12 minutes ago
The Conference Board LEI for Australia fell sharply in April led by a large decline in building approvals (April’s significant drop in the housing indicator was mainly due to a temporary interruption in approval processing), and there were downward revisions to the past few months as actual data for sales to inventories ratio* and gross operating surplus* for the first quarter of 2012 became available. With this month’s decline, the six-month change in the leading economic index remained negative at 2.8 percent (about a -5.5 percent annual rate) between October 2011 and April 2012, significantly down from the increase of 1.0 percent (about a 1.9 percent annual rate) during the previous six months. In addition, the weaknesses among the leading indicators have been somewhat more widespread than the strengths in recent monthsConsider this chart from the same report:
Members noted that indicators of recent economic activity had been mixed but, on balance, suggested continued moderate growth. Taking the past two months together, ABS data suggested a pick-up in the growth rate of retail sales; nominal retail sales declined by 0.2 per cent in April, but this had followed a strong rise of 1.1 per cent in March. Consumer confidence rose slightly in May, but remained below its long-run average level. In aggregate, housing prices continued to decline and activity in the housing market remained weak, with a sharp fall in dwelling approvals in April partly accentuated by the introduction of new legislative guidelines in Western Australia
Surveys of business conditions generally fell in April, to average or below-average levels. Much of the reported strength in business conditions continued to be in mining-related and transport industries, with the weakness concentrated in the retail, construction and manufacturing industries. Members were briefed on the March quarter capital expenditure survey, which suggested a continuation of the very large pipeline of committed mining investment in coming years, notwithstanding recent announcements by some mining companies that they were re-considering the viability of a number of resource projects to which they had not yet committed. The data also showed that non-mining investment intentions remained weak. The pace of business credit had been increasing gradually to an annualised rate of around 4 per cent over the six months to April.Australia's economy has two sectors: mining/natural resources and everybody else. With China right around the corner, Australian natural resource companies have a natural market for their goods. However, note that China is now becoming a less-then competitive manufacturer because of rising wages. This is part of the overall reason for their latest slowdown, which in turn is having an impact on the suppliers of China's raw materials. This explains why miners are going to continue with current expansion plans, but are rethinking expansion that is only theoretical right now.
Some modest strengthening in the labour market over the year to date was apparent, as employment increased by 15,000 in April, the unemployment rate declined to below 5 per cent and the trend measure of average hours worked edged up. However, other indicators and information from liaison continued to suggest that hiring intentions outside mining-related activities remained relatively subdued.
Recent data indicated that private wage growth had been relatively steady in the past few quarters. The wage price index for the private sector increased by 0.9 per cent in the March quarter, to be 3.7 per cent higher over the year; growth of public-sector wages slowed a little in the quarter and was running at 3.1 per cent in year-ended terms. In line with differences in labour market conditions across the country, the pace of private-sector wage growth had picked up across a broad range of industries in Western Australia, although, relative to other states, the difference in the rate of growth of wages was less marked than it had been in 2007–2008. Fair Work Australia's annual wage review announced a 2.9 per cent increase in the minimum wage and award wages.
Forget about the implied 5.5% NGDP growth forecast. Australia has a 2-3% inflation target and faster trend RGDP growth than the US. That sort of nominal growth would be beyond my wildest dreams for the US. Rather think about how proactive they are. Unemployment is low and inflation is in the sweet spot. But they are easing monetary policy because they see the global slowdown, which for some reason the much more sophisticated Fed and ECB don’t quite comprehend. They aren’t cutting rates because 5.5% NGDP growth is too low, they are cutting rates to make sure that 5.5% NGDP growth happens.
The Fed seems content to wait until our recovery is off the rails, and then pull out still another QE, each one less stimulative than the last, because they mostly work via signalling. Every time the Fed fails to carry through it losses a little more credibility. And the biggest irony is that the credibility loss they are worried about is too much inflation! That’d be like Mitt Romney worrying that people will regard him as too spontaneous and reckless.
By 2022, the Congressional Budget Office estimates (pdf) the Affordable Care Act will have extended coverage to 33 million Americans who would otherwise be uninsured.
2. Families making less than 133 percent of the poverty line — that’s about $29,000 for a family of four — will be covered through Medicaid. Between 133 percent and 400 percent of the poverty line — $88,000 for a family of four – families will get tax credits on a sliding scale to help pay for private insurance.
3. For families making less than 400 percent of the poverty line, premiums are capped. So, between 150% and 200% of the poverty line, for instance, families won’t have to pay more than 6.3 percent of their income in premiums. Between 300 percent and 400 percent, they won’t have to pay more than 9.5 percent. This calculator from the Kaiser Family Foundation will let you see the subsidies and the caps for different families at different income levels.
4. When the individual mandate is fully phased-in, those who can afford coverage — which is defined as insurance costing less than 8 percent of their annual income — but choose to forgo it will have to pay either $695 or 2.5 percent of the annual income, whichever is greater.
5. Small businesses that have fewer than 10 employees, average wages beneath $25,000, and that provide insurance for their workers will get a 50 percent tax credit on their contribution. The tax credit reaches up to small businesses with up to 50 employees and average wages of $50,000, though it gets smaller as the business get bigger and richer. The credit lasts for two years, though many think Congress will be pressured to extend it, which would raise the long-term cost of the legislation.
6. Insurance companies are not allowed to discriminated based on preexisting conditions. They are allowed to discriminate based “on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio).”
7. Starting in 2018, the law imposes a 35 percent tax on employer-provided health plans that exceed $10,200 for individual coverage and $27,500 for family coverage. The idea is a kind of roundabout second-best to capping the tax code’s (currently unlimited) deduction for employer-provided heath insurance. The policy idea is to give employers that much more reason to avoid expensive insurance policies and thus give insurers that much more reason to hold costs down.
8. The law requires insurers to spend between 80 and 85 percent of every premium dollar on medical care (as opposed to administration, advertising, etc). If insurers exceed this threshold, they have to rebate the excess to their customers. This policy is already in effect, and insurers are expected to rebate $1.1 billion this year.
9. The law is expected to spend a bit over $1 trillion in the next 10 years. The law’s spending cuts — many of which fall on Medicare — and tax increases are expected to either save or raise a bit more than that, which is why the Congressional Budget Office estimates that it will slightly reduce the deficit. (There’s been some confusion on this point lately, but no, the CBO has not changed its mind about this.) As time goes on, the savings are projected to grow more quickly than the spending, and CBO expects that the law will cut the deficit by around a trillion dollars in its second decade.
10. In recent years, health-care costs have slowed dramatically. Much of this is likely due to the recession. Some of it may just be chance. But there’s also evidence that the law has accelerated changes in the way the medical system delivers care, as providers prepare for the law’s efforts to move from fee-for-service to quality-based payments.
11. The law’s long-term success at controlling costs will likely hinge on its efforts to change the way health care is delivered, most of which have gotten very little attention. They include everything from encouraging Accountable Care Organizations to spreading medical homes to penalizing hospitals with high rates of preventable infections to creating an independent board able to quickly implement new reforms through the Medicare system.
Value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. For example, a composite housing affordability index (COMPHAI) of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the COMPHAI then shows that this family is more able to afford the median priced home.Finally, remember that building permits are a leading indicator while total payrolls is a coincident indicator. Put another way, builders have to start building in anticipation of demand, largely because it takes awhile to get a housing community up and running.
Now, if people are borrowing, other people must be lending. What induced the necessary lending? Higher real interest rates, which encouraged “patient” economic agents to spend less than their incomes while the impatient spent more.
OK, so that’s what happens when an economy is engaged in increased leveraging. Then something makes people remember the dangers of debt, and leveraging gives way to deleveraging.
You might think that the process would be symmetric: debtors pay down their debt, while creditors are correspondingly induced to spend more by low real interest rates. And it would be symmetric if the shock were small enough. In fact, however, the deleveraging shock has been so large that we’re hard up against the zero lower bound; interest rates can’t go low enough. And so we have a persistent excess of desired saving over desired investment, which is to say persistently inadequate demand, which is to say a depression.
By the way, this is in a fundamental sense a market failure: there is a price mechanism, the real interest rate, that because of the zero lower bound can’t do its job under certain circumstances, namely the circumstances we face now.
What to do? One answer is fiscal policy: let governments temporarily run big enough deficits to maintain more or less full employment, while the private sector repairs its balance sheets. The other answer is unconventional monetary policy to get around the problem of the zero lower bound: maybe unconventional asset purchases, but the obvious answer is to try to create expected inflation, so as to reduce real rates.
Now look at what the serious people say: we must have fiscal austerity, not stimulus, because debt is bad; we must not have unconventional monetary policy, because that would endanger “credibility” (where it’s not at all clear what that means).
So basically, we must do nothing to fix this horrific market failure, and allow unemployment to fester instead.
It’s really awesome, when you think about — not just that we’re committing this massive act of folly, but that it’s all being done in the name of sound policy.
The Conference Board LEI for Australia fell sharply in April led by a large decline in building approvals (April’s significant drop in the housing indicator was mainly due to a temporary interruption in approval processing), and there were downward revisions to the past few months as actual data for sales to inventories ratio* and gross operating surplus* for the first quarter of 2012 became available. With this month’s decline, the six-month change in the leading economic index remained negative at 2.8 percent (about a -5.5 percent annual rate) between October 2011 and April 2012, significantly down from the increase of 1.0 percent (about a 1.9 percent annual rate) during the previous six months. In addition, the weaknesses among the leading indicators have been somewhat more widespread than the strengths in recent months.The overall trend for this number is now down. As my co-blogger Silver Oz points out, this may be a country specific event; Australia is heavily dependent on China, which is itself slowing down. In addition, Australia is also heavily dependent on natural resources, which are also declining.
The Markit Eurozone PMI® Composite Output Index was unchanged at 46.0 in June, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. The index therefore signalled that the private sector economy shrank at a rate unchanged on May – which had seen the steepest contraction since June 2009.Philly Fed Manufacturing Index tanks
With the exception of a marginal increase in January, the survey has recorded continual contraction since last September, with the rate of decline having gathered significant momentum in the second quarter. The second quarter has seen the steepest downturn for three years
Manufacturing firms responding to the Business Outlook Survey indicated weaker business conditions this month. The survey’s diffusion index of current activity fell to -16.6 from a reading of -5.8 in May, its second consecutive negative reading. The survey’s indicators of future activity remained positive and improved slightly.China's manufacturing index dropped into negative territory:
Indicators for new orders, shipments, and average work hours were also negative this month, suggesting overall declines in business. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries
China’s manufacturing may shrink for an eighth month in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown.German sentiment is decreasing:
The preliminary reading was 48.1 for a purchasing managers’ index today from HSBC Holdings Plc and Markit Economics. Above-50 readings indicate expansion. The lowest crisis level was 40.9 in November 2008, when industrial production increased 5.4 percent from a year earlier, compared with a gain of 9.6 percent last month.
If confirmed on July 2, the gauge would be at the lowest since November 2011 and equal the run of below-50 readings from August 2008 to March 2009.
The Ifo Business Climate Index for industry and trade in Germany continued to fall in June. Although assessments of the current business situation brightened somewhat after deteriorating significantly last month, companies reported far lower expectations with regard to their six-month business outlook.
The German economy fears the growing impact of the euro crisis. The business climate index in manufacturing dropped further. Manufacturers assess the current
business situation as slightly improved. As far as their six-month business outlook is concerned, however, manufacturers expressed far greater caution than in the past. Their expectations in terms of export business are also much lower and their recruitment plans remain defensive. In retailing the business climate recovered somewhat, after clouding over considerably last month. The retailers surveyed assess their current business situation much more positively and
are also no longer as pessimistic about future business developments as they were last month.
In wholesaling, on the other hand, the business climate indicator fell. Fewer wholesalers described their current business situation as good. Moreover, they are now slightly more sceptical as far as their outlook is concerned.