The trend of stagnating retail sales around the world continues with Australia reporting a fall in demand. We are also starting to see headlines of falling demand for credit cards in the United States.
Debt continues to fund what little productivity there is in the economy, whether it is through consumer loans or central bank stimulus.
Developing now is a direct correlation between falling demand for consumer credit and the stagnation of retail sales and GDP figures. This was always going to happen when debt is the primary source of funding.
With interest rates starting to rise, particularly in the US, the cost of servicing debt increases as a consequence, which makes the affordability of consumers taking out further debt more difficult.
All this is occurring as central banks begin prepping people to expect interest rates to carry on rising and for monetary stimulus to be scaled back. The narrative of a false economic recovery is growing.
UBS Chairman Axel Weber, who was once policymaker at the the European Central Bank and President of the German Bundesbank, said recently that,
“I don’t think a single trader can tell you what the appropriate price of an asset he buys is, if you take out all this central bank intervention”
- We were looking forward to the latest Fed Senior Loan officer survey for more details about changing loan dynamics within US society.
- What the report revealed was troubling: while on the surface, the Loan Officer Survey characterized loans to businesses as “basically unchanged” from the previous survey, it did remark that standards for commercial real estate (CRE) loans had tightened.
- Demand for credit cards is now running at the lowest level in the 5 years the survey has provided credit- card-only data for consumer demand.
- The eurozone is suddenly looking in a healthier state than it has at any time since the financial crash of 2008 and 2009 — and despite the many, many false dawns over those years, investors might well be finally tempted by its undervalued equities.
- The European Central Bank looks likely to start winding down its €2.2 trillion program of quantitative easing. That would be a big mistake. It might have worked imperfectly, and with uneven results, but QE has worked. It has floated the eurozone off the rocks, and created the conditions for a durable recovery.
- If the ECB needs QE Forever, then it should keep it in place, because the alternative is another nasty crash.
- Troubled lender Banca Monte dei Paschi di Siena SpA said Thursday it swung to a net loss for the first quarter, hurt by declining revenue and one-time costs, as it struggles to right itself after having asked the Italian government to bail it out in December.
- The bank said its first-quarter net loss was EUR169 million ($185 million), compared with a net profit of EUR93 million the year before.
- The quarterly results follow two consecutive losses of a total of EUR3.54 billion ($3.88 billion) in the second half of last year, as the bank undertook large write-downs of bad loans.
- Revenue for the quarter dropped by 21%, to EUR933 million, from the first quarter of last year, as both net interest income and fees declined.
- Four months after the Atlanta Fed started off its Q1 GDP nowcast at 2.5%, then raised it just shy of 3.5% before eventually crashing, and closing the books at 0.2%, slightly below where the BEA reported Q1 GDP, on May 1 the regional Fed released its initial GDP forecast for Q2, and, as we noted last week, it came as no surprise to anyone that the initial estimate was just a tad optimistic at 4.3%, to which we commented that if past is prologue, “expect this number to end roughly 50% lower in three months when the first advance Q1 GDP report is released.“
- One week later, we are a third of the way there, because moments ago, the Atlanta Fed did just as expected, and chopped off a whopping 17% from its initial estimate, revising its Q2 GDP estimate from 4.3% as of May 1 (and 4.2% as of May 4) to 3.6%, due to a decline in forecast real consumer spending growth and real private fixed investment.
- Australian retail sales fell in March, in the latest sign of an economy that is facing headwinds from a weak job market and slack wages growth.
- Retail sales fell by 0.1% from a month earlier, the Australian Bureau of Statistics said Tuesday, compared with a 0.3% increase expected by economists.
- Demand for food retail and household goods contributed to the fall in March.
- Retail sales in the first quarter increased by just 0.1%, below the 0.5% growth expected by economists.
- The rise of anti-globalisation political movements and the threat of trade protectionism have led some people to wonder whether a stronger multilateral core for the world economy would reduce the risk of damaging fragmentation. After all, lest we forget, the current arrangements – as pressured as they are – reflected our post-world war two forebears’ strong desire to minimise the risk of “beggar-thy-neighbour” national policies, which had crippled growth, prosperity and global stability in the 1930s.
- Similar considerations fuelled the launch, nearly 50 years ago, of the International Monetary Fund’s special drawing right as the precursor to a global currency. And with renewed interest in the stability of the international monetary system, some are asking – including within the IMF – whether revamping the SDR could be part of an effective effort to re-energise multilateralism.