David Llewellyn-Smith


Lending finance not bad

ABS Lending Finance for May is out and the news looks better than Consumer Confidence suggests. All major categories (with the exception of leasing) rose modestly, with business finance looking strongest. These figures look more robust than the RBA’s credit aggregates for business lending, which showed a flat result for May overall. Nonetheless, there has


Consumer confidence smashed

The Westpac/Melbourne Institute Consumer Sentiment survey is out and boy it looks like Australians really do not like their new economy. Excerpts with commentary below. • The Westpac–Melbourne Institute Index of Consumer Sentiment fell by 8.3% in July from 101.2 in June to 92.8 in July. This is a surprisingly weak result. This is the lowest level for


Feeling QEeeeesy

Last night’s market action should leave us in no doubt. Equities and commodities are caught in a paradox of US Fed front running. The market rout emanating from the structural debt problems of the EU and US was arrested briefly last night with the release of new Federal Reserve minutes, which showed, unsurprisingly, a willingness


July 13 links: Fed hope

Rockets: gold, CRB, metals, grains, ore, energy Up: $US Flat: euro, Aussie Contagion easing: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5


Pitchford makes a comeback

I make no secret of my disdain for the Pitchford Thesis, that doctrine that says that current account deficits (CAD) don’t matter in an era of floating exchange rates, so long as the resulting debt is in the private sector. This was the notion that led Canberran policy-makers to turn a blind eye to Australia’s


NAB Survey: Retail hits GFC levels

The June NAB Business Survey again makes pretty ordinary reading with Australia’s so called two-speed economy, other wise known to the sane as Dutch Disease, turning virulent. Here’s the commentary: Domestic sector struggling to gain momentum as confidence slumps. Forecasts for growth lowered and rate rises delayed – reflecting current slowdown and, in the medium


Western policy chaos

Look, I’m not a bear by nature. And frankly, I’m a bit tired with the grim macro outlook. But it is what it is and today it’s most definitely taken a turn for the worse. Contagion is now rampant in ten and two year bonds at the core of Europe. Here are the charts: Italy


July 12 links: Raging contagion

Raging contagion: Ireland, Portugal, Spain, Italy, Belgium, Greece Rocket: $US, gold Up: ore Down: CRB, metals, grains Smashed: energ, euro, Aussie The big short on Italy. FT, NYT, WSJ Europe needs a plan B. George Soros No shit US rail traffic soft in June. Calculated Risk Mind the US output gap. Economist’s view US unemployment projections. Calculated Risk US stimulus in trouble. Gavyn Davies Rosenberg: QE3 cometh. Zero


Banks sieze massive market share

An interesting piece of research from Deutsche this afternoon helps explain the large rise in refinancing apparent in this morning’s May housing finance data. According to Deutsche: Housing finance up 0.9%mom ex-refinancing, evidence of ‘churning’ between bank and non-bank lenders. Excluding re-financing, housing finance rose by 0.9%mom in May, following a 3.7%mom rise in April. The rise


Housing finance recovers a bit more

ABS Housing Finance key points above. I’ve graphed results by state below: All states showed some level of ongoing recovery from the early 2011 hammering but all, with perhaps the exception of Victoria, are still looking very anaemic with most states showing monthly housing finance commitment levels first seen a decade ago. When we dig


Something for everyone

I’m glad we finally have a carbon price. My guess is that the roll out of the tax will be less contentious than currently appears. The leader of the opposition may want a referendum on the issue but in my view, but once it’s in place, the tax will give way to famous Australian pragmatism


Blame the lenders

Exclusively from Michael Pettis’ newsletter: Over the past two years we have become pretty used to the spectacle of Chinese government officials warning the US about its responsibility to maintain the value of the huge amount of US treasury bonds the PBoC has accumulated. More recently we have been hearing complaints in Germany about the


July 11 links: Carbon mania

Howdy you lot, back from illness and can’t believe my eyes. The more things change the more they stay the same it seems… Restive Egypt. Bloomberg Republicans blink on debt deal. Washington Post Week ahead for Dow. Calculated Risk US double dip. Mark Thoma US temp hiring rolling over. PragCap US turning Japanese, QE3 must come.


Household pain higher than GFC

The venerable economists of the Melbourne Institute released their quarterly Household Financial Conditions survey yesterday and jeez we are unhappy. In fact, we were happier about our state of financial health in the midst of the greatest global economic crisis since the Great Depression: The press release added that: According to Dr. Edda Claus “the


Leading indicators point backwards

The Melbourne Institute/Westpac Leading Indicators Index is out today and shows that growth momentum in the economy has slowed. From the release (full report below): The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 2.7% in April 2011 below its long term


Dutch Disease visualised

After last week’s sectoral chartathon for employment, I thought I’d go back to the first quarter national accounts and see where production is headed sector by sector. The ABS’s Gross Value Added (GVA) is the simplest way to measure the sectoral contribution to GDP.  The result is the above chart, which shows a number of interesting


Sell the rallies

So, the Dow and euro are up as the latest debt crisis passes, again. I wish it were so. We have had a stonking sell-off and I suspect it’s time for a technical bounce, with some evidence beginning to flow through that lower commodities are boosting US purchasing power, and Bernanke likely to offer QE2.5


June 22 links: Greek illusions

Down: $US, ore Flat: energy Up: CRB, metals, grains, euro, Aussie, gold Sovereign easing: Ireland, Portugal, Spain, Italy, Belgium, Greece The illusion of voluntary haircuts. BBC, FT, Reuters ESM altered. FT Nigel Farage. Zero Hedge UK prepares for Greek default. Telegraph And it should. Martin Wolf Bank exposures. Alphaville Examining QEs. Credit Writdowns Home sales slowing again. Calculated Risk Chinese inflation washing up on US shores. WSJ Commodity


Racist FIRB

The Lowy Institute today released a study into Chinese attitudes towards investing in Australia. The research makes for sobering reading. In my view, we have made a complete hash of FIRB, to the point where its secret operations more resemble an arm of ASIS than they do a transparnent foreign investment review panel. The report


ABARE bets on US stimulus

The ABARE quarterly update of commodity prices for the year ahead is out today. First, the key macroeconomic assumptions:   God knows, it’s no easy job putting that lot together but let’s unpack a couple of assumptions. US growth projected at 2.9%, hmmm…well, maybe. The first quarter of this year was 1.8% and the economy


Clearly dovish minutes

Below find the complete RBA minutes from the recent meeting. Now we know what’s got them jumping and it looks like another win for MacroBusiness. Scroll to the final paragraph and you’ll find this key statement: While there had been additional evidence of the coming strong pick-up in investment in the resources sector, activity remained


The commodity bubble

In its recent Bulletin, the RBA has a new piece of research that questions the role of financialisation in commodity prices. The research has some spectacular charts and ultimately concludes that new financial instruments “short-run price dynamics for some commodities, the level and volatility of commodity prices appear to be primarily determined by fundamental factors.”


June 21 links: Waiting for Bernanke

Up: $US Flat: ore, energy, metals, grains, euro, Aussie, gold Down: CRB Sovereign easing: Ireland, Portugal, Spain, Italy, Belgium, Greece Greece wrangles. WSJ Not over. WSJ Italy the final battleground. FT HK house prices to fall by 15% by year end. Bloomberg Zombie bonds. Bloomberg US deleveraging continues. Bonddad America’s shrinking households. The Economist Synthetic prime brokerage. Alphaville Obama missed the boat on bank reform. Big Picture China buys


Chinese soft landing: 1 in 3 chance

From Credit Suisse comes this must read report into Chinese bank debt, on and off balance sheet, and the likely fallout in the coming slow down. Rising risks to asset quality Our analysis shows China’s credit-to-GDPhas risen to alarming levels in the past two years due to massive off-balance-sheet financing. Market has only focused on banking


Is the RBA or market wrong?

In its weekly economic missive this morning, Macquarie Bank has an interesting take on the current mismatch between the RBA’s stop/start hawkish rhetoric and pricing in the interest rate futures market. The Macquarie Weekly: The central bank that cried wolf For the past year, the Reserve Bank of Australia has been forecasting great things for


Old economy fights back

Last week, the Unconventional Economist made a fascinating comparison between the rhetoric of the Canadian and Australian central banks on overvalued houses. He noted how much more candid the Canadian central bank has been about the degree of house price overvaluation and the need to mitigate those risks. As we know, neither the government nor


June 20 links: Gimme back the old economy

Europe to withhold half of Greek aid. Bloomberg European liquidity. Zero Hedge Core Europe and Greece. Felix Salmon Central Europe and Greece. Beyondbrics The euro will survive. Wolfgang Munchau Mismanaged crisis. Gavyn Davies FOMC meeting preview. Calculated risk Week ahead for the Dow. Calculated Risk Japan finds hot spots. Washington Post China copies Austrian city. Daily Mail (h/t


Weekend reading: You call that a rally?

Crushed: $US, energy Down: ore Flat:  metals, grains Up: euro, Aussie, CRB, gold Sovereign easing: Ireland, Portugal, Spain, Italy, Belgium, Greece Germany concedes. FT As predicted and solves nothing… Greek maths. Zero Hedge Greece’s Lehman moment. Alphaville Renew Greece. Mohammed El-Erian Beginning global restructuring. Chris Whalen Michael Pettis podcast on China. Alphaville China’s political problem. Bloomberg China house prices still rising. Bloomberg More layoffs coming to Wall St. NYT


Four dark clouds

The Dow went up a bit last night. Hooray! But if you think this correction is over, think again. This is the correction we have to have. Think about it. There are four big economies in the world: Japan, EU, China and the US. A dark cloud hangs over each. Japan is far worse than