The financial markets were more persuaded than ever last week that the global economy’s darkest days are behind it. Stocks were as frisky as a lamb, with the US S&P 500 index up 6.5% in a week and the Dow Jones Eurostoxx was up 4.5%. Investors are seeing green. They read a 0.4 percentage point increase in the US unemployment rate to 8.9% as less-bad news. Of course, it would have been higher if the government wasn’t hiring.
The overall newsflow really was a little less bad, to judge from breakingviews.com’s Green Shoots Spotter (GSS). We classify a mix of statistics, comments and news items from "still in real trouble" (rated 1) to "rapid recovery" (rated 5). The GSS is in only its second week, so it’s a bit early for trend-spotting, but the second week was less bad than the first.
Green shoots are still much more prevalent in the market than the economy, but on our scale the economy moved from a meagre 1.9 to a slightly less meagre 2.1.
If that 0.2 point rate of weekly increase keeps up, the world economy will be booming by autumn. But the improvement could prove no more than a statistical bounce. Watch this space.
Here are the data we used.
Still in real trouble (1 on the GSS scale)
1. The Fed's Senior Loan Officer Opinion Survey showed 64% of banks tightened lending standards for non-traditional mortgages and about 66% of banks tightened for commercial real estate loans (May 5)
2. UK house prices fell by a bigger than expected 1.7% in April, according to Halifax (May 6)
3. Eurozone retail sales volumes fell 0.6% in March, a slightly faster pace of decline than the average 0.4% monthly drop seen since last October (May 6)
4. Spanish industrial production fell by -24.7% in March, worse than from -22.5% in February (May 6)
5. Losses at EasyJet, the leading UK low-cost airline, more than doubled in its financial first half (May 6)
6. The number of luxury US homes entering foreclosure jumped 127% during the first 10 weeks of 2009 (May 6)
7. Taiwan April exports fell 34.3%, almost as bad as the 35.7% decline in March (May 7)
8. Swedish industrial production declined 2.8% in March, after falling 2.2% in February (May 7)
9. Merger and acquisition (M&A) activity hit its lowest monthly level since 2004 in April (May 7)
10. The first quarter of 2009 experienced the worst annual drop in revenue per available room in the US lodging industry’s organisation’s history (May 7)
11. US wholesale inventories fell by 1.6% in March, in line with a downward revised 1.7% decline in the previous month (May 8)
12. Swiss unemployment rose in April from 3.3% to 3.4%, the highest level since July 2006 (May 8)
13. US commercial property loans credit quality deteriorated, with 2.45% of loans 30 days or more behind in payments (May 8)
14. Stephen Hester of Royal Bank of Scotland says he sees no green shoots (May 8)
Getting less bad (2 on the GSS scale) 1. Federal Reserve Chairman Ben Bernanke said the economic contraction may be slowing and that the housing market has “shown some signs of bottoming” (May 5)
2. The Fed's Senior Loan Officer Opinion Survey showed about 40% of banks tightened standards for commercial and industrial loans, down from 65% in January (May 5)
3. The US ISM non-manufacturing index of business condition increased to 43.7 in April from 40.8 in March. 50 is the boundary between contraction and expansion (May 5)
4. The US construction purchasing managers’ index (PMI) of business conditions rose in May to 38.1 from 30.9 (May 5)
5. Spanish unemployment rose 39.5k in April, less than expected and than in previous months, after seasonal adjustments (May 5)
6. Eurozone services shrink at slowest pace in six months (May 6)
7. UK services PMI rose in April to 48.7 from 45.5 in March(May 6)
8. The US NMI (Non-Manufacturing Index) registered 43.7 in April up from 40.8 in March. (May 7)
9. Diageo says full year profits will meet expectations, while Unilever reported better-than-expected sales in the first quarter. (May 7)
10. US non-farm payroll employment fell 539,000 in April, less than the expected 600,000. The unemployment rate rose from 8.5% to 8.9% (May 8)
11. US banks were asked to raise $75bn of additional capital, in line with recent expectations (May 8)
Not just stabilising but stable (3 on the GSS scale)
1. US spending on private construction flat (May 4)
2. US Fed members Yellen and Stern are cautiously optimistic for a subdued recovery (May 6)
3. German monthly industrial output in April was unchanged (May 8)
4. German imports rose 0.8% in March, Exports rose 0.7% (May 8) 5. German industrial production flat in March (May 8)
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Slow growth (4 on the GSS scale)
1. US Construction spending rose 0.3% in March, above expectations (May 4)
2. US Pending home sales increased 3.2% in March following a 2.0% gain the prior month (May 4)
3. German new car registrations rise 19.4% in April, helped by government subsidy (May 5)
4. Next, the UK's second largest clothes retailer, raised its sales forecasts for the year after much better than expected first-quarter trading (May 6)
5. Oil goes to $58 a barrel, a six-month high (May 7)
6. German factory orders rose 3.3% in March (May 7)
7. Markit's iTraxx Europe index of spreads on credit default swaps of investment grade debt narrowed to 121 basis points, more than 20bp lower on the week (May 8)
Rapid recovery (5 on the GSS scale) Still nothing, nada, niente, rien. Zero, zilch, nought, nil.