Transcript Lecture 5 PPT - Kleykamp in Taiwan

Brief Review of Lecture 4 on the Japanese Economy
--- The Japanese economy is growing faster now than in the past.
Currently, the annualized QoQ growth is very high at a 6.7% rate for
2014 Q1. This is expected to fall greatly in the next quarter due to
the effect of the consumption tax rise. A more realistic but optimistic
estimate of 2014 growth in Japan would be about 1.5% - 2%.
--- The unemployment rate has ticked up recently from 3.5% to 3.7%,
but this may be due to people entering the workforce because jobs are
becoming available.
--- Japanese productivity showed very strong growth from 2013, but
fell considerably in April, recovering slightly in May.
--- Inflation has shown signs of falling again into a deflationary mode
with June data. This is perhaps surprising.
--- The Deficit to GDP ratio fell indicating that output growth has
been stronger than the rise in government spending
--- The industrial production index for Japan fell a surprising 3.3 %
in June and this has led to speculation that Abenomics may not be
working well and that the Japanese economy might be moving back
to stalled growth. The IPI in the next month in August will be very
important.
--- Japan’s current account to GDP has been falling steadily since
2008 from 4.8 % to 0.7 %. Imports have grown faster than exports
since 2008. However, exports have taken off after 2013 due to a
weakening yen. Energy imports have hampered policies to revive
the country.
--- Japan faces enormous difficulties in implementing structural
reforms to agriculture, bankruptcy laws, market opening measures,
and labor market reforms. Also, there are the issues of whether to
return to nuclear power, how to stimulate new births, how to deal
with debts, health care, and an ageing population, as well as how to
deal with a more strident China. See Haidar and Hoshi 2014
The Development of the
Global Economy
China as the World’s Factory –
The need for redirecting resources
and rebalancing
Lecture #5
Problems with the Chinese Economy
How is China Doing on Growth,
Unemployment, and Inflation?
China is Doubling the Size of Its
Economy Every Nine Years
What can we say about
China’s Unemployment ?
Note: The Official Rate does NOT respond
to movements in economic growth.
China's unemployment rate, for instance, is almost always low. And it doesn't
fluctuate much. In December, the official Chinese rate was 4.1 percent. It's
remained between 4 percent and 4.3 percent since 2003. But the CIA notes
that China doesn't count among its unemployed the migrants who flock to
Chinese cities in search of work. Once you include them, China's
unemployment rate looks more like 9 percent.
China’s Youth Unemployment Rate is especially worrisome. Not
everybody that Goes to University Get a Job.
Source: China Household Finance Survey in 2012
The Graph Above Indicates that Getting Educated Does Not Help the
Average Student
Most Countries are Not like China ,,, for example ... the US
Data Here is People for 25 Years and Older whereas
China’s Data is for People 21-25 Years of Age.
Not much discussion of this in the news, but China has
been into a trend of deflation. This is particularly bad news
since successful rebalancing would require strong
consumption and reduction in investment. Hard to see that
in the data above.
Year on Year (YoY) seems to show a disinflation going
on, although the annualized and the YoY may be
contaminated with some seasonal effects. On
nevertheless gets the feeling of a slowdown in China
rather than a pick up in economic activity. Sellers are
having to hold back on their price increases in order to
make sales.
China began in 1991 increasing its fixed
investment and reducing its consumption as a
percentage of GDP – rebalancing has not
really begun
China’s Trade Surplus is falling relative to GDP
and is down to 2% of GDP.
China’s Consumer Confidence Data is Looking More and More Choppy and
Uncertain. This is not a good signal. Trend is also down.
In China, the consumer confidence index is based on a survey of 700 individuals
over 15 years old from 20 cities all over the country. This composite index covers
the consumer expectation and consumer satisfaction index, thus measures the
consumers' degree of satisfaction about the current economic situation and
expectation on the future economic trend. The Index measures consumer
confidence on a scale of 0 to 200, where 200 indicate extreme optimism, 0
extreme pessimism and 100 neutrality.
In China, Housing Index is measured by
year over year change in house prices in
70 medium and large cities.
China’s Ghost Cities Continue to Worry the World
This Isn’t Paris
All the Houses are Sold but No One is Living in Them -- Yet
If You Build It They Will Come – Right?
Incredible Fast Changes
Occurring to China
What do you Think ?