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Trendlines Research  ...  Providing macro-economic charts & guidance for Legislators, Policymakers, Investors & Stakeholders
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  [New!]  June update of China TRENDLines Recession Indicator ~ Projects 6.8% GDP for rest of 2013
[New!]  June update of USA "Real" Unemployment Rate:  13.8%
[New!]  May update of Canadian TRENDLines Recession Indicator  ~ TRI signals sub 2.3% for rest of 2013
[New!]  May update of USA TRENDLines Recession Indicator:  GDP would be -3.4% w/o the massive deficit
[New!]May update of TRENDLines Realty Bubbles Monitor Australia,  Canada,  UK  &  USA
[New!]  update of TRENDLines  USA Debt Wall ~ USA to Hit Austerity Crisis Tipping Point in 2024
 
  TRENDLines G-20 Recessions Monitor
 
blast from the past:    Risk of Collapse of New Cars & Light Truck Sales
   

90 days too long to wait?  View our current guidance charts via:  (a) Annual-membership special of $25/month or (b) $35/month Quarterly access or (c) $50 project access-fee

Scroll down for[New!]monthly updates of the 11 Economics charts

 

   TRI China Projects 6.8% GDP for rest of 2013

Sept 10th delayed FreeVenue public release of June 10th MemberVenue guidance ~ Today's Trendlines Recession Indicator monthly update reveals the momentum of thirteen months of incrementally rising economic growth appears to have crested in April and may have entered an era of secular decline as the new Gov't implements planned reforms amid a maturing economy.

China's official data released in April infers March (1Q13) Real GDP was 6.4% (Q/Q), down from an 8.1% pace in December (Q4).  Conversely, TRI's monthly gauge of economic activity found Q1 to be a robust 7.2% (Q/Q), up from 6.9 in the previous quarter.  TRI's monthly gauge of early proxy data June (Q2) to be 7.1%, down from 7.2% in May.  The model's measure of animal-spirits-plus indicates a 6.8% pace for both Q3 & Q4.

Albeit this year's 7.0% annual growth rate is up from 6.7% in 2012, China-specific headwinds should see GDP slip back to 6.7% in 2014 & incrementally recede to 6.4% by 2020.  There is no evidence of a soft-landing within the 2020 visible horizon.

click chart for guidance...

   

 USA "Real" Unemployment Rate improves to 13.8% in May

Sept 7th delayed FreeVenue public release of June 7th MemberVenue guidance ~ Today's headline USA Unemployment Rate for May slid back to 7.6% (U-3 BLS), but the dire state of the jobless is better reflected by the REAL Unemployment Rate ... 13.8%.  The latter U-6 rate improved from 13.9% in April and is significantly below the Great Recession high of 17.2% set Oct/2009.  That said, today's rate is not even way back to the pre-Recession low of 7.9% (Dec/2006).  To the 11.8 million U-3 unemployed, the U-6 calculation adds the marginally attached:  7.9 million involuntary part-timers (economically necessitated), 0.8 million discouraged souls (no longer looking for work as no apparent jobs) and 1.4 million saddled with school or family responsibilities.

To hold the Unemployment Rate static considering natural growth of the labour force via graduating students & immigration and minus retirements, the current economy must generate 89k/month in net new jobs.  The TRENDLines Recession Indicator suggests this would equate to a 1.1% Real GDP growth pace.  Similarly, UR-3 would rise 0.1%/month in a 0% GDP environment.  Recent progress reflects a highly stimulated economy which is generating 201k/month (avg) net new jobs.  The model projects the glide path of U-6 should see the 11.0% natural unemployment rate (6.0% U-3) achieved by March 2015.  This suggests FOMC will start to raise its key interest rates in Dec/2014.

click chart for guidance...

   

  TRI-Canada ~ sub 2.3% GDP for rest of 2013

Aug 31st delayed FreeVenue public release of May 31st MemberVenue guidance ~ Today's update of the TRENDLines Recession Indicator suggests a second consecutive sub 1% quarter in 3Q13 before the economy finally possesses the critical mass to sustain positive growth w/o the assistance of federal fiscal policy stimulus.  That said, the Canada Economic Plan remains in place and historic growth rates will prevail over the next three years despite several defined headwinds, primarily the medium-term correction of the 28% ($80k) Canadian Realty Bubble.  It presented a -0.3% headwind this month.  Faced with either combating Inflation or priming for upcoming waning economic activity, the model predicts Bank of Canada will mistakenly raise its key rate in 4Q14.  The headwind caused by residual rising oil prices (Oct/2010 - Apr/2011) finally expired in March 2013 and in an ironic twist, declining petroleum costs actually provided a 0.2% tailwind to GDP growth in May.

 TRI   StatCan released data today inferring March's (Q1) Real GDP grew at a 2.5% rate, compared to the TRI inference of a 1.2% pace.  TRI gauges May GDP was 0.8%, down from 0.9% in April.  TRI's measure of animal-spirits-plus projects a 0.8% Q2, 0.8% Q3 & 2.2% Q4.  Model filtering enhancements indicate much of the cause of the pause to economic activity two years ago is traceable to rising residual oil prices which at their peak in April 2011 formed a 1.6% headwind.  This factor dissipated with declining petroleum costs to the point where fossil fuel energy provided a 0.2% tailwind to May's GDP growth rate.  Despite this ironic good news, the combination of the other definitive headwinds are increasing their grasp to the extent where the annual economic growth rate appears to be entering a multi-decadal era of sub 2.6% performance.

 TRIX   The preceding discussion is typical of conventional Real GDP narrative where one identifies the symptoms of an economy ... not its underlying problems if any.  The genuine health of the Canadian economy is best observed when viewed thru a prism which filters out the influence of Federal Gov't Deficits & Surpluses.  Calculated via fiscal multipliers, the resulting metric (Structural GDP) is depicted in the chart as TRIX (red line).

 Headwinds   Factors contributing to short, medium & long-term weakness in the TRI outlook to 2030 continue to be:  (a) correction of the CMHC realty bubble;  (b) an Exports killing "par-plus" Loonie;  (c) federal debt retirement;  (d) the USA's potential 2024 austerity crisis;  & (e) by contrast and in an ironic twist, the $16/barrel decline in USA Refiner Acquisition Crude and related petroleum costs since the Libya crisis are in turn providing the economy with a quantifiable tailwind!

click chart for outlook table & guidance...

   

  USA TRI ~ GDP would be -3.4% w/o the massive deficit

Aug 30th delayed FreeVenue public release of May 30th MemberVenue guidance ~ Stripped of reporting period noise, baseline Real GDP has been climbing 26 months, much in thanx to dissipation of a petroleum headwind which was a record -1.6% during the April 2011 Libya crisis.  On the short-term outlook, the TRENDLines Recession Indicator's measure of animal-spirits-plus suggests GDP growth will continue it upward trek, reaching 3.1% in January, but from that juncture it's all downhill.

Analysis by the Trendlines Debt Wall model attributes much of the decline to the (2Q15) combination of rising Treasury yields and a secular uptrend of the federal Deficit which together cause debt service on the national debt to crowd out Federal discretionary and program spending.  Longer term, the model continues to develop its discovery (Sept/2012) of a fiscal tipping point which leads to a  potential 2024 austerity crisis and ultimate multi-year Severe Recession.

The Trendlines Recession Indicator monitors and projects two macro metrics:  (a) TRI - a gauge of baseline Real GDP filtered of reporting period noise;  & (b) TRIX - a measure of the health of the underlying economy via a filtering out the influence of Congress's fiscal policy Deficits.  The latter suggests the USA has been mired in a Structural Greater Depression since late 2006.

 TRI   This month's guidance is in general agreement with today's announcement by BEA its second estimate for March (1Q13) Real GDP is 2.4% - compared to the 1.9% pace gauged by TRI.  May GDP is assessed @ 2.1%, up from 2.0% in April.  The ongoing general decline in petroleum prices provided a 0.1% tailwind to GDP growth this month.  TRI's analysis of the federal Deficits and its measure of animal-spirits-plus indicates an upcoming 2.2% 2Q13, 1.7% 3Q13 & 2.4% 4Q13.  It appears the growth rate of the current business cycle faces a crest (3.1%) in Jan/2014.

 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;  & (e) by contrast and in an ironic twist, the $15/barrel decline in USA Refiner Acquisition Crude and related petroleum costs since the Libya crisis are in turn providing the economy with a quantifiable tailwind!

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

   

May 23 2013 monthly update ~ Realty Bubbles Monitor

Overpricing of Median/Avg Home in April 2013

Bubble Today

price rise/fall from same season last year   Bubble @ Peak
$178,000 & 75% up $7,300 Australia $249k & 137%  (2007)
$ 80,000 & 28%  up $3,300 Canada $94k & 35%  (2011)
$  6,000 & 4%  up  $18,600 USA $75k & 52%  (2005)
81,000 & 98% up 900 UK 107k & 145%  (2007)

Aug 23rd delayed FreeVenue public release of May 23rd MemberVenue guidance ~ The Realty Bubbles Monitor calculates the variance of a nation's annual home price from the trend of its historic Price/Family-Income ratio.  Of the four monitored nations, only the USA price has resumed its secular uptrend after completing in 2011 its 25% reversion to mean.  Alternatively, it is seen Australia, Canada & UK are engaged in generally sideways corrections one to five decades in length.  The weight of excessive mortgage and rent payments faced by families in these jurisdictions continues to be so great a headwind that economic growth will be damped for several years to the point where this factor can facilitate or prolong future Recessions.  That said, comparing this past Spring to last year the median/avg price was up for all four countries. 

By this P/FI metric, lofty home values are most vulnerable in the UK where the avg home is overpriced by 98%.  Double.  Thus it is hardly a surprise its economy suffered GDP contractions in five of the last eight fiscal Quarters.  The Australian median home is currently 75% overpriced.  Their proximity to Asia has assisted in maintaining economic growth but the once robust GDP has slipped to an avg 2.6% over the past twelve months.  Canada's housing bubble was the last to burst (Aug/2011).  The Canadian economy has suffered seven monthly GDP contractions since Sept/2010 and the TRENDLines Recession Indicator projects annual economic growth will not exceed 2.5% within its 2020 horizon.  Canada's Great Recession lasted only ten months, but the short duration feat was not accomplished by clever fiscal management but rather due to Federal Gov't & CMHC decisions to prolong its housing bubble whilst other jurisdictions were mitigating corrections.

These three national realty corrections are going relatively unnoticed by the lamestream media who instead are hysterically disseminating an groundless rumour of the entrenchment of a new housing bubble in the USA.  In May 2012, Gary Shilling 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.  All three extreme views are wrong.  My analysis reveals American home prices completed a classic return-to-the-mean correction in 2011; are presently a mere 4% ($6k) above the 2013 target; and will set a new high in 2025.

This price escalation will occur despite an inevitable rise in interest rates.  The USA TRI model forecasts FOMC will commence normalization of its key rates in Dec/2014, resulting in a 2% rise in 5-yr mortgage rates by late 2016.  International interest rates will likely rise ahead of the USA and these external influences may accelerate the housing price corrections in Australia, Canada & UK.  After Canada's first realty bubble burst (55% 1989), prices declined only 6%.  It took ten years for the inflated prices to become generally re-affordable.

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

   

 Debt Wall - Massive Deficits will induce 2024 Austerity Crisis & Severe Recession

Aug 14th delayed FreeVenue public release of May 14th MemberVenue guidance ~ At the same time the Trendlines Recession Indicator calculates data from the PBO suggests federal surpluses will enable Canada to retire its national debt by 2040, American figures provided by the CBO today continue to indicate preservation of long-term entitlements will force rocket the 2040 USA Deficit to $10 trillion (19% of GDP) & drive the Federal Debt to $125 trillion (235% of GDP).

Since Y2k I have attempted to bring attention to the fact such projections are unsustainable.  The TRENDLines Debt Wall chart had typically since 2009 illustrated the magnitudes involved on the present course and began to annotate where certain tipping points were being signaled along the route.  I was continually troubled this depiction did not fully translate the macro consequences of inevitable interventions.  So the Debt Wall & the Trendlines Recession Indicator models were enhanced to alert stakeholders, policymakers, investors and legislators it is inconceivable the Treasury Dept can continue the Deficit related massive borrowing with impunity.

Starting March 2013, TRI & Debt Wall charts break with traditional sky's-the-limit graphs and tables and instead depicts a best efforts projection of a probable path for GDP and Federal Deficits & GDP after certain tipping points are transgressed.  The calculation of this critical threshold includes empirical observations of Deficit & Debt to GDP ratios, the long-term borrowing rate environment, the trajectory of fiscal balances for jurisdictions.  Conversely, recent discourse in the realm of academia seems to be restricted to the sole factor of Debt/GDP.  This lack of robustness robs such efforts of any value of predictability.

click chart for Debt Wall guidance...

   

Global GDP:  Year 2007  5.4%     Year 2008  2.8%     Year 2009  -0.6%   > Year 2010  5.3%     Year 2011  3.9%     Year 2012  3.5% (pending)     Year 2013  3.9% (est)>

 

2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4

2012Q1

2012Q2 2012Q3
3.2% 1.7% -0.3% -7.0% -5.8% 4.3% 5.4% 5.3% 6.6% 5.1% 4.0% 4.5% 3.7% 3.2% 3.6% 2.6% 3.6% 2.9% 3.9% est

G-20 nations in Technical or Severe Recession:

 USA

 

21% of Global GDP

USA Japan Germany France Italy

38% of Global GDP

USA Japan Germany France Italy

38% of Global GDP

USA Japan Germany UK France Italy Mexico

43% of Global GDP

USA    Japan Germany UK     Russia France Brazil   Italy Canada Turkey Mexico SouthAfrica

53% of   Global        GDP

USA    Japan Germany UK     Russia France Brazil   Italy Canada Turkey Mexico SouthAfrica

53% of   Global        GDP

UK     Russia  Italy Canada SouthAfrica Turkey

27% of Global GDP

UK Turkey Russia

8% of Global GDP

Russia

3% of Global GDP

Russia

3% of Global GDP

nil

Japan

8% of Global GDP

Japan

8% of Global GDP

Japan

8% of Global GDP

Japan Italy

9% of Global GDP

Japan UK Italy

12% of Global GDP

UK Italy

6% of Global GDP

UK Italy

represents 6% of Global GDP

 

pending:

UK Italy

And Not in Recession in 2012Q2:  USA, China, Japan, Germany, France, Brazil, Canada, Russia,>India, Australia, Mexico, South Korea, Turkey, Indonesia, Saudi Arabia, South Africa & Argentina >(in order of GDP & comprising 59% of worldwide GDP;  excludes 20th membership, courtesy to EU).  The remaining 160 nations comprise 35% of worldwide GDP    (data source: IMF)

 click here for more G-20 & global graphs & 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 !   Real farmers don't live on subsidies... they live in Brazil !

                                                                                                                                                              Freddy Hutter, TrendLines Research,  Aug 4  2004

 

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Beware ... the Lunatic Fringe

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  Canada Flag
Trendlines Research  ...  Providing macro-economic charts & guidance for Legislators, Policymakers, Investors & Stakeholders
long-term multi-disciplinary perspectives by Freddy Hutter since 1989
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Last modified: November 03, 2013