Helping you navigate the new normal since 2001
As the Financial Times wrote on Saturday:
“Earlier this year, it all seemed so straightforward. Central banks printed money and proffered soothing words, and markets went up. Now, it’s getting more complicated.”
In fact, nervous readers might want t…
Outsourcing and offshoring took off in western industry during the 1990s. The babyboomers’ demand supercycle meant new manufacturing capacity was urgently needed. And the entry of East Europe, China and India into the global economy offered a seeming…
Reshoring brings manufacturing jobs back to the West Read More
US investors are continuing to excite themselves over the potential for a re-run of the sub-prime housing boom from 2003-7. Thus they welcomed last week’s news of higher house prices with a major rally, after having ignored earlier reports of a slower…
Underwater mortgages temporarily support US house prices Read More
China has now published initial data on its key areas of GDP growth in 2012. As the chart shows, this highlights the major task ahead of the new leadership as they seek to rebalance the economy towards a more sustainable future:
• Infrastructure (g…
China’s GDP data suggests rebalancing is now urgent Read More
The blog still owns the lapel button it was given when running ICI’s feedstock and petchem trading office in Houston, Texas. Its advice for any trader is excellent – ‘The Trend is Your Friend’. But as all traders learn over time, there are moments wh…
Slowly but surely the world’s media are starting to follow the demographic story, and how it relates to today’s ongoing economic crisis. Thus the blog was interviewed by BBC Radio’s flagship current affairs programme, The World Tonight on Thursday (i…
As the above chart shows, India’s auto sales have now fallen for the last 6 months versus the previous year. According to India’s auto association, this has never happened before (sales data was first collected in March 1998). This is another symptom…
Q1 was another miserable quarter for EU olefin producers. As the chart shows, based on APPE data, ethylene production at 4.7MT was at the lowest level in the past 10 years, with the exception of 2009. In fact, one has to go back to 1997 to find a low…
The usual flow of China’s polyethylene (PE) production data has been interrupted since the start of the year. But the good news is that normal publication has now been resumed. Thus the chart above shows market developments between January – April, v…
We are now nearly at the end of May, and still there is no sign of a sustained recovery in demand. This mirrors the weakness seen in January and March – normally also very strong months. Now, unless seasonal patterns are overturned, demand will remai…
Japan’s 7% Nikkei index fall highlights risks ahead Read More
A year ago, the blog’s quarterly review of company results revealed mixed views on the outlook. Dow were expecting “global growth will gain momentum”, whilst Unilever warned the “external environment remains difficult”. But today, much of the optimis…
Barrons, the leading US investment magazine, recently published a major cover story analysing the potential impact of the Millennial generation on the US economy. These are the young people now aged between 18 to 37 years, who are starting to enter th…
Good news about EU auto sales is always welcome, especially when it comes after 17 months of declining sales. Thus the blog is happy to note that April’s sales rose 1.7% versus 2012. Equally, however, it has to report the commentary of Europe’s auto …
China’s electricity consumption (green line) is the best real-time guide to economic developments. It is now beginning to confirm the blog’s suggestion that a major shakeout is underway as the new leadership takes charge:
• Consumption soared in re…
A month ago, the blog highlighted the potentially major implications of the Bank of Japan’s (BOJ) push to devalue the yen as follows:
“However, the BOJ has a slightly different agenda. It aims to devalue the yen, not the US$. And the yen has already f…
‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
This quotation from Lewis Carroll’s great novel ‘Through the Looking-Glass’ rather seems to sum up policymakers’ cur…
Sometimes a picture really is worth 1000 words. This is certainly true with the above chart, showing China’s producer price index since 2008:
• It highlights prices up 10% at the peak of the export boom, before the H2 2008 crash
• Then it shows t…
China heads into deflation as lending boom impact ends Read More
The 25 years of the BabyBoomer demand supercycle between 1983-2007 cover the careers of most people in the industry. Over this quarter-century, we all grew to accept that low-cost and reliable supply was key to success. Demand would always take care …
Q1 data from Global Trade Information Services provides further evidence of the slowdown underway in China. As the chart shows, the dramatic drop in net PVC imports suggests the new leadership are determined to burst the house price bubble they inheri…
China’s Q1 PVC imports drop 98% as housing bubble targeted Read More
Friday provided a good test of the blog’s analysis that Japan’s aggressive policy of devaluing the yen could result in major downward pressure on crude oil prices:
• The yen crashed through the $1: ¥100 level, ending at a 4-year low of $1: ¥101.6
…
The importance of demographics in driving demand is clearly becoming more widely understood.
This week, the blog was interviewed by the editors of MoneyWeek (the UK’s leading investment magazine) in the implications of today’s ageing western populatio…
Blog readers read it here first. Last month the blog did some simple sums to show that US auto sales were unlikely to continue to grow at the 8.6% reported rate of Q1. The reason was that sales had been increased by the need to replace the 250k autos…
US auto sales growth declines for 5th successive month Read More
As the blog discussed yesterday, central banks have now kept oil prices above the historical $10-30/bbl range for 10 years.
But can they remain there forever?
What might bring them back in line with the fundamentals of supply/demand? And what would…
Since 1900, as the chart shows, oil prices have never been so high for so long as now. Until 2003, they had only been above $30/bbl for 4 years between 1979-1982, during the OPEC production cuts in the Iran crisis. But since 2004, they have been cont…
Central bankers mean well. But, of course, good intentions do not guarantee good results.
Their intention since the start of the 2008 crisis has been to boost financial markets. They have therefore provided $tns of liquidity, which has indeed produc…
Central banks pop champagne corks as stock markets soar Read More
More and more industries are now entering the New Normal and refocusing on the new areas for future growth, such as the New Old 55+ generation in the West. Cosmetics companies are the latest to change direction:
• When the Boomers were young, they …
3 years ago, two Harvard professors published a book with the eye-catching title, “This Time Is Different: Eight Centuries of Financial Folly”. Marketed as “the landmark work of financial crises”, it went straight into the best-seller lists and became…
Policymakers seek simple answers to complex issues Read More
It would be nice to believe that a sustained recovery was now underway in the US housing market. But unfortunately, there is little evidence to confirm the claims now being made. As the chart of prices from the S&P Case-Shiller index shows:
• Febr…
90% of new US mortgage bonds now government guaranteed Read More
Do any blog readers routinely trade on the basis of Twitter comments? Or more specifically, do any trade within milliseconds of receiving a tweet? The answer of course is “no”, as readers have no ability to trade in milliseconds.
But last week the c…
The above chart from the Wall Street Journal highlights the major change that has already taken place in the US economy as it transitions to the New Normal. The black line shows the 10-year average growth for US GDP since 1980, which has halved since …
The ‘middle ground’ was the place to be to capture maximum profits during the Boomer-led SuperCycle between 1983-2007. But now, people have less money to spend, and credit conditions are tighter. So margins are disappearing as volumes come under pres…
As new premier Li Keqiang noted some years ago, China’s GDP statistics are “man-made and therefore unreliable”. But as leadership targets, they are very important in signalling the direction to be taken. Thus the blog is quite amazed that the financ…
China’s electricity consumption growth just 2% in March Read More
India is the 3rd largest Asian auto market after China and Japan, and a year ago its automobile association was confidently forecasting annual demand growth of 10%-12%. Instead, sales have fallen 7% (India uses an April-March year) – the first time an…
One volume car manufacturer in Europe achieved a 15% volume increase in Q1 with one of its major brands. The same brand is also achieving margins of around 9%. Who was it?
Regular blog readers will know the answer. Renault’s low-cost Dacia was the …
Low-cost Dacia boosts sales 15%, as EU market declines 10% Read More
Brent crude oil prices have now dropped $20/bbl since their February peak at $119/bbl. The major drop has occurred this month, following the Bank of Japan’s decision to introduce its own massive liquidity programme. This confirms the blog’s long-stan…
Japan’s liquidity programme sends oil, gold prices tumbling Read More
The Euphrates is the longest river in Western Asia at 3000km (1850 miles), and with the river Tigris (1850km) it has been supporting Middle Eastern agriculture for 450k years. But new research from the Water Resources Research academy confirms that bo…
Middle East risks ‘water wars’ as river basins dry up Read More
Something very strange happened in China’s auto market during Q1. As the chart shows, sales (red square) rocketed 20% in January/February versus 2012 (green line), before cooling to 15% growth in March. Neither government nor the auto industry expect…
Licence plate trading drives Q1 jump in China’s auto sales Read More
Operating rates in European chloralkali markets are confirming the general slowdown in demand across the continent. Total chlorine production was already down 1.9% in 2012, with H2 operating rates averaging just 75.7%. And sadly, March data from Euro…
Chloralkali operating rates confirm European slowdown Read More
Have you ever wondered, as you pay your energy bill or fill the fuel tank in your vehicle, just why oil prices have risen so much on the past decade? The question occurred to the blog when reading a Reuters report of the latest Outlook from the Intern…
"Surplus oil is filling inventories worldwide" – Reuters Read More
Crude oil markets long ago lost their role of price discovery. Since early 2009, they have instead been dominated by pension funds seeking to find a ‘store of value’ as the US$ weakened, along with hedge funds enjoying a money-making ‘momentum play’. …
Central bankers clearly read too many super-hero comics when they were young. Ben Bernanke at the US Federal Reserve, Mario Draghi at the European Central Bank, Mervyn King at the Bank of England and now Haruhiko Kuroda at the Bank of Japan, all see t…
Pollution is, unfortunately, one of the downsides of industrial development. Luckily for us in the West, it is mostly a distant memory. But as the BBC picture on the left reminds us, Britain was paralysed by ‘smog’ (a lethal mixture of fumes and fog)…
China’s need to clean up pollution will slow economic growth Read More
Stock market investors in Japan are feeling very pleased. The Nikkei share index has risen 40% since new premier Abe was elected last year. And now the new governor of the Bank of Japan has confirmed he plans to wave a magic wand to restore economic …
Japan waves another ‘magic wand’ to restart economic growth Read More
250,500 US autos were destroyed during Hurricane Sandy last November, according to official data from the National Insurance Crime Bureau. Their replacement was clearly going to have a big impact on auto sales for the following months. Yet strangely,…
US auto sales growth slows as Hurricane Sandy impact ends Read More
Last week saw more evidence that recent weakness in chemical markets mirrors developments in the global economy. Of course, given the bullish mood amongst investors, these signs were still treated as being ‘surprises’. This is perhaps inevitable when…
US employment ‘surprise’ confirms computers lack commonsense Read More
Traders in Western financial markets are confident of 3 key facts about the economic outlook:
• The US is already recovering, with auto and housing markets returning to pre-2008 levels
• The Eurozone crisis is almost resolved and recovery is expec…
China’s polyethylene demand has proved an excellent forward indicator of economic policy. So far, however, the usual data on China’s own production has not been yet been published in 2013. Today, therefore, the blog is instead focusing on trade analys…
Don’t be surprised if your finance team starts working even longer hours over the next few weeks. Not only will they have to worry about revising profit forecasts and working capital issues, as demand weakens in some core markets. Now they have to w…
Drug supplies cut to Greece as capital controls return to Europe Read More
Is a recovery underway in the US housing market? Investors on Wall Street certainly think so. One over-excited fund manager called the blog recently to exclaim “housing starts were at 500k, now they are at 900k, and they’ll be back to 2 million withi…
The divergence between the real world and financial markets was sharply clarified last week:
• The world’s major stock index, the US S&P 500, hit a record new closing high of 1569
• Sadly, Europe’s 3rd largest PVC producer, Kem One, filed for bank…
S&P 500 hits new record as Kem One files for bankruptcy Read More
Autos are the largest manufacturing business in the world, and are also the largest single source of demand for chemicals and plastics. So developments in the major markets are key to future economic growth and demand patterns.
The chart summarises d…
350k Americans are now reaching the age of 65 each month until 2030. But according to government forecasts, this surge in the retirement population will have little impact on economic growth. That’s the view of the White House Council of Economic Ad…
Wishful thinking dominates US government economic forecasts Read More
There really isn’t very much to say about the latest EU auto sales data. They were simply awful. As the chart shows, 2013 volumes (red square) are well below 2012 levels (green line). Less than 800k cars were sold in the 2 months combined, down 10%….
China’s new premier, Li Keqiang, was the first senior official to confirm that the country’s GDP figures were “for guidance only”, being “man-made and therefore unreliable”. As he told the US ambassador in 2007, he instead used electricity consumption…
China’s new leadership prepare for property price crackdown Read More
The blog was in sober mood when giving its usual New Year Outlook in January, warning that “renewed global recession appears to be the major risk facing us at the start of 2013”. Developments since then only reinforce its caution. Europe and Asia are…
Readers outside Southern Europe may not realise the growing crisis that is developing across the region. As Unilever CEO Paul Polman warned in January, “the biggest issue in Europe is going to be social cohesion”. Similarly, his colleague, Jan Zijder…
Europe’s social shock-absorbers show crisis strain Read More
The blog was with the mining industry last week, when giving the keynote speech on The Impact of the ‘Demographic Cliff’ on Demand Patterns at the annual Metal-Pages conference. Mining is seeing similar demand patterns to those in chemicals, whilst th…
Aluminium prices rise as stocks reach record levels Read More
My words fly up, my thoughts remain below:
Words without thoughts never to heaven go
These lines from Shakespeare’s most famous play, Hamlet, aptly describe the critical issue in the Eurozone crisis.
This issue is very simple, as the blog discussed …
Italy’s Grillo calls for referendum on leaving the euro Read More
Are you worried about the economic outlook for your company, for your family and for your country? Do you suspect that current policies may be doing more harm than good? Are you interested in exploring a new analysis that focuses on the importance …
Sustaining Growth as the West Arrives at the Demographic Cliff Read More
Financial markets long ago lost all touch with reality. Not only have central banks provided $tns of cheap liquidity with the specific aim of pushing stock markets higher. But they have also allowed computers to dominate trading, so no single market …
Xi Jinping was formally confirmed as China’s new president this week. But we know remarkably little about him, apart from a rather dry list of his official positions as he climbed the career ladder. This is understandable, given the chaos that result…
Xi Jinping needs to repeat his father’s economic success Read More
The blog’s 6 monthly review of global stock markets highlights a very unusual pattern since global demand and chemical markets peaked on 29 April 2011, as the chart shows:
• Markets in developed economies have powered ahead with Japan up 24%, the US…
Famously, when Bill Clinton ran his successful presidential campaign in 1992, his advisers would remind him of the key message with just one phrase “Its the economy, stupid!”. Today’s policymakers would do well to maintain a similar focus on the oil p…
Jiang Zemin never spent too much time worrying about Western financial markets or domestic criticism, either before or after he became China’s president between 1993-2003. Instead, he focused on 3 core areas, which became known as the Three Represents…
China’s PVC imports tumble as its housing market slows Read More
Chemical markets continue to paint a very worrying picture of the state of the global economy. There has been no improvement in demand over the past week, since the blog first raised the alarm. Instead, plants are being temporarily closed because of …
Lanxess temporarily closes plants, as demand remains slow Read More
The blog is delighted to have been asked to address a wide variety of industry and investor conferences over the next few months.
The arguments of our ‘Boom, Gloom and the New Normal’ eBook are clearly starting to make sense to an increasing number …
A critical change is underway in consumer buying habits as we enter the New Normal. The key driver for this is the switch from value-added to affordability:
• Value-added. The Boomers loved buying premium products when they were young. Companies …
CNN captured the world’s imagination when launching 24/7 television coverage of the first Gulf War in 1991. For the first time in history, viewers were able to see what happening as it happened. And CNN used expert and experienced commentators to mak…
US auto sales growth slips as Hurricane Sandy impact ends Read More
Today sees the start of China’s annual National People’s Congress (NPC) in Beijing, when the new leadership of president Xi and premier Li will formally take office. Judging by their activity since November, when the appointments were confirmed, we ma…
China’s new leadership starts to change economic direction Read More
The best view is always from the top of the mountain.
As the chart shows, this is where we are today – for the 4th time since the H2 2008 crisis. And just as at the previous 3 peaks, nobody seems to be noticing that demand is again weakening fast. …
The economic SuperCycle trend is now steadily reversing Read More
Economic recovery is already underway, according to the optimists who have bid up financial markets in recent weeks. But the blog’s quarterly review of company results shows little evidence of it on the ground.
Phrases such as ‘challenging’, ‘economi…
Europe’s auto association (ACEA) has joined India’s in worrying about likely future sales levels. As the chart shows, it reports volumes “reached a historic low for the month of January (red square)”. Even German sales were down 8.6% versus 2012. Wh…
EU auto sales fall again, as young people lose interest in cars Read More
The blog’s annual review of the Russian market showed production growth stalled in 2012. Output had picked up sharply in 2010-11 following the 2009 crisis. But as the chart shows, based on latest data from statistics agency Rosstat, today’s outlook h…
Russia’s growth stalls in 2012, as new capacity comes online Read More
The blog is awarding itself and co-author John Richardson a pat on the back today, for its pioneering insight into the major changes underway in China’s economy due to the ‘one child policy’. As the chart above shows, China’s economy after 25 years of …
“Everybody knows” that full economic recovery is inevitable. And today, everybody absolutely knows that it must now be very close. After all, it has now been 4 years since the crisis began.
This expectation is understandable, as anybody who began…
The end of the Central Bank bubble may now be very close Read More
Do you find it easier to use the keypad on your phone or your calculator? If the phone, then you are in good company.
Most people prefer the numbers to start logically at the top, rather than searching for them at the bottom.
Therefore the blog wo…
John Karlin, inventor of all-digit dialing, dies at 94 Read More
We all hope to live long enough to receive a pension. But few of us have any real idea of how much money is needed to fund our retirement.
Many happily assume that savings of $250k, for example, will easily fund round-the-world travel and major hom…
Pension risks growing as pretence continues "all will be well" Read More
Unrealistic expectations lead to disappointment. That seems to be the learning from developments in India’s economy in recent years. Its car sales provide a good illustration of the problem, as the above chart shows:
• Sales took off in 2010-11, a…
The blog is constantly astonished by the lack of interest in many companies in the vital field of trade data. No business today, no matter how large and well-connected, can possibly hope to understand market developments without constant analysis of t…
Global PE trade data shows little room for major US expansion Read More
The blog tips its hat today to the International Energy Agency, whose oil research director, Antoine Halff, confirmed its own long-held view that the “recent run-up in prices will rekindle questions about the interplay of financial and fundamental fact…
Chlorine, caustic soda, suggest 2013 demand remains slow Read More
Canada’s plastics industry has published important new research about the potential value of waste plastic.
At the moment, any plastic not recycled goes to landfill – which is both costly and negative for the environment. Now their new research sho…
Canada’s ‘waste plastics’ worth $792m/year as fuel Read More
As the major regional economies continue to slow, more companies are starting to reduce capital budgets. Maintenance spending is always an easy target for a cutback. The cost of poor performance may not be seen for some time, whilst the bottom line s…
2012 was another difficult year for the European olefin industry. As the chart above shows, based on official APPE data, total ethylene volume was just 18.9MT. This was only just above 2009’s 18.8MT. Before that, we have to go back to 1997 to find a…
What is the right conclusion to draw from the above graph? Much rests on the answer, as China’s polyethylene (PE) demand is a good indicator for the overall state of its consumer demand:
• Was the dramatic leap in demand growth (blue column) in 200…
The blog is becoming worried about the likely outlook for Q2. Sentiment now seems to be weakening alongside the fundamentals of supply/demand:
• Fundamentals. The start of 2013 has been a disappointment. Demand has shown some recovery after the …
The president of the European Central Bank, Mario Draghi, was ‘person of the year’ in financial markets with his July promise to “do whatever it takes” to save the euro. 6 months later, it seems worth checking on the current situation.
The chart t…
Eurozone’s ‘Draghi rally’ faces election test in Italy Read More
Oil prices long ago moved away from the fundamentals, as the US Federal Reserve targeted asset price bubbles in a misguided effort to magic up consumption gains. Thus we have to focus on sentiment indicators, as in the chart above, to anticipate likel…
Fed liquidity boosts oil prices as fundamentals weaken Read More
When ‘everybody knows’ something, experience has taught the blog to become very suspicious. And when everybody knows that rising US house prices are certain to drive a US economic recovery, it becomes very suspicious:
• For a start, as the above ch…
US house prices unlikely to drive economic recovery Read More
The approach of Lunar New Year is a good moment to look back over the economic inheritance being left by president Hu and premier Wen as they handover to Xi and Li next month in China. Their strategy was to exploit the opportunity provided by China ha…
China’s new leadership have major economic task ahead Read More
Most commentators seemed surprised by last week’s news of weak US Q4 GDP growth. To help avoid similar shocks in future, the blog is pleased today to present its ‘cut out and keep guide’ to future levels of US GDP and interest rates.
The guide has …
Aging population means low US GDP and interest rates Read More
January was, as usual, a good month for the optimists in the financial community. They filled the media with confident predictions of sustained and high levels of global economic growth. China will apparently soon be booming under its new leadership,…
Are you worried about the future direction of interest rates, and what they may mean for your pension, your family and your company?
Then the chart above, showing 300 years of UK government bond yields, may just be helpful. It will probably also su…
The US auto market seems to be at the start of a 3rd period of major change since 1950. As the chart above shows, sales have still not recovered to 1995-2007 levels. Equally, the key drivers behind the earlier two phases of development seem to be unw…
"Cheap, convenient mobility" the new trend for US auto markets Read More
One of the great myths of recent years has been that China – whose population mainly earns less than $10/day – has somehow become ‘middle class’.
It is certainly true that some of China’s 1.3bn population have done well since the economy reopened t…
“Two roads diverged in a yellow wood,
And sorry I could not travel both”
These lines by famous American poet Robert Frost provide a good description of the critical cross-roads now being approached for the 3rd time since June 2008, as the impact of th…
Some trends play out tactically in days or weeks. Others move more slowly over months and years. These tend to get ignored in the modern world of twitter and 24-hour news cycles. But then, as with the sub-prime collapse in 2008, the future suddenly …
Ms Kay Sun is a 32 year-old administrative assistant in Shanghai, earning $29k/year (Rmb180k). Last month, like many 30-somethings around the world, she put down a deposit on an apartment. But the cost of Ms Sun’s ordinary one-bed apartment was in a …
What do you do if your core customers disappear? Go bankrupt, or find new ones? That’s the issue facing many companies as the West heads over the ‘demographic cliff’.
As the Financial Times reports, iconic motorbike manufacturer Harley Davidson has …
Autos are now the largest single global market for chemical and polymer sales, after the slowdown in US and European housing. Each US auto is worth $3636 to the industry, according to American Chemistry Council data. Thus the US market was worth a re…
Combined EU, US, China auto sales edge up 4% in 2012 Read More
The risk of global recession continues to rise, with the World Bank last week warning that “the real-side recovery is weak and business sector confidence is low”. Spain, the world’s 12th largest economy, provides a good example of how the problems ar…
Its now 4 years since the blog published its first New Year Outlook in ICB. Then it was in a small minority when advising CEOs “to prepare for a marathon not a sprint” in dealing with the financial crisis. And very few accepted its suggestion that it…
Chlorine and caustic soda production are a key indicator of economic growth. They have been produced in large volumes for over a century, and have a extremely wide range of uses from pharmaceutical and aluminium production to detergents and disinfecti…
Crude oil and the major commodity markets have been a “fool’s paradise” in the past 4 years, created by the arrival of the central banks’ massive liquidity programmes. Pension funds rushed to buy, in the belief they would be a “store of value”. Hedge…
China, like the USA, had a leadership transition in November. And, of course, this led to led to some effective ‘massaging’ of the economy in the preceding months. As the blog noted in November, it was no coincidence that bank lending jumped $1.1tn b…
Nobody ever said that financial and chemical were meant to be easy to understand. But current developments are clearly far more complex than normal. We have grown used to manipulation by policymakers, via their various quantitative easing (QE) progra…
Volatility rises as players bet on recovery or recession Read More
2013 is the year that the Western world reaches the ‘demographic cliff’. Its BabyBoomers (born between 1946-70) are the largest and wealthiest generation that the world has ever known. Now they are ageing rapidly. They have less money to spend as th…
Sustaining growth as the West reaches the ‘demographic cliff’ Read More
Crude oil prices remained at a record level for the second year running in 2012. As the chart shows, Brent prices averaged $112/bbl versus $111/bbl in 2011 (blue line). By comparison, 2008 averaged $97/bbl, or $102 if adjusted for inflation (red):
Oil prices at record level for 2nd successive year Read More
December saw continued strong volume in US auto markets, with sales (red line) at pre-Crisis levels for the month. The key driver is the need to replace ageing vehicles, but manufacturers were also generous with rebates and credit offers to help clear…
US auto buyers prefer new to old, as used market tightens Read More
Half of China’s population lived in abject poverty as recently as 1979, with incomes less than $2/day. Since then, economic policy has largely focused on reducing this number. As the chart shows, only 7% are still in this position (brown column). I…
Affordability, not luxury, the focus for China’s new leadership Read More
New Year is a traditional moment for price increases. And last week didn’t disappoint, with Brent crude oil jumping $3/bbl. Whilst financial markets soared globally on hopes that the US ‘fiscal cliff’ deal might be a sign that policymakers will final…
The financial magazine MoneyWeek have produced a new video in their Investment Tutorial series, looking at the impact of today’s ‘demographic cliff’ on the economy.
Editor-in-Chief Merryn Somerset Webb suggests this is “One of the key bits of informat…
The blog’s latest post for the Financial Times FT Data blog is published today.
January 1, 2013 8:00 am by Financial Times
By Paul Hodges
Chart 1: For the first time in history, most westerners now live beyond 55 years
January 1 2013 mar…
Happy 55th birthday, Mr and Ms Average Baby Boomer Read More
Today is a day for celebration, as it marks the day that the average Western BabyBoomer, born in 1958, will join the New Old 55+ generation! This is a truly remarkable moment. Even 100 years ago, as the chart shows, this generation simply didn’t exis…
The blog is now close to celebrating its 150,000th visit. Its readership also continues to grow and it is now read in 146 countries. Readers remain very loyal, with 50% visiting every week and 28% visiting on a daily basis.
The main event of the yea…
The wrong diagnosis can often make the problem worse not better, as doctors know very well. But the message hasn’t got across to policy makers. They refuse to believe that ageing populations spend less and save more – even though all the evidence con…
Merryn Somerset Webb, editor-in-chief of Money Week and also a Financial Times columnist, has devoted her latest post to the implications of the ageing Western population:
“I can’t be sure of much about next year. But here’s one fact you can’t argue w…
In January, the blog suggested that political issues would continue to gain increased importance. Its argument was that the strong economy between 1982-2007, when the US suffered just 16 months of recession, meant political and social issues took a ba…
Auto sales continue to struggle in 3 of the world’s main markets. The chart shows combined sales by month in China, US, EU, Japan and India. These were 76% of global demand in 2011. Overall, volume is up 6% versus last year:
• China’s sales are …
Global auto sales remain slow as China boosts exports Read More
China’s new leaders have made a good start. Its too early to say whether they will really tackle the key issues, but the change in style is noteworthy in itself:
• New premier Li Keqiang made his first official trip to Shenzhen, visiting the statue…
China’s leaders aim for "greater political courage and wisdom" Read More
Over the past 4 years, 18 men (no women are involved) have run the global response to the financial crisis, as politicians refused to take a lead.
Instead, the world’s leading central bankers felt forced to establish their own Economic Consultative…
Oil prices are heading for a second successive year of record annual prices. Last year, Brent averaged $111/bbl and it is averaging similar levels so far in 2012. History suggests this is very bad news for consumers, for companies and for the global …
The blog’s regular Chemistry & the Economy webinar with the American Chemical Society takes place today at 14.00 hours Eastern Time. As always, it will be moderated by friend and colleague Bill Carroll – chair of the ACS and Vice President of Occident…
Changing demographics are leading to major growth in robot development in both Japan and China:
• In Japan, the ageing population means there is a shortage of people to do the heavy lifting required when people become ill
• Equally important, as…
Demographics drive robot development in Japan and China Read More
The head of Pimco, the world’s largest bond fund managers, provides influential support this month for the blog’s argument in ‘Boom, Gloom and the New Normal’ about the importance of today’s demographic changes. Bill Gross comments as follows in his …
China’s important polyethylene market (PE) showed little sign of any major upturn in October. Trade data from Global Trade Information Services shows:
• Demand was up just 4% versus 2010 levels
• Production was up 3%, as China’s refinery operatin…
Last week the blog looked back at the performance of its 3 benchmark products since the start of 2009. This week it looks at what has happened to its 3 financial market products:
• Before 2009, there was normally an inverse correlation between oi…
The blog was interviewed on CNBC Africa’s ‘Beyond Markets’ programme last week, during its visit to AECI in Johannesburg. Hosted by Karema Brown, the programme focuses on the news that drives markets across the continent.
The 3 minute interview dis…
If something seems to be ‘too good to be true’, then it usually is. This may be the learning for the world’s largest pension funds, as they plan their next moves in commodity investment.
Their involvement jumped from 2009 after central banks began st…
Capacity utilisation continues to be on a downward path, according to the latest data from the American Chemistry Council. As their chart above shows, there has been no improvement since the summer:
• October should see peak rates, as companies cat…
Every stock market chart tells a story. And the chart above is no exception. It highlights investors’ roller-coaster ride over the past 5 years since the Shanghai stock market hit its all-time peak of 5903 in October 2007:
• After this it collapse…
As we approach year-end, it is interesting to review performance of the blog’s 3 benchmark products since the start of the major central bank liquidity programmes. The chart begins in January 2009 when the G20 stimulus programme was being prepared, an…
Slowing markets underline failure of central bank policies Read More
Are you a typical employee in the chemical industry (aged in your 30s or 40s)? Have you noticed that you spend rather more money than your parents? Then you may have spotted the reason for the more difficult economic conditions that your company is n…
Europe’s political leaders were deadlocked last weekend over plans for the EU’s new Budget. A new north-south gap opened up, where the major contributors to the Budget (Germany, UK, Netherlands) demanded €30bn ($39bn) in cuts. This was, of course,…
Europe’s olefin operating rates remain at recession levels Read More
As promised, the blog today looks at the impact of former President Jiang Zemin’s return to active politics during the recent leadership transition. Its monitoring of expert commentary inside and outside China suggests he has achieved 4 major changes:…
It is not easy to discover what is really happening in China’s government. There were no opinion polls before the new leaders were appointed, and certainly no public policy debates. But the blog’s careful reading of Chinese and foreign media does sug…
Jiang returns to help China avoid the ‘middle income trap’ Read More
The battle between the major central banks and the fundamentals of supply/demand is starting resemble the battlefields of the 1st World War. The generals running the campaign believe (with the exception of the Bank of Japan) that today’s crisis is sim…
Chemical industry operating rates fall as oil prices rise Read More
The blog is in S Africa next week as the guest of AECI, where on Tuesday it is also scheduled to be interviewed on CNBC’s ‘Beyond Markets’ about New Normal developments.
It is particularly pleased that the visit coincides with the achievement of a m…
“Energy efficiency is the cheapest way to meet our energy needs” according to the International Energy Agency. It also has much shorter payback periods than increased use of renewables, according to Capella Festa of the IEA when speaking at our confer…
IEA highlights $18tn of gains from energy efficiency Read More
Autos are easily the largest global demand sector for chemicals, now housing has declined. Developments in the world’s 4 major markets (China, US, EU, Japan) are thus critical to the future outlook, as they account for nearly 75% of total sales. As t…
There are two great myths in the modern world. One, as discussed yesterday, is that central banks can restore growth to SuperCycle levels. The other is that China’s economy will grow consistenly at high rates for the next decade. Both are wishful th…
China’s new leaders face slowing economy, rising protests Read More
The blog today tips its hat to Borealis CEO Mark Garrett, who becomes the first major company boss to publicly accept that Europe is following Japan into a prolonged period of economic slowdown. He told ICIS news:
“I believe Europe has entered a 10-y…
Europe in "10-year stagnation period, just like the Japanese" Read More
Our World Aromatics Conference in Berlin, now in its 11th year, provided valuable insight into changing market developments, thanks to our array of top-level speakers:
Ted Randall, Global Business Manager for Saudi Aramco, highlighted how their drive …
The blog’s quarterly survey of chemical industry results shows the downward trend continued in Q3. Some companies remain untouched by the mainstream problems, but they are now clearly in the minority:
• Bayer remain optimistic, and DuPont hopeful …
Cotton prices, as the chart shows, have returned to the 50c-70c/lb range that has dominated since 1982. This proves, once again, that ‘reversion to the mean’ is usually the best investment strategy. Sadly, however, it is the people who did not belie…
Polyester markets head for crisis as cotton prices crash Read More
The US spent $6bn on its presidential and congressional elections this year. Apart from expressing the will of the people, it may also prove valuable if it helps to highlight the danger of allowing wishful thinking to override factual evidence on the …
When the economy is running well, most people tend to get on with their lives. That was the case during the 1982-2007 SuperCycle, when growth was almost constant. But today’s greater economic uncertainties translate into a growing role for Political …
IMF warns on recession risk as Political, Social worries rise Read More
The UK housing market has led a charmed life in recent years. Unlike the US, Spain, Ireland and many other Western countries, prices have not collapsed. Instead, near zero interest rates, and the high proportion of mortgages on variable rates, meant …
The US auto market is reaching a critical fork in the road. The consensus view believes that full recovery is well underway. They see the slowdown in October’s sales as purely being weather-related, due to the arrival of hurricane Sandy.
Clearly t…
The above chart may well become a collectors’ piece in time. It appears in a fascinating article in the latest Harvard Business Review, which focuses on why stock market analysts in the USA (U), Europe (E), Asia (A) and Latin America (L) issue ‘buy’ r…
Next week’s World Aromatics conference is a must-attend event for anyone involved with the industry.
It features speakers from leading companies including Dow, Saudi Aramco and Shell, as well as from the International Energy Agency. In addition, ther…
This is a big week for politics. Today is the US Presidential election, which could have major implications for US-China trade, as Mitt Romney has said he will brand China a ‘currency manipulator’ on his first day in office. It is also the start of C…
Hands-up those who remember the G-20? Well done, Mexican readers, you get full points. But other readers seem doubtful. This weekend the world’s Finance Ministers were meeting in Mexico City, as the country concludes its G-20 presidency. But you w…
The blog’s friends at the American Chemistry Council used a very relevant quotation recently from Alexander Graham Bell, who invented the telephone and numerous other modern wonders:
“Sometimes we stare so long at a door that is closing that we seek t…
US Federal Reserve policies confront a closing door Read More
Its never easy interpreting China’s statistics. Partly this is due to the sheer impossibility of producing accurate numbers in an emerging economy. It is also made difficult by the fact that as the incoming premier Li Keqiang noted some years ago, it…
China’s infrastructure lending jumps $1.1tn before Congress Read More
As promised, the blog looks today at the business implications of population ageing and slower economic growth. The chart shows official US household expenditure data, by category. The overall message is clear: spending peaks by the age of 55 years, …
The next few decades will see very much slower economic growth in most countries. This will have critical implications for business strategy, as the blog summarises in a new Research Note. Encouragingly, the Financial Tmes has devoted a column to its…
What happens if prices stay unaffordable for so long, that the consumer eventually stops buying? Younger readers may not remember such a period, as it last happened in the early 1980s, before the SuperCycle began. But it looks as though they may be c…
The blog was interviewed by ICIS’ Will Beacham on its budget outlook this week. Key points from our discussion were:
On the short-term outlook
“Let’s just say that things are going to be pretty flat. The fourth quarter and first quarter of 2013 a…
US housing markets have been a disaster for many homeowners. Overall, they have lost $6tn since the collapse began in 2006. Nationally, prices are still down 32% versus their peak, according to the Case Shiller Index.
Temporarily, however, the mar…
US housing starts rise as investors buy into rental sector Read More
The impact of sustained high oil prices is becoming very clear in global auto markets. Car sales are facing major headwinds with gasoline and diesel prices at, or near, record levels in many countries. The chart shows combined sales in the 3 major ma…
The blog is awarding itself and fellow-blogger John Richardson a pat on the back this morning. The reason is that investment bank Goldman Sachs, the largest player in commodity markets, has completely reversed its analysis of oil markets. They now ac…
Whisper it quietly, so as not to disturb the world’s central bankers as they rest. But the impact of their latest round of quantitative easing programmes (yellow highlight, QE3) may already be slowing. As the chart shows, these had an immediate impac…
US companies’ revenue starts to fall, as higher oil prices bite Read More
As companies finalise Budgets for 2013-15, many will be thinking long and hard about the implications of the IMF’s new economic forecast:
“The recovery continues, but it has weakened. In advanced countries, growth is now too low to make a substantial …
Current farming techniques haven’t changed much over thousands of years. Yet the people who eat the food that comes from farms no longer live next door to them. So the food has to be transported ever-greater distances – sometimes thousands of kilomet…
Mark Twain, the famous US writer, put it well when he warned that:
“It isn’t what you don’t know that gets you into trouble. It’s what you think you know for sure.”
This has certainly been the case with auto sales in China. In 2010, leading analyst…
Next month’s World Aromatics conference is a must-attend event for anyone involved with the industry.
It features an impressive line-up of major players, including Saudi Aramco, the world’s largest oil company, as well as Dow, Shell and the Internatio…
Saudi Aramco, Dow, Shell, IEA to speak at Berlin conference Read More
This year’s European Petrochemical Association in Berlin was notable for its realism. The blog gave an interview to ICIS news which was headlined ‘Major recession ahead, warns leading consultant’. This overview seemed to capture the overall mood of t…
There are many ways to lead a company to disaster. But one of the most reliable is to follow conventional wisdom. The reason is that this is almost always backward-looking, and tells us little about likely future developments.
The blog instead aim…
It is tempting to think that oil price volatility is a zero-sum game. For every ‘winner’, one would expect there to be a ‘loser’. But when it comes to downstream industries like chemicals, the answer is more complicated, as Richard Bartlett, BP’s com…
Oil price speculators drive major petchem volatility Read More
95% of Indian households do not own a car. And as the chart above shows, motor cycles remain the key market for manufacturers. 2011-12 annual figures have now been published, and they show:
• 70% of sales were motorbikes (light blue), versus 66% i…
It would be nice to believe that there are billions of middle-class people in emerging countries. And even nicer to imagine they are just waiting for the chance to buy expensive Western goods. Sadly, the truth is more prosaic. 96% of China’s populat…
October is usually one of the 4 strongest months for demand, alongside January, March and May. This year it should be particularly strong, as many say September’s demand was the weakest they can remember.
The reason it is normally strong is that comp…
Tesco is the world’s 3rd largest retailer, operating in most major markets. A new analysis by its CEO, Philip Clarke, confirms that a generational change is underway in Western shopping patterns. Writing in the Financial Times, he notes:
• ‘Briton…
Here we go again’ seems to be the reaction of financial markets to the US Federal Reserve’s latest push to expand liquidity. So far, policymakers have tried 4 times to return the economy to the world of the Supercycle between 1982-2007. As the chart …
Spain is in the eye of the storm in the Eurozone crisis. Its economy is the 12th largest in the world, with GDP of $1.4tn. If it crashes out of the euro, then we will all feel the impact. And worryingly, the pace of events seems to be speeding up, e…
In the SuperCycle, polyethylene (PE) demand growth was closely linked to economic growth. Our research for the 2008 Feedstocks for Profit study showed, for example, a 1: 1 ratio between global growth in GDP and PE demand between 2002-7. But since the…
Since 2009, analysts have found it more and more difficult to explain oil price movements. They would like to believe these are driven by the fundamentals of supply and demand. But this is clearly not the case. Inventories all around the world are …
The latest Global Risks report from the World Economic Forum warns that its highlighted “societal risks all have a relatively high likelihood of occurring in the next 10 years”.
As the chart above shows, the top 3 risks are those also highlighted in ‘…
The latest weekly report from the American Chemistry Council (ACC) includes a worrying picture of falling operating rates around the world. As their chart above shows, these fell quite sharply in August by 0.4% to 84.8%. By comparison, rates in Augus…
The blog continues to hear very depressing news from its contacts in the market about the state of China’s economy. The most depressing report is that GDP growth may actually have stalled in recent weeks. And the latest figures for electricity consum…
A major new report from BBC News suggests that “China’s economic model is in danger” due to its rapidly ageing population.
It reaches exactly the same conclusions as in our Boom, Gloom and the New Normal ebook. Chapter 6, published in November 2011…
The US Federal Reserve and the European Central Bank have adopted new and aggressive monetary measures to try and boost US employment and stabilise peripheral Eurozone bond markets. Unfortunately, their actions are more likely to increase the chances …
Deutsche Bank’s annual long-term asset return study is always worth reading. It was one of the first to make the link between an ageing Western population and the end of the 1982-2007 economic supercycle. This year’s study is titled ‘A Journey into th…
Western politicians have failed to take responsibility for managing the Crisis. And so, as the blog noted last week, policy is instead being made by unelected central bankers – principally Ben Bernanke at the US Federal Reserve, and Mario Draghi at th…
Mario Draghi, new head of the European Central Bank (ECB), is extremely good at doing deals. He learnt his trade at Goldman Sachs, and then polished his skills whilst running the Bank of Italy. But unfortunately, deal-making skills are not enough to …
It has been obvious for most of this year that China’s economy is in trouble. As the blog wrote in the Financial Times in March:
“PTA is thus warning that China’s economy could be slowing faster than generally realised”.
Yet it is hard for the gover…
China increases lending as leadership talks continue Read More
It was a very good week for traders in oil markets. Guaranteed profits are rare enough these days, even for them. But the combination of Mario Draghi at the European Central Bank, and then Ben Bernanke at the US Federal Reserve, meant they could put …
Blog readers are often very successful people. So the blog thought you might like to know that the London house above is now on sale.
A bargain at just £300m ($480m), the Financial Times reports it has 45 bedrooms on 7 floors and overlooks Hyde Park…
‘Masterly inactivity’ was Wellington’s policy in his successful European wars against Napoleon in the early 19th century. The English general was always under great pressure from the politicians to ‘do something’. But Wellington knew he had to defeat…
Central bankers fail to learn the Wellington lesson Read More
The blog’s 6-monthly review of global financial markets highlights some interesting developments. It began 4 years ago, and was followed by the co-ordinated G-20 stimulus programme in March 2009. This ran out of steam by April 2011, leading the blog …
Financial markets suffer despite stimulus programmes Read More
The above 2 charts show US jobs and car sales on a monthly basis, side by side. They cover the years 2008 – 12, and the combination provides a clear message about demand trends:
• The jobs total began to improve in 2011 (green line)
• They rose 2…
Writing over 2000 years ago, the ancient Greek dramatists had a phrase to describe what is happening today in the global economy:
‘Those whom the gods wish to destroy, they first make mad”
Central banks have spent the last 4 years, since the Crisis b…
Over the past 20 years, the financial sector has captured an increasing share of the wealth created by the rest of the economy. At its peak before the Crisis, it accounted for 40% of all profits in the US corporate sector, allowing financiers to claim…
European olefin markets had a miserable time in Q2. As the chart shows, based on APPE data, ethylene production (red square) was just 4.7MT. This was the lowest Q2 volume since 1998.
Of course, crackers had switched severity to produce more propyl…
The 25 year economic Supercycle between 1982-2007 led to a major change in companies’ budget processes. They could simply assume that growth would be more or less constant. And so they were able to focus on their own specific product silos, and bette…
Housing used to be the engine-room of the US economy. Rising prices allowed people to use their house as a cash machine. In turn, this drove GDP growth, as consumer spending is 70% of the US economy. But for the past 5 years, this process has gone i…
US housing stabilises, but Uncertainty remains high Read More
Markets spent last week ‘waiting for the Fed’. The high-frequency traders desperately need more cheap money, if they are to continue driving commodity and stock prices higher. And on Friday afternoon, they believed they got their wish.
Brent crude o…
Candide, the classic novel of the great French writer Voltaire, is a satirical description of a young man who has been taught that ‘everything is for the best in the best of all possible worlds’. Voltaire’s modern equivalent might well decide to set h…
“You cannot just sit back and expect things to happen the way they have happened in the past, especially in emerging markets.”
This insight from a senior Hong Kong-based executive with a global polyethylene (PE) producer highlights the risks faced by…
Emerging countries such as China and Brazil are very prompt in publishing trade data. So their figures provide a timely snapshot of economic developments.
Brazil’s economy is heavily dependent on China, due to its mining industry. Worryingly, July p…