Months of poor economic data have been discarded by Bob Pisani who is busy cheerleading a Chinese recovery. Shanghai has outperformed Tokyo recently, and Pisani uses this fact to bolster the Chinese recovery narrative. Frothy stock markets and manipulated official data do not constitute an economic recovery. The best third party data we have shows a shrinking manufacturing sector confirmed by trading partners importing less Chinese goods.
Moreover, Chinese money markets remain distressed:
Shrinking exports amidst ongoing financial distress point to lackluster future growth in China, and this dynamic will continue to depress growth in emerging markets.
Yay! Greece is saved! (again). The mainstream media enjoys calling an end to the Greek debt crisis every few months. This time, the achievement of a “primary budget surplus” is the reason to start partying like its 2008. Unfortunately, the primary surplus does not exist:
The data, which don’t include payments on debt interest, local government and social security fund budgets, show that Greece is likely to secure a primary budget surplus for the year, for the first time in more than a decade. (My emphasis)
The health system is running a deficit of over €1.2bn year to date and is not paying vendors. The arrears to these vendors are not included in the €1.2bn figure. Once you take into account these hidden debts, Greece no longer runs a primary surplus. Furthermore, unemployment is still the highest it’s ever been, and the economy continues to shrink over 4% a year.
On the plus side, after German elections, Angie will write another check for some much-needed debt relief. Perhaps, with a little luck, Greece can rise to a recession from a depression.
The Fed may attempt to taper in September, but once the results of its experiment run awry it will fire up the printing press. A reduction in bonds purchases will trigger a market panic, and that cannot be allowed. The stock market has not been rising on S&P revenue, so the magic money machine it is, as our chart makes abundantly clear.
India remains stuck between a rock and a hard place. A weak currency will stoke inflation, but a defensive interest rate hike will sap growth. The RBI has decided to deploy other measures including removing cash from the system via bond sales. Our chart shows the relative ineffectiveness of these measures. Despite the best efforts of the RBI, the rupee still slides. If you stay between a rock and a hard place, eventually you’ll get smashed.
The economist’s definition of a recession is two straight quarters of contracting GDP. This definition has nothing to do with the reality experienced by workers. As long as unemployment rates remain high, incomes will stagnate, and this is what regular people would consider as a recession. Just as you have suspected, economists are not regular people. PMIs point to an end to the Eurozone’ GDP contraction, but the labor markets remain weak, sovereign debt levels continue to grow and bank lending to the private sector is decreasing. The recession may technically end, but the malaise remains.
Japan’s economy is growing because of cheap money inflating the stock market and Japan Inc’s profits. This “wealth effect” from all of this money should now trickle down to households creating a self-sustaining recovery. Just because this policy has failed in both the U.S. and the U.K. does not mean failure in Japan. This time is different!