Intelligentguess

Situation

On a monthly basis : New orders increased by 3.1 % in Mar’07 ( - 5.7 % decline in Feb’07)

On a yearly basis : New orders decreased by -1.278 % p.a in Mar’07 ( -0.354 % p.a decline in Feb’07)

Background

• Shipments, up following two consecutive monthly decreases, increased 1.5 % .This followed a - 0.6% Feb’07 decrease. 
• Inventories, up twelve of the last thirteen months, increased 0.2%. The inventories-to-shipments ratio was 1.23, down from 1.25 in Feb’07.
• New orders had continued declines in Feb’07
• USA - Production growth in Mar’07 was at its slowest pace since Sept’05
• USA - Q1 2007 GDP annual growth slumped to its lowest since 2003 Q3

Conclusion ( click on image for a larger visual)

1. Orders look like it could have an initial range ( towards Jun’07) between a drop towards -2.50% p.a and +2.5% p.a growth
2. Towards end of 2007 early 2008 orders look like dropping down towards  a - 5.0% p.a  / - 6.0 % p.a .
3. Production can therefore be expected to continue to face declines towards Jun’07

Related links

• USA - New Orders continues declines in Feb’07 ( annual basis)
• Europe - New Orders growth rate drops in Feb 2007
• Japan - Orders grow at a slower pace in Feb’07

• USA - Production grows in Mar’07 at the slowest pace since Sept’05
• UK - Production - annual growth rate slips to a negative in Mar’07
• Japan - Production growth rate drops in Mar’07
• Euro area - Production (IIP) grows in Feb’07
• India - Production grows in Mar’07

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Situation

On a monthly basis - production ( IIP)  grew by 13% in Mar’07 ( as compared to a negative -5.0% growth in Feb’07).

On an annual basis - Feb’07 grew at 12.90 %  p.a ( up from 10.8% p.a).This is the first time since Nov’06 ( 15.8% p.a) that production growth rate increased. Production has had a continuous drop between Nov’06 and Feb’07

On a 3 month average basis ( to take out any “adjustments/ re-arrangement” ) - the annual growth was at 11.8% p.a. (11.9% p.a in Feb’07)  The average was growing since Oct’06 ( 8.9% p.a) and peaked in Jan’07.

Background

• India - Production continues to drop in Feb’07
• Cost of money has risen since the CRR was raised on Mar’07

Conclusion ( click on image for a larger visual)

1) 3 month rolling average looks like dropping towards 9 % p.a towards Jun’07. It is  likely that annual IIP calculated on a monthly basis may drop towards Jun’07.

2) 3 month rolling average - IIP could then range between 9 % p.a  - 12% p.a towards end ‘07

Related links

• USA - Production grows in Mar’07 at the slowest pace since Sept’05
• Euro area - Production (IIP) grows in Feb’07
• UK - Production - annual growth rate slips to a negative in Mar’07

• USA - New Orders continues declines in Feb’07
• Europe - New Orders growth rate drops in Feb 2007
• Japan - Orders grow at a slower pace in Feb’07

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Situation

On a monthly basis prices rose by 0.30 % ( - 0.50% in Feb’07)

On an annual basis prices rose by  -0.10 % p.a ( -0.20 % p.a in Feb’07)

Background

• The Bank of Japan (BOJ) raised the uncollateralized overnight call rate from 0.25% to 0.50% on Feb 21 2007 ( with a comment that future rate hikes would depend on growth and consumption)
• The BOJ left rates unchanged in their last meeting
• Consumer inflation have been dropping since Aug’06 the CPI in Feb’07 was  in a negative territory.
• Producer prices had a minor growth in Mar’07 prior to which it  had been dropping between Sept’06 and Feb’07.

Conclusion ( click on image for a larger visual ) 

1. The recent drops in PPI ( between Sept and Feb’07) will continue to cause further drops in CPI ( until April ‘07 ) - and - with possibility of further drops in PPI - could result in CPI remaining low towards June’07.
2. CPI could initially stay at the 0% p.a area.
3. CPI looks likely to drop towards the negative -0.50% p.a towards the end of 2007

In these circumstances it is unlikely that the BOJ will consider raising rates on their meeting on May 16th 2006.

Related links

• Japan - Consumer Price Index (CPI) continues its drops into negative territory in Feb’07
• UK - Inflation ( CPI) at its highest since Sept’92
• USA - Inflation (CPI) inches up in Mar’07 , while core inflation drops
• Euro area - Inflation (CPI) flat in Mar’07

• UK - Producer prices ( PPI) have a sharp rise in Mar’07
• USA - Producer prices continue to grow in Mar’07
• Euro area - Producer Prices ( PPI) : Prices rise at the lowest pace since Aug’04 ( on an annual basis)
• Japan - Producer prices ( PPI ) inches up in Mar’07

• Japan - Bank leaves rates unchanged in April’07
• Japan - GDP growth stronger in Q4 2006

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