We recently wrote about the UK household savings ratio falling to a record low of 4.9% in 2017 (since comparable records began in 1963) as growth in households’ spending exceeded the growth of households’ income. (Read more here).
The US, the UK, France and Spain all reported GDP numbers over the last week.
US real GDP increased at an annual rate of 2.3% in the first quarter of 2018 as per an advance estimate released by the Bureau of Economic Analysis. Read more about it here.
Personal consumption collapsed, with vehicle sale falling significantly. Business inventories were up significantly too. Total employee compensation (which includes wages and benefits) rose 2.7% over past 12 months, up from 2.4% a year ago and the highest since Q3 2008, while the household savings rate fell to a multi-year low of 3.1%.
UK GDP was estimated to have increased by 0.1% in Q1 2018 as per the Office for National Statistics. We reported here at the end of March that UK households’ saving ratio fell to the lowest ever on record as mortgage and consumer credit outstanding hit the highest ever.
Parts of the European Union have seen GDP per capita shrink between 2007 and 2017 and the overall compounded annual growth rate for the European Union was just 1.2%
GDP growth for the European Union between 2007 and 2017 adjusted for inflation was negative
Banks in Greece, Cyprus, Portugal and Italy have a non-performing loan ratio of over 10% a decade on from the financial crisis and have only provisioned around 50% of the losses
The European Central Bank (ECB) is by far the biggest holder of European bonds and has a balance sheet of €4.5 trillion or some 45% of the GDP of the Eurozone
18 of the 28 countries that are part of the European Union have seen house prices fall between 2008 and 2017
Greece has been the worst affected country, with its stock market down 85% since 2007, GDP per capita down 22% since 2007, house prices down 43% since 2008 and banks in Greece currently have a non-performing loan ratio of 42%
Eurozone Debt as % of GDP is gradually falling but is still historically high
Since the financial crisis of 2008, economic uncertainty has seen falling fertility rates for the European Union with population now set to fall over the coming decades
The US Bureau of Labor Statistics data reveals that the US unemployment rate has a hit a new multi-year low four to eight months before the start of every recession since the 1940s. In other words, the economy hits full employment four to eight months before the start of a recession.
The graph below might help visualise it better (the shaded areas indicate recessions),
ECB sells yet another bond after spotting an error
The European Central Bank (ECB) via Bundesbank has sold yet another bond issued by Telefonica Deutschland a year after it bought it. The bond which was due to mature in 2021 breached an ECB rule that they should not hold bonds that pay a step-up coupon (one that could go up in value if certain conditions are met – in this case if the company was acquired).