International Economic Indicators and Central Banks E-Book

Anne Dolganos Picker

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Finance Editions
• Sprache: Englisch

Seitenzahl: 505

Veröffentlichungsjahr: 2011

Beschreibung

Praise for International Economic Indicators and CentralBanks "Anne Picker's International Economic Indicators and Central Banksis a tour de force. It brings together a wealth of information,explanation, and guidance, which has hitherto only been availablefrom disparate and frequently obscure sources, and does so withgreat clarity and authority. It will be an invaluable resource notonly for investors but for all others involved in the fields offinance and economics." --Donald R. Anderson, OBE FRSE (UK), International EconomicsAdvisor, formerly chief economist, Courtaulds Group "Picker's book provides a comprehensive and up-to-date guide to theworkings of key central banks, and to the economic data thatinforms their thinking and policy formation. The book should berequired reading for those with more than a passing interest infinancial markets and monetary policy formation." --George Worthington, Chief Economist, Asia Pacific, Thomson-IFR(Australia) "International Economic Indicators and Central Banks is aninvaluable guide for anyone doing business overseas or investing ininternational markets. It is thorough and precise enough forprofessional economists yet readily accessible to business peopleand investors. Anne Picker is not only an excellent communicatorwho demystifies central bank operations and technical economicindicators; she is also a top-notch economist with extensiveexperience in analyzing them. Don't read any international economicanalysis without this volume close at hand." --David A. Levy, Chairman, The Jerome Levy Forecasting Center

Leseprobe

Contents

List of Illustrations

List of Tables

Preface

Book Outline

Acknowledgements

A Brief Introduction to the Financial Markets

About the Author

Part One: Central Banks

Chapter 1: An Overview of Central Banks

A Fascination with Central Banks

Inflation Targeting

Inter-Central Bank Cooperation

Chapter 2: Bank of England

The Very Early Years

Post World War II

Independence!

How the Bank Determines Monetary Policy

United Kingdom and the Euro

Chapter 3: European Union and the European Central Bank

European Union

The Constitution

Stability and Growth Pact

European Central Bank

Chapter 4: Bank of Japan

An Overview

Monetary Policy

Chapter 5: Bank of Canada

The Bank Reflects its Geography

Monetary Policy

Preparing for a Policy Announcement

The Exchange Rate

What Interest Rate?

Chapter 6: Reserve Bank of Australia

Reserve Bank of Australia’s Role

Monetary Policy

Reserve Bank Board

Interest Rate Decision Support

The Australian Dollar

Chapter 7: People’s Bank of China

Background

Monetary Policy

Part Two: Economic Indicators

Chapter 8: An Overview of International Economic Indicators

What is an Economic Indicator and Why is it Important?

International Data Providers

Standard National Accounts

Gross Domestic Product—A Snapshot of Economic Activity

Price Measures

Labor Market Indicators

Merchandise Trade and Balance of Payments

Output

Retail Sales

Purchasing Managers’ Indexes

Chapter 9: European Indicators: Eurostat and National Statistics

Eurostat

Gross Domestic Product

Prices

Labour Force

Output

Merchandise Trade and Balance of Payments

M3 Money Supply

Retail Sales

EU Business and Consumer Sentiment Survey

Germany

France

Italy

Chapter 10: UK Indicators

Gross Domestic Product

The Blue Book

Price Measures

Labour Markets

Merchandise Trade and Balance of Payments

Output

Retail Sales and Retail Sales Volumes

Other Indicators

Chapter 11: Japanese Indicators

Gross Domestic Product

Tankan Survey

Prices

Measures of Production

Tertiary and All-Industry Indexes

Labor Markets

Merchandise Trade and Balance of Payments

Retail Sales

Chapter 12: Canadian Indicators

Statistics Canada

Gross Domestic Product

Price Indexes

Labour Force

Merchandise Trade and the Balance of Payments

Retail Sales

Monthly Survey of Manufacturing

Chapter 13: Australian Indicators

Australian Bureau of Statistics

Australian System of National Accounts

Gross Domestic Product

Price Indexes

Labour Force Survey

Output

Merchandise Trade and Balance of Payments

Retail Sales

Manufacturing Sales

Chapter 14: Chinese Indicators

The Wild Wild West of Economic Indicators

Gross Domestic Product

Labor Market

Prices

Industrial Production

Merchandise Trade

Appendix A: Key Indicators by Country and Issuing Agencies

Appendix B: National Income and Product Accounts vs. System of National Accounts

Appendix C: Industrial Classification Systems

Glossary

Bibliography

Index

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Copyright © 2007 by Anne Dolganos Picker. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Picker, Anne Dolganos, 1936-

International economic indicators and central banks / Anne Dolganos Picker. p. cm.—(Wiley finance series)

Includes bibliographical references and index.

ISBN-13: 978-0-471-75113-7 (cloth)

ISBN-10: 0-471-75113-8 (cloth)

1. Economic forecasting. 2. Economic indicators. 3. Investments—Decision making. 4. Banks and banking, Central. I. Title.

HB3730.P515 2007

330.01’5195—dc22

2006025756

To Hope

My daughter and number one fan

List of Illustrations

Figure 2.1Bank of England’s Policy Interest RateFigure 2.2Consumer Price Index and Retail Price Index Excluding Mortgage Interest PaymentsFigure 2.3Average EarningsFigure 2.4Halifax House PricesFigure 2.5Pound Sterling and the U.S. DollarFigure 2.6UK and EMU Gross Domestic ProductFigure 2.7Bank of England and European Central Bank Interest RatesFigure 3.1ECB Policy Interest RateFigure 3.2M3 Money Supply and Harmonized Index of Consumer PricesFigure 4.1Yen per U.S. DollarFigure 4.2The NikkeiFigure 4.3Bank of Japan Discount RateFigure 5.1The Consumer Price Index and the Bank of Canada Core RateFigure 5.2Bank of Canada and Federal Reserve Target Interest RatesFigure 5.3Canadian Dollar and the U.S. DollarFigure 6.1Consumer Price IndexFigure 6.2Reserve Bank of Australia and Federal Reserve Target Interest RatesFigure 7.1People’s Bank of China Prime Lending Interest RateFigure 8.1Germany—A Comparison of Two Unemployment RatesFigure 8.2UK—Two Measures of Consumer PricesFigure 8.3Group of Seven GDP Growth in 2005Figure 8.4Unemployment in the EMU Countries Plus the U.S., Japan, and AustraliaFigure 9.1GDP in the EMU Plus the U.S. and JapanFigure 9.2Harmonized Index of Consumer Prices for the EMU CountriesFigure 9.3Producer Prices for the 12 EMU CountriesFigure 9.4Unemployment Rate for the 12 EMU CountriesFigure 9.5Output Excluding Construction for the 12 EMU CountriesFigure 9.6EMU Merchandise Trade BalanceFigure 9.7M3 Money SupplyFigure 9.8Retail Sales for the 12 EMU CountriesFigure 9.9EU Confidence Survey for the 12 EMU CountriesFigure 9.10Germany—GDPFigure 9.11Germany—Consumer Price and Producer Price IndexesFigure 9.12Germany—East, West and Total Unemployment RatesFigure 9.13Germany—Manufacturing Orders and Industrial ProductionFigure 9.14Germany—Merchandise Trade BalanceFigure 9.15Germany—Retail SalesFigure 9.16Germany—Ifo Sentiment SurveyFigure 9.17Germany—ZEW Indicator of Economic SentimentFigure 9.18France—GDPFigure 9.19France—Consumer Price and Producer Price IndexesFigure 9.20France—Unemployment RateFigure 9.21France—Industrial ProductionFigure 9.22France—Merchandise Trade BalanceFigure 9.23France—Consumption of Manufactured GoodsFigure 9.24Italy—GDPFigure 9.25Italy—Consumer and Producer Price IndexesFigure 9.26Italy—Unemployment RateFigure 9.27Italy—Industrial ProductionFigure 9.28Italy—Merchandise Trade BalanceFigure 10.1UK—GDPFigure 10.2UK—Two Measures of Consumer PricesFigure 10.3UK—Input and Output Producer PricesFigure 10.4UK—Employment ChangeFigure 10.5UK—ILO and Claimant Unemployment RatesFigure 10.6UK—Average EarningsFigure 10.7UK—Merchandise Trade BalanceFigure 10.8UK—Manufacturing OutputFigure 10.9UK—Retail Sales VolumesFigure 11.1Japan—GDP and the GDP Price DeflatorFigure 11.2Japan—The TankanFigure 11.3Japan—Consumer Price Index and the Corporate Goods Price IndexFigure 11.4Japan—Industrial ProductionFigure 11.5Japan—Tertiary IndexFigure 11.6Japan—All Industry Index and GDPFigure 11.7Japan—Unemployment RateFigure 11.8Japan—Merchandise Trade BalanceFigure 11.9Japan—Retail SalesFigure 12.1Canada—GDP, Consumption and InvestmentFigure 12.2Canada—Monthly GDP, Services and ManufacturingFigure 12.3Canada—CPI and Core CPIFigure 12.4Canada—Industrial Product Price Index and Raw Materials Price IndexFigure 12.5Canada—Unemployment RateFigure 12.6Canada—Merchandise Trade BalanceFigure 12.7Canada—Retail SalesFigure 12.8Canada—Manufacturing ShipmentsFigure 13.1Australia—GDPFigure 13.2Australia—Consumer Price IndexFigure 13.3Australia—Producer Price IndexFigure 13.4Australia—Unemployment RateFigure 13.5Australia—Merchandise Trade BalanceFigure 13.6Australia—Retail SalesFigure 14.1China—Gross Domestic ProductFigure 14.2China—Consumer Price IndexFigure 14.3China—U.S. China Bilateral Trade Balance

List of Tables

Table 2.1UK—Bank of England Concise HistoryTable 8.1International—Statistics Issuing AgenciesTable 9.1International—Gross Domestic Product Classifications Using the SNATable 9.2International—Producer Price IndexTable 9.3International—Industrial ProductionTable 9.4International—Merchandise TradeTable 9.5International—Retail TradeTable B.1Gross Domestic Product Classifications Using SNATable B.2Gross Domestic Product Classifications Using NIPA

Preface

Investors are no longer constrained for the most part by political barriers and now seek investments that diversify their portfolios geographically. The move toward globalization has presented investors with worldwide investment opportunities. Anyone interested in making an international investment is interested in the factors that may have an impact on it—be it good or bad. And the good and bad in individual global markets no matter where they are located, can affect a company’s operations and that carries through to their bottom line. It is a rapidly changing world, and one needs to track economic events diligently as they occur. Why should economic growth in Europe, for example, influence a U.S. company’s profits? For one thing, it could be a prime market for that company and its fortunes are tied to it.

The importance of economic data is being recognized everywhere, and vast strides have been made in data quality even over the past year since I began writing this book. Somewhat belatedly, governments are finally appreciating the value of economic data for planning purposes and attracting investment. As a result, the production of indicators is a growth industry in many nations and changes and improvements are being made continually along the way.

Investors in the United States want to know how the economy is growing, whether there is inflation, and if employment and wages are increasing. They want to know the impact of these variables on consumer spending and on the profits of companies engaged in the making and selling of consumer products. Investors are concerned about the outlook for interest rates and how they will affect the value of the dollar, and therefore of the imports that everyone wants to buy. And I could go on. It is no different in Europe, Asia, and Australia. If you are investing in Germany, you would want to know why domestic demand has been lagging other European Monetary Union countries, for example.

The overall goal is to help investors make more informed investment decisions outside of the United States. And the first stop on that road is a brief look at who watches economic data in the financial marketplace. The “watchers” and “reactors” are found in three broad markets: bonds, stocks, and foreign exchange. And because we will be talking about events that can move financial markets wherever they might be located, a brief review of the bond, stock, and currency markets follows the preface in an introduction to the financial markets.

Part I of the book is directed toward an explanation of how central banks operate and why they influence economies and your investments. Part II deals with economic indicators and how that information helps investors understand what is happening economically and why it could influence the behavior of their investments. The data can also point to new avenues of investment opportunity. And since not all indicators are created alike across geographical borders, an understanding of these differences is also important.

This book covers the major industrial countries of Canada, the United Kingdom, Germany, France, Italy, Japan, Australia, and China. The euro-zone or European Monetary Union (EMU) is also included as the umbrella organization for the three European countries covered here. I have chosen to include some brief remarks on China’s central bank, the People’s Bank of China, along with brief profiles of their major economic indicators and their pitfalls. Despite the rudimentary nature of their data and the information about it, it is impossible to overlook the country’s ever-increasing importance in today’s global economy.

Book Outline

The book begins with a brief description of the bond, stock, and foreign exchange markets. That is where investors have the opportunity to respond to the latest news on central bank actions and/or the latest data on a key economic indicator. Over time, analysts have come to expect certain reactions to these events.

Part I, Central Banks, follows this market introduction. In this section, the banks’ role and how they can influence investment decisions is discussed. Part II describes economic indicators from the international perspective. I regard indicators as critical input to sound investment decisions.

Chapter 1 provides an overview of central bank functions. I have included a section on the monetary tool du jour, inflation targeting. In part, it explains investor fixation with price indexes. The chapter focuses on the many tasks that a central bank might perform, including currency issuance and regulatory duties. In Chapters 2 through 7, the discussion hones in on the individual central banks. In Chapter 2, the unique role of the Bank of England is discussed. In Chapter 3, the European Union (EU) and its growing pains are described. Its development and its credibility led to the founding of the European Monetary Union (EMU) and the European Central Bank (ECB). The two are inextricably linked, and it is imperative to know about the EU to understand ECB policies and problems.

Chapter 4 discusses the Bank of Japan, its difficulties in ridding the economy of deflation and the recent reintroduction of a more normalized monetary policy after years of deflation. Chapter 5 focuses on the Bank of Canada and its success with inflation targeting along with its hard-won independence from reacting to U.S. Federal Reserve policy. Chapter 6 covers the Reserve Bank of Australia. The Bank has also been successful with its inflation-targeting policies, while keeping the economy on a growth path that has lasted more than 15 years.

The People’s Bank of China is the subject of Chapter 7. Not too much is known about the PBOC. It is an example of a central bank that is not independent and must have its policies approved politically before they are enacted.

Part II of the book deals with the nitty-gritty of market-moving economic indicators. It is not the purpose here to cover all indicators. Rather the goal is to focus on indicators that have proven themselves over time to be reliable gauges of economic activity and provide investors with the kind of information they need to make prudent investment decisions.

Chapter 8 provides an overall guide to major economic indicators and why they are important to the financial markets. Specifics about each country are included in the following chapters.

European economic indicators are targeted in Chapter 9. Economic indicators for the EMU are covered first. They provide the overall guidelines for the individual country members’ data. However, because of the importance of Germany, France, and Italy, their national indicators are discussed as well. Despite Eurostat’s (the EU statistics agency) goal of providing uniform statistics that can be compared across Member States, national idiosyncrasies are smoothed over or lost in the process. Therefore, it is important, if you want to invest in these countries, to look at their national statistics and appreciate the differences among them.

Chapter 10 describes key British indicators. The United Kingdom is a member of the EU but not the EMU. As such, they comply with Eurostat’s data rules. But here, too, it is important to look at the national statistics. There are major differences here, and they could impact investment decisions.

In Chapter 11, we move to Japan. Japan’s slow recovery from its asset price bubble combined with wariness about its data has taught data watchers to be very careful in their interpretations. The big debate of 2006 involving the government, the Bank of Japan, and analysts has been whether deflation has really ended. The answer—it depends on which inflation measure you use and the reason you are using it!

Canadian indicators (Chapter 12) are easy to use and straightforward. But there are indicators here that could be new to investors, such as monthly gross domestic product.

Australian indicators in Chapter 13 provide an overview of data that are quite sophisticated and reliable. Timing differences however play a role, especially for the consumer and producer price indexes.

Finally, the importance of China could not be overlooked. Chapter 14 provides a brief overview of the main Chinese indicators. While the information is sketchy, efforts are being made to improve the timeliness and quality of the data.

Acknowledgements

This book should provide the answer to the lifelong question from my family: “So what do you really do?”

There are numerous people that I would like to thank for their help and encouragement over the past year and before. I would like to thank especially:

Drs. Lois Schwartzman, Donald Bergman, and Robert Stark, who helped me to keep mind and body together during the past year.Evelina Tainer, who prodded me to write this book and managed somehow to be a one-person cheerleading squad and critic at the same time.Maurine Haver, who provided critical comment and insights that would have been unattainable otherwise. And a special thank you to members of her staff at Haver Analytics, including Randy Gernaat and Akosua Apenteng, who patiently answered my pressing questions of the day.

Although the book is dedicated to my daughter Hope, I would be remiss if I didn’t acknowledge her invaluable assistance along the way. She read the manuscript at least three times and kept me on the straight and narrow, all the while reassuring me that it was a worthwhile undertaking.

There have been many others that have helped and encouraged me along the way and they know who they are. But I should like to mention two early mentors—the late Drs. Gerhard Bry and Charlotte Boschan, who pointed me in the direction of my life’s long work.

Anne Dolganos Picker

September 2006

Greenwich, Connecticut

A Brief Introduction to the Financial Markets

Throughout the book, I refer to reactions in the bond, stock, and foreign exchange markets to central bank actions and new economic information. Markets react when a central bank changes policy—or even if it stays the same. And they react to new economic news in the form of economic indicators: Did the indicator move up or down and how did the result conform with the consensus opinion prior to the release? Certain reactions are expected, but others differ from expectations. The following review outlines the workings of the three markets and spells out what type of reaction is expected to occur.

BONDS

Bond markets behave differently than stock markets—bond markets live and breathe interest rates. Therefore, central bank interest rate policies are one of the most influential factors on bond prices and returns. Other factors influence their behavior as well. In periods of political uncertainty, bonds are regarded as a safe haven. U.S. government bonds in particular have always been considered a safe haven in times of uncertainty. Just as equities and foreign currency markets respond to economic news, the bond markets do also.