Is Hong Kong in a recession or a depression now?

Some days an item of news just reaches out and grabs you and this morning it has come from the increasingly troubled Hong Kong. We knew that there would be economic consequences from the political protests there but maybe not this much.

The Census and Statistics Department (C&SD) released today (October 31) the advance estimates on Gross Domestic Product (GDP) for the third quarter of 2019.     According to the advance estimates, GDP decreased by 2.9% in real terms in the third quarter of 2019 from a year earlier, compared with the increase of 0.4% in the second quarter of 2019.

The commentary from a government spokesman confirmed various details.

marking the first year-on-year contraction for an individual quarter since the Great Recession of 2009, and also much weaker than the mild growth of 0.6% and 0.4% in the first and second quarters respectively. For the first three quarters as a whole, the economy contracted by 0.7% over a year earlier. On a seasonally adjusted quarter-to-quarter comparison, the fall in real GDP widened to 3.2% in the third quarter from 0.5% in the preceding quarter, indicating that the Hong Kong economy has entered a technical recession.

The concept of recession first switched to technical recession meaning a minor one ( say -0.1% or -0.2% GDP growth) but now seems to encompass what is a large fall. Time for Kylie again I guess.

I’m spinning around
Move outta my way

A clue to the change is the way that the year so far has fallen by 0.7% in GDP terms. If we look back we see that annual GDP growth of 3.8% slowed a little to 3% from 2017 to 18. But the quarterly numbers have been falling for a while. In annual terms GDP growth was 2.8% in the third quarter of 2018 but then only 1.2% in the last quarter and then going 0.6%, 0.4% and now -2.9% this year.

The Details

If we take the advice of Kylie and start breaking it down we see this.

Gross domestic fixed capital formation decreased significantly by 16.3% in real terms in the third quarter of 2019 from a year earlier, compared with the decrease of 10.8% in the second quarter.

Investment has taken quite a dive as this time last year it was increasing at an annual rate of 8.6%. Indeed the private-sector full stop took a fair hammering.

private consumption expenditure decreased by 3.5% in real terms in the third quarter of 2019 from a year earlier, as against the 1.3% growth in the second quarter.

The one bright spot was government expenditure.

     Government consumption expenditure measured in national accounts terms grew by 5.3% in real terms in the third quarter of 2019 over a year earlier, after the increase of 4.0% in the second quarter.

Is it too cheeky to suggest that at least some of this will be police overtime? So far it is not increased unemployment payouts

     The number of unemployed persons (not seasonally adjusted) in July – September 2019 was 120 300, about the same as that in June – August 2019 (120 600). The number of underemployed persons in July – September 2019 was 41 500, also about the same as that in June – August 2019 (41 000).

The flickers of acknowledgement of the present troubles were in the employment not the unemployment numbers.

 Total employment decreased by around 8 200 from 3 863 600 in June – August 2019 to 3 855 400 in July – September 2019. Over the same period, the labour force also decreased by around 8 500 from 3 984 200 to 3 975 700.

Also does the labour force fall suggest some emigration?

However you spin it the commentary is grim.

As the weakening economic conditions dampened consumer sentiment, and large-scale demonstrations caused severe disruptions to the retail, catering and other consumption-related sectors, private consumption expenditure recorded its first year-on-year decline in more than ten years. The fall in overall investment expenditure steepened amid sagging economic confidence.

Trade

This added to the woes as you can see below.

Over the same period, total exports of goods measured in national accounts terms recorded a decrease of 7.0% in real terms from a year earlier, compared with the decrease of 5.4% in the second quarter. Imports of goods measured in national accounts terms fell by 11.1% in real terms in the third quarter of 2019, compared with the decline of 6.7% in the second quarter.

Ironically this looks like a boost to GDP from a tale of woe. This is because the fall in imports ( a boost to GDP) is larger than the fall in exports. This situation reverses somewhat in the services sector presumably mostly due to lower tourism revenue.

Exports of services dropped by 13.7% in real terms in the third quarter of 2019 from a year earlier, following the decline of 1.1% in the second quarter. Imports of services decreased by 3.8% in real terms in the third quarter of 2019, as against the increase of 1.3% in the second quarter.

Looking Ahead

That was then and this is now so what can we expect?

Looking ahead, with global economic growth expected to remain soft in the near term, Hong Kong’s exports are unlikely to show any visible improvement. Moreover, as the adverse impacts of the local social incidents have yet to show signs of abating, private consumption and investment sentiment will continue to be affected. The Hong Kong economy will still face notable downward pressures in the rest of the year.

If we look at the results from the latest official quarterly business survey and note what happened in the third quarter then we get a proper Halloween style chill down the spine.

 For all surveyed sectors taken together, the proportion of respondents expecting their business situation to be worse (32%) in Q4 2019 over Q3 2019 is significantly higher than that expecting it to be better (7%).  When compared with the results of the Q3 2019 survey round, the proportion of respondents expecting a worse business situation in Q4 2019 as compared with the preceding quarter has increased to 32%, against the corresponding proportion of 17% in Q3 2019.

According to the South China Morning Post then prospects for China continue to weaken.

The manufacturing purchasing managers’ index (PMI), released by the National Bureau of Statistics (NBS) on Thursday, stood at 49.3 in October, down from 49.8  in September.  The non-manufacturing PMI – a gauge of sentiment in the services and construction sectors – came in at 52.8 in October, below analysts’ expectations for a 53.6 reading. The figure was also down from September’s 53.7, dropping to its lowest level since February 2016.

As to Japan there seems to be little hope as the Bank of Japan just seems lost at sea now.

As for the policy rates, the Bank expects short- and long-term interest rates to remain at their present or lower levels as long as it is necessary to pay close attention to the possibility that the momentum toward achieving the price stability target will be lost.

Comment

As you can see the situation in Hing Kong is clearly recessionary and the size of it combined with the fact that it looks set to continue means it is looks depressionary as well. There has been a monetary respone but this of course only represents maintenance of the US Dollar peg.

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) that the Base Rate was adjusted downward by 25 basis points to 2% with immediate effect according to a pre-set formula.  The decrease in the Base Rate follows the 25-basis point downward shift in the target range for the US federal funds rate on 30 October (US time).

As to the guide provided by the narrow money supply there is this.

The seasonally-adjusted Hong Kong dollar M1 decreased by 0.5% in September and by 3.4% from a year earlier, reflecting in part investment-related activities.

However you spin it people are switching from Hong Kong Dollars to other currencies.

The Investing Channel

 

The economic depression in Greece looks set to continue

A feature of the economic crisis that enfolded in Greece was the fantasy that economic growth would quickly recover. It seems hard to believe now that anyone could have expected the economy to grow at 2% ot so per annum from 2012 onwards but the fans of what Christine Lagarde amongst others called “shock and awe” did. I was reminded of that when I read this from the International Monetary Fund on Tuesday.

Greece has now entered a period of economic growth that puts it among the top performers in the eurozone.

That is to say the least somewhat economical with the truth as this from the Greek statistics office highlights.

The available seasonally adjusted data
indicate that in the 4th quarter of 2018 the Gross Domestic
Product (GDP) in volume terms decreased by 0.1% in comparison with the 3rd quarter of 2018.

So actually it may well have left rather than entered a period of economic growth which is rather different. Over the past year it has done this.

in comparison with the 4th quarter of 2017, it increased by 1.6%.

What this showed was another signal of a slowing economy as 2018 overall was stronger.

GDP for 2018 in volume terms amounted to 190.8 billion euro compared with 187.2 billion euro for 2017 recording an increase of 1.9%.

There is a particular disappointment here as the Greek economy had expanded by 1% in the autumn of last year leading to hopes that it might be about the regain at least some of the ground lost in its depression. Now we find an annual rate of growth that is below the one that was supposed to start an up,up and away recovery in 2012. Nonetheless the IMF is playing what for it is the same old song.

We expect growth to accelerate to nearly 2½ percent this year from around 2 percent in 2018. This puts Greece in the upper tier of the eurozone growth table.

Money Supply

This has proved to be a good guide of economic trends in the Euro area so let us switch to the Bank of Greece data set so we can apply it to Greece alone. The recent peak for the narrow money measure M1 was an annual rate of growth of 7.3% in December 2017 and then mostly grew between 5% and 6% last year. But then the rate of growth slowed to 3.8% last December and further to 2.7% in January.

I am sorry to say that a measure which has worked well is now predicting an economic slow down in Greece and perhaps more contractions in the first half of this year. Looking further ahead broad money growth has slowed from above 6% in general in 2018 to 4.2% in December and 3.3% in January. This gives us a hint towards what economic growth and inflation will be in a couple of years time and the only good thing currently I can say is that Greece tends to have low inflation.

The numbers have been distorted to some extent by the developments mentioned by the IMF below but they are much smaller influences now.

 For example, customers are now free to move their cash to any bank in Greece, and the banks themselves have almost fully repaid emergency liquidity assistance provided by the European Central Bank.

The Greek banks

Even in the ouzo hazed world of the IMF these remain quite a problem.

Third, we are urging the government to do more to fix banks, which remain crippled by past-due loans. This will help households and businesses to once again be able to borrow at reasonable interest rates.

They have another go later.

Directors encouraged the authorities to take a more comprehensive, well-coordinated approach to strengthening bank balance sheets and reviving growth-enhancing lending.

There are two issues with this and let me start with how many times can the Greek banks be saved? Money has been poured again and again into what increasingly looks like a bottomless pit. Also considering they think bank lending is weak – hardly a surprise in the circumstances – on what grounds do they forecast a pick-up in economic growth?

Back on the 29th of January I pointed out that the Bank of Greece was already on the case.

An absolutely indicative example can assess the immediate impact of a transfer of about €40 billion of NPLs, namely all denounced loans and €7.4 billion of DTCs ( Deferred Tax Credits).

So the banks remain heavily impaired in spite of all the bailouts and are no doubt a major factor in this.

vulnerabilities remain significant and downside risks are rising……………. If selected fiscal risks materialize, the sovereign’s repayment capacity could become challenged over the medium term.

That would complete the cycle of disasters as about the only bit of good news for the Institutions in the Greek bailout saga is this.

The government exceeded its 2018 primary fiscal balance target of 3.5 percent of GDP,

Moving out of the specific area of public finances we see that money is being sucked out of the economy to achieve this which acts as a drag on economic growth.

The Eurogroup

It does not seem quite so sure that things are going well as it refrains for putting its money behind it at least for now. From Monday.

The finance ministers of the 19-member Eurozone have decided to postpone disbursing 1 billion euros ($1.12 billion) to Greece.

The reason for postponing the payment is that Greece has not yet changed the provisions of a law protecting debtors’ main housing property from creditors to the EU’s satisfaction. ( Kathimerini).

Euro area

The problem with saying you are doing better than the general Euro area is twofold. If we start with the specific then it was not true in the last quarter of last year and if we move to the general Greece should be doing far, far better as it rebounds from the deep recession/depression it has been in. That is not happening.

Also beating the Euro area average is not what it was as this from earlier highlights. From Howard Archer.

Muted news on as German Economy Ministry says economy likely grew moderately in Q1 & warns on industrial sector. Meanwhile, institute cuts 2019 growth forecast sharply to 0.6% from 1.1%, citing weaker foreign demand for industrial goods.

Some have been pointing out that this matches Italy although that does require you to believe that Italy will grow by 0.6% this year.

Comment

Let me shift tack and now look at this from the point of view of how the IMF used to operate. This was when it dealt with trade issues and problems rather than finding French managing directors shifting its focus to Euro area fiscal problems. If you do that you find that the current account did improve in the period 2011-13 substantially but never even got back to balance and then did this.

The current account (CA) deficit was wider than anticipated, reaching 3.4 percent of GDP (though in part due to methodological revisions). Higher export prices and strong external demand were more than offset
by rising imports due to the private consumption recovery, energy price hikes, and the large import share in exports and investment. The primary income deficit widened due to higher payments on foreign investments.

That is quite a failure for the internal competitiveness model ( lower real wages) especially as we noted on January 29th that times were changing there. So the old measure looks grim in fact so grim that I shall cross my fingers and hope for more of this.

The tourism and travel sector in Greece grew 6.9 percent last year, a rate that was three-and-a-half times higher than the growth rate of the entire Greek economy, a survey by the World Travel and Tourism Council (WTTC) has noted.

The survey illustrated that tourism accounted for 20.6 percent of the country’s gross domestic product, against a global rate of just 10.4 percent.

This means that one in every five euros spent in Greece last year came from the tourism and travel sector, whose turnover amounted to 37.5 billion euros. ( Kathimerini ).

The Investing Channel

 

 

A solid day for the UK economy or another trade disaster?

Today has opened with some positive news for the UK economy. The opening salvo was fired just after midnight by the British Retail Consortium.

In September, UK retail sales increased by 1.9% on a like-for-like basis from September 2016, when they had increased 0.4% from the preceding year……..On a total basis, sales rose 2.3% in September, against a growth of 1.3% in September 2016. This is above the 3-month and 12-month averages of 2.1% and 1.7% respectively.

So we have had 2 months now of better news on this indicator although it is a far from perfect guide to the official data series mostly because it combines both volumes and prices as hinted below.

September saw a second consecutive month of relatively good sales growth which should indicate welcome news for retailers and the economy alike. Looking beneath the surface though, we see that much of this growth is being driven by price increases filtering through, particularly in food and clothing, which were the highest performing product categories for the month.

Anyway for all the talk of price increases if you look at the figures they cannot have been that high and we have also got a small bit of good news on that front. From the BBC.

Car insurance premiums have dipped for the first time in more than three years, but the respite for drivers will be short-lived, analysis suggests.

Prices fell by 1%, or £9, in the third quarter of the year compared with the previous three months, according to price comparison website Confused.com.

Tourism

The lower value of the UK Pound £ seems to have given the UK economy something of a boost as well.

Tourism is booming in the UK with nearly 40 million overseas people expected to have visited the country during 2017 – a record figure.

Tourist promotion agency VisitBritain forecasts overseas trips to the UK will increase 6% to 39.7 million with spending up 14% to £25.7bn this year.

Also we seem to be holidaying more at home ourselves.

Britons are also holidaying at home in record numbers.

British Tourist Authority chairman Steve Ridgway said tourism was worth £127bn annually to the economy……From January to June this year, domestic overnight holidays in England rose 7% to a record 20.4 million with visitors spending £4.6bn – a rise of 17% and another record.

Over time this should give a boost to the UK trade figures which feel like they have been in deficit since time began! Especially if numbers like the one below continue.

Spending on UK debit cards overseas was down nearly 13% in August compared with the same month in 2016.

Production

If we move to this morning’s official data series we see that production is in fact positive.

In August 2017, total production was estimated to have increased by 0.2% compared with July 2017………In the three months to August 2017, the Index of Production was estimated to have increased by 0.9%……Total production output for August 2017 compared with August 2016 increased by 1.6%.

It is being held back by North Sea Oil & Gas output.

The fall of 2.0% in mining and quarrying was due mainly to oil and gas extraction, which fell by 2.1%. This was largely due to maintenance during August 2017.

The maintenance season is complex is we had a good June followed by weaker months so we do not know if this is part of the long-term decline in the area or simply the ebb and flow of the summer maintenance schedule.

Tucked away in the revisions was some good news as new data sources raised the index for the second quarter of 2017 from 101.6 to 102.1. We also saw a continuing of the trend towards services as production’s weighting in the UK economy fell from 14.65% to 13.95% or another example of the trend is your friend.

Manufacturing

This was the bright spot in the production data set with it rising by 0.4% on a monthly basis and by the amount below on an annual one.

with manufacturing providing the largest upward contribution, increasing by 2.8%

We actually beat France (2.7%) on a year on year and monthly basis which poses food for thought for the surveys telling us it was doing “far,far better ” as David Byrne would say. A driver of this is shown below and the numbers are on a three-monthly basis.

other manufacturing and repair provided the largest contribution, rising by 3.8%, due mainly to an increase of 13.1% in repair and maintenance of aircraft and spacecraft.

We are repairing spacecraft, who knew? If we look at the pattern we see that the official data seems to be catching up with what had previously been much more optimistic survey data from the CBI and the Markit business surveys.

Here is the overall credit crunch era situation which is now a little better than we thought before due to revisions and the recent manufacturing growth.

both production and manufacturing output have risen but remain below their level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008, by 6.9% and 3.0% respectively in the three months to August 2017.

Construction

There were even some better numbers from this sector.

Construction output grew 0.6% month-on-month in August 2017, predominantly driven by a 1.7% rise in all new work……Compared with August 2016, construction output grew 3.5%

However I have warned time and time again about this data set and tucked away in the detail was a clear vindication of my scepticism.

The annual growth rate for 2016 has been revised from 2.4% to 3.8% and the leading contribution to this increase is infrastructure, which itself has been revised from negative 9.2% to negative 3.2%.

The ch-ch-changes are far too high for this series to be taken that seriously and this is far from the first time that this has happened.

Trade

This invariably brings bad news as here we go again.

Between the three months to May 2017 and the three months to August 2017, the total UK trade (goods and services) excluding erratic commodities deficit widened by £2.9 billion to £10.8 billion.

The bit that has me bothered about this series apart from its “not a national statistic” basis is this when we have reports from elsewhere that exporting is doing well as we have seen earlier today from the manufacturing and tourism news.

total trade (goods and services) exports decreased by 1.4% (£2.1 billion) ( in the latest 3 months).

Also it is hard to have much faith in primary income and investment position data which has been revised enormously especially in the latter case. I know we have got used to large numbers but a change of £500 billion?

The trade figures themselves have been less affected but surely the tuition fees change was known and should have been anticipated?

The biggest revision is in 2012 (£4.0 billion), with the inclusion of tuition fees having the greatest impact, followed by the inclusion of drugs data into the estimates of illegal activities.

Comment

Let us start with the good news which is that the data in the last 24 hours for the UK economy has been broadly positive. This is especially true if we compare it with the REM style “end of the world as we know it” which manifests itself in so much of the media. Also it is good that the UK Office for National Statistics has a policy of reviewing and trying to improve its data.

The bad news is that some of the large revisions lately bring into question the whole procedure. I mentioned last week the large upwards revision in UK savings which changed the picture substantially there which was followed by unit on labour costs being estimated as growing annually by 1.6% and then 2.4%. We now look at the construction sector which has given good news today and the balance of payments bad news. Both however have seen such large revisions that the true picture could be very different.

It is hard to believe that even those in the highest Ivory Towers could have any faith in nominal GDP targeting after the revisions but it pops up with regularity.

 

UK GDP grinds higher thanks to services and the film industry

Today brings us up to date in terms of official data on the performance of the UK economy in the first half of 2017. Whilst expectations are low rather than stellar the last week or so has brought a little more optimistic tinge to things. This started with the retail sales numbers last week. From last Thursday.

In the 3 months to June 2017, the quantity bought (volume) in the retail industry is estimated to have increased by 1.5%, with increases seen across all store types…….Compared with May 2017, the quantity bought increased by 0.6%, with non-food stores providing the main contribution.

This contrasted with the fall of a similar amount seen in the first quarter of the year which meant that we got back to levels seen at the end of 2016 or around 2.6% higher than in the second quarter last year.

This was added to by better news on the tourism front albeit for only some of the latest quarter.

For the period March to May 2017, spend in the UK by overseas residents increased 14% on the previous year to £5.6 billion………During the period March to May 2017, there were 2% more visits abroad by UK residents compared with the corresponding period a year earlier, and they spent 1% more on these visits

So whilst there was still a considerable trade deficit it did shrink a bit compared to last year as we presumably see a beneficial impact of a lower exchange rate for the pound.

Manufacturing

Yesterday came news from the Confederation of British Industry that the manufacturing was in pretty good shape.

Production among UK manufacturers grew at the fastest pace since January 1995 in the three months to July, according to the latest quarterly CBI Industrial Trends Survey……….Output growth is expected to continue to grow strongly in the quarter ahead and manufacturers are upbeat about prospects for overall demand. Domestic orders are expected to continue growing strongly, while expectations for growth in export orders improved to a four-decade high

This was upbeat as you can see and came with positive expectations from all of employment, investment and exports. It also came with some better inflation news.

Meanwhile, input cost pressures cooled in the quarter to July and are expected to soften further in the near-term, while factory gate price inflation is also expected to be more subdued.

This poses a few questions as whilst this is to some extent consistent with the Markit PMI business survey although it was more subdued and had a fading in June. It is much less in line with the official data which has shown only a little growth up to May.

Mini

There was some good news on the production front here as well. From City-AM.

A fully-electric version of the Mini is to be built at BMW’s plant at Cowley, in Oxford, the car firm has announced.

Actually whilst good news it is more accurate to say that it will be assembled there. Also in the light of the announcement that sales of petrol and diesel cars will be banned from 2040 it was interesting to see that BMW is heading down that road to at least some extent.

By 2025, BMW expects electric vehicles to make up between 15 and 25 per cent of sales. It currently produces electric models at 10 plants worldwide.

Today’s GDP Data

Here we go.

UK gross domestic product (GDP) was estimated to have increased by 0.3% in Quarter 2 (Apr to June) 2017.

So some but not a lot and it was driven by a very familiar sector.

The growth in Quarter 2 2017 was driven by services, which grew by 0.5% compared with 0.1% growth in Quarter 1 (Jan to Mar) 2017.

As I regularly point out this sector must be 80% of our economy by now as again and again it grows faster than the other sectors.

The services aggregate was the main driver to the growth in GDP, contributing 0.42 percentage points. Production and construction recorded falls in Quarter 2 2017 of 0.4% and 0.9% respectively, each contributing negative 0.06 percentage points to GDP.

This had an interesting corollary though.

Construction and manufacturing were the largest downward pulls on quarterly GDP growth, following 2 consecutive quarters of growth.

As I have noted above this is very different from the “Production among UK manufacturers grew at the fastest pace since January 1995 ” of the CBI and the growth recorded in the Markit business surveys. I note that Chris Williamson of the latter has been on the wires.

ONS say economy grew 0.3% in Q2, but & output fell 0.5% & 0.9% respectively. These likely to be revised higher.

Regular readers will be aware of my particular doubts about the official data on the UK’s construction sector although there was an interesting reply from the Mayor of West Yorkshire who said that elections always cause slow downs as people wait for the result.

The Film industry

There was good news on this front.

The second largest contributor was motion picture activities, which grew by 8.2% and contributed 0.07 percentage points to GDP growth….. Motion picture activities are a subset of the transport, storage and communications sector, which grew by 1.0%.

Actually only a couple of weeks or so ago Albert Bridge was closed for filming at the weekend and yesterday I noted filming taking place in Battersea Park. This is of course purely anecdotal but this sector has been mentioned in GDP despatches before in recent times. For more information we get referred to the BFI website which does not have the numbers until tomorrow but the ones for the first quarter were strong and perhaps provide a guide.

The total UK spend and budget of these films was £747 million and £983 million respectively, a substantial increase from UK spend of £231 million and total budget of £318 million in Q1 2017. UK spend, as a percentage of budget, was the highest since 2013, at 76%.

The only cloud in this silver lining is that we may have to start being more tolerant of some of the extraordinary statements made by luvvies, excuse me I mean economic miracle workers.

Comment

So the UK economy is grinding on in a slow way as we see the annual rate of growth fall to 1.7%. Also the news from looking at the data on a more personal level shows the minimum rate of growth possible.

GDP per head was estimated to have increased by 0.1% during Quarter 2 2017.

We also learn that the first quarter may not have been the type of statistical quirk we see regularly from the US but of course much more data will be needed for us to be sure of that.

On the more positive side this was always going to be the awkward period after the EU leave vote as higher inflation from the Pound’s fall causes not only lower real wage growth but actual falls.

Real earnings declined despite historically low unemployment. Adjusted for inflation, average weekly earnings fell by 0.7% including bonuses and by 0.5% excluding bonuses, over the year ( to May). For total real pay (including bonuses) this is the largest 3-month average year-on-year decrease since the 3 months to August 2014.

Also the film industry numbers make me wonder about the UK football premiership where the numbers are ballooning but the latest update I can find is this from E&Y.

The Premier League and its Clubs together generated over £6.2 billion in economic output that contributed approximately £3.4 billion to national GDP in 2013/14.

Surely there has been a fair bit of growth? Although of course the flow of money in then sees a flow of money out in transfer fees. Some are claiming that so far this year the defence budget of Manchester City exceeds that of around 25 countries.

 

 

 

The Greek economic depression continues to the sound of silence

Today it is time again to look at what has been in my time as a blogger a regular and indeed consistent contender for the saddest story of all. This is of course the issue proclaimed as “shock and awe” by Euro area ministers such as Christine Lagarde back in May 2010 as they sent Greece spiralling into an economic depression from which it shows little sign of returning. This was accompanied by a media operation where those who argued for a different course of action were smeared with claims that they would damage the Greek economy. How shameful that was!

Instead we got austerity and claims of an internal devaluation instead of the old IMF strategy where the austerity was ameliorated by a currency devaluation. Oh and promises of reform which remain in the main just that promises. Eventually there was a default but by then it was not enough partly because the official creditors refused to take part. Drip by drip we have had confessions of failure as the IMF first decided its sums were wrong and more recently has become a fan of fiscal stimulus rather than austerity. Just as a reminder Greece was supposed to return to growth in 2012 (1.1%) and then 2.1% for two years before growing at 2.7% until the end of time.

An economic depression

How do we measure this? Well the first signal is that Greek GDP was 19.5% lower in the second quarter of this year than it was in the second quarter of 2010 when “shock and awe” was proclaimed. So that is a severe depression or Great Depression. There is no other way of putting that.

If we move to the present position then we see this.

Available seasonally adjusted data indicate that in the 2nd quarter of 2016 the Gross Domestic Product (GDP) in volume terms increased by 0.2% compared with the 1st quarter of 2016 against the increase of 0.3% that was announced for the flash estimate.

Sadly even this brief flicker of candle light gets sucked up by the gloom when we look at the annual comparison.

In comparison with the 2nd quarter of 2015, it decreased by 0.9% against the decrease of 0.7% that was announced for the flash estimate of the 2nd quarter on August 12, 2016.

We have other signs of a depression here. Firstly the fact that so far there is no rebound. Ordinarily however bad things are economies eventually rebound in what is called a V-shaped response but here we have a much grimmer L shape as in a collapse and then no recovery. Also numbers in such a situation are mostly revised upwards but as you can see it has in fact been downwards.

Wages

An important signal of these times has been the behaviour of wages and especially real wages well we have seen nothing like this. There is an index for Greek wages for different sectors so let us start with manufacturing which at the start of 2010 was at 95.9 and at the start of 2016 was at 45.5 and had fallen by over 9% in the preceding year. It is not the worst example as the wages of the professional and scientific sector fell from 100.8 to 45.9 over the same time period.

Just so you see both sides of the coin the best number was for the information sector which only and by only I mean comparatively fell from 89.8 to 80.9.

Retail Trade

This sadly is one of the worst examples of the economic depression. You may wish to make sure you are sitting comfortably before you read that on a scale where 2010=100 then Greek retail trade was 69.8 in June. Grimmest of all is that food is at 78.1.

Is it getting any better or Grecovery as some were proclaiming in 2013? Take a look for yourself.

The overall volume index in retail trade (i.e. turnover in retail trade at constant prices) in June 2016, recorded a decrease of 3.6% compared with the corresponding index of June 2015, while compared with the corresponding index of May 2016, recorded an increase of 3.7%.

May must have been dreadful mustn’t it?

The Monetary System

We see regular proclamations of recovery but regular readers will recall the situation last year when Greece saw capital flight on a large-scale. Capital Greece sums it up like this.

Greece΄s banking sector saw a 42 billion euro deposit outflow from December to July last year.

They try to put a positive spin on the data but it tells a rather different story.

Greek bank deposits dropped slightly in July after a rise in the previous two months………Business and household deposits fell by 160 million euros, or 0.13 percent month-on-month to 122.58 billion euros ($138.3 billion), their lowest level since November 2003.

That means the credit crunch is ongoing.

Export Led Growth

One of the ways that the “internal devaluation” was supposed to benefit Greece was via foreign trade. This should impact in two ways. Firstly exports would be more price competitive and rise and secondly imports would fall in sectors where Greek producers can replace them. How is that going? From Kathimerini.

exports of Greek products dropped to their lowest point in the last four years in the first half of 2016, posting an annual decline of 8.1 percent to 11.8 billion euros, against 12.8 billion in January-June 2015. Excluding exports of oil products, the annual decline came to 1.4 percent.

So the oil price fall has had an impact except care is needed here if it was counted when we were being told this was getting better. Especially troubling considering the efforts of the ECB to reduce the value of the Euro came from this.

There was a notable decrease in exports, including oil products, to non-EU countries, where they fell by 14.6 percent compared to June last year.

An area which had shown signs of hope was tourism where I recall better numbers and hope for the future but sadly the Bank of Greece has another tale.

In January-June 2016, the balance of travel services showed a surplus of €2,991 million, down 6.7% from a surplus of €3,205 million in the same period of 2015…….The decrease in travel receipts resulted from a 1.6% decline in arrivals and a 4.9% fall in average expenditure per trip.

Just in case someone wants to deploy the scapegoat of 2016 which is of course Brexit that has so kindly given the poor much abused weather a rest. well see for yourself…

Receipts from the United Kingdom increased by 24.8% to €388 million.

Actually it is people from outside the European Union who have stopped going to Greece for a holiday it would appear.

while receipts from outside the EU28 dropped by 21.9% (June 2016: €469 million, June 2015: €601 million).

Any thoughts as to why?

Comment

As we review the scene there is a familiar austerity drumbeat.From Kathimerini.

Tens of thousands of pensioners will see their auxiliary pensions slashed by between 10 and 12 percent on Friday morning, while in some cases the cuts will even exceed 40 percent…..This second wave of cuts will affect 144,000 pensioners, after a first one hit just under 67,000 retirees in August.

Odd that because we have been told so many times that reform has been completed. Oh and we have been told so many times that the banks are fixed as well.

Greece’s four systemic banks increased their provisions for nonperforming loans by a total of 1 billion euros during the second quarter of the year

By systemic they mean toxic under the Britney definition.

I’m addicted to you
Don’t you know that you’re toxic
And I love what you do
Don’t you know that you’re toxic

Meanwhile the Greek depression continues to the Sound of Silence.

Hello darkness, my old friend
I’ve come to talk with you again
Because a vision softly creeping
Left its seeds while I was sleeping
And the vision that was planted in my brain
Still remains within the sound of silence