Economic Statistics Review

After weeks of unanimously bearish news about the U.S. economy, the bulls had a relatively good day today, with one really bullish news, one moderately bullish, one mixed and one bearish. The really bullish one was the increase in the ISM Manufacturing index. But while the ISM Manufacturing index is an important indicator, one isolated monthly rise is not enough to signal an end to the manufacturing recession, given the otherwise overwhelmingly bearish news and given the fact that the absolute level of the index, 52.3, is still relatively low. Another seemingly positive news was the significant increase in personal income. But this seems to be mostly a one-time event related to bonuses on Wall Street and elsewhere, so this doesn't really contradict the bearish view of the U.S. economy.

The mixed news consisted of a sharper than expected drop in January construction spending combined with an upward revision of December construction spending, leaving January construction spending at about the expected level. The bearish news consisted of higher levels of both initial and continuing jobless claims. Also, as expected, the personal income and consumption report reported that the "core" PCE deflator increased at its fastest rate for quite some time.

Yesterday, we saw an expected sharp downward revision in U.S. fourth quarter GDP growth, from 3,5% at an annual rate compared to the previous quarter to 2,2%. The downward revision was pretty broad based, with personal consumption, fixed investments, inventories and net exports all being downwardly revised. The only thing that was upwardly revised was -ominously- government spending.

Hong Kong also reported fourth quarter GDP. The trend continued to be positive, with overall growth being 7.0% compared to a year before, led mainly by rising investments. Government spending has stopped falling in absolute terms, but still falls relative to GDP.

Sweden also reported strong growth, although at 4,7%, it is still a low lower than Hong Kong. The Swedish boom is driven by a combination of sound factors, such as a relatively favorable demographic structure (Sweden is one of the few Western countries where the working age population is rising relative to overall population) and a falling relative burden of government spending, and the very unsound factor sonstituted by the too inflationary policies of the Riksbank (Money supply growth in Sweden is higher than in China, even though potential structural growth is far, far lower).