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Scroll down forcharts of 11 monthly Economics updates

  USA TRI:  Structural GDP improves to -4.2%

April 30th delayed FreeVenue public release of Jan 30th MemberVenue guidance ~ For most of 2012, TRI's measure of animal-spirits-plus had been signaling a building surge in 2013Q2 ... in anticipation of a Romney victory.  But since the Election the prospect for a robust Spring has waned with each passing week.

The TRENDLines Recession Indicator monitors two measures of the USA economy:  Structural GDP (TRIX) & Real GDP (TRI).  The model suggests since 2007 Real GDP essentially has been a proxy for the genuine underlying Structural GDP being buoyed by Congressional Deficits via the action of fiscal multipliers.

 TRI   This month's guidance suggests baseline Real GDP has been progressively building since the Spring 2011 pause ... and remains en route to a damped Spring 2013 surge.  TRI's depiction of economic activity conflicts significantly with today's announcement by BEA its first estimate for December (Q4) Real GDP is -0.1%, a number likely to face upward revision when compared to the 1.5% pace gauged by TRI.  January GDP is assessed @ 1.8%, while TRI's measure of animal-spirits-plus projects a 1.7% Q1 and 2.7% crest in June (Q2).

 TRIX   The current epic event is truly massive and not yet commenced its Recovery phase.  The TRIX contraction began in March 2007, troughed at -13.6% in Jan/2009 and improved to -4.2% in January.  With SGDP averaging -7.1% over the last 24 quarters, TRI's visible horizon shows no sign of resurrection of this Structural Depression 'til after an inevitable Greek-scale Treasuries yield (7%) crisis in 2027 (and perhaps IMF intervention).

To add some context to the Great Recession historically, SGDP avg'd -9.7% during the four worst years of the Great Depression (1930-1933).  The current event already has a six year span (2007-2012 & -7.1%).  SGDP was -17.1% in the worst year of the Great Depression (1932).  It was -11.2% in 2009.

 Headwinds   Factors contributing to short/medium/long term weakness of the RGDP & SGDP outlooks continue to be:  (a) political dysfunction;  (b) stubbornly high unemployment;  (c) rising international inflation & interest rates;  & (d) structural deficits and sovereign debt rating downgrades.  The threat from residual high petroleum costs was finally eliminated last month.

click a chart for outlook table, guidance & research notes...

April 25th delayed FreeVenue public release of Jan 25th MemberVenue guidance ~ Comparing this past Autumn to last year, the national median/avg price is down in Australia, Canada & the UK ... continuing their multi-year realty bubble corrections as measured by variance from the long-term trend of the Price/Family-Income ratio.  Each nation faces a prolonged stifling of economic activity due to the profound assault on consumer disposable income by the incredible weight of home mortgage payments and rent.  The fundamentals remain in place for Technical Recessions in all three jurisdictions.

Home values are most at risk in the UK where the avg home is overpriced by 113%.  As such, they have suffered economic  contractions in five of the last seven quarters.  The Australian median home is currently 77% overpriced.  Due to its proximity to Asia, growth has been positive since Spring 2011.  Canada's housing bubble finally burst in June 2012.  The avg home here is 28% overpriced and sells for 2.1 x's its American counterpart.  The Canadian economy has suffered no less than eight monthly GDP contractions since Sept/2010 and the TRENDLines Recession Indicator currently projects annual economic growth will not exceed 1.9% viewed thru its 2018 horizon.  Canada's Great Recession was only 10 months, but the feat of a relatively short duration was not accomplished by clever fiscal management but rather by Gov't inaction to prolong the housing bubble whilst other jurisdictions were correcting.

Conversely, the USA median price is up almost seventeen thousand dollars from the same season last year consolidating a resumption of its secular uptrend commenced March 2012.  In May 2012, Gary Shilling made made the case USA homes will drop another 20%, whilst in March 2012, Robert Shiller proclaimed it could be five decades 'til American homes re-attain their old highs.  I cannot share their pessimism.  My analysis reveals both Existing Home & New Home prices have completed a classic return-to-the-mean correction.  New Homes will establish a new annual record this year and Existing Homes should set a new high in 2023.

This price escalation will occur despite an inevitable rise in interest rates.  The USA TRI model forecasts FOMC will finally commence a normalization of its key rates in mid 2016.  This should result in a 2% rise in 5-yr mortgage rates  by late 2017.  International interest rates will likely rise ahead of the USA and this external influence may accelerate the housing price correction in Australia, Canada & UK.  After Canada's realty bubble hit 55% in 1989, its correction was a mere -6% in ten "lost years".  It is probable the three jurisdictions can expect a similar scenario rather than the rapid 25% plunge witnessed in the USA.

click a chart for 4-nation Bubble guidance & research notes ...

  TRI Suggests China GDP is on the Rise... d

April 18th delayed FreeVenue public release of Jan 18th MemberVenue guidance ~ Today's Trendlines Recession Indicator quarterly update reveals Chinese economic activity has been on the rise for the last six months.  Both the Central Peoples Govt's official GDP figures and TRI's gauge of baseline Real GDP re-confirm that media & pundit speculation over the past two years that China's economy had been facing a business cycle hard-landing was completely unsubstantiated.  Using conventional Q/Q reporting methodology on the CPG data, the Real GDP growth rate slipped to no worse than 6.0% (March 2012) while TRI's monthly monitor assessed a low of 7.8% in July 2012.  This hiatus is attributed to engagement by authorities in anti-inflation activity.

China's official data released today infers Q4 Real GDP was 8.2% (Q/Q), down from an 8.8% pace in Q3 but vastly improved from the 6.0% in Q1.  Conversely, TRI's monthly gauge of economic activity found December (Q4) to be a robust 9.4% (Q/Q), up from an 8.2% pace Sept (Q3).  TRI's measure of animal-spirits-plus projects GDP is en route to a robust 9.9% in February.  From that juncture, China-specific headwinds should gradually dampen GDP growth rates to an ultimate annual low of 8.0% in 2020, down from a projected 9.5% for 2013.  At this time no soft-landing of the current business cycle appears in the visible horizon.

click chart for guidance...

 USA "Real" Unemployment Rate stable @ 14.4% in December

April 4th delayed FreeVenue public release of Jan 4th MemberVenue guidance ~ Today's headline USA Unemployment Rate for December may be stable at 7.8% (U-3), but the dire state of the jobless is better reflected by the REAL Unemployment Rate ... 14.4%.  The latter U-6 BLS rate was also the same as November but is significantly below the Great Recession induced high of 17.2% set Oct/2009.  That said, today's rate is not even 1/3 the way back to the pre-Recession low of 7.9% in Dec/2006.  To the 12.3 million U-3 unemployed, the U-6 calculation adds the marginally attached:  7.9 million involuntary part-timers (economically necessitated), 1.1 million discouraged souls (no longer looking for work as no apparent jobs) and 1.5 million with school or family responsibilities.

click chart for guidance...

  TRI-Canada ~ CMHC's Realty Bubble Stalls Economy

March 21st delayed FreeVenue public release of Dec 21st MemberVenue guidance ~ As the correction of Canada's realty bubble enters its seventeenth month, it is seen the Canadian economy still lacks the critical mass to sustain pre-Recession growth levels w/o the assistance of the Bank of Canada's accommodative monetary policy and moderate fiscal policy stimulus via the federal, provincial and municipal governments.  As evidence, the periodic easing of infrastructure monies has resulted in eight monthly GDP contractions since Autumn 2010.

StatCan released data today inferring the October Real GDP growth rate was 0.1%, compared to the Trendlines Recession Indicator estimate of a 1.1% pace.  TRI gauges December GDP was 1.3%, up from 1.1% in November.  TRI's measure of animal-spirits-plus projects a surge is under way which will culminate with a 2.4% crest in June (Q2).

Afterward, headwinds cause the growth rate to enter a multi-year era of sub 2% performance but the trajectory shows no sign of a soft/hard landing to the current business cycle.  This conflicts with my original Sept/2009 analysis of North American economic activity over the past four decades and its conclusion of the existence of an 8.5-yr business cycle with probable troughs in 2017, 2026 & 2034.  Note the most recent TRI alert:

click chart for graphic view back to 1952, outlook table & guidance...

 USA Debt Wall - Structural Deficits will induce Bond Rating downgrade to "B" in 2020

Nov 25th delayed FreeVenue public release of Aug 25th MemberVenue guidance ~ The TRENDLines Debt Wall model gauges current deficit financing will require another raising of the Federal Debt Limit ($16.394 trillion) by Dec 26 2012.  These partisan negotiations rarely highlight the decadal effects of accumulated deficits and the realities of compound interest.  After expressing concern over this issue for over a decade, Trendlines Research began in early 2009 to publish regular graphic alerts warning that unless there is a sea change in fiscal management, the USA Federal Gov't is inevitably headed for its own sovereign debt crisis.  Bond vigilantes are increasingly monitoring Deficit/GDP & Nat'l-Debt/GDP ratios.  The bond rating agencies have since joined the fray albeit as late pilers-on.  It is certain the current Wall Street spotlight on periphery European nations will be donned on American metrics within eight short years as it becomes clear at that juncture the future redemption of newly issued instruments are in jeopardy.

Current legislation will see the Deficit/GDP ratio plunge from 2009's 9.9% high-water mark to 4.7% in 2015.  From then however, the momentum of unaffordable entitlements and a sea change in demographics combine and force the ratio to a secular uptrend, rising to a crippling 19% by 2040.  Failing mitigation, impatience with Congress's ability to hold the line on the budget imbalance will culminate in 2020 in the form of surging yields at the weekly Treasuries auctions ... and a downgrade of USA short-term debt to "B" ratings.

click chart for Debt Wall guidance...

 ~

blast from the past with chart update

July 21 2010 ~ Due to exorbitant gasoline and diesel prices at the pump, USA Car & Light Truck sales collapsed in 1980,  1990 & 2007.  On its present trajectory, the same fuel cost/GDP ratio that initiated these episodes of dramatic demand destruction will be revisited upon $3.42/gallon gas ($92/barrel crude) ... probably in 2011Q1. 

Ignoring the Cash-for-Clunkers anomaly, annualized sales have climbed back to as high as 11.8 million from 9.1 in Feb/2009.  See our Gas Pump & Barrel Meter charts for lots more discussion on the real factor thrusting the USA economy into double-dip.

 ~

   Real farmers don't live on subsidies... they live in Brazil !

                                                                                                                                                              Freddy Hutter, TrendLines Research,  Aug 4  2004

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