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Goods as a % of GDP

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Goods and Services as a % of GDP

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Balance of payments ( BOP) as a % of GDP

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UK - Trade as a % of GDP (click on image for a larger visual)

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USA - Trade as a % of GDP (click on image for a larger visual)

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Situation

• On a quarterly basis GDP grew by 0.81% in Q1 2007 (as compared to 1.32% in Q4 2006)
• On a annual basis GDP grew by 2.68% p.a in Q1 2007 (as compared to 2.42% p.a in Q4 2006)

Background 

1. Japan - Orders grow marginally in Apr’07    
2. Japan - Dramatic fall in new orders in Mar’07 ( strongest fall since May ‘02 )
3. Japan - Production grows at a declining rate in Apr’07

Bank of Japan ( BOJ) governor Toshihiko Fukui has said that the central bank intended to adjust interest rates “gradually” as the economic fundamentals improve. The bank seems to be treating a growth of 2% p.a as a situation wherein they can start tightening monetary policy.

The empahisis is gradually shifting from growth concerns to inflation concerns.

Macro picture 

Conclusion (click on image for a larger visual)

If the growth rate remains above 2% p.a , the BOJ would feel comfortable in raising interest rates. This in turn could cap growth at this area

As such growth could range between 2.50% p.a (initially) and 1.50% p.a towards early 2008

Related Links

• Japan - GDP growth stronger in Q4 2006 
• USA - Q1 2007 GDP annual growth revised to a lower level (lowest since 2003 Q3)   
• Euro GDP continues to grow at a faster pace in Q1 2007
• UK - GDP grew at 2.96 percent per annum in Q4 2006 as compared to 2.90 percent in Q3 2006

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Situation

• On a monthly basis production has grown by 15.96%  ( contracted by -15.73 %  in Mar’07)
• On a yearly basis production has grown by  2.98 % p.a ( contracted by -16.46  % p.a in Mar’07)

Background

Japan - Production grows at a declining rate in Apr’07

Conclusion ( click on image for a bigger visual)

Orders can be expected to range between a growth of 3% p.a and a contraction of -17% p.a from end’07 to mid ‘08

Related links

• Japan - Dramatic fall in new orders in Mar’07 ( strongest fall since May ‘02 )
• USA - New orders grow for the first time since Sept’06
• Europe - New Orders grow in Mar’07

• Japan - Production grows at a declining rate in Apr’07
• Euro area - Production (IIP) grows 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
• India - Production grows in Mar’07

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Situation

• On a monthly basis production has contracted by -0.09%  ( -0.28% drop in Mar’07)
• On a yearly basis production has grown by 2.48 % p.a ( 3.16 % p.a in Feb’07)

Background

• Production decreased, Shipments and Inventory increased, Inventory Ratio decreased.
• Dramatic fall in new orders in Mar’07 ( strongest fall since May ‘02 )
• Japan - Production growth rate drops in Mar’07

Conclusion ( click on image for a bigger visual)

• Production can be expected to grow at a rate of 1.80% p.a - 1.40% p.a towards Jul’07
• Growth rate range between 0% - 3% p.a towards end 2007

With production down - Japans GDP cannot be expected to offer a very positive picture for Q2 and Q3 2007.

Compounding this situation,  the Bank of Japans statement after the last monetary Policy meeting suggests that they may consider interest rates hikes giving a priority to inflation - even if effects growth

Related links

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Situation

• On a monthly basis prices rose by 0.79 % (0.30 % in Mar’07)
• On an annual basis prices rose by  2.20 % p.a ( 2.01% p.a in Mar’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  meeting on May 17th
• Producer prices have been rising since Feb’07 ( 1.71% p.a) 

Conclusion ( click on image for a better visual)

Producer prices look like heading towards a 1.35% p.a

The possible impact of the recent Producer prices and Consumer Prices on the Monetary Policy of the Bank of Japanwill be taken up in a separate report, due shortly.

Related Links

• Japan - Producer prices ( PPI ) inches up in Mar’07
• USA - Producers prices remain high in Apr ‘07
• UK - PPI Producer prices drop in Apr’07
• Europe - Producer Prices : Prices in Mar’07 rise at the lowest pace since Jul’04

• USA - Inflation rate (CPI) drops marginally in Apr’07
• UK Inflation (CPI) drops in Apr’07
• Euro area - Inflation (CPI) flat in Mar’07
• Japan - Inflation indices ( CPI ) deflate in Mar’07 - Bank rates likely to remain unchanged
• India - marginal drop in inflation ( CPI )

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Situation

• On a monthly basis orders contracted by -15.73%  ( 2.78% growth in Feb’07)
• On a yearly basis order contracted by -16.46% p.a ( 5.83 % p.a growth in Feb’07)

Background

• Production growth rate drops in Mar’07
• Orders grow at a slower pace in Feb’07
• This site expected that the strong fall in new orders would be post mid’07 towards mid’08 ( click here )

The fall has happened much earlier and much faster than expected

Conclusion ( click on image for a bigger visual)

1. In the April-June period the total amount of machinery orders is forecasted to decrease by 3.3%
2. Even if New orders grows on a monthly basis by 9.33% ( the highest month on month growth in the past 12 months) in Apr’07 over Mar’07 , the annual growth will be a decrease of -2.91% p.a
3. We can now expect a decrease in new orders between - 3 % p.a and -17% p.a till end ‘07 - mid ‘08
4. Production can be expected to continue declines - following the trend in New Orders .

Japans GDP cannot be expected to offer a very positive picture for Q2 and Q3 2007

In the current circumstances Bank of Japan ( BOJ ) is not going to be looking at hiking interest rate anywhere in the near future , but may again consider dropping rates

Related links 

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

• Japan - Production growth rate drops in Mar’07
• 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
• India - Production grows in Mar’07

• Japan - Bank leaves rates unchanged

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Situation

On a monthly basis production has contracted by -0.65%  ( 0.75% growth in Feb’07)

On a yearly basis production has grown by 2.78 % p.a ( 4.45 % p.a in Feb’07)

Background

• Production grew moderately in Feb’07. 
• The pace of new orders growth had dropped in Feb’07
• According to the Survey of Production Forecast in Manufacturing,　Production is expected to increase in April and May. ( the increase may be modest) 

Conclusion  (click on image for a better visual)

1. Production growth rate can be expected to be towards 2.0% p.a (with a maximum of 4.00 % p.a) for the 1st half of 2007
2. Prodcution growth rate can be expected to drop to a sub 2.5% p.a to a 0% p.a towards end 2007

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
• India - Production grows in Mar’07

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

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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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Situation

• On a monthly basis PPI grew by 0.30% in Mar’07 ( was at 0%  in Feb’07)
• On an annual basis PPI grew at 2.01% ( 1.71% in Feb’07).

Back ground

• Annual PPI has been dropping since Sept’06 ( 3.56% p.a).  
• The recent drops in inflation led to the BOJ leaving the Bank rates unchanged. 

Conclusion ( click / double click on image for a clearer visual )

PPI looks like it has further space to drop towards 1.35% p.a ( with a upside possibility of 2.10% p.a) 

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.

Related Links

1. Consumer Price Index (CPI) continues its drops into negative territory in Feb’07
2. Producer Price Index (PPI) annual growth rate drops in Feb’07 
3. Bank leaves rates unchanged

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Situation

On a monthly basis - Orders grew by 5.5% in Feb’07 as compared to 10.59 % in Jan’07

On an annual basis - Orders grew by 6.31% p.a in Feb’07 as compared to 11.06 % p.a in Jan’07

Background

• New Orders growth rate improved in Jan’07 as compared to Dec’06.
• Production grew moderately in Feb’07. 

Conclusion  (click on image for larger visual )

• Orders can be expected to range between a 0% -10% p.a growth till mid’07. ( range looks ” rather large” but have a look at the visual - and you will get the picture ) 
• Post mid ‘07 Orders can be expeced to contract to a negative area towards mid’08

• The recent growth in orders for both Jan’07 and Feb’07 should translate into a higher growth in production for Mar’07 and April’07.

Note :

Production growth rates of in Oct, Nov and Dec’07 were at 6.92%, 4.92%, and 4.58% respectvely on a per annum basis. This translated to a GDP growth rate of 2.52% p.a in Q4 2006.

The Jan and Feb’07 growth rates in production are at 2.86% and 3.96% per annum respectively.

The Q1 2007 GDP growth does look like it will grow at a slower pace/far slower pace than Q4 2006 .

Related links

1. New Orders growth rate improves in Jan’07 as compared to Dec’06
2. Production grows moderately in Feb’07 (on an annual basis)
3. GDP growth stronger in Q4 2006

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