Mish's Global Economic Trend Analysis

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• Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal
• Ceridian Fuel Index Up 0.3 Percent in March, Down 2.2 Percent From Year Ago
• Eurozone Composite PMI® Signals Recession Says Markit; France in Renewed Decline, German Growth Weakens, Italy and Spain Contract Further
• Spanish Economic Drama: Nearly 57% of Budget Devoted to Pensions, Unemployment Benefits, and Interest; Unemployment Rate Hits 23.6%; Spain Warns of Soaring Debt

Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal Posted: 04 Apr 2012 12:43 PM PDT Curve Watcher's Anonymous has an eye on European sovereign bond yields. Here are a few charts to consider. Spain 10-Year Yield Italy 10-Year Yield Portugal 10-Year Yield Charts courtesy of Bloomberg. In the absence of another huge LTRO program from the ECB, and perhaps even with another LTRO program, yields in Spain, Portugal and Italy should head North. The LTRO is not going to trump long-term fundamentals which are downright horrible. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Ceridian Fuel Index Up 0.3 Percent in March, Down 2.2 Percent From Year Ago Posted: 04 Apr 2012 09:52 AM PDT The UCLA Ceridian Pulse of Commerce Index based on real-time truck fuel usage rose slightly in March. The Ceridian-UCLA Pulse of Commerce Index® (PCI®), issued today by the UCLA Anderson School of Management and Ceridian Corporation rose 0.3 percent in March following the 0.7 percent increase in February and the 1.7 percent decrease in January. The first quarter PCI is below the fourth quarter of last year by 4.9 percent at an annualized rate. Sampling of Graphs From the Report click on any chart for sharper image I would like to see a comparison of the current three months vs. the same three months a year ago, excluding seasonal adjustments. Workday adjustments are reasonable but should be negligible over a three month period. Such a comparison is how I show overall petroleum and gasoline usage. Please see Another Plunge in 3-Month Rolling Average of Petroleum and Gasoline Usage for details. I will have an update through March out soon. GDP vs. PCI Year-Over-Year Growth of PCI PCI Compared with Real Retail Sales What accounts for these divergences? Government spending Online sales Rebound in auto sales and high-end merchandise Extreme weakness in housing  Renewed plunge in Savings Rate Personal Savings Rate Encouraged by the Fed, Consumers are once again spending too much. The picture is not sustainable. The US economy will not disconnect from the rest of the world regardless of what most mainstream media reports. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Eurozone Composite PMI® Signals Recession Says Markit; France in Renewed Decline, German Growth Weakens, Italy and Spain Contract Further Posted: 04 Apr 2012 08:32 AM PDT In what should have been expected, but somehow wasn't, Eurozone weakness is across the board except for Ireland bucking the trend for now. Markit says Eurozone Composite PMI® Signals New Recession in Eurozone Key Points for March Final Eurozone Composite Output Index: 49.1 (Flash 48.7, February 49.3) Final Eurozone Services Business Activity Index: 49.2 (Flash 48.7, February 48.8) France sees renewed decline, German growth Latest PMI data provided further evidence of a mild contraction of the Eurozone private sector economy during March. The latest decline also meant that output fell over the first quarter as a whole, raising the likelihood that the economy has fallen back into technical recession. Composite PMI Output Index by Nation High oil prices led to a further marked increase in average input costs in March, with the impact felt at both manufacturers and service providers. Input cost inflation was the fastest for nine months, but remained below the near-record high reached one year ago. Input price inflation accelerated in Germany, Spain and Ireland, but eased in France and Italy. Italy nonetheless still saw the steepest overall increase. Inflows of new orders fell for the eighth month running, dropping at the fastest pace so far this year. New business fell across the big-four nations, with particularly steep falls seen in Spain and Italy. Weak demand also held down output prices, with March data signalling little change over the month. Comment: Chris Williamson, Chief Economist at Markit said: "A slight easing in the rate of decline of the Eurozone service sector was insufficient to offset the first decline in manufacturing output for three months, causing the overall economy to contract again in March. "With the exception of a marginal expansion seen in January, the economy has been in continual decline since last September. Although the average rate of decline seen over the first quarter eased compared with the final three months of last year, the survey data nevertheless indicate that the region has slipped back into a technical recession. "The downturn is currently only very mild, however, with gross domestic product probably falling by just 0.2% in the first quarter. Furthermore, with business confidence in the service sector running at a far higher level than late last year, the recession may also be brief." I have been critical of Market analysis for months and this is the worst yet. First they said Germany would prevent a recession, then Germany would decouple, now they suggest this is only a "technical" recession and  the "the recession may be mild and brief". The European recession will be neither mild nor brief. Spain, Portugal, and Greece are in economic depressions with no end in sight. Spain and Italy (the 3rd and 4th largest eurozone markets) are poised for steeper slides. Germany will not be immune to this as I have stated for months on end. German manufacturing contracted in March and services sector will soon follow. For some reason, Markit economists cannot figure this out. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Spanish Economic Drama: Nearly 57% of Budget Devoted to Pensions, Unemployment Benefits, and Interest; Unemployment Rate Hits 23.6%; Spain Warns of Soaring Debt Posted: 03 Apr 2012 11:40 PM PDT Inquiring minds keep poking around at problems in Spain and everywhere one looks problems are far greater than government officials would like you to believe. Please consider this Google Translation from the Guru'sBlog Spanish Economic Drama, Over Half Federal Budget Devoted to Pensions, Unemployment and Interest Today the Minister of Finance and Public Administration, Critobal Montoro, has submitted to Congress the 2012 State Budget , and I am frightened by the huge numbers that are involved in pensions, unemployment and interest. 37.1% of total state budget will be allocated to pension payments, 9.2 % for unemployment benefits , while another 10.5% will go to interest payments (28.848 million euros, equivalent to 2.7% of GDP. In all, these three items account for 56.8% of total State Budget 2012. Spain Warns of Soaring Debt The AP reports Spain Warns of Soaring Debt as Unemployment Rises Spain said Tuesday its national debt will spiral sharply higher this year as data showed unemployment hit a record high in March, complicating efforts to stabilise the country's strained finances. Budget Minister Cristobal Montoro said borrowings of 186.1 billion euros ($248 billion) this year will take the debt-to-GDP ratio to 79.8 percent from 68.5 percent in 2011, well above the EU 60 percent limit. "Spain is a critical situation. That is what we're trying to address," he told a news conference after delivering the conservative government's cost-cutting budget for 2012 to parliament. Adding to the strain on public finances, the number of people out of work rose for the eighth straight month in March as Spain headed back to recession with the economy expected to shrink 1.7 percent this year after expanding 0.7 percent in 2011. The number of workers registered as without work climbed 0.82 percent from February to 4.75 million, the highest figure since the current statistics series began in 1996, the labour ministry said. The 2012 budget -- approved by the cabinet on Friday -- includes 27 billion euros in tax increases and spending cuts aimed at slashing the annual public deficit to 5.3 percent of output this year from 8.5 percent last year. It closes tax loopholes and rebates for large companies and freezes wages of public sector employees but spares jobless benefits and pensions amid growing public anger at the dire economic situation. Spanish unemployment is up for the 8th consecutive month and may soon top 25%. Moreover, revenues will drop substantially. There is no way Spain can meet its deficit targets. In response, Brussels will soon be demanding cuts in pension benefits. More violence is right around the corner. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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