Aggregator • MaxedOutMama • ID=55391 |
Some Thoughts - MaxedOutMama Jun 9, 2009, 1:00 pm
Wholesale inventories and sales for April (pdf). Get Excel files here. Sales dropped only 0.4% and inventories dropped 1.4%, bringing the inventory sales ratio to 1.31. A year ago it was 1.12, so we have quite a way to go unless sales start to revive. In March it was 1.32.
From April 08 to April 09, inventories have dropped 6.2%, but sales have dropped 19.5%.
Unless sales pick up decently, this could take until the end of the year to get back to a reasonable range. I suppose that is not good news if you are hoping for the economy to return to growth this summer, but at least this ratio is dropping. The magic number here is going to be about 1.20.
Brazil's YoY GDP growth for the first quarter was reported at -1.8%.
Germany's industrial production fell 1.9% from March to April. Foreign sales fell 4.8% from March to April, which is certainly not going to be good for business projections:
'The world is still adjusting to the burst of the credit boom and this kind of hangover won't be gone in a couple of months,' said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. 'The global economy is still lackluster.'Lackluster is an interesting word. May revenues to Egypt from traffic through the Suez Canal was down 29% YoY. In April it was down 22.7%. This confused me, because I had been reading that some of the sidelined ships had been restarted. According to this Logistics Management article, some of the ships are using roundabout routes and avoiding both the Panama and Suez Canals. Air cargo is really suffering.
When the transportation conferences are desperately talking about green madness, you know change is in the works. Since March, IATA has changed its 09 global air traffic estimate from 4.7 billion to 9 billion:
'There is no modern precedent for today's economic meltdown,' said Giovanni Bisignani, IATA's director general and CEO. 'State of the Industry' address to 500 of the industry's top leaders gathered in Kuala Lumpur for the 65th IATA Annual General Meeting and World Air Transport Summit, Bisignani painted a bleak picture.This is not just meaningless detail. The implication is that there will be a 4-5 year recovery process which will impact the makers of aircraft considerably. The global scope and depth of this downturn makes it particularly hard to assess. We are probably seeing and going to see more derivative effects that are most unusual and have not been felt globally since the WWII era.
Recession is the most significant factor on the industry's bottom line, said association analysts. IATA's revised forecast sees revenues declining an unprecedented 15 percent ($80 billion) from $528 billion in 2008 to $448 billion in 2009.
Air cargo demand is expected to decline by 17 percent. In 2009, airlines are forecast to carry 33.3 million tons of freight, compared to 40.1 million tons in 2008. Passenger demand is expected to contract by 8 percent to 2.06 billion travelers compared to 2.24 billion in 2008. The revenue impact of falling demand will be further exaggerated by large falls in yields—11 percent for cargo.
On the oil front, Total SA is looking for givebacks in costs:
Total SA, Europe's third-largest oil producer, is seeking to cut equipment and services costs by between 20 and 30 percent as the global recession lowers energy demand, an official said.Recent oil price rises have changed matters in India:
...
The company wants bigger than targeted reductions in costs for deepwater equipment, rentals of which have surged 300 percent in the last few years, Guillermou said. Contractors should reduce costs if they want to maintain demand for rigs, he said.
'If they want the backlog to continue they have to bring cost of services and equipment back to the environment which prevailed in 2005, 2006,' he said.
Prime Minister Manmohan Singh's government was expected to lift a 5 1/2 year cap on pump prices of automobile fuels after his re-election last month. Oil Minister Murli Deora said May 29 he planned to seek cabinet approval to free up fuel prices from state control within six weeks. Removing the curbs will enable refiners to profit from crude's 54 percent advance this year.Most of their companies haven't even made back the prior losses. The way India has been funding this is through oil bonds, which are an off-balance sheet item.
'Petrol and diesel margins have turned negative at these oil prices, which affect the companies' earnings and cash flows,' said Vishwas Katela, an analyst at Mumbai-based Anand Rathi Financial Services Ltd. 'We don't know what the government will do, but the chances of complete de-regulation are slim.'
The depth and global extent of this recession are unique since the 50s, so in a way one can understand the deep underestimation of its severity involved in this graph from the Obama administration's pitch for the stimulus bill (from the Innocent Bystanders blog)
It was a little stupid to do this in the first place, because it was always likely to be one of those things that can be used against you. One can understand and forgive that. It is hard to forgive the lack of attention since to situation. The official pundits do seem a bit slow.
I'm still amazed to the point of stammering incoherence by the concept of trying to push through major healthcare reform in this environment without a careful economic projection and an assessment of costs.
Several fed governors have raised the suggestion that the US will have to raise rates late in 2009. I agree - I think the bond market is already signalling that. It's clear that it will take years to absorb the excess capacity in the system, and growth will be quite anemic until that happens. Thus, flooding the market with money will not create new investment, but instead speculation as people bid for and hold options on or actual natural resources. That would create a very negative environment for growth.
I would like to see the US administration do some analysis similar to the Deutsche Bundesbank effort here, and then have the CBO analyze various legislative initiatives under some reasonable assumptions.
