Helping you navigate the new normal
Major new opportunities are starting to appear in today’s New Normal world, as I describe in a new analysis for the Institution of Chemical Engineers. Please click here to read the full article. We are set to enter a “New Normal” world as economies slowly reopen again with the arrival of Covid-19 vaccines. This will
The post Supply chains set to transform as companies start to reshore appeared first on Chemicals and the Economy.
A year ago, many were suggesting the lockdowns might produce a “baby boom” as couples spent more time together. But early data suggests the world is instead seeing a “baby bust”. As Nikkei Asia reports: “Births (in December/January) have fallen between 10% and 20% in such countries as Japan, France and Spain — and even
The post Pandemic leads to ‘baby bust’ as births decline in most countries appeared first on Chemicals and the Economy.
Every now and then, people wake up to the fact that debt is only good news when it adds to growth. Otherwise, it simply destroys value. China is usually the case study for this analysis, as the chart confirms. It shows the rise in debt from 2002, when official data begins, versus the rise in
The post China’s dual circulation policy aims to reduce debt reliance appeared first on Chemicals and the Economy.
Everyone who has ever played the Beer Distribution Game on a training course knows what is happening in supply chains today. A small increase in underlying demand is rapidly leading to a massive increase in ‘apparent demand’. As the New York Times reports, “the pandemic has disrupted every stage of the (supply chain) journey.” And
The post Rising US interest rates, US$ and oil prices set to pressure financial markets appeared first on Chemicals and the Economy.
10 years ago, I took a look ahead at what we could expect in the next decade, as discussed last week. Unfortunately, we now face the major economic and social crises that the chart predicted, if policymakers continued with ‘business as usual’. This week, I want to look ahead at what we can expect to
The global chemical industry is the third largest sector in the world behind agriculture and energy, and its outputs find their way into everything we consume. Paul Hodges, chairman of the pH Report, analyzes the chemical industry to give a unique perspective on the global economy to investors and corporations. In this timely discussion, he
In my interview for Real Vision earlier this month, (where the world’s most successful investors share their thoughts on the markets and the biggest investment themes), I look at what data from the global chemical industry is telling us about the outlook for the global economy and suggest it could be set for a downturn. “We look at
London house prices are “falling at the fastest rate in almost a decade” according to major property lender, Nationwide. And almost 40% of new-build sales were to bulk buyers at discounts of up to 30%, according of researchers, Molior. As the CEO of builders Crest Nicholson told the Financial Times: “We did this sale because we […]
The post London house prices slip as supply/demand balances change appeared first on Chemicals & The Economy.
“By Monday, the third straight day of flooding, the aftermath of Hurricane Harvey had left much of the region underwater, and the city of Houston looked like a sea dotted by small islands. ’This event is unprecedented,’ the National Weather Service tweeted. ‘All impacts are unknown and beyond anything experienced.’” This summary from the New […]
US home ownership is back at levels seen briefly in the mid-1980s, and before that in the mid-1960s. One key issue today is that while the US population is still growing, the younger population has quite a different profile from the Boomer generation, as the Pew Institute have reported. In 1980, only 1 in 10 young Boomers were […]
US house prices have recovering for 3 years, as the chart from the Wall Street Journal confirms. It shows two lines: The dark blue line is money of the day: prices rose steadily from 1989, peaking in 2006 at 141% of 1989 value The grey line adjusts for inflation: “real prices” were negative until 2000, […]
Previous chairs of the US Federal Reserve had a poor record when it came to forecasting key events: Alan Greenspan, at the peak of the subprime housing bubble in 2005, published a detailed analysis that emphasised how house prices had never declined on a national basis Ben Bernanke, at the start of the financial crisis […]
Data over the past month continues to confirm my fears that the US housing recovery is going into reverse. The argument was summed up yesterday by S&P’s chairman, when reporting Case/Shiller housing price data for December: “The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home […]
We now have full US Census Bureau data for housing starts in 2014, which shows: Starts returned to the 1m level for the first time since 2007 They were also nearly double the low of 554k seen in 2009 But at 1.006m, they were less than half of the 2.068m peak in 2005 The data also […]
Conventional wisdom seemed to think the US housing report was positive this week. But analysis of the data makes it hard to see why. One confusion comes from media use of the ‘seasonally adjusted’ number. But why do we need an adjustment, when we have data going back to 1959? It simply creates more potential for error. […]
Signs of stress seem to be appearing in the US housing market once more. Thus the Wall Street Journal reports: “An estimated one in seven appraisals conducted from 2011 through early 2014 inflated home values by 20% or more..Bankers, appraisers and federal officials in interviews said inflated appraisals are becoming more widespread as the recovery […]
Be very careful what you wish for. That is the key message coming out of close analysis of China’s latest trade data. Recent media reports were upbeat at news that China’s exports had increased, as it appeared to suggest Western demand was returning. But it seems nothing could be further from the truth. One major concern is that part […]
The blog’s new Research Note in the ‘Your Compass on China’ series highlights the way that China’s commodity imports have been used to finance its housing bubble. This is clearly a shock for investors, who have till now believed the imports were a sign of its superior economic policies and long-term growth prospects. The Qingdao probe could […]
Today, the blog launches a major new Research Note in the ‘Your Compass on China’ series, produced in association with leading Hong Kong-based financial advisory firm Polarwide. Titled ‘Here today and gone tomorrow – a simple guide to China’s world of trade finance’, it is probably the single most important paper it will publish all […]
China’s property market is the epicentre of the global debt bubble discussed yesterday. It has been red-hot since urban residents became free to buy their own home in 1998. Before then, they lived where the state told them. With interest rates held low to boost state-funded infrastructure spending, people had few options for investing their money. The […]
To assume, as they say is “to make an ass out of u and me”. That was certainly the case last week, when financial markets assumed that China’s slightly better PMI index was a sign that its domestic economy was stabilising. They had temporarily forgotten the key message of February’s Research Note, namely that the government would aim to […]
The above chart is the blog’s simple guide to forecasting China’s auto sales. We know from all the data that most Chinese are far too poor to afford to buy a car out of their income. Average per capita consumer spending in the towns is just $2600/year, after all. While rural incomes are only a […]
The UK no longer leads the world in soccer, as next month’s World Cup will confirm. But it can still hold its own when it comes to creating house price bubbles. China would be the obvious winner of the World Bubble Championship, with Shanghai prices at an eye-watering 29 times average earnings. But London would have […]
The blog’s recent Research Note on the likely impact of China’s economic reforms has attracted enormous interest. As a result, it will hold 2 free webinars on Wednesday to discuss the outlook in more detail. The webinars will be co-hosted with John Richardson, author of the Asian Chemical Connections blog – and co-author with the blog of Boom, […]
The end of Q1 seems a good moment to look back at the position of the benchmark markets in the IeC Downturn Monitor. Compared to previous quarters, there has been surprisingly little movement: Benzene has remained the most volatile, with supply outages temporarily pushing up prices (green line) HDPE has trended higher, but these are […]
Most people, if they are lucky, never get to see a property bubble during their lives. But those of us alive today have seen two distinct types of bubble in action: The first has been the Ponzi-type bubble sponsored by government lending policies, as seen in the subprime era and now in China. These take […]
Many readers have asked to see how the UK economy is being impacted by its ageing population, following the blog’s December series on the US, China, Japan, Germany and France. As the chart shows, it is in a very similar position to all of these countries: Life expectancy has increased by 17% to 81 years today, from […]
Trade data for net US PVC exports seems to be trying to tell us something very important about the current state of the global economy. As the chart shows, based on data from Global Trade Information Services: Net exports failed to grow in 2013 (red column) versus 2012 (black) and were only up 2% versus 2011 […]
One of the great myths of modern times is that China is now full of middle class people with Western levels of consumption. Nothing could be further from the truth. Annual per capita incomes have certainly soared over the past two decades. But the main impact has been to lift people out of absolute poverty, […]
There were never any excuses from policymakers during the BabyBoomer-led SuperCycle from 1983 – 2007. The Chairman of the US Federal Reserve, Alan Greenspan, came to be styled ‘The Maestro’. Whilst the Governor of the Bank of England argued that his efforts had created the NICE decade of Non-Inflationary Constant Expansion. Central bankers came to be seen as wise […]
Housing used to be the key driver for US chemical demand in the SuperCycle, and went into overdrive in the subprime era between 2003-6, when housing starts rose to 2 million/year. We don’t yet have December’s data, but we already know that 2013′s total will be only half this level, despite all policymakers’ efforts to revive the […]
Volatility is one of the blog’s key themes for the next few years, as the world transitions to slower growth and a more regional economy. And the chart above from the latest ICIS pricing Asian ethylene margin report highlights this new trend very well: Margins jumped 42% last week to reach $290/t, based on naphtha […]
It was only a “mini-stimulus” that was delivered by China’s new leaders in July. Well, thank goodness it wasn’t more, to judge by the above chart from Albert Edwards at SocGen. It shows how house price inflation has jumped in 69 of China’s 70 main cities between March and September: In March (orange column) inflation […]
Affordability is the key factor in today’s markets. And nowhere is this more true than in US housing. The subprime lending boom of the early 2000s is now long finished. And US GDP growth averages just 1.7% since 2000. So …
“Its only when the tide goes out that you learn who’s been swimming naked.” We may soon discover the meaning of this wisdom from Warren Buffett, one of the world’s leading investors.
The reason is that the macro trends that …
Last week saw new Bank of England governor, Mark Carney, follow the lead of US Fed Chairman Ben Bernanke on trying to deliver a ‘quick fix’ for the economy by boosting asset prices – particularly house prices and stock market levels. But as the Bank of England chart shows, this means trying to return the ratio of house prices to earnings back […]
US housing is core to the US economy. And as the US economy is 22% of the global economy, developments in housing matter to all of us. We learnt this during the subprime Crisis, when the blog’s warnings that the supposed boom was an illusion were ignored until too late. Now the same problem is developing again. Thus […]
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…
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…
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…
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…
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 …
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…
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…
How many more empty cities like Ordos does China really need? Are 64.5m empty apartments enough, or should there be more? Should we build more steel mills, to add to the current 220MT of over-capacity?
These are the questions facing China’s leadersh…
Wenzhou in coastal Zhejiang province was the first city to encourage private enterprise when China began opening its economy in 1978. Its growth accelerated after China joined the World Trade Organisation in 2001, attracting 2.8 million migrant worker…
The blog’s series on the emerging ‘VUCA world’ today looks at how companies have to manage increased levels of Uncertainty. This can be seen in key areas of demand, such as housing.
The above chart shows how US housing starts (blue line) have fallen …
China’s demand growth continues to be weak down the main value chains.
Auto sales are the most obvious example. As the chart shows, they have recovered from the very slow period over the Lunar New Year holiday, but are still only up 2% (red diamond) …
China’s leadership remain preoccupied with the transition to a new politburo in October, and the continuing fallout from the Bo Xilai affair. Equally, April’s 7% rise in food price inflation remains a major issue for a country where 96% of the populat…
The story of the past 5 years has been how global economic growth moved from a dependency on the West’s housing boom to a dependency on China’s housing boom. Today’s only problem is that history suggests such booms are unlikely to have a happy ending….
Investment bankers and development economists like to talk about China being a ‘middle class’ country. Yet Asian Development Bank data shows that 96% of the population earn less than $20/day on a (PPP) Purchasing Power Parity basis.
Similarly, China’…
It is hard to be very optimistic about the demand outlook for Q2.
Demand in Q1 was lacklustre, even though it should have been the strongest quarter of the year. H1 is seasonally strong, and Q1 also benefited from Easter being in Q2. Equally, the Ch…
The US housing market was the original cause of the current financial crisis. It has gone quiet recently, but this does not mean that the problems are resolved. Quite the opposite, in fact.
True, foreclosures have slowed recently, due to legal issue…
Saturday’s blog post highlighted the risk of a hard landing in China.
This risk is very real, and is centred on the government’s need to achieve a difficult balance between reducing today’s high rate of food price inflation, whilst not collapsing the …