In absolute dollar terms, China’s trade surplus with the United States reached USD275bn in 2017. The previous high was USD260bn in 2015. Clearly, the United States matters to China. If the United States monetary policy remains loose in the guise of supporting economic growth and employment, because inflation is not showing up and if financial instability risks are disregarded, clearly it is to China’s benefit. Just saying.
A fascinating and even somewhat frightening report on China’s appetite for commodities. The geopolitical influence that this buys China will be hard, if not impossible, to match.
I read a piece by Mohamed El-Erian in FT. He is permitting himself economic optimism and less discomfort with asset prices. I wonder how he would react to this story about the ‘shocked’ market reaction to the tiny shift in the asset purchases by the Bank of Japan. In other words, how durable is this so-called global recovery?
This page gives details on the asset purchase programme of the European Central Bank. The 10-year Greek bond yield is at 3.75%. There has been no big improvement in its unemployment rate or in its debt ratio. This table gives the youth unemployment rates in European Union countries. Check out the statistics for Greece, Spain, Italy, Portugal and France. This is annual data up to 2016. This table gives you the figures as of August 2017. You can compare the numbers for the above countries and figure out the improvement, if any and decide for yourself whether this is the stuff of a sustainable recovery that justifies Mr. El-Erian’s optimism.
India’s consumer price inflation data for December 2017 was a bit of a worry. JP Morgan finds the momentum in core CPI (headline minus food and fuel) surprising and concerning. Among States, Tamil Nadu and Kerala contribute quite a bit to the inflation rate with their 7% inflation rate and a combined weight of 11%. That means nearly 80 basis points of inflation out of an inflation rate of 5.2%. That is nearly 16% contribution. Inflation in Uttar Pradesh is well behaved. Is hoarding by intermediaries an issue in Tamil Nadu and Kerala? Just asking.
Industrial Production data for November, notwithstanding the outsized contribution by the Pharma sector (and that too, antacids!), was more encouraging than that of the inflation data because motor vehicles, other transportation equipment and basic metals constitute 20% of Industrial Production. They are growing nicely. Pharma with a weight of 5% was growing at an annual rate of 40% and that gives you a contribution of 2% to the annual IP growth rate of 8.4% – almost 25%.
The rather poor growth in textiles and apparels must be worrisome for a country that is looking to light manufacturing to create jobs. It is not that they command a high percentage in the index. In fact, their should increase and they should be productive. There is a role for policy action here?