Mish's Global Economic Trend Analysis

---

• 70% of Spanish Citizens Don't Believe Prime Minister Rajoy on the Recovery
• Eurozone Manufacturing Expands Except in France and Greece; Hollande Concedes Taxes 'Too Heavy' Offending Everyone
• US Manufacturing PMI Shows Solid Expansion, Led by Large Companies; Expect "Measured Pace" Tapering

70% of Spanish Citizens Don't Believe Prime Minister Rajoy on the Recovery Posted: 02 Jan 2014 05:56 PM PST In what may be the least shocking economic statistic reported so far this year (albeit it's very early), 70% of Spanish Citizens Don't Believe Prime Minister Rajoy on the Recovery. Via translation from El Economista... In 2013, Prime Minister, Mariano Rajoy, promised the "economic recovery" would begin in 2014. A survey released Wednesday by the newspaper El Mundo shows 71% of the citizens of our country believes that recovery will begin in 2015. A mere 17% trust the recovery will start this year and 8% estimated that the recovery actually started in the latter part of 2013. The stats have gotten worse. A year ago 30% of Spaniards saw 2014 as the year of recovery, now that number is down to 17%. With regard to the personal situation of respondents, only 20% believe their life from an economic point of view will be better in 2014. 75% believe it will be the same or worse. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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 Manufacturing Expands Except in France and Greece; Hollande Concedes Taxes 'Too Heavy' Offending Everyone Posted: 02 Jan 2014 12:47 PM PST Eurozone manufacturing is at a 31-month high according to Markit. Every country but France and Greece are expanding. French manufacturing is at a seven-month low in an intensified downturn. The seasonally adjusted Markit Eurozone Manufacturing PMI® rose for the third month running to post 52.7 in December, up from 51.6 in November (and unchanged from the earlier flash estimate). The latest improvement in overall operating conditions was underpinned by solid and accelerated growth in the Netherlands, Germany, Ireland and Italy, while Austria continued to expand at a robust clip despite the rate of increase easing slightly since November. Meanwhile the Spanish PMI moved back into expansion territory. There was even relatively positive news from Greece, where higher levels of output and new orders elevated its PMI to a 52-month high and close to the 50.0 stabilisation point. France moved in the opposite direction, however, with its PMI falling to a seven - month low and signalling contraction for the twenty-second successive month. Chief Economist Comment Markit Chief Economist Chris Williamson "While Germany, Italy and Spain are seeing the strongest output growth since early - 2011, buoyed to varying degrees by improved export sales, France is seeing a steepening downturn, in part the result of widening export losses. This suggest s that competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers." Hollande Concedes Taxes 'Too Heavy' Offending Everyone French president François Hollande rang the bell on the new year the same way he rang the bell throughout 2013, with an economic as well as public relations gaffe. His vague promise of lower taxes coupled with an admission on national TV that taxes are too high, infuriated French households facing tax rises now, at the start of the year. The Telegraph explains François Hollande concedes taxes 'too heavy' in admission that annoys all sides in France. A New Year's message from François Hollande backfired as his vague promise that taxes would be lowered some time in the future jarred with French voters facing tax increases that took effect as he was speaking. Instead of winning plaudits for his unexpected admission that taxes had become "too heavy, much too heavy", the unpopular socialist president - weakened by tax increases, rising unemployment and a shrinking economy - provoked incredulity and scepticism among critics on both Left and Right. Hard-pressed French households faced VAT increases on most goods and services from Jan 1 and only days earlier France's supreme court had upheld a new 75 per cent supertax on high-paying companies. Mr Hollande made his televised address in front of a virtual background, an image of the Elysée Palace, which provoked a flood of comments on Twitter comparing his appearance with that of a Soviet leader of the 1970s. He offered companies a "responsibility pact", which he defined as the possibility of "lower labour charges and fewer restrictions on their activity in return for hiring more workers and more dialogue with trade unions". But he gave no details about which restrictions might be lifted or how he would reduce the high social security charges and payroll taxes that leave French companies with some of the lowest profit margins in Europe. His proposal came days after France's highest court approved his controversial 75 per cent "supertax" to be paid by companies on annual salaries exceeding €1 million. Mr Hollande's proposal immediately came under attack from the left wing of his Socialist Party. Marie-Noëlle Lienemann, a Socialist senator, said: "This is not the time to offer companies incentives when ordinary people are struggling. It has to be balanced with measures to help them." She complained that households would be hard hit by an increase in the standard rate of VAT from 19.6 per cent to 20 per cent yesterday, with an intermediate rate increased from seven to 10 per cent. Bernard Accoyer, a centre-right MP, said his message was "a litany of his failures in 19 months as president" and added: "He admitted that he underestimated the crisis, raised taxes and charges on companies too high and failed to make the necessary cuts in public spending." Vague Promises, Nonsensical Proposal Hollande offers a "possibility" of lower taxes and labor charges IF businesses expand hiring and negotiate more with unions. What business would accept that nonsensical proposal? Given the proposal was accompanied by an admission "taxes are too heavy, much too heavy", it's no wonder everyone was offended. It's also no wonder France is going the opposite of the rest of the eurozone. But the rest of the eurozone is not out of the woods yet. No structural problems have been fixed anywhere. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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.

US Manufacturing PMI Shows Solid Expansion, Led by Large Companies; Expect "Measured Pace" Tapering Posted: 02 Jan 2014 10:09 AM PST Both the ISM Report and the Markit PMI report show strengthening US manufacturing. ISM: The December 2013 Manufacturing ISM Report On Business® shows Economic activity in the manufacturing sector expanded in December for the seventh consecutive month. "The PMI™ registered 57 percent, the second highest reading for the year, just 0.3 percentage point below November's reading of 57.3 percent. The New Orders Index increased in December by 0.6 percentage point to 64.2 percent, which is its highest reading since April 2010 when it registered 65.1 percent. The Employment Index registered 56.9 percent, an increase of 0.4 percentage point compared to November's reading of 56.5 percent. December's employment reading is the highest since June 2011 when the Employment Index registered 59 percent. Comments from the panel generally reflect a solid final month of the year, capping off the second half of 2013, which was characterized by continuous growth and momentum in manufacturing." Markit: Here is a look at the Markit US Manufacturing PMI. Key Points PMI rises to 11 - month high, indicating solid improvement in business conditions Output supported by strong increase in new orders Employment growth quickens to nine - month high Input price pressures intensifies Summary Business conditions in the U.S. manufacturing sector improved at the fastest rate since January, according to the final December Markit U.S. Manufacturing Purchasing Managers' Index™ (PMI™). At 55.0, up from 54.7 in November and above the earlier flash estimate of 54.4, the PMI indicated a solid rate of expansion. Production in the series average and the fastest since March 2012. All three market groups (consumer, intermediate and investment) posted higher levels of output in December, with manufacturers of investment goods posting the fastest rate of increase. Manufacturing Output Company size analysis Large manufacturers (more than 500 employees) reported a marked rise in output during December. This generally reflected a sharp increase in new business , with the rate of new order growth the joint - fastest since late - 2009. In contrast, new order growth was only modest at small manufacturers (less than 100 employees), with new export work having fallen since November. "Measured Pace" Tapering The consensus will start looking for additional Fed tapering, perhaps at an accelerated pace. I expect tapering at a "measured" pace (small) accompanied by dovish statements from the Fed. When the economy slides, tapering will halt. Recall that Alan Greenspan used the term "measured pace" when he started hiking rates after the 2001 recession. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com 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.

You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610