Tag Archives: Growth

The European Union rose “only” 0,4 percent in Q1 of 2018

Last week I talked about America`s fantastic growth of 4,1 percent on quarter in Q2 of 2018, and this is only the beginning. It is no doubt; President Trump must be doing something right. But, what about the European Union?

GDP in the European Union rose «only» 0,4 percent on quarter in the first three months of 2018. Not much to write home about. But the growth have never been above 1 percent since the financial crisis in 2008.

The European Union reached an all time high of 1,30 percent in 1999 and that is right before the tech bubble burst. Since then it has been a dead fish, reaching an all time low of -2,60 percent in the first quarter of 2009.

At the same time we can see that the unemployment rate reached a record low of 6,80 percent in February of 2008, and that`s right before the financial crisis. It reached an all time high of 11 percent in February 2013, but in May this year it fall down to 7 percent again.

This isn`t good enough if we are living in a capitalistic world.

The European Union in Brussels are nothing more than unelected bureaucrats. Draghi and the ECB have, just like Japan and the U.S «printed» a lot of money, and will continue to do so. If they can`t turn around the ship, they need to consider a strong cheerleader.

European Commission President Jean-Claude Juncker had a meeting with President Trump last week. They were talking about trade, free trade and tariffs. Mr Trump`s goal is to make better deals so both the U.S and the EU can take more profit and prosper.

I think that the EU should be glad for that and they need to hurry up. The U.S is the world`s third biggest exporter, yet exports account «only» for 13 percent on GDP. Exports in the U.S reached an all time high of 215328 USD million in May this year, which is pretty impressive.

The EU has 28 member states and the biggest among them all is Germany (21 percent of total GDP), the United Kingdom (15 percent), and France (15 percent).

Exports of goods and services account for 46 percent of GDP while imports account for 42 percent, adding 4 percent of total GDP. But this is about to change. If the UK contribute with 15 percent of the total GDP in the EU, then what will happen to their growth after Brexit?

That being said; nor is the UK a success story. The British economy grew by 0,1 percent in the first three months of 2018 and well below 0,4 percent in the previous period. It is the lowest growth rate since a 0,1 percent contraction in Q4 2012.

The largest contribution to growth in the UK was from household spending at 0,2 percentage points. From the production side, the service industries made the largest contribution to GDP growth, followed by production.

Agriculture, the smallest component within the output approach of GDP made no contribution to growth to one decimal place, while construction deducted from GDP growth. The service industries increased by 0,3 percent.

Positive growth was recorded within all sub-sectors of the services industries; distribution, hotels and restaurants (0,1 percent vs -0,1 percent).

President Trump have repeatedly said that the EU have treated the US very bad. I have written many articles about that long before Mr Trump`s inauguration. The European Commission has fined Google €4,34 billion for breaching EU antitrust rules this month.

In May 2009, Intel was imposed with a 1,06 billion euro fined for abusing its market dominance on central processing units. Microsoft has been in trouble with the Commission on several occasions. In 2004, the Commission ruled that Microsoft had abused its market dominance.

In 208, the Commission fined Microsoft nearly 900 million euros for charging «unreasonable» royalty fees. In 2013, another fine of 561 million euros was imposed on Microsoft. This time for failing to comply with the Commission`s ruling that it had to allow users to more easily choose a prefered web browser.

The European Commission fined Facebook for 110 million euros in May this year in relation to its takeover of WhatsApp. Facebook acquired the messaging service in 2014 for $19 billion, but provided the Commission with misleading information about the acquisition.

In August 2016, the Commission ruled that tech giant Apple had received illegal tax benefits from Ireland worth up to 13 billion euros. Ireland was ordered to recover the unpaid tax from Apple, plus interest.

As early as 1966, British Politician Tony Benn said that «Communism run by commissars from Moscow did not work, and nor will capitalism run by commissioners in Brussels. Both deny people their right to develop in their own way.»

Now, under President Donald Trump, big companies like Apple are moving home to the United States with billions of dollars. Apple alone, are bringing in $230 billion. They will build new plants and a magnificent campus.

They will spend their money wisely and the money will be in the U.S. All this is possible because of Trump`s tax cuts and reforms. This is how you make growth.

 

 

Advertisements

Leave a comment

Filed under Politics

Trump`s tax cuts and reforms are working, and 4,1 percent growth means the strongest growth rate since the third quarter of 2014

America is growing fast. The United States are growing faster than China. The U.S economy advanced an annualized 4,1 percent on quarter in Q2 of 2018, while China grew by «only» 1,8 percent. That`s a bomb.

The Chinese economy advanced 6,7 percent YoY in June quarter of 2018. Last year, the economy expanded by 6,9 percent, beating the government target of around 6,5 percent and following a 26 year low of 6,7 percent in 2016. But, the United States can come up to that level very soon.

Trump`s tax cuts and reforms are working, and now we can all see right in front of us. The U.S economy advanced in the second quarter of 2018 and it will continue. This is just the beginning. The growth can reach 6 percent and compete with China.

The U.S exports jumped 9,3 percent (3,6 percent in the previous quarter), and imports rose at a much slower pace. 0,5 percent compared to 3 percent. The impact from trade was 1,06 percent, which is much better than -0,02 percent in the first quarter, and this is the highest contribution since the last three months of 2013.

4,1 percent growth means the strongest growth rate since the third quarter of 2014 amid higher consumer spending and soybean exports while business spending slowed. Spending of durable goods rebounded 9,3 percent compared to -2 percent and rose faster for nondurable goods; 4,2 percent compared to 0,1 percent and services; 3,1 percent compared to 1 percent.

Larry Kudlow said in his speech today that this is just the beginning. They have fixed a world broken trade system, and business investment is booming. 9 to 10 percent in the beginning of this year.

This is important because it is the key to productivity which is the key to growth which is the key to real rising wages. Big corporations like Apple are also coming back to the U.S.

This is a boom that is sustainable, Kudlow said.

Leave a comment

Filed under Politics

Banks are in focus this week and ECB could change its forward guidance

The FED is expected to increase the short-term interest rate by 25 basis points this week. If the FED does not raise rates at he March FOMC meeting, it will be a big surprise for many investors. Two things to look for is unemployment and inflation.

The FED is not the only one to have a look at the rates this month. BOJ and ECB is also looking at the rate. All this is headed for an exiting week.

 

 

The U.S unemployment rate fell to 4,7 percent last month which is in line with market expectations. Labor force participation rate increased by 0,1 percentage point to 63 percent, and the number of unemployment persons was almost unchanged at 7,5 million.

Inflation rate is at near 5-year high of 2,5 percent, which is the highest since March of 2012. The inflation rate accelerated for the sixth consecutive month, mainly boosted by gasoline prices. Energy prices jumped 10,8 percent YoY and food prices declined 0,2 percent.

 

 

Watch out for inflation in February 2017 on Wednesday 15 at 12:30 PM. forecast is 2,5%.

Mario Draghi and ECB discussed whether rates can rise before QE ends. A big surprise for many analysts. Why are they doing that? The fact is that they are not satisfied with negative interest rates. This negative rates is squeezing banks’ profit margins because they are not matching the cost, and that will make if difficult for banks to lend to households and companies.

BNP Paribas has predicted the deposit rate will be increased this September, and QE is intended to run until at least the end of 2017. Some people said at least mid-2018. Anyway; analysts will scrutinize the ECB statement on Thursday to look for any changes.

BOJ will have an Interest rate decision on Thursday 16th at 03:00 AM. Forecast is -0,1 percent, which is the same as its January 2017 meeting. In January, policymakers also decided to maintain its 10-years government bond yield target around zero percent.

Economic growth forecast is 1,5 percent for 2017 fiscal year from an earlier projection of a 1,3 percent growth.

Banks are in focus this week and ECB could change its forward guidance.

 

trump100_b

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Politics, Quantitative Easing

Is this the end of QE?

Two things are important right now. Earnings and the Fed. 80% of the S&P companies that have reported earnings have beaten estimates, according to Bloomberg. The catalyst for last week`s 4% rally was the reported earnings, and will continue to be the catalyst this week for any move in the market.

Todays FOMC Statement and Fed Funds rate decision will also play a big role in the market this week. Interest rate is very important in the stock market, and the big question for investors now is when the Fed will start to raise the interest rates. Any hint or insight will likely stir the markets.

Fed Chair Janet Yellen is worried about the low inflation, and the inflation gauge has fallen short of the Fed`s 2% target. The risk of deflation may weight against raising interest rates too soon.

Prices as measured by the personal consumption expenditures index rose 1,5% from a year earlier in August, and oil prices is something Fed has no control over. As you may know, the oil prices has dropped over 20% so far this year.

Many investors expect the Fed to end its third round of asset purchases today, while others say the central bank should consider a delay in ending QE in light of the falling inflation. It is possible for the Fed to reduce the monthly purchases by $10 billion and leave the final $5 billion reduction for December.

The Fed will still hold a record $4,48 trillion balance sheet accumulated during QE 3 despite an end of QE today. That will limit the supply of securities and keep the yield lower as their borrowing cost is limited.

Market volatility and sign of slowing global growth will make the Fed to act with caution, and it`s expected to see the interest rate to near zero for a «considerable time» after bond buying ends. Fed`s benchmark rate has remained at zero to 0,25% since December 2008, but it is expected to see the rate to increase in mid-2015.

FOMC`s next meeting is in December.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Quantitative Easing