Abe Gulkowitz, publisher of the periodic chart masterpiece The Punch Line, has released his latest macro economic update full of 17 pages of charts and news blurbs indicating the true state of the economy in an easily digestible format. While it will hardly come as a surprise to most, the prevalent chart direction is one from the top left to the bottom right in practically every macro vertical, despite the now endless monetary intervention attempts by all central developed world central banks.
The Punch Line's punchline:
With prospects of sizeable liquidity injections by central banks, there were growing expectations of at least stabilization in world growth prospects. Moreover, the U.S. housing debacle appeared to be easing, with building evidence of improvement in key parameters of this important sector. As a result, risky asset prices were quickly lifted to new highs, a move so dramatic that it had airs of the heady days just a few years ago – before the great financial breakdown. The realities of a fiscal nightmare for the U.S. economy plus continued difficulties on the European front, and mounting weakness in Asia combined to trigger a rethink in markets. Recent history suggests the two parties in the U.S. are seriously polarized and heroics may be needed to get them to come together and form a viable plan. Even if U.S. housing shows evidence of a crawling recovery, capital expenditures are slowing. Indeed, signs of business caution are seen in US and German factory orders The weakness in Europe was also evidenced by several recent developments. The collapse of a major European cross-border deal and downgrades of two leading car makers became stark reminders of how precarious life in the Eurozone has become. BAE’s proposed merger with EADS was always likely to face obstacles and it was confirmed on Wednesday that the deal had collapsed. This was always a deal that needed not only management to approve, but also the governments of France, the UK and Germany. So much for economic union! Autos were also key barometers in the Eurozone. Moody’s downgraded Peugeot and Fiat to Ba3 from Ba2. And it is not just a function of years of austerity in the EU and weak growth. These firms face significant challenges in restructuring their auto operations, and even if it successful, credit metrics will be stressed beyond the current rating category. Peugeot suffers from its exposure to southern Europe, as does Fiat. Italy still makes up the bulk of Fiat’s sales and demand for cars is declining. The charts on the auto sector in this chart packet are telling. Bottom line, even with temporary setbacks, the recent shifts in stimulus policy will come back as the final backstops and dominate the markets.
And a representative chart of how not everything is as good as 5 episodes of quantitative easing would make it seem:
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Full slideshow (pdf [11]):
The Punch Line [12]