figures from the seasonally adjusted Markit/CIPS PMI recorded a UK manufacturing sector contraction of 47.6 in November; this is the lowest recorded level since June 2009.

Commenting on the report, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: "It looks like it's going to be a bleak winter for UK manufacturers with the PMI showing very little to be positive about at the moment. Exports orders, which UK manufacturers are increasingly dependent on, continue to decline as the Eurozone crisis impacts demand in US and Asia as well as Europe.

Slowdown in European Trade Coming Up

In general, Eurozone nations are in deep trouble because of tax hikes and various austerity measures. Indeed, all of Europe is in trouble, even the non-eurozone countries like the UK and the trade surplus countries like Germany.

Sampling of Links to Consider

Slowdown in Global Trade Coming Up

Any country dependent on European sales is in trouble and that includes China.

In turn, China will need fewer imports of raw materials from places like Australia and Canada. China will also need less technology from Japan and that has Japan worried.

Please see Japan Proposes Nonsensical Deal to China: "I'll Loan You a Nickel if You Loan Me a Nickel"; Japan Worries About Servicing Its Debt for details.

Think the US will Be Immune?

One has to be a major Pollyanna to think the US will be immune from all of this.

I can already show the US has been impacted: China to Withdraw Support for Foreign Investment in Autos; Three Reasons China Will Not Be a Boon to Global Auto Sales

Chinese Regime Change Dynamics

To top it off, a regime change is coming this year in China. It is highly likely China will be a shift away from construction, real estate, and fixed investment as a means of growth and that too will reduce China's needs for commodities from Australia as well as truck equipment from Caterpillar.

For a look at Australia, please consider 4 out of 5 Australians Worry about Debt; New Reality - Owing More on Your Home Than You Own; Shocking Year for Corporate Collapses

This macroeconomic chain-of-events portends a major slowing in global trade with huge worldwide consequences and missed budgets everywhere you look.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Portugal Car Sales Plunge 60% in December, 31% for Entire Year; Spain Car Sales Plunge 17.7% to 1993 Levels

Posted: 02 Jan 2012 04:04 PM PST

Things are not starting off on a good foot for Portugal or Spain, the two countries where the European sovereign debt crisis is most likely to strike early in 2012.

Portugal Car Sales Plunge 60% in December Compared to Year Ago

Via Google Translate, please consider The sale of passenger cars dropped 31.3% in Portugal in 2011

The sale of passenger cars in Portugal fell to 31.3 percent in 2011 compared with the previous year to sell a total of 153,433 units, reported the Automobile Association of Portugal (ACAP).

This marked reduction was driven by the results of last December, when sales fell 60% over the same month last year.

The market for vehicles, including light commercial vehicles and heavy with cars, registered a contraction of 29.9% over 2011.

Spain Car Sales Plunge 17.7% to 1993 Levels

Also from El Economista via Google Translate, please consider Car sales fell 17.7% in 2011 in Spain, near 1993 levels

Registrations of cars and SUVs in Spain stood at 808,059 units in 2011, resulting in a decrease of 17.7% compared to previous year's figure, according to manufacturers' associations (Anfac) and sellers (Ganvam).

During the last month of last year, deliveries of cars in the Spanish market reached 66,458 units, representing a decrease of 3.6% compared to data recorded in December 2010.

These figures show that 2011 was one of the worst year ever in terms of volume of registrations in Spain and Spanish car market place at levels close to those recorded in 1993 when 792,500 units were delivered.

Channels, the supply of private cars to customers stood at 387,831 units in 2011, representing a cumulative decline of 33.6%, while in December the figure was reduced by 8% to 35,657 units.

Ganvam Anfac and explained that these sales data in the particular channel shows that 48 of every 100 cars sold in Spain during the last year were purchased by individual customers, compared with 60% recorded in 2007.

Both associations noted that the drop in enrollment "has caused a significant drop in tax revenues for the acquisition of vehicles," so that the State has failed to enter EUR 450 million the previous year.

These economies are basket cases already. Tax hikes will make matters much worse.

For details, please see Spain's Budget Minister says "Serious Budget Shortfalls in All 17 Autonomous Regions"; Primer Minister Announces $19.3 Billion Package of Tax Hikes; Cockroaches and the Theory of the Unexpected.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Eurozone Manufacturing Contracts 5th Straight Month; New Orders Fall Faster than Output

Posted: 02 Jan 2012 11:12 AM PST

There was a slight improvement in European manufacturing PMI for December but it is a meaningless illusion given prolonged contraction coupled with the fact new orders are sinking much faster than output.

The PMI is a diffusion index with reading below 50 in contraction, above 50 in expansion.

MarketWatch reports PMI data underline euro-zone recession fears

The final December reading of the Markit purchasing-managers index for the manufacturing sector rose to 46.9 from a 28-month low of 46.4 in November, matching an earlier estimate.

"Euro-zone manufacturing is clearly undergoing another recession," said Chris Williamson, chief economist at Markit. "Despite the rate of decline easing slightly in December, production appears to have been collapsing across the single-currency area at a quarterly rate of approximately 1.5% in the final quarter of 2011."

For the second month in a row, all nations covered by the survey reported a decline in output.

Williamson said it was particularly worrying to see new orders falling at a far faster rate than output. That indicates firms have relied on orders placed earlier in the year to sustain current production levels, he said.

PMI Readings

Germany 48.4
France 48.9
Netherlands 46.2
Austria 49
Italy 44.3
Spain 43.7
Greece 42.0

The Eurozone New Orders component came in at 43.5 so expect a plunge across the board in future PMI readings as manufacturing output contracts further to keep up with orders.

New austerity measures in Italy, Spain, Portugal, France, and Greece have yet to bite, and they will. Economists think the European recession will be over mid-year. I think they are in fantasy-land. More likely, the US follows Europe into recession.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Obama Signs Legislation Killing Bill of Rights; Ron Paul, Rand Paul, Rachel Maddow Skewer Obama; Road to Tyranny; Complete List of Senatorial Cowards Backing the Bill

Posted: 02 Jan 2012 12:10 AM PST

In 9 Things to Say Goodbye To, I lamented on the loss of privacy and free speech.

Unfortunately, the situation is much worse, thanks a huge group of senatorial cowards that wrote and passed a "defense" bill that allows US citizens to be arrested, detained, even sent to Guantanamo, Cuba without being charged with any crimes.

On New Year's Eve Obama Signed Defense Bill Despite 'Reservations'

Obama's Blatant Hypocrisy

The "reservations" Obama has are of his own making. Please consider this skewering of President Obama by Rachel Maddow.

Link if video does not play: Rachel Maddow Skewers Obama

The bill is a clear and direct attack on the Bill of Rights.

Link if video does not play: Rand Paul vs. John McCain

Road to Tyranny

Please consider this video from Larry Wilkerson, retired colonel and former Chief of Staff to Colin Powell.

Link if video does not play: Wilkerson: New Military Powers the Road to Tyranny

"Larry Wilkerson: National Defense Authorization Act that passed the Senate giving the military power for indefinite detention without trial is a draconian violation of our rights"

Ron Paul Say Defense Bill Establishes Martial Law In America

In an interview with Alex Jones on Prison Planet, Ron Paul says Defense Bill Establishes Martial Law In America

Bill Passes Senate 86 to 13

Unfortunately the Indefinite detention bill passed in Senate

Exactly 220 years to the date after the Bill of Rights was ratified, the US Senate today voted 86 to 13 in favor of the National Defense Authorization Act for Fiscal Year 2012, allowing the indefinite detention and torture of Americans.

As RT reported earlier, one provision in NDAA FY2012 will allow for the reinstatement of "enhanced interrogation techniques," essentially making waterboarding and forms of psychological torture a very possible reality for anyone America deems to be a threat, including its own citizens who, prior to the ruling, had the US Constitution on their side.

Among the corporations which have lobbied in support of NDAA FY2012 are several military contractors, including Honeywell and Bluewater Defense, who together have received millions of dollars in Pentagon guarantees this year alone.

"How long can you hold them? As long as it takes to make us safe," said Graham.

In his closing marks, Graham ironically recited that in respect to "civil liberties and the American way of life," US citizens must fight. "If we don't fight for it, we're going to lose it."

Unfit for Office

Any Senator voting on a bill that would allow US citizens to be arrested, detained indefinitely, even sent to Cuba without being formally charged with any crime is no friend or supporter to the US constitution.

Note the absurd irony in Graham's statements. The fight for freedom can never be won by trashing freedoms or the Bill of Rights.

Senator Graham and Senator McCain are both huge hypocrites and cowards.

Indeed, all 86 Senators who voted for that bill are cowards, a hypocrites, and no friend to the United States or the US Constitution.

Even more disgusting, Senator Mark Udall introduced an amendment intended to forbid the indefinite detention of U.S. citizens and even that amendment was rejected by a vote of 38–60.

I do not have a roll call on that, but there are 60 extreme cowards who wrap themselves in a flag while pissing on the Constitution.

13 Courageous Votes

Nay ID Crapo, Michael [R]
Nay ID Risch, James [R]
Nay IL Durbin, Richard [D]
Nay IA Harkin, Thomas [D]
Nay KY Paul, Rand [R]
Nay MD Cardin, Benjamin [D]
Nay MN Franken, Al [D]
Nay OK Coburn, Thomas [R]
Nay OR Merkley, Jeff [D]
Nay OR Wyden, Ron [D]
Nay SC DeMint, Jim [R]
Nay UT Lee, Mike [R]
Nay VT Sanders, Bernard [I]

There you have it. Anyone not on that list voted to trash the constitution. I am particularly pleased by the votes of Senators Jim DeMint, Thomas Coburn, Rand Paul, Mike Lee, Michael Crapo, and James Risch.

Those are the only six Republicans willing to stand behind the Constitution.

Senator Rand Paul Explains His Vote

Link if video does not play: Rand Paul's Impassioned Plea

"Detaining citizens without a court trial is not American. ... Justice Scalia said the very core of liberty, secured by our anglo-saxon system of separated powers has been freedom from indefinite imprisonment at the will of the executive. Justice Scalia was, as he often does, following the wisdom of our founding fathers. ... As Franklin wisely warned, those who give up their liberty for security may wind up with neither."

Wikepedia has the Benjamin Franklin quote as follows "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety."

Benjamin Franklin is correct and Senator Rand Paul was a hero for fighting this bill. Sadly, Rand Paul failed to a collective group of cowards who do not know what the Constitution is about or why we need it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Monday, January 2, 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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