Fukushima Daiichi Disaster Prompts Closure of Another Plant

As workers continue to battle with the crippled Fukushima Daiichi Nuclear Plant, more impacts from the worst nuclear disaster since Chernobyl are starting to arise. The latest impact will hit car manufacturers, with plants in central Japan hit the hardest: power firm Chubu Electric has agreed to shut its Hamaoka Nuclear Plant until it can build better defenses against the kind of massive earthquake and tsunami that hit on March 11, and Hamaoka provides power to at least 15 auto plants

Japan’s Economy Fights For Air

With the arrival of the first real Japanese data since the Tsunami struck the immensity of the tragedy which Japan is passing through is only now gradually becoming apparent. Exports were down by a seasonally adjusted 7.7% in March over February, while imports were only fell by a much more modest 1.4%, with the inevitable consequence that the trade surplus which forms the lifeline for Japan’s fragile economy shrank sharply. In particular car production was badly hit, with output at Toyota plunging 62.7% during the month, while Nissan reported a drop of 52.4% and Honda put the shrinkage in its Japanese domestic production at 62.9% adding that output would be at 50 percent of its former projections until at least the end of June.

In fact March output across the whole of Japanese industry fell at a record monthly pace of 15.3%, while household spending declined at the record annual rate of 8.5%

UK PMI Hits Low

Sterling is falling against the US dollar this morning after the April manufacturing PMI has come in weaker than expected at 54.6, the lowest in seven months. Inflation is the third highest since the data was first collected in

Has the US manufacturing sector’s growth already started its cyclical descent?

The April 2011 Manufacturing ISM Report On Business came out today and confirmed the slight downward path we have seen since February. Mind you, 60.4% is still a very robust reading. Nevertheless, I still believe the manufacturing sector’s contribution to overall GDP growth has peaked

Japan is even worse than the economic data suggest

The power shortages and damaged factories are taking a larger toll than was initially evident. Press reports, for example, warn that the contagion via the supply chains may have greater global impact, which in turn could impact the manufacturing activity outside of Japan. Toyota, the world’s largest auto producer, has indicated that its output collapsed by nearly 2/3 in March compared with a year earlier. Honda’s loss of output was similar while Nissan reports its auto output was cut by a little more than half. One press report indicated that Toyota will cuts its output from its Melbourne, Australia plant by half this month and next, citing a shortage of parts that were to be shipped from Japan.
While the disruption emanating from Japan will hit other auto sectors on the margin, the disruption of the Japanese economy itself appears more severe. Moody’s today revised this year to 0.0%-1.0% from 1.5% and with downside risks

The Curve in the Road

Bernanke (and Dudley) have been testifying that inflation is not an issue. But what signs and maps are they reading? Bernanke specifically invokes inflation expectations as being most important, and he contends they are low. They both note that the “output gap” (more on it later) is still high and that wage inflation is unlikely in a period of high unemployment. But, as Greenspan recently said, “The problem is, none of these indicators will tell you when inflation is about to take hold.”

The Economic Cycle Research Institute wrote what I think is a very powerful editorial about the problem with Fed policy and inflation. I will quote some of the more important paragraphs:

“Central bankers need to stop clinging to policy orthodoxy and pay attention to proven cyclical leading inflation indicators that can actually tell them when inflation is about to take hold. Otherwise, if a well-meaning Fed stimulates the economy for too long, it will let inflation and/or asset prices get out of control, fostering boom-bust cycles that keep long-term unemployment at elevated readings as each short boom ends with a bust that pushes the jobless rate back up.”

UK Manufacturing Data Soft, Dollar and Sterling Weak

BBH CurrencyView US dollar continues to weaken ahead of tomorrow’s ECB and BoE meeting UK manufacturing much weaker than expected; Swiss CPI exceeds estimates Euro remains resilient ahead of ECB meeting; Portugal raises €1 bn in auction The dollar continues to weaken, paring yesterday’s gains, ahead of tomorrow’s policy decision from the ECB and BoE,

Global Manufacturing Slips Back Slightly In March

By Edward Hugh Evidence which would enable us to assess the full economic impact of the Japanese earthquake and tsunami is still hard to come by. There is a lot of talk of supply chain disruptions, but little in the way of detailed evidence to back up assertions of the more anecdotal kind. Even the

Philly Fed Index Highest Since 1984

From the Federal Reserve Bank of Philadelphia: The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 35.9 in February to 43.4 this month (see Chart). This is the highest reading since January 1984. The demand for manufactured goods is showing continued strength: The new orders index increased 17 points

Has Anyone Noticed The Mammoth Shifts in Chinese Economic Policy?

I don’t think people realize that the Chinese have just made a rather sizable shift in economic policy. The Chinese are moving on multiple fronts now toward a new economic paradigm that includes slower growth but more domestic consumption. And this will have major implications for the rest of the world

Manufacturing still firing on all cylinders

The February 2011 Manufacturing ISM Report On Business came out today confirming the strong manufacturing reading we got yesterday from the Chicago PMI. The National PMI came in at 61.4%, ahead of consensus expectations for 60.5% and up from 60.8%. These are good numbers. In fact, the numbers you want to see going up like

Other Alpha Sources

Claus Vistesen with one economist’s view on China and EM currency revaluation, innovation in 3D manufacturing and the climate change debate