Monday July 21, 2008

Singapore retail sales growth slows as inflation hurts spending

This article belongs to the Singapore stagflation watch story arc.

bloomberg.com :

Singapore's retail sales growth slowed in May 2008 as consumers bought fewer cars and spent less on furniture amid the fastest inflation in 26 years, spurred by surging commodity and energy costs. The retail sales index gained 4.8% from a year earlier, after climbing 7.5% in April, the Statistics Department said today [15 Jul 2008]. Faster inflation has left consumers with less to spend, hurting an economy that expanded at the slowest pace in five years in the second quarter. Vehicle sales in May declined 1.9% from the same month in 2007. From April, auto sales dropped 3.4%. Oil prices have doubled in the past year, reaching a record $147.27 per barrel on July 11. Prices of grains such as rice and wheat have also hit records, increasing costs for consumers.

- Notice how they are once again commenting on the second order here, when they talk about the rate of retail sales growth slowing from 7.5% in Apr to 4.8% in May, year-on-year. The figures are starting to turn toward negative territory. Now the question that remains is not whether we are heading into a stagflationary recession, but how long we will remain there, and what we can do about it.

See also :

1. Singapore industrial production unexpectedly dropped in Apr 2008 on drugs, electronics
2. Singapore stagflation : May 2008 exports fell most in 17 months; inflation at 26-year highs
3. Singapore GDP shrinks 6.6% in Q2 2008 as stagflation continues

(2008-07-21 17:09:15 SGT) [Biz] Permalink Comments [0]

Hyperinflation : Zimbabwe introduces $100 billion dollar banknotes

This article belongs to the Zimbabwe inflation watch story arc.

channelnewsasia.com, cnn.com :

Zimbabwe, grappling with a record 2.2 million percent inflation, has introduced new $100-billion-dollar currency notes in a bid to tackle rampant cash shortages, the central bank said. The new note will go into circulation on Monday [21 Jul 2008]. As high as they are, though, the bills still aren't enough to buy a loaf of bread. They can buy only four oranges. The new note is equal to just one U.S. dollar.

Zimbabwe has been ravaged by hyperinflation which shot up from 165,000 percent in February to 2.2 million in June. Independent economists however believe the official inflation figure is grossly understated, estimating it could be running between 10 million and 15 million percent. Zimbabwe's chronic economic crisis has left at least 80% of the population living below the poverty threshold and mass shortages of basic goods in shops.

Zimbabwe's hyperinflation is running faster and faster. It has got to be the one place in the world where the weakening US dollar is still welcomed with open arms, and that's only because the local currency is a hundred billion times weaker. Just 2 months back, they introduced the $500 million dollar notes, and now they have these $100 billion dollar notes. So they are adding a zero to the currency roughly every month. After they hit trillion and then quadrillion, either scientific notation would have to come in or people would have to start grappling with such exotic words as quintillion, sextillion, septillion and so on. If they don't collapse entirely or turn around by then, their people could be turning into septillionaires and yet are none the richer.

See also :

1. Zimbabwe inflation hits 165,000%
2. Zimbabwe adds $500 million dollar note as hyperinflation runs on
3. Runaway hyperinflation : Zimbabwe inflation rate now over 1 million percent
4. Runaway hyperinflation : Zimbabwe inflation rate hits 2.2 million percent officially

(2008-07-21 09:16:53 SGT) [Biz] Permalink Comments [1]

Thursday July 17, 2008

Runaway hyperinflation : Zimbabwe inflation rate hits 2.2 million percent officially

This article belongs to the Zimbabwe inflation watch story arc.

channelnewsasia.com :

Zimbabwe's annual rate of inflation has hit a new record high of 2.2 million percent, the central bank's governor Gideon Gono said on Wednesday [16 Jul 2008]. The figure is the first from the authorities in Zimbabwe since the announcement of the rate for February, when it was put at around 165,000 percent.

- So the Zimbabwe government has finally put out an official CPI inflation rate figure, after months of silence. The 2.2 million percent figure is probably understated though. A month back, international observers said that the actual rate was closer to 4 million percent, so it won't be too surprising if actual street price inflation is either already at or is soon going to hit 10 million percent. They ought to be switching over to scientific notation already, if only they had an electronic payment network to support that. For now, it's still currency notes, of which they issued the $500 million dollar banknotes a while ago, and chances are good that they would have to switch over to billion dollar notes soon, making holders of such notes instant "billionaires" - instant "trillionaires" should not be too far off.

Zimbabwe is the modern day hyperinflationary cautionary tale. Will the rest of the world take heed and avoid the same fate, or are we to also follow them down the current path, the path that leads us to global hyperinflation?

See also :

1. Zimbabwe: IMF estimates inflation at 150,000%
2. Zimbabwe inflation hits 165,000%
3. Zimbabwe adds $500 million dollar note as hyperinflation runs on
4. Runaway hyperinflation : Zimbabwe inflation rate now over 1 million percent

(2008-07-17 16:47:32 SGT) [Biz] Permalink Comments [2]

Europe inflation hits record 4% in June 2008; Germany, France inflation rate at 15, 17 year highs

Inflation in the 15 countries sharing the euro hit a record 4% in June 2008 on soaring oil prices, according to official EU data on 16 Jul 2008. Driven by record oil prices, Eurozone inflation in June spiked to the highest rate since the launch of the euro in 1999. Oil prices hit records over $140 a barrel in June, pinching the purchasing power of consumers already struggling to cope with soaring food prices. Soaring oil prices lifted inflation in Germany to a near 15-year high and in France to a near 17-year high. Inflation in the 27-nation European Union rose even faster than in the Eurozone, hitting 4.3% in June. Record inflation adds to consumer and businesses' pain just as they are struggling to cope with flagging economic activity and has triggered protests by fishermen and truckers.

- Despite the strength of the euro, the European inflation rate has risen steadily over the past year, starting with an unexpected rise in the money supply, followed by the inflation rate hitting 3.1% in Nov 2007, and now it stands at a record 4%.

Germany is a country which should be keenly aware of the dangers of inflation, as they have gone through the Weimar period of hyperinflation with their reichmarks back in the 1920's (an early predecessor of the situation in Zimbabwe). Similarly, France had their hyperinflationary episode with their assignats during the French Revolution. In spite of all that history, they are beginning to feel the effects of inflation yet again. And once inflation gets started, it is hard to stop. This time round, the inflation is global, hitting the US, Europe, and Asia all at the same time, and if world leaders are not too careful about it, they could be leading us down the path of global hyperinflation.

See also :

1. European money supply growth accelerated unexpectedly in October
2. China inflation surges to 8.7% in Feb 2008, highest in 11 years
3. India wholesale inflation rate rises to 11%, a new 13-year high
4. Singapore inflation rate hits new 26-year high of 7.5% in Apr 2008
5. Malaysia inflation rate could hit 9-year high of 5% on petrol and diesel price hikes

(2008-07-17 12:55:50 SGT) [Biz] Permalink

Monday July 14, 2008

Fannie, Freddie too big to fail, else a trillion dollar meltdown

news.yahoo.com :

Fannie Mae and Freddie Mac, the largest buyers of US home loans, are too big for the government to allow them to fail, leading Republican and Democratic lawmakers said. A government takeover is being considered if their problems get worse. Shares in Fannie Mae are down 84% from the Oct 2007 highs, while Freddie Mac is down 87% - levels not seen since 1991.

Congress created Fannie Mae during the Great Depression and formed Freddie Mac in 1970. The companies own or guarantee about half of the $12 trillion of US mortgages. The companies' failure would deepen a housing recession that already is the worst in a quarter century. Freddie Mac owed $5.2 billion more than its assets in 2008Q2, making it technically insolvent, while Fannie Mae's assets fell 66% to $12.2 billion, and may be negative next quarter.

- This is huge. If the US government decides to do a bailout, the US dollar will head straight down towards zero, and commodity prices will immediately execute a warp drive and head not only for the stars, but quite possibly the next galaxy. Like the Fed, Congress is now stuck between a rock and a hard place. They have two choices : collapse the dollar, or collapse the housing market, and with it, the rest of the economy. Neither choice is very palatable, and doing nothing is not acceptable either. This has the potential to turn out to be a multi-trillion-dollar meltdown.

See also :

1. The housing bubble has burst
2. US 'spending binge' to end as housing market slows
3. Housing sales drop in 40 states
4. Housing slowdown may claim 800000 jobs

(2008-07-14 09:37:49 SGT) [Biz] Permalink Comments [1]

Thursday July 10, 2008

Singapore GDP shrinks 6.6% in Q2 2008 as stagflation continues

This article belongs to the Singapore stagflation watch story arc.

channelnewsasia.com -> app.mti.gov.sg :

Singapore's real gross domestic product (GDP) registered an estimated 1.9% on a year-on-year basis in the second quarter of 2008. Statistics released by the Ministry of Trade and Industry [MTI] on Thursday [10 Jul 2008] showed that the slowdown reflected a sharp contraction in the biomedical manufacturing output. On a quarter-on-quarter seasonally-adjusted basis, real GDP declined 6.6% following an increase of 15.6% in the previous quarter. The manufacturing sector is estimated to have contracted by 5.6% in the second quarter, compared with a 12.7% growth in the first quarter. The electronics cluster also registered some decline due to weakening foreign demand. However, the transport, engineering and chemicals industries continued to grow.

bloomberg.com :

Asian governments are torn between efforts to rein in surging prices and the need to shore up growth. Singapore Finance Minister Tharman Shanmugaratnam yesterday [9 Jul 2008] warned there is a limit to how much the country's dollar can gain to fight inflation, as any "dramatic strengthening" of Asia's third best performing currency this year may hurt exports "badly."

- The economic outlook looks cloudy, with reports that continue to confirm that we are not only heading into, but may already be in a stagflationary environment. I have been watching the economic reports with concern for the past months, waiting for the lag effect of the housing- and credit crisis-led US slowdown and subsequent recession to hit Singapore. I reckoned that it would take half a year to at most a year. And now it looks like we are getting hit hard.

The quarter-on-quarter Singapore GDP reports are looking increasingly gloomy, with the earlier report of a 4.8% GDP shrinkage in Q4 2007, followed by a relatively better subsequent quarter, and now we are back in GDP contraction mode again. The headline year-on-year Singapore GDP growth rate does not look very good either, at only 1.9%. Given that the M3 money supply growth rate has been running at around 12% in the past months, that makes for a real inflation rate, from an Austrian economic basis, of around 10%. Which is somewhat higher than the official CPI figures of 7.5%.

It would be officially stagflation in Singapore if the headline year-on-year GDP growth rate falls into negative territory, and inflation continues at its present rate or even increases. Can the Singapore economy try to eke out a positive reading in the subsequent quarters or will it fall below zero? We shall see about that. Crude oil prices not too far from recent record highs, increased petrol and diesel prices, and electricity rate increases are certainly not helping the situation at all.

See also :

1. Singapore stagflation : May 2008 exports fell most in 17 months; inflation at 26-year highs
2. Singapore industrial production unexpectedly dropped in Apr 2008 on drugs, electronics
3. Singapore GDP unexpectedly shrinks on weaker output
4. Singapore economy shrinks first time since 2003
5. Singapore CPI inflation rate for May 2008 continues at 26-year high of 7.5%

Updated :

1. Singapore retail sales growth slows as inflation hurts spending

(2008-07-10 13:21:51 SGT) [Biz] Permalink

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