Having tried fertiliser by the truckload, we are now approaching the ‘what next phase’ in the progress of the green shoots.
Tuesday saw a number of reports in the US, Asia and Australia that highlighted the mixed outlook for gardeners with an economics and analytical bent.
The most interesting was the admission from a voting member of the fed’s Open Markets Committee this year, Janet Yellen, head of the San Francisco Fed.
She said yesterday that the Fed’s key rate could remain near zero for a couple of years based on the amount of slack now in the economy.
Reuters reported that Ms Yellen said "My staff has looked at 12 different ways to calculate the output gap," and every one points to a large gap between current and potential output. Bets in futures markets on a rate increase as soon as late 2009 are "jumping the gun," she said.
The jobless rate is likely to continue climbing this year, and the moment the recession ends is "not the right time to take away the punchbowl."
She added that views circulating that the Fed risks triggering some kind of hyper-inflation by not rushing to raise interest rates are "misplaced."
So no rate rise until 2011? Are conditions in the US really that bad?
As well as these comments, the slide in US house prices seems to be slowing, and the contraction in Australian and US manufacturing is easing, but still very real; US consumer confidence fell in a major shock, European consumer inflation has joined Japanese and Chinese consumer inflation in falling into negative territory.
But prime American home mortgages are starting to go bad at an accelerating rate, with foreclosures among the same class of home loan also rising strongly.
China’s manufacturing had a good month in June, with a small rise in an activity index released yesterday. The purchasing managers; index edged up to a seasonally adjusted 53.2 in June from 53.1 in May. (A reading above 50 indicates an expansion).
The Index May had fallen 0.4 percentage points from April.
A worrying point from the latest index was the fall in new orders: The output index was 57.1, up 0.2 percentage points from May, but the new order index fell to 55.5 from 56.2 in May and 56.6 in April.
And while sentiment among Japan’s biggest manufacturers has improved in the latest Tankan survey from the country’s central bank, the improvement fell short of expectations.
That is now seen as signaling the economy may recover more slowly over the remainder of 2008 from its deepest postwar recession.
The June Tankan revealed that an index of confidence among large manufacturers climbed to minus 48 from a record minus 58 in March.
Bloomberg and other agencies said this was down on the forecast figure of a reading of 43; it was taken to signify that the expected improvement in business sentiment was less stronger than expected.
A key part of the index on capital spending plans showed the true, recessed nature of big Japanese company sentiment.
Big companies surveyed said they plan to cut spending at a rate faster than they predicted in the March Tankan.
Even with the rebound from a record low, business sentiment is still worse than at any time during the previous recession, which ended in 2002.
Large businesses plan to slash capital spending by 9.4% in the current business year, more than the 6.6% predicted three months ago and the worst-ever projection for a June Tankan.
They expect profits to tumble 19.8%, more than the 11% predicted in March.
Exports are down 30% over the past year and industrial output is off 29% in the same time.
Employees at the country’s biggest companies will also see summer bonuses fall 18.3% this year, according to the main business lobby, Keidanren.
That, plus unemployment at a five year high of 5.2% will make retail sales harder to grow in coming months.
The slump in consumer price inflation into a deepening deflation, will add to problems stimulating demand across the entire economy.
Still, the worst of the slump is probably over as the Government’s 25 trillion yen ($US261 billion) in consumer incentives, job support, and infrastructure spending since October kick in, helping stem the slump in consumer confidence and car sales.
Bloomberg reported that Japanese economists say the economy grew an annualized 2.3% in the June quarter after the record 14.2% contraction in the first three months of the year.
But with industrial production forecast to slow from the 5.9% rate in April and May and the downgrades in spending plans, some economists say the June quarter’s growth might be a one off and the economy will fall away in the closing months of the year.
From the US, the near free fall in house prices seems to be stopping, with a smaller fall in April in US home prices according to the Standard & Poor’s Case Schiller Index, the most accurate of all measures.
Normally that would be a sign of ‘break out the bubble and lets go’ for investors, but fickle American consumers had to go and get all gloomy again, right out of the blue.
In fact confidence among US consumers dropped in June after two months of building optimism; that surprised economists and knocked the wind from markets.
The Conference Board, an US industry group, said its respected index of consumer confidence dropped to 49.3 t
