US and Global Economic Prospects
We currently estimate that real GDP fell -0.7% (annualized) in the first quarter, versus a December consensus estimate of +2½%. On the face of it, this is a large disappointment. It raises the question whether 2014 will be yet another year when initially high hopes for growth are ultimately dashed.
Today we therefore ask whether our forecast that 2014-2015 will show a meaningful pickup in growth relative to the first four years of the recovery is still on track. Our answer, broadly, is yes. Although the weak first quarter is likely to hold down real GDP for 2014 as a whole, the underlying trends in economic activity are still pointing to significant improvement….
The basic rationale for our acceleration forecast of late 2013 was twofold—(1) an end to the fiscal drag that had weighed on growth so heavily in 2013 and (2) a positive impulse from the private sector following the completion of the balance sheet adjustments specifically among US households. Both of these points remain intact.
Despite many beginning-of-the-year predictions about spring growth in the housing market falling flat, and despite a still chugging economy that changes its mind quarter-to-quarter, economists at the National Association of Realtors and other industry groups expect an uptick in the economy and housing market through next year.
The key to the NAR’s optimism, as expressed by the organization’s chief economist, Lawrence Yun, earlier this week, is a hefty pent-up demand for houses coupled with expectations of job growth—which itself has been more feeble than anticipated. “When you look at the jobs-to-population ratio, the current period is weaker than it was from the late 1990s through 2007,” Yun said. “This explains why Main Street America does not fully feel the recovery.”
Yun’s comments echo those in a report released Thursday by Fitch Ratings and Oxford Analytica that looks at the unusual pattern of recovery the U.S. is facing in the wake of its latest major recession. However, although the U.S. GDP and overall economy have occasionally fluctuated quarter-to-quarter these past few years, Yun said that there are no fresh signs of recession for Q2, which could grow about 3 percent.
If San Francisco was a country, it would rank as the 20th most unequal nation on Earth, according to the World Bank’s measurements.
Natural Gas and Fracking
This could dampen the demand – and ultimately the price for – LNG from the United States. East Asia represents the most prized market for producers of LNG. That’s because it is home to the top three importers of LNG in the world: Japan, South Korea and China. Together, the three countries account for more than half of LNG demand worldwide. As a result, prices for LNG are as much as four to five times higher in Asia compared to what natural gas is sold for in the United States.
The Russia-China deal may change that.
If LNG prices in Asia come down from their recent highs, the most expensive LNG projects may no longer be profitable. That could force out several of the U.S. LNG projects waiting for U.S. Department of Energy approval. As of April, DOE had approved seven LNG terminals, but many more are waiting for permits.
LNG terminals in the United States will also not be the least expensive producers. The construction of several liquefaction facilities in Australia is way ahead of competitors in the U.S., and the country plans on nearly quadrupling its LNG capacity by 2017. More supplies and lower-than-expected demand from China could bring down prices over the next several years.
Next month, the US Energy Information Administration (EIA) will publish a new estimate of US shale deposits set to deal a death-blow to industry hype about a new golden era of US energy independence by fracking unconventional oil and gas.
EIA officials told the Los Angeles Times that previous estimates of recoverable oil in the Monterey shale reserves in California of about 15.4 billion barrels were vastly overstated. The revised estimate, they said, will slash this amount by 96% to a puny 600 million barrels of oil.
The Monterey formation, previously believed to contain more than double the amount of oil estimated at the Bakken shale in North Dakota, and five times larger than the Eagle Ford shale in South Texas, was slated to add up to 2.8 million jobs by 2020 and boost government tax revenues by $24.6 billion a year.
…With demand poised to slow given a tepid economic backdrop, weaker household affordability, rising mortgage rates and developer cash flow weakness, we believe current construction capacity of the domestic property industry may be excessive. We estimate an inventory adjustment cycle of two years for developers, driving 10%-15% price cuts in most cities with 15% volume contraction from 2013 levels in 2014E-15E. We also expect M&A activities to take place actively, favoring developers with strong balance sheet and cash flow discipline.
The China Banking Regulatory Commission has shed light on the country’s opaque shadow banking sector. It was as large as 33 trillion yuan ($5.29 trillion) in mid-2013 and equivalent to 80% of last year’s GDP, according to Yan Qingmin, a vice chairman of the commission.
In a Tuesday WeChat blog sent by the Chong Yang Institute for Financial Studies, Renmin University, Yan wrote that his calculation is based on shadow lending activities from asset management businesses to trust companies, a definition he said was very broad. Yan said the rapid expansion of the sector, which was equivalent to 53% of GDP in 2012, entailed risks of some parts of the shadow banking business, but not necessarily the Chinese economy.
Yan’s estimation is notably higher than that of the Chinese Academy of Social Sciences. The government think tank said on May 9 that the sector has reached 27 trillion yuan ($4.4 trillion in 2013) and is equivalent to nearly one fifth of the domestic banking sector’s total assets.
Information Technology (IT)
I am an IT generalist. Am I doomed to low pay forever? Interesting comments and suggestions to this question on a Forum maintained by The Register.
I’m an IT generalist. I know a bit of everything – I can behave appropriately up to Cxx level both internally and with clients, and I’m happy to crawl under a desk to plug in network cables. I know a little bit about how nearly everything works – enough to fill in the gaps quickly: I didn’t know any C# a year ago, but 2 days into a project using it I could see the offshore guys were writing absolute rubbish. I can talk to DB folks about their DBs; network guys about their switches and wireless networks; programmers about their code and architects about their designs. Don’t get me wrong, I can do as well as talk, programming, design, architecture – but I would never claim to be the equal of a specialist (although some of the work I have seen from the soi-disant specialists makes me wonder whether I’m missing a trick).
My principle skill, if there is one – is problem resolution, from nitty gritty tech details (performance and functionality) to handling tricky internal politics to detoxify projects and get them moving again.
How on earth do I sell this to an employer as a full-timer or contractor? Am I doomed to a low income role whilst the specialists command the big day rates? Or should I give up on IT altogether
China has banned government use of Windows 8, Microsoft Corp’s latest operating system, a blow to a US technology company that has long struggled with sales in the country.
The Central Government Procurement Center issued the ban on installing Windows 8 on Chinese government computers as part of a notice on the use of energy-saving products, posted on its website last week.
Statistics of election irregularities – good forensic data analytics.