In an ominous harbinger of holiday spending, comSCore reported today that US online spending last month grew by only 1 percent over October 2007, down from the 5 percent annual growth rate recorded in September. October saw the lowest monthly growth rate since comScore began tracking e-commerce in 2001.
Retail e-commerce growth rates have fallen from a high of 28 percent in August 2007 to a growth rate of just 1 percent in October 2008. October represents the sixth consecutive month this year of slowing growth rates.
The overall softness in online retail spending was precipitated by curtailed spending across mid to lower income segments, with households earning less than $50,000 reducing their spending compared to a year ago.
Technorati Tags: eCommerce, economic-data, online-retail, online-shopping, retail
Fitch Ratings predicts that the world’s major advanced economies - US, UK, Euro area and Japan - will next year experience the steepest decline in GDP since World War II. In aggregate GDP growth in these countries is expected to be (minus) -0.8% in 2009, compared to an estimated 1.1% for 2008, Fitch says in its latest Global Economic Outlook.
Tighter credit conditions, consumer retrenchment and falling corporate investment are expected to combine to deliver an unusually synchronised downturn across the advanced economies.
World GDP will grow by just 1% next year - the slowest rate since the early 1990s - and compared to an average of 3.5% over the last five years. The combination of recession in developed countries, lower commodity prices and reduced international capital flows will result in a sharp slowdown in growth in emerging markets, though most will avoid outright recession.
The macroeconomic policy response, along with the boost to real incomes from lower commodity prices, will form an important part of the expectation for recovery in 2010. This will, however, be to a rate well below that seen in the last five years, when credit was abundant.
The rapid intensification of the global credit crisis in the last two months and clearer evidence of household retrenchment, declining corporate investment intentions and falling world trade growth explain the sharp deterioration in the outlook since Fitch’s previous Global Economic Outlook was published on July 4 2008.
These factors far outweigh the benefits to income growth in the advanced economies from the decline in commodity prices.
Recession driven by a contraction in the supply of credit is uncharted territory for the world economy and there are few historical parallels on which to gauge its possible depth or length. However, the aggressive expansion of central bank liquidity provision since early September, in combination with major fiscal injections into the US and European banking systems will head off the worst-case scenario of widespread deflation.
The recent widening of the credit crisis to emerging markets dampens the prospects of companies in the advanced economies switching sales strategies to the developing world as the US consumer retrenches. This will also weigh on investment. In particular, the increasingly likely prospect of a hard landing in eastern Europe will hit German export growth, which has been a mainstay of its recent recovery.
Fitch also expects growth in China to slow to just over 7% in 2009, its lowest rate for nearly two decades. Even so, it expects growth in Brazil, Russia, India and China (BRICs) overall to be 5.7%, reflecting policy flexibility, external financial strengths and structural factors.
The decline of inflationary pressures from the commodity markets is positive news. It will allow the European Central Bank and the Bank of England to bring down interest rates rapidly, which will ease the de-leveraging process and help banks’ profitability. In concert, fiscal policy will also cushion the shock to growth as governments absorb an increasing share of global liquidity through higher borrowing and inject it back into the economy through tax cuts or higher spending.
Technorati Tags: commodity-prices, credit-crisis, economic-data, economic-forecast, GDP, recession
It says something about the parlous state of the US housing industry when an annual decline of 17.7 % in home prices can be viewed as good news. But the fact that the August decline in the Standard & Poor’s Case-Shiller 10-City Composite Index was only slightly worse than the 17.5% recorded in July indicates that at least the rate of decline continues to slow. The 20-city Composite showed a 16.6% annual decline, compared with 16.3% in July.
“For the fifth straight month, every region reported negative annual returns. Both the 10-City and 20-City Composites have been in year-over-year decline for 20 consecutive months. Of the 20 regions, 13 of them had their annual returns worsen from last month’s report. As seen throughout 2008, the Sun Belt markets are being hit the most. Phoenix and Las Vegas are both reporting annual declines in excess of 30%, and Miami, San Francisco, Los Angeles and San Diego are all in excess of 25%.”
“Nine of the 20 regions have record annual declines. Phoenix and Las Vegas are now returning -30.7% and -30.6% versus August 2007, respectively. Each of the California markets- Los Angeles, San Francisco, and San Diego- are down more than 25% from their values 12 months ago. Miami and Tampa, the two Florida markets, are down 28.1% and 18.1%, respectively.”
For the August/July period only 2 regions, Cleveland and Boston, had positive returns. Cleveland returned +1.1% and Boston returned +0.1%. Boston has had positive monthly returns for each of the past five months. Dallas and Denver’s streaks of 4+ straight positive returning months ended in August. San Francisco was the biggest decliner for the month returning -3.5%. This worsened from its July/June return of -1.8%. From August 2007 to August 2008, Dallas and Charlotte have the best relative performance. Dallas is down 2.7% over the year and Charlotte is down 2.8%.
Technorati Tags: case-shiller, economic-data, housing
The OECD’s latest annual Revenue Statistics report shows that the average tax burden in the 30 OECD countries as a proportion of gross domestic product (GDP), is close to the historic peak of 36.1% reached in 2000. In 2006, the latest year for which complete figures are available, the tax-to-GDP ratio was 35.9%, up from 35.8% in 2005 and compared with 29.4% in 1975.
The latest figures show a continued rise in revenues from corporate income taxes to an average 3.9% of GDP in 2006, compared with 3.7% in 2005 and only 2.2% of GDP in 1975.
Whether this trend will continue in 2008 is uncertain, however. “The current economic slowdown is going to put additional pressure on government budgets,” OECD Secretary-General Angel Gurría observed. Britain and the U.S. are already downgrading forecasts of how much revenue they can expect from the financial sector, and other countries are also likely to see a reduction in revenues from corporate income taxes.
Since 1965, the contribution to total government revenues of corporate income taxes increased from 9% to 11% and that of social security charges has jumped from 18% to 25%. The share of personal income taxes, by contrast, has fallen back to below 1965 levels after rising in the 1970s and 1980s.
In the US, the tax burden inched up to 28.3% of GDP in 2007, from 28.0% in 2006. It was still below the peak of 29.9% reached in 2000, and compares with 25.6% in 1975. Revenues from corporate taxes rose to 3.3% of GDP in 2006 from 3.0% in 2005 and 2.9% in 1975.
Technorati Tags: economic-data, tax, tax-policy
Composite leading indicators (CLIs) for August 2008 indicated a continued weakening outlook for all seven major economies, a trend that seems certain to accelerate given the financial market meltdown since that time.
The CLI for the OECD area decreased by 0.7 point in August 2008 and was 4.9 points lower than in August 2007. For the United States it fell by 0.5 point in August and was 5.3 points lower than a year ago. The Euro area’s CLI decreased by 1.0 point in August and stood 6.4 points lower than a year ago.
The CLI for Japan decreased by 0.9 point, and was 2.8 points lower than a year ago and for the United Kingdom was down by 1.1 point and 6.1 points.
The data for major non-OECD member economies tentatively pointed to expansion in Brazil, a downturn in China and Russia and a slowdown in India.
Changes in the CLI from the previous month and a year earlier were as follows:
China -0.7 point -3.1 points
India -1.2 point, -7.1 points (July)
Russia -2.3 points, -0.4 point
Brazil -1.0 point, +3.4 points
Canada -1.5 point, -4.7 points
France -0.8 point, -5.6 points
Germany -2.0 points, -7.6 points
Italy -0.8 point, in -5.9 points
In a separate report, the OECD said The standardised unemployment rate for the OECD area was 6.0% in August 2008, 0.2 percentage point higher than the previous month and 0.4 percentage point higher than a year earlier.
Technorati Tags: economic-data, OECD, unemployment
US home prices continued to decline in July, but at a slower pace , according to the latest S&P/Case-Shiller Home Price Indices.
The 10-City and 20-City indices reached new record annual declines of 17.5% and 16.3%, respectively. The 10-City level marked its 10th consecutive monthly report of a record decline, beginning with data reported for October 2007.
While the annual returns of the two indices continue to reach record lows, the pace of the decline has slowed, particularly over the last three months.
For the three months of May through July, home prices cumulatively fell about 2.2%; whereas for the three months of February through April, and November 2007 through January, the cumulative rates of decline were closer to 6.0-6.5%.
Las Vegas remains the weakest market, reporting an annual decline of 29.9%, followed by Phoenix and Miami at -29.3% and -28.2%, respectively. Atlanta, Dallas, Minneapolis and Tampa showed improvements in their annual and monthly returns, but all four are still too close to their recent lows to determine if the markets have stabilized. While their annual returns are negative, Atlanta, Boston, Dallas, Denver and Minneapolis all reported positive returns for the three months or more.
Technorati Tags: economic-data, housing, subprime
In what could be a sign of the peaking of the current inflation cycle, consumer prices in the industrialized world fell slightly in August, reflecting lower energy and food prices. On a monthly basis, consumer prices in the OECD decreased by 0.1% in August, compared with a rise of 0.4% in July. They rose by 4.7% in the year to August 2008, compared with 4.8% in year to July 2008, the OECD said.
Consumer prices for energy were up by 20.9% year-on-year in August, as against 22.5% in July and consumer prices for food by 7.1% compared with 7.2% in July. Excluding food and energy, consumer prices rose by 2.3% in the year to August, unchanged from July.
In the euro area, the Harmonised Index of Consumer Prices (HICP) was up by 3.8% in the year to August, compared with 4.1% in the year to July. Month-on-month, the HICP in the euro area decreased by 0.1% between July and August, after a decrease of 0.2% between June and July. Excluding food and energy, the year-on-year rise in the HICP in the euro area amounted to 1.9% in August, compared with 1.7% in July.
In the United States, the Consumer Price Index (CPI) increased by 5.4% over the year to August, compared with 5.6% in the year to July.
In Japan, consumer prices were up by 2.1% year-on-year in August, as against 2.3% in July. Over the year to August, consumer prices rose by 4.7% in the United Kingdom, 4.1% in Italy, 3.5% in Canada, 3.2% in France and 3.1% in Germany.
Technorati Tags: economic-data, inflation, OECD
Inflation fears among executives have decreased sharply around the world in the past six months, according to the latest McKinsey global survey on economic conditions. At the same time many companies have scaled back hiring plans and taken some easy steps to become more energy efficient.
Respondents answered the survey in early September, after commodity prices had eased and Lehman Brothers had filed for bankruptcy, but before the US government bailout of financial institutions.
Despite this ongoing turmoil and a notable lack of confidence in national economies, respondents indicate that many companies have some flexibility to cope: most of those seeking external funding have so far been able to find it, respondents who predict higher inflation are also likely to report that their companies will be able to raise prices, and a majority of all executives expect the productivity of their companies to increase.
Though many central bankers remain cautious, the executives’ expectations of higher inflation have started to recede: only 51 percent foresee it during the next six months, down from 72 percent six months ago. Further, inflation fears have eased markedly in China and India: 43 percent of the respondents in the former and 65 percent in the latter expect lower inflation, compared with only 28 percent of respondents overall. This finding is probably related to these two countries’ particularly high reliance on commodities.
Although executives indicate that their companies have greater pricing power, it isn’t translating into stability for workers. Almost 30 percent of the executives now expect their companies to shrink the size of the workforce in the next six months, up from 18 percent a year ago. But 43 percent of the executives in energy expect hiring levels to rise—by far the most in any industry.
More than 60 percent of the respondents report that their companies have acted to become more energy efficient. Among the most widely used moves are two that can be made very quickly—using less energy to heat or cool corporate offices and reining in business travel. Longer-term options, such as shortening the supply chain, have been implemented less frequently. That is consistent with the findings of another recent survey: though executives report that rising energy prices rank among the top three issues influencing the supply chains of their companies, only 16 percent say that the problem is being addressed. The longer any single issue had affected the supply chains of companies, however, the more likely they were to have addressed it.
This suggests that if energy prices remain relatively high, companies will probably act in more complex ways to manage them.
Technorati Tags: economic-data, employment, energy-efficiency, inflation
An article in the International Monetary Fund’s Finance and Development magazine offers a stark illustration of the extent to which emerging countries have displaced the G-7 nations as drivers of global economic growth.
The contribution of the Group of Seven major industrial economies to global growth has declined—from about 50 percent in 1990 to 20 percent last year. Meanwhile, the seven largest emerging economies (the EM-7) have seen their contribution to global growth rise from 25 percent in 1990 to approaching 50 percent. 
This development poses a challenge for forecasters, who have much more experience with forecasting G-7 economies. Their economic forecasts have been fairly accurate in tracking recessions in both G-7 and EM-7 countries, but forecasters have been more pessimistic than warranted about the extent of economic recovery in EM-7 countries.
The forecasts made in October of the year of the recovery are still quite a bit below the actual outcomes.
This does not mean that forecasts of economic growth have no value. Without them, policymakers would be operating “without radar,” the article says “But it does suggest that users of forecasts might be better served by paying greater attention to the description of the outlook and the associated risks than to the central forecast itself.”
Technorati Tags: economic-data, economic-forecast, emerging-markets
The economic outlook for almost all major economies continues to weaken, according to the OECD’s latest composite leading indicators.
The CLI for the OECD area decreased by 0.7 point in July 2008 and was 5.2 points lower than in July 2007. For the United States the CLI fell by 0.2 point in July and was 5.0 points lower than a year ago, while the Euro area’s CLI decreased by 1.2 point in July and stood 6.0 points lower than a year ago.
The latest data for major non-OECD member economies tentatively point to expansion in China, Brazil and Russia and a downturn in India. The CLI for Russia increased by 1.8 point in June and was 5.0 points higher than a year ago. The CLI for India was up 1.5 point in June 2008 and but 5.5 points lower than in June 2007, while for Brazil the CLI increased by 1.4 point and was 2.3 point higher than a year ago. The CLI for China decreased 1.3 point in July 2008 and was 1.4 point lower than a year ago.
The July and annual CLI for other countries:
Japan -0.5, and -3.4 points.
United Kingdom -0.9 point and -5.5 points.
Canada -1.5 point and -5.0 points.
France -1.1 and -6.0
Germany -1.5 point and -6.7 points.
Italy -1.9 point in July and -5.9 points.
Technorati Tags: economic-data, OECD