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It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

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NEW$ & VIEW$ (6 FEBRUARY 2014)

SOFT PATCH WATCH

Lightning  EUROZONE RETAIL SALES REMAINED WEAK IN JANUARY AFTER A BLEAK CHRISTMAS

Yesterday, I reported on the very severe decline in retail sales in December. To repeat, especially since I have yet to find a mainstream media with this important factual news (even uber-bear ZeroHedge missed it):

Total retail volume dropped 1.6% MoM in December in the EA17. Over the last 4 months, retail volume is down 1.8%, that is a 5.4% annualized rate! Core sales volume dropped 1.8% in December and is down 1.5% since September (-4.6% annualized). Real sales dropped 2.5% in Germany (-2.4% in last 4 months), 3.6% in Spain (-6.0%), 1.0% in France (-1.2%).

These numbers were from Eurostat. Today, Markit released its January Eurozone Retail PMI. Read their release considering that it is based on surveys conducted in Germany, France and Italy. The overall reading is up just above the 50 mark, but only because Germany had a solid January following a dismal December. France and Italy continued to experience poor sales trends, even after a very soft December.

imageJanuary eurozone retail PMI® data from Markit showed the first rise in sales for five months. And although only slight, the increase was the fastest since April 2011. Germany was the driver of growth, posting its most marked improvement in trade since August. France’s drag on the currency union’s overall performance meanwhile diminished as sales there fell at a much slower pace than in December, whereas Italy saw another solid decrease.

The Markit Eurozone Retail PMI registered at a 33-month high of 50.5 in January. Although indicative of only marginal growth, this latest index reading was nevertheless a marked improvement from 47.7 in December. Sales were still notably lower compared with the situation one year ago, however.

Stocks of goods for resale at eurozone retailers rose to the greatest extent in more than a year-and-a- half in January. With spending on resale items having fallen on the month, data suggested that this was in part due to sales being lower-than-expected. Indeed, retailers confirmed that they had generally underperformed relative to their targets.

Pointing up This is very worrying. The all-important December sales were terrible and January was only better in Germany (thanks in part to mild weather). Retailers are thus stuck with high unsold inventories which will negatively impact manufacturing in coming months. Given that U.S. retailers also seem to be overstock post Christmas, manufacturers of consumer goods are probably globally feeling the pain at this moment.

Retailers’ sales chilled by weather, low consumer confidence

(…) Kohl’s Corp (KSS.N) on Thursday said sales in January were “significantly” lower than expected as shoppers stayed away. The department store chain reported a 2 percent decline in quarterly comparable sales, those online and at stores open at least a year, despite a good start to the holiday season.

Analysts expect a group of nine retailers that report these results on a monthly basis to show a 2 percent rise in comparable sales for January, well below the 4.9 percent growth of a year earlier, according to Thomson Reuters.

Some chains managed to register sales gains, but those came either at the expense of rivals or profit margins.

Costco Wholesale Corp (COST.O) said its same-store sales rose 5 percent in January, with fresh food a popular item for its bargain-seeking members. That contrasted with a quarterly decline at Wal-Mart Stores Inc’s (WMT.N) Sam’s Club chain.

Victoria’s Secret parent L Brands Inc (LB.N) posted a much bigger-than-expected jump of 9 percent in comparable sales. But the company said its profit margin was “significantly” lower after it had to deepen discounts and hold sales events longer. The retailer expects only modest sales gains in February.

The consumer mood seemed to sour last month. The Thomson Reuters/University of Michigan’s consumer sentiment index slipped to 81.2 in January from 82.5 in December. Confidence fell acutely among households with annual incomes below $75,000. (…)

Cato Corp (CATO.N), a chain of low-priced clothing stores; Fred’s Inc (FRED.O), which sells general merchandise; and Stein Mart Inc (SMRT.O), an off-price clothing retailer, all blamed Mother Nature for declines in comparable sales.

Sterne Agee analyst Charles Grom said higher home heating bills could crimp consumer spending “well into April.”

Clothing chains that cater to teens had another dismal month in January. The Buckle (BKE.N) reported a 6.6 percent drop in comparable sales, while at Zumiez Inc (ZUMZ.O), they fell 7.6 percent.

The disappointing sales results follow recent poor reports from many stores. Baird analyst Mark Altschwager estimated that comparable sales at J.C. Penney Co Inc (JCP.N) fell 3 percent last month. And last week, Wal-Mart said its profit for the fourth quarter ended January 31 would come at or slightly below its forecast.

Getting shoppers into stores, a source of major concern for retailers during the holiday season, did not seem to improve last month. Walgreen Co (WAG.N) managed to report a jump in comparable sales, but the drugstore chain said traffic fell 2.2 percent.

Meanwhile, ECB Keeps Rate Unchanged The European Central Bank kept interest rates on hold, resisting calls for additional stimulus to guard against threats to a nascent recovery in the euro zone

“The reason for today’s decision not to act has really to do with the complexity of the situation that I described and the need to get more information,” Draghi said in Frankfurt today after the ECB left interest rates on hold. “We are willing, and we are ready to act.”

“We remain firmly determined to maintain the high degree of monetary accommodation and to take further decisive action if required,” Draghi said. “We firmly reiterate our forward guidance. We continue to expect the key ECB interest rates to remain at present or lower levels.”

“I tried to give you a sense of how complex is the picture which would explain why before taking any decision today we would wait,” Draghi said. “Things may get better, or they may stay where they are, or they may get worse.”

They are also driving blind in Europe. At least, Draghi admits it.

US retailers feel the food aid squeeze Big grocers report falling sales because of welfare cuts

The neediest Americans will be hurt by an $8.6bn cut to food aid in a bill that was approved by Congress this week and will be signed into law by President Barack Obama on Friday. But another set of welfare beneficiaries will lose out too: big grocery retailers. (…)

At Walmart, which is better known for penny-pinching, analysts estimate that around 20 per cent of shoppers use food stamps. The company said last week that sales at its US stores had fallen in the past quarter partly due to $11bn of food stamp cuts that began in November and will extend over three years. For a household of four, that reduced monthly payments by $36 to $668, according to equity analysts at Cowen & Co.

The cut approved this week, which is spread over a decade, works out at an annual reduction of $860m. It will shrink benefits for 850,000 households – or about 4 per cent of all recipients – by an average of $90 a month, according to the Congressional Budget Office.(…)

At Target, 17 per cent of shoppers use food stamps – known as the Supplemental Nutrition Assistance Program – and at Costco the figure is 13 per cent, says Cowen & Co. (…)

The very fact that this is happening in the USA is incredible!

Fortunately,

World Food Prices Drop to 19-Month Low as Sugar to Grains Slide

World food prices fell in January to a 19-month low, as costs for everything from sugar to grains slid amid ample global supplies, the United Nations’ Food & Agriculture Organization said.

An index of 55 food items dropped to 203.4 points last month from 206.2 in December, the Rome-based FAO wrote in an online report today. The index is down 4.5 percent from a year earlier and is at the lowest level since June 2012, as costs of grain, sugar, vegetable oils and meat fell, with only dairy prices rising.

More Men in Their Prime Are Out of Work More than one in six men ages 25 to 54 don’t have jobs. It’s partly a symptom of a U.S. economy slow to recover from the worst recession in 75 years and also a chronic condition that shows how technology and globalization are transforming jobs faster than many workers can adapt.

(…)  Some are looking for jobs; many aren’t. Some had jobs that went overseas or were lost to technology. Some refuse to uproot for work because they are tied down by family needs or tethered to homes worth less than the mortgage. Some rely on government benefits. Others depend on working spouses.

Having so many men out of work is partly a symptom of a U.S. economy slow to recover from the worst recession in 75 years. It is also a chronic condition that shows how technology and globalization are transforming jobs faster than many workers can adapt, economists say.

The trend has been building for decades, according to government data. In the early 1970s, just 6% of American men ages 25 to 54 were without jobs. By late 2007, it was 13%. In 2009, during the worst of the recession, nearly 20% didn’t have jobs.

Although the economy is improving and the unemployment rate is falling, 17% of working-age men weren’t working in December. More than two-thirds said they weren’t looking for work, so the government doesn’t label them unemployed.

For women, the story is different. In the 1950s, only about a third of women ages 25 to 54 had jobs. That rose steadily until the 1990s, and then leveled off for reasons that aren’t clear. At last tally, about 70% were working; 30% weren’t.(…) 

Inflation Fuels Crises in Two Latin Nations

(…) For Brazil, fewer exports of its cars, auto parts, food and manufactured goods to one of its major trading partners, Argentina, stands to further hold back its already slowing economy. Uruguay, whose economy is more dependent on Argentina’s, is concerned about a run on Argentine banks and a drop in tourism from its neighbor.

Venezuela, economists say, has started to selectively default—failing to pay European airlines, American oil service companies and Colombian food exporters, among others, as it struggles with fast-depleting reserves. (…)

Price Pressures

NEW$ & VIEW$ (5 FEBRUARY 2014)

Markets Misled By Factory Order Book Signal

Stock markets have fallen sharply in what looks to be an over-reaction to a steep deterioration in the ISM survey. The ISM’s manufacturing new orders index
suffered its largest fall in points terms since December 1980, plummeting 13.2 points from 64.4 in December to 51.2 in January. The drop in new orders contributed
to a steep fall in the survey’s headline PMI, which dropped from 56.5 to 51.3.

Analysts had been wrong-footed, having expected the PMI to merely dip to 56.0. The severity of the miss against expectations induced new worries that the US
economy was not as healthy as previously thought. Benchmark equity indices dropped by around 1%. However, the market reaction to the survey looks overblown.

First, analyst expectations were too high to start with. In its report, the ISM noted unusually cold weather was at least partly to blame for the decline. January had seen record low temperatures across swathes of the US, which Markit’s flash PMI (published 23 January) had already shown to have caused a slowdown in manufacturing activity. Analysts should have factored this into their ISM predictions.

imageSecond, the fall in the ISM new orders index needs to be looked at in context of prior months, in which the survey had been signalling far stronger growth of
factory orders than official data had been registering. The ISM new orders index had been running above 60 in the five months prior to January, with an increase to
64.4 in December. To put this in context, the ISM data suggest that the second half of 2013 therefore saw a rise in new orders of a magnitude commensurate with
the sharp rebound from the depths of the financial crisis seen in late-2009. However, official data have recorded a mere 0.2% rise in factory orders between June and November of last year, including a 0.5% fall in October, which is likely to have been linked to disruptions caused by the government shutdown.

Markit’s PMI, in contrast, to the ISM, has tracked official data on factory orders well (see chart). The survey has shown weak growth of orders in the third quarter of last year, with a marked easing due to the October shutdown, after which growth revived in the final two months of the year. January’s final Markit PMI data showed reasonable, if unexciting, growth of orders at US factories. The increase was the weakest for three months (the index dipped from 56.1 in December to 53.9), but once an estimated allowance is made for the number of companies reporting disruptions due to the adverse weather, the underlying trend in new orders appears to have been as strong, if not slightly stronger, than late last year.

The fall in the ISM’s new orders index in January therefore needs to be viewed as a hit from the cold weather plus – and most importantly –a correction from
misleadingly high readings late last year.

Markit is grinding its own axe but their point is absolutely valid. The ISM was clearly off track in recent months. Financial markets will learn to put their trust in Markit’s surveys.

Developed World Leads Global Trade Revival In January

imageWorldwide PMI™ survey data signalled an increase in goods exports for a seventh straight month in January, indicating that the upturn in global trade flows seen late
last year has persisted at the start of 2014. However, a widespread weakness of exports from emerging markets reveals how the upturn is being largely concentrated in the developed world.

A GDP-weighted aggregated global export orders index derived from the manufacturing PMI surveys conducted by Markit acts as a reliable guide to official trade data, which are only available with a substantial delay. This PMI index fell slightly for a second month running in January, down to a four-month low. However, the decline was at least in part attributable to the weather-related disruption in the US (excluding the US the global index would have remained steady at 52.0), and at  51.2 the index has now been above the 50 level, thereby indicating rising global exports, for seven straight months.

Comparisons with official data indicate how the PMI accurately foretold the upturn in global trade in imagethe second half of last year from the stagnation seen during the second quarter. The January PMI reading is consistent with global exports rising at an annual rate of approximately 8%. The latest available official data registered a 6.9% annual increase in November. Extreme cold weather disrupted US trade flows in January, pushing the world’s largest economy to the foot of the global PMI export orders rankings. Besides the US, the only other countries seeing falling export orders in January were emerging markets, including three of the BRIC economies: China, Russia and Brazil.

China’s exports fell for a second successive month, contributing to the country’s first overall deterioration of manufacturing conditions for six months in January. Russia meanwhile saw exports fall for a fifth successive month.

The decline in Brazil was only very marginal, but adds further to the contrast between the ongoing plight of Asian and South American emerging markets against robust growth in many developed world economies.

The top half of the trade league table was in fact dominated by developed countries and eastern European nations that are benefitting from rising trade with Germany. January’s PMI survey indicates that the eurozone’s largest member state has entered 2014 on a firm footing, with GDP on course to rise by over 0.6-0.7% in the first quarter. The Czech Republic led the overall global trade rankings, followed by the UK, then Germany and the Netherlands.

The export-led revival of eurozone peripheral countries was meanwhile underscored by both Italy and Spain occupying fifth and seventh place respectively. Ireland likewise saw a robust rise in export orders and even Greece enjoyed a modest upturn.

Related: Manufacturing highlights growing developed and emerging market divergences

EM Currencies May Reflect Normalization, Not Crisis

Pointing up This is the best piece I have seen on the EM crisis.From Robert Sinche, Pierpont Securities, via BloombergBriefs.

(…) Each month the Federal Reserve takes its basket of EM other important trading partner (OITP) currencies and adjusts its value relative to (U.S.) inflation to estimate a real trade weighted value of the U.S. dollar versus the basket of OITP currencies. The latest reading, for December 2013, showed the real trade-weighted U.S. dollar was only about 1 percent above its 30-plus year low set in April 2013, about 15 percent below its average since 1980 and still 30 percent below its recent high in February 2003. After adjustment for relative inflation, the U.S. dollar remains undervalued relative to a basket of EM currencies.

imageIn this context, it should not come as a great shock that U.S. manufacturers are increasingly competitive and that some have been returning production to the U.S. from selected EM countries.

During recent years, Fed initiatives to stimulate the economy through quantitative easing appeared to be a catalyst for a weaker U.S. dollar. While the central bank under Ben S. Bernanke did not pursue a “currency war” with emerging countries, QE did mark a retreat for the U.S. dollar, improving domestic competitiveness and limiting imported deflation pressures. It should not come as a great surprise that the tapering of the pace of Fed asset purchases is triggering a correction in the sharp undervaluation of the dollar.

In this context, is the recent correction in the U.S. dollar versus emerging markets currencies a sign of crisis, or a shift towards a normalized value? After all, based on movements in the nominal trade-weighted U.S. dollar versus OITP currencies, the real trade-weighted dollar increased only about 2 percent during January, taking the index up to the 95- 96 range. Compared to the (real) U.S. dollar surge versus OITP currencies in the 1997-98 Asian currency crisis (a more than 20 percent rise during seven months) or the 2008-09 global economic crisis (a 13.3 percent gain during seven months), the 2-3 percent rise in January is only a minor adjustment. If not for the simultaneous weakening of global equity markets, in some cases, a well advertised and healthy correction, it is not clear the adjustment in EM currencies would be garnering so much attention.

As a result, it appears very unlikely that EM currencies will reverse and rebound any time soon. Instead, the preferable course would be a continued, moderate
decline in many EM currencies (heavyweights China yuan and Hong Kong dollar excluded) that re-establishes more reasonable, competitive values for many
emerging economies. India might be a leading indicator; the rupee fell almost 25 percent versus the U.S. dollar from early May through early September, setting off
sharp adjustments in Indian growth and, particularly, import demand. With a short lag, the economy, including India’s rupee, has stabilized, with data released this
past Monday showing the 3rd consecutive reading above 50 for the HSBC/Markit PMI for Indian manufacturers.

The key for many EM countries will be the policy initiatives taken as their currencies weaken, with those adopting sound monetary and fiscal policies having the
higher probability of benefiting economically from a moderate improvement in competitiveness. For the U.S., conversely, a gradually strengthening dollar versus
many EM producer economies opens the potential for subdued import prices that should help keep inflation below-target, a potential complication for Fed policy makers as the economy slows during the early months of this year.

The Bank of Canada is showing the way, openly letting the CAD decline even after its recent 10% retreat. The Canadian economy needs a lower currency and the BOC is more than happy to let markets do the job.

SOFT PATCH WATCH
Surprised smile EUROZONE RETAIL SALES CRATER IN DECEMBER

This is not in the mainstream media today but it is major stuff. Total retail volume dropped 1.6% MoM in December in the EA17. Over the last 4 months, retail volume is down 1.8%, that is a 5.4% annualized rate! Core sales volume dropped 1.8% in December and is down 1.5% since September (-4.6% annualized). Real sales dropped 2.5% in Germany (-2.4% in last 4 months), 3.6% in Spain (-6.0%), 1.0% in France (-1.2%).

image
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Note that U.S. retail sales are also pretty weak based on weekly chain store sales:

image
What Do Auto Prices Need to Do? ‘Keep Melting’ Some analysts say prices will need to keep falling if U.S. car sales are going to hit the level needed to mop up all the new vehicles rolling off factory floors.

With rising inventory, increasing production capacity, and slowing demand, February is shaping up to be an important indicator of the health of the auto industry,” Morgan Stanley writes after January’s weaker-than-expected sales. Weather “clearly played a materially negative role,” Morgan Stanley says, particularly for the Detroit Three as much of their sales are in the Midwest and Northeast.

The firm thinks the industry “stands at a cross-road,” where “pricing is going to have to keep melting” if US sales are to get to a seasonally-adjusted annual rate of 17 million sales in the next 12-18 months. The best of the auto replacement cycle is over, Morgan Stanley thinks, with “the incremental buyer moving from someone who needs to replace their car to one who wants to…making bank willingness to lend and credit availability more important than ever.

LOAN DEMAND: UP FOR C&I, DOWN FOR MORTGAGES

The Federal Reserve recently released its Senior Loan Officer Opinion Survey (SLOOS). Conducted each quarter, the survey examines changes in the standards and terms of lending, as well as the state of business and household demand for loans. This quarter’s survey is based upon responses from 75 domestic banks and 21 U.S. branches and agencies of foreign banks. On the commercial lending side, results broadly reflected 1) an easing of lending standards on C&I loans and an increase in demand versus the prior survey; and 2) continued easing in commercial real estate (CRE) lending standards accompanied by the ongoing strengthening of demand. Shifting to the household lending side, the survey’s key takeaways were that 1) a small number of domestic banks tightened standards on prime residential mortgages, even as borrower demand declined for a second consecutive quarter; 2) a small fraction of lenders eased standards on credit card, auto and other loans; and 3) demand strengthened for all three categories, which represents four consecutive quarters of a net increase or flat demand. (Raymond James)

 image image

The next chart from CalculatedRisk shows the MBA mortgage purchase index. The 4-week average of the purchase index is now down about 14% from a year ago.

U.S. EMPLOYMENT

(…) Of the 3 percentage point decline in labor force participation since the end of 2007, about 1.5 percentage points is due to long-term trends, mostly the retirement of Baby Boomers, CBO said. The aging of this group has swelled the proportion of the population aged 55 years or older — a group that is less likely to work than younger people. The downward pressure from this group on the participation rate would have happened regardless of the 2007-2009 recession.

Temporary factors — namely the anemic recovery — account for another 1 percentage point of the labor force participation decline, the equivalent of roughly 3 million people, the CBO said. The lack of good job opportunities in a weak economy discourages some people from looking for work, perhaps sending some of them back to school. As the economy strengthens and demand for workers rebounds, these people will re-enter the labor force, the CBO said, predicting that the “dampening effect” this factor has on participation will end by 2018.

Finally, about 0.5 percentage point of the decrease in labor force participation since 2007 was due to people who have dropped out permanently, and not because of demographic trends. These people wouldn’t have left if not for the harsh recession and unusually weak recovery that followed. Some who had trouble finding work decided to sign up for Social Security Disability Insurance instead. Others departed for early retirement or “chose alternative unpaid activities, such as caring for family members, and will remain out of the labor force permanently,” the report said. The report was released Tuesday alongside the CBO’s budget and economic outlook.

Looking ahead, the CBO predicts the participation rate will continue its downward drift downward even after the economy fully recovers. The CBO said the labor force participation rate will stay at about 62.9% in 2014 but fall to 60.8% by the end of 2024.

While those who temporarily stopped looking for work will return to the labor force between 2014 and 2017, that recovery “will be more than offset by the downward pressure on participation stemming from other changes,” especially aging, the CBO said. (…)

  • Health Law to Cut Into Labor Force The Congressional Budget Office report forecasts that more people will opt to work less as they seek coverage through Affordable Care Act.

The new health law is projected to reduce the total number of hours Americans work by the equivalent of 2.3 million full-time jobs in 2021, a bigger impact on the workforce than previously expected, according to a nonpartisan congressional report.

The analysis, by the Congressional Budget Office, says a key factor is people scaling back how much they work and instead getting health coverage through the Affordable Care Act. The agency had earlier forecast the labor-force impact would be the equivalent of 800,000 workers in 2021.

Because the CBO estimated that the changes would be a result of workers’ choices, it said the law, President Barack Obama‘s signature initiative, wouldn’t lead to a rise in the unemployment rate. But the labor-force impact could slow growth in future years, though the precise impact is uncertain. (…)

The report indicates that, in effect, some workers will either leave the workforce entirely or cut back on hours because the law lets them get coverage on their own without regard to their medical history, in some cases with a subsidy.

The report also said that in the next few years, some of the hours that were given up would be picked up by the many Americans seeking jobs. (…)

The CBO estimated that insurance premiums on the health-care exchanges were 15% less than originally forecast, and, more broadly, the agency said the recent slowdown in the growth of Medicare costs had been “broad and persistent” and projected “that growth will be slower than usual for some years to come.” (…)

(…) Roughly 36 million people in the U.S. had some graduate school under their belts (though not necessarily an advanced degree) in early 2013, the Census Bureau said Tuesday. That’s up from 29 million in early 2008, during the recession. (…)

Overall, the number of Americans with at least some college, including undergrad and grad school, rose 11% since 2008 to 121 million in 2013.

But there was a downside. Just as more people received degrees, a lot of students entered graduate programs but never completed them. The number of people with some graduate school but no degree jumped 38% from 2008 to 2013.

The rise in enrollment varied across programs. For example, the number of Americans with an associate’s degree increased almost 19% between 2008 and 2013. Those who had earned a bachelor’s degree, but with no graduate school, climbed just 3%.

A defining feature of the U.S. recovery is that unemployment has remained historically high. That has left many college graduates in jobs outside their fields or that pay less than those workers would earn during healthier times. Workers’ pay, even among many college grads, hasn’t kept up with the rise in prices.

Those with advanced degrees still earn far more, on average, than other workers. But their earnings relative to high-school graduates dipped during the recovery.

On average, Americans with an advanced degree who worked full-time, year-round earned $89,253 in 2012. That’s about 2.7 times more than the $32,630 earned, on average, by high-school grads with no college.

That premium has dipped since 2009, when full-time workers with advanced degrees earned 2.8 times the pay of high-school grads.

Meanwhile, those with only a bachelor’s degree earned, on average, $60,159 in 2012. Those with at least some college or an associate’s degree earned $35,943, and those who hadn’t completed high school earned $21,622.

Cold Weather Heats Natural-Gas Prices

Natural-gas futures jumped nearly 10% Tuesday on expectations another wave of colder-than-average weather will generate even more demand for the heating fuel.

Households across the Midwest and Northeast have consumed record amounts of natural gas this year amid frigid temperatures. Forecasters are calling for cold weather to persist through mid-February, with some predicting below-normal temperatures into March.

The resulting spike in heating demand has revived the formerly sleepy gas market, sending investors scrambling to exit from bets that prices would stay low and into new wagers that futures will rally further.

On Tuesday, natural gas for March delivery shot up 9.6%, to $5.375 a million British thermal units. Futures are within striking distance of a four-year high of $5.557 set last Wednesday.

(…)  Declines in the nation’s natural-gas stockpiles have reawakened supply concerns and injected volatility into the futures market.(…) As of Jan. 24, natural-gas inventories stood at 2.193 trillion cubic feet, 17% below the five-year average level for that week. The EIA is scheduled to release its storage data for the week that ended Jan. 31 on Thursday. (…)

Japanese wage rises remain elusive Base salaries fall adding to Abenomics concerns

(…) Total worker earnings rose 0.8 per cent in December compared with the same month a year earlier, government data showed on Wednesday.(…)

Overtime pay increased by 4.6 per cent in December, Wednesday’s data showed, while bonus pay rose by 1.4 per cent. Base earnings continued to decline, however, falling by 0.2 per cent.

Taking inflation into account, real wages for Japanese workers fell by 1.1 per cent in December and are “unlikely to turn to positive territory in the near future, especially after the consumption tax rate hike,” said Masamichi Adachi, economist at JPMorgan.

In a country where laying off workers is difficult and expensive, compensation levels, rather than jobs, have been the main casualty of economic weakness. Economists say unemployment has now fallen far enough – it hit 3.7 per cent in December, the lowest level since late 2007 – to put natural upward pressure on wages, but it remains unclear how much given that the bulk of the new jobs are lesser-paid part-time or contract positions.

“The secular shift of labour composition in the workforce should weigh on the rise in average wages,” Mr Adachi said.

BAROMETER FATIGUE…

The “Super Bowl Indicator” says that a win for a team from the NFC division (i.e., the Seahawks) means the stock market will be up for the year. Some may laugh, but this theory has been correct 81% of the time.

However, let’s not ignore the balance of the 19%: in 2008, the New York Giants, an NFC team, won the Super Bowl, but the stock market suffered its largest downturn since the Great Depression.

Pizza Italy accuses S&P of not getting ‘la dolce vita’ Culture clash triggers $234bn threat over downgrade Confused smile

(…) Standard & Poor’s revealed on Tuesday it had been notified by Corte dei Conti that credit rating agencies may have acted illegally and opened themselves up to damages of €234bn, in part by failing to consider Italy’s rich cultural history when downgrading the country. (…)

Notifying S&P that it was considering legal action, the Corte dei Conti wrote: “S&P never in its ratings pointed out Italy’s history, art or landscape which, as universally recognised, are the basis of its economic strength.” (…)