November 2009 - Global Economic Watch


Global Economic Watch


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Visualization: the Shifting Media Landscape and Consumer Behavior

11-30-2009 11:08 AM with no comments

The Economist held a Media Convergence Forum in October to explore the changing relationship between consumers and commerce in the digital age.  Here's how the organizers described the purpose of the forum on their website:

The surge of new technologies and social media innovations in today's environment is significantly altering the future media landscape for marketers. Consumer behaviour is changing and the way marketers reach their audience must also change. Marketers are searching for new ways to not only reach their customers, but to understand them, to peer inside their minds. As the level of consumer understanding increases, so can the knowledge of how best to reach them. However the plethora of tools at a marketers disposal is not easy to navigate and real learning comes from a real understanding of the future of media convergence.

Interesting and compelling, to be sure.  But they also had Karl Fisch, Scott McLeod, and Jeff Brenman put together a video/data visualization of the changing landscape, and it really captures your attention. Titled Did You Know 4.0: The Media Landscape, it presents, in less than 5 minutes, the current shifts in how consumers and businesses are interacting through digital media.  And while much of the focus is on news media and advertising, the core issues connect to just about all facets of commerce in the digital age:

(Hat tip to Chelsey Hoffman, University of Michigan)

Posted by Graham Griffith

Black Friday Stats and Consumer Confidence

11-30-2009 8:58 AM with no comments

Black Friday is always a day ripe for hype and wide-though predictable-television coverage.  But the last two Black Fridays seem to have attracted even more speculation, and anxiety, than usual. So it is impossible to resist looking at some of the numbers that are coming through today.  The takeaway seems to be that there were more people shopping this Black Friday than last year, but they spent less.  So the overall take by retailers was higher, but not by much.  Andrea Chang shares some of the key stats in today's LA Times:

Sales on the day after Thanksgiving rose just 0.5% to $10.66 billion, according to ShopperTrak RCT Corp., a research firm that monitors sales at more than 50,000 stores. That compared with a 3% year-over-year Black Friday increase in 2008 and an 8.3% surge in 2007. 

"It's a positive sign that we had an increase in sales, but the numbers certainly don't indicate that those will be sustained," said Britt Beemer, chairman of consumer behavior firm America's Research Group. 

Nationwide, 195 million shoppers visited stores and websites over the four-day weekend, up from 172 million last year, the National Retail Federation said Sunday. 
But average spending fell 7.9%, to $343.31 per person, from $372.57 a year ago. Total spending reached an estimated $41.2 billion.

The resistance to making big purchases is no surprise to the folks at The Big Picture, where, before any Friday stats came out, David Rosenberg shared the below chart and stressed that consumer frugality is alive and well:

Rosenberg writes:

The Conference Board’s consumer confidence index may have improved (48.7 in October to 49.5 in November) and beaten consensus expectations, but it remains firmly in recession terrain. It is so obvious that consumers are tired of the over-borrowing and over-spending days of yesteryear. Despite all the temptations provided by the government, auto buying plans dropped to an eight-month low (from 4.7 in October to 4.4 in November); home buying plans slipped to a new 27-year low of 2.3 (from 2.5 in October and 3.0 in September); and intentions to buy a major appliance stayed at a 14-year low (23.2).

Read Consumer Confidence in the Doldrums here.  

Posted by Graham Griffith

The Street Poll on the Impact of Dubai Crisis

11-30-2009 8:19 AM with no comments

The United Arab Emirates has "pledge[d] to lend money to banks operating in Dubai," according to the New York Times, in an effort to prevent big disruptions on markets around the world after Dubai's announcement on Friday that the once-high-flying emirate needs to "reschedule" debt payments.  The Street's Eric Rosenbaum is now polling readers, asking who will be hit the hardest by the Dubai "sand trap," and he writes that the impact could be widespread:

Big bank lenders to Dubai and the United Arab Emirates, including the Royal Bank of Scotland(RBS Quote)HSBC(HSBC Quote) andStandard Chartered were throttled, as was the entire banking sector in the broad sell-off.

However, the implications from the Dubai sand-trap could spread across many players, sectors and slices of the economy, and it's still anyone's guess as to the true significance of the debt crisis. There is already talk that the problems in Dubai could serve as an emerging-markets contagion, harkening back to Argentina in 2000 and Russia in the 1990s.

Read the article and participate in the poll here

Posted by Graham Griffith

Big Think Black Friday Special: 'The Science of Spending'

11-27-2009 10:56 AM with no comments

Big Think has pulled together a baker's dozen of videos for Black Friday viewing.  The videos cover our collective issues with spending and saving.  The third video in the collection features Lee Eisenberg, author of the new book Shoptimism: Why the American Consumer Will Keep Buying No Matter What. Here is Eisenberg discussing the history of splurging:

You can watch the full Science of Spending series here.  

Posted by Graham Griffith

60 Years of Unemployment, Visualization

11-24-2009 2:10 PM with no comments

Over at Tableau Software, Ross Perez has put together a nice visualization of unemployment across decades.  Take a look:


data visualization by tableau public

Posted by Graham Griffith

Case-Shiller Numbers: Housing Prices Rose in Third Quarter

11-24-2009 1:42 PM with no comments

The Standard  & Poor's/Case-Shiller Home Price Indices released today reveal that housing prices rose in the third quarter.  That means we saw two consecutive quarters of rising housing prices this year,  and while that is good news overall for the economy, the year-over-year figures paint a much gloomier picture:

From the Case-Shiller release:

The chart above depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded an 8.9% decline in the third quarter of 2009 versus the third quarter of 2008. This is a marked improvement over the 14.7% decline in the annual rate of return reported in the second quarter of 2009, and the 19.0 drop in the first quarter. The 10-City and 20-City Composites recorded annual declines of 8.5% and 9.4%, respectively. These two indices, which are reported at a
monthly frequency, have generally seen improvements in their annual rates of return every month since the beginning of the year.

The New York Times has some helpful charts online that look at the Case-Shiller data for the 20 cities in the 20-city composite.  Like this one of Las Vegas:

Click here to use the NYT interactive charts.

Read the full Case-Shiller release here.



Posted by Graham Griffith

Lloyd's of London CEO on Learning from Crises

11-24-2009 8:15 AM with no comments

Richard Ward, CEO of Lloyd's of London, says his company isn't really a company, but rather it is a market--"the only insurance market in the world."  Ward spoke recently as part of the Wharton Leadership Lecture Series at the Wharton School.  He explained how the "Lloyd marketplace" works, and he recounted two moments when Lloyd's faced its own collapse: first in the Nineties when billions of dollars in claims came in with the a series of suits over asbestos, lead paint, and others; and later after the September 11, 2001 terrorist attack on the World Trade Center.  After the World Trade Center attack, Lloyd's face $11 billion in claims and came close to bankruptcy.  

Posted by Graham Griffith

Good Housing Data/Bad Housing Data

11-23-2009 10:48 AM with no comments

The National Association of Realtors is celebrating some good numbers out today:

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”

Read the full release here.

Meanwhile, the Morgage Bankers Association focuses on a different set of housing market statistics from last quarter:

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter of 2009, and up 265 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 108 basis points from 8.86 percent in the second quarter of 2009 to 9.94 percent this quarter.

And MBA Chief Economist Jay Brinkmann says the news is only going to get worse in those regions of the country hardest hit so far, like Arizona, California, Florida, and Nevada:

First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace.  Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates.  Second, the number of loans 90 days or more past due or in foreclosure is now a little over 4 million as compared with 3.9 million new and previously occupied homes currently for sale, although there is likely some overlap between the two numbers.  The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country.

Read the MBA's release here

Posted by Graham Griffith

Seth Godin's Tips on How to Lose an Argument Online

11-23-2009 9:34 AM with no comments

Seth Godin shares a lot of good advice for business owners at Seth's Blog on how to communicate.  Today he gives some good advice on how NOT to communicate, by listing effective ways to lose an argument online.  For example, Tip#1:

Have an argument. Once you start an argument, not a discussion, you've already lost. Think about it: have you ever changed your mind because someone online started yelling at you? They might get you to shut up, but it's unlikely they've actually changed your opinion.

And #4:

Question motives. The best way to get someone annoyed and then have them ignore you is to bypass any thoughtful discussion of facts and instead question what's in it for the person on the other end. Make assumptions about their motivations and lose their respect.

For the full list, and Godin's ideas on what actually works, click here.  

Posted by Graham Griffith

World GDP Share Since 1969

11-23-2009 9:07 AM with no comments

Chart of the weekend: this is a simple graph, from Mark Perry of  the University of Michigan, Flint, that says a lot:

Here's how Perry interprets the info above:

World GDP (real) doubled between 1969 and 1990, and has increased by another 60% since then, so that world output in 2009 is more than three times greater than in 1969. We might mistakenly assume that the significant economic growth over the last 40 years in China, India and Brazil has somehow come "at the expense of economic growth in the U.S." (based on the "fixed pie fallacy") but the data suggest otherwise. Because of advances in technology, innovation, and significant improvements in U.S. productivity, America's share of total world output has remained remarkably constant at a little more than 25%, despite the significant increases in output around the world, especially in Asia.

Read Perry's full analysis here.  

(Hat tip to Greg Mankiw)

Posted by Graham Griffith

Acemoglu on Institutions, Prosperity, and What Makes Poor Countries Poor

11-20-2009 11:55 AM with no comments

MIT economist Daron Acemoglu believes institutions matter when it comes to generating prosperity.  And in analyzing what makes rich countries rich, and poor countries poor, one has to look primarily at government.  Or as he writes in Esquire: "Put simply: Fix incentives and you will fix poverty. And if you wish to fix institutions, you have to fix governments."

How do we know that institutions are so central to the wealth and poverty of nations? Start in Nogales, a city cut in half by the Mexican-American border fence. There is no difference in geography between the two halves of Nogales. The weather is the same. The winds are the same, as are the soils. The types of diseases prevalent in the area given its geography and climate are the same, as is the ethnic, cultural, and linguistic background of the residents. By logic, both sides of the city should be identical economically.

And yet they are far from the same.

On one side of the border fence, in Santa Cruz County, Arizona, the median household income is $30,000. A few feet away, it's $10,000. On one side, most of the teenagers are in public high school, and the majority of the adults are high school graduates. On the other side, few of the residents have gone to high school, let alone college. Those in Arizona enjoy relatively good health and Medicare for those over sixty-five, not to mention an efficient road network, electricity, telephone service, and a dependable sewage and public-health system. None of those things are a given across the border. There, the roads are bad, the infant-mortality rate high, electricity and phone service expensive and spotty.

The key difference is that those on the north side of the border enjoy law and order and dependable government services — they can go about their daily activities and jobs without fear for their life or safety or property rights. On the other side, the inhabitants have institutions that perpetuate crime, graft, and insecurity.

Read What Makes a Nation Rich? One Economist's Big Answer here.  And take a closer look at the accompanying map/graphic (above) by clicking here.

Posted by Graham Griffith

When Marketers Become Media Companies

11-20-2009 9:58 AM with no comments

Ad Age editor Jonah Bloom says "the marketer has truly become the media owner."  With technology lowering "cost of entry" dramatically in the digital age, some marketers are now able to take their messages directly to consumers.  In this Ad Age video, Bloom discusses some of the recent success marketers have had, and suggests these are not exceptions, but signs of a larger trend:

Posted by Graham Griffith

OECD Economic Outlook: 'Tepid' Recovery and Rising Unemployment

11-19-2009 1:15 PM with no comments

The Organisation of Economic Cooperation and Development's latest Economic Outlook is out today, and it is full of some mildly good--if reserved--news.  The big takeaway: the recovery is on, but it is slow and unemployment will keep rising across OECD nations at least until the middle of 2010 for the US, and likely later for Euro countries. Jørgen Elmeskov, head of the OECD's Economics Department, answers some key questions about the report's findings:

Here's a look at the unemployment projections in the report:

You can watch the OECD's press conference explaining the report, and access the full report here.

Posted by Graham Griffith

Robert Pozen on Fair Value Accounting

11-19-2009 8:47 AM with no comments

In the November Harvard Business Review, Robert Pozen--former adviser to President George W. Bush and Massachusetts Governor Mitt Romney, and current chair of MFS Investment Management--weighs in on the debate over whether accounting rules bear some blame for the financial crisis.  And he says that both sides in the argument over whether "fair value accounting" exacerbated the credit crunch a year ago may be wrong:

We do not want banks to become insolvent because of short-term declines in the prices of mortgage-related securities. Nor do we want to hide bank losses from investors and delay the cleanup of toxic assets—as happened in Japan in the decade after 1990. To meet the legitimate needs of both bankers and investors, regulatory officials should adopt new multidimensional approaches to financial reporting.

Before we can begin to implement sensible reforms, though, we must first clear up some misperceptions about accounting methods. Critics have often lambasted the requirement to write down impaired assets to their fair value, but in reality impairment is a more important concept for historical cost accounting than for fair value accounting. Many journalists have incorrectly assumed that most assets of banks are reported at fair market value, rather than at historical cost. Similarly, many politicians have assumed that most illiquid assets must be valued at market prices, despite several FASB rulings to the contrary.

You can read his article here (subscription only).  You can also watch Pozen discuss the issue, along with a brief introduction to some of the ideas he puts forward in a new book, Too Big To Save, in this video from Harvard Publishing:

Posted by Graham Griffith

Daniel Gross Looks for Silver Lining on Unemployment

11-18-2009 12:42 PM with no comments

There is no shortage of strong writing on unemployment figures these days.  Or, for that matter, projections.  Nouriel Roubini, for one, is projecting things to get worse:

Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.

The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession.

As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures.

The damage will be extensive and severe unless bold policy action is undertaken now.

But Daniel Gross has an interesting take at his Moneybox column for Slate.  He agrees that "before things get better, they have to get worse more slowly."  But he looked at the third quarter productivity numbers from the Bureau of Labor Statistics and saw some hope:

In the third quarter, productivity—econospeak for companies doing more work with the same amount of labor—rose at a 9.5 percent annual rate. We've just witnessed the fastest two-quarter productivity surge since the first year of the Kennedy administration. Economists can read these omens the way Roman priests read chicken entrails. And here's one of their explanations: Just as investors and businesspeople don't believe things could ever go wrong at the peak of the boom, they have difficulty imagining things can get better at the trough of the bust. And so they respond to rising demand not by hiring new employees but by coaxing existing employees to work harder. But just as hamsters can run only so fast on their treadmills, there are limits to productivity growth. "If you look at economies over many centuries, you can't grow productivity for 7 or 9 percent for more than two or three quarters," said Lakshman Achuthan, managing director at New York-based Economic Cycle Research Institute, whose leading employment indicators are looking up. "At a certain point, people will start to collapse at work." Should the economy expand in the fourth quarter at the same 3.5 percent annual rate it did in the third quarter—as it shows every sign of doing—companies won't have any choice but to hire, says Michael Darda, chief economist at MKM Partners. "There's an outside chance we could see job growth by the end of the year."

Read Coming Soon: Jobs! here.

Posted by Graham Griffith

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