Trade data for net US PVC exports seems to be trying to tell us something very important about the current state of the global economy. As the chart shows, based on data from Global Trade Information Services:
- Net exports failed to grow in 2013 (red column) versus 2012 (black) and were only up 2% versus 2011 (yellow)
- Latin America was up 18% versus 2012, Mexico up 27% and the Middle East up 6%
- LatAm volume was supported by Brazil, where sales doubled ahead of the soccer World Cup and Olympics
- But sales to China were down 14%, in another sign of the country’s new policies having an impact
Another worrying sign was that H1 data had shown net exports up 14% versus 2011. The slowdown in H2 was thus relatively sharp, with volume at the end of Q3 only up 7% versus 2011. Two issues thus immediately jump to mind:
- Lack of demand, not cost advantage on supply, is clearly a more important factor that experts had expected
- The promised Recovery Scenario is seemingly once again failing to appear, just as the blog has feared
Domestic PVC sales have never recovered since the housing crash began in 2006. But the US was able to maintain production since then by increasing its exports. These were a third of total production in 2009, but seem to have peaked at 44% in 2012.
Of course, the optimists will still argue that a strong US housing recovery is now underway. But they have been arguing this since 2008, and the data shows that housing starts are still below the 1 million level, and also lower than any annual level seen between 1959-2007.
PVC is normally a very good indicator of underlying economic conditions. We can only hope that for some reason the signals today are somehow mistaken.
If you ever get the chance to go to an Olympic Games event, then go. The blog spent last night at the athletics finals, and saw the most amazing performances it is possible to imagine.
These athletes are at their peak of their careers. They really have sacrificed everything for these few minutes of possible success. And at the end, for most of them, the difference between winning and losing is fractional. Each event is thus completely absorbing.
What to say, for example, about the Bahamas (pictured right). A country of 350k people, their men won their first-ever Olympic gold medal – in the 4 x 400m relay. They came from behind in the final leg to beat the USA (population 315m).
Or, what to say about the US women, beating the world record in the 4 x 100m relay? Even the Jamaicans could not get close to them. Yet the margin beween first and last was only 2.10 second.
Then there is the technical difficulty of the women’s hammer, where world and Olympic champions can still hurl their hammers into the netting.
Or the sheer impossibility of the men’s pole vault. The co-ordination required to vault 6m (20ft), the height of a London double-decker bus, needs to be seen to be believed.
And, of course, last night, there was also the beauty of the stadium itself (pictured above, during the women’s hammer medal ceremony). Plus the friendliness of the crowds and the officials. And the weather, which defied all those who say it always rains in the UK.
If you can get a ticket to the Rio Olympics in 2016, then go!
The blog has spent today at the Olympic Park. The athletes, atmosphere and buildings are quite amazing – everything said about the event is true.
Above is a picture of the Aquatic centre, before the heats began this morning. Left, is a picture of a Dutch Olympian, wearing their most striking uniform.
A word is also relevant on the security issue. As is well-known, the British have a genius for ‘muddling through’. And bringing in the armed forces to run the security has proved a master-stroke.
It was the first time the blog has ever enjoyed going through security. The soldiers were enjoying themselves tremendously. And instead of trying to terrify everyone, they made it clear this was a much better assignment than being shot at Afghanistan.
Plus, and most deservedly, they also have access to some of the best seats in the Park when off-duty.
Truly, a day to remember. The blog will report back next weekend on its visit to the athletics final on Friday night.
This week marks the opening of the 3rd London Olympics. To celebrate, the blog today looks at developments in government bond yields since the 1st London Games in 1908. On Thursday, it will look at GDP per capita changes since the 2nd London Games in 1948.
In 1908, UK interest rates were the benchmark for the world. And as the chart shows, based on Barclays Equity gilt study data, they averaged 2.9% during the 1900s. In 1908 itself, they were 3%. Today, long-dated 30 year government bonds yield exactly the same amount.
In fact, as the chart shows, rates have always been around this level, with the exception of the 1970s-1990s. Many commenators make the mistake of focusing on recent history, and argue that higher yields are ‘normal’.
But they are not. It was only the arrival of the BabyBoomers (those born between 1946-70) that created a major increase in demand as we moved into the 1970s. The rise in UK births was quite astonishing:
• They averaged 784k between 1921 – 1945
• They jumped 15% to 901k in the next 25 years, 1946 – 1970
• Since then, they have fallen 17% to average just 744k
Unsurprisingly, bond yields have fallen back to historical levels again.
Equally, fewer people in the Wealth Creator 25 – 54 age group means that overall demand levels will be lower. Plus, UK life expectancy has risen from 50 years in 1908 to around 80 years today.
This means 18m people, 28% of the UK population, are now in the New Old 55+ age group. They need to save more, and spend less, in order to finance their extended life span.
As we argue in Boom, Gloom and the New Normal, demographics drive demand. Those companies who adapt to the changes underway will win the medals in years to come.