Chart of the Day

Chart of the Day: China’s imports of primary goods

We often read about the size of the ‘China effect’ on the demand for and prices of primary commodities traded around the world. This over-simplification ignores the impact that other emerging market economies are having on the consumption of primary products – indeed a much greater proportion of global economic growth is being provided by the resource-intensive emerging economies. Added together, the emerging economies account for 23% of global GDP whereas the US accounts for around 29%.

Chart of the Day: $6m per minute - hot money flows into China

The Chinese stock market is down and property prices have been falling in many of the major cities and the Chinese trade surplus is starting to diminish. But short term capital flows are surging into the Chinese economy at the moment - according to research from HSBC Global Economics,

Chart of the Day: Imported Inflation into the UK

Our chart for the day is linked to the news that the pound has fallen to an historic low against the Euro. One of the consequences of a depreciating currency is that the prices of many of the goods and services we import from overseas goes up potentially leading to a fresh burst of cost-push inflation.

Chart of the Day: EU Wheat, Bread and Cereal Prices

Our chart today links what has been happening to international wheat prices with the cost of basic groceries such as bread and cereals in the shops in the UK. Globally, wheat prices have been surging higher over the last few years - look at the movements in European Union milling wheat prices since the start of 2006. Changes in raw commodity prices invariably feed through into the prices of products on the supermarket shelves albeit with a time lag. (Can you spot any in the chart). And certainly in recent months, the CPI for breads and cereals has moved sharply higher as food manufacturers have passed on some of their higher costs. The CPI data suggests that bread and cereal prices have risen by over 12% since the start of 2005, yet milling wheat prices have jumped by more than 250%? How can you explain this difference? And who gains from the spike in grain prices - good news for farmers perhaps? Not if you are rearing cattle and having to find the money for more expensive grain as feed.

Chart of the Day: Consumer Credit

Interest rates on unsecured credit are up to five times the base rate of interest set by the Bank of England. And consumer confidence is dipping sharply as the economy heads into a slowdown. But that doesnt seem to be stopping UK consumers from piling on the debt onto their credit cards. New figures show that personal borrowing in Britain soared by its highest amount in more than five years in the year to February 2008. The level of new consumer credit surged by nearly £2.4 billion in February with unsecured borrowing growing by £1.6 billion. An act of irrational desperation? Or an inevitable and necessary move when other supplies of credit dry up? Re-mortgaging is become more expensive and less easy to arrange forcing consumers who want to live on the never-never to find fresh sources of funds. It seems crazy to me that people are prepared to do this, why not rein in spending at this time and save some more for the tougher times ahead? Perhaps most people dont expect a recession - or dont think that it will hit them directly?

PowerPoint chart
Consumer_Credit.ppt

Chart of the Day: Global Hedge Fund Investments

Love them or loathe them, hedge funds seem to have an aura and gravitas in financial markets, a mystique and attraction that perhaps go well beyond what they deserve. Perhaps this is because many funds have been spectacularly successful attracting enormous interest in the financial media. However, they still remain largely out of reach of the smaller investor as hedge funds are unregulated and not for the feint-hearted.

Despite the failure of several high profile hedge funds in recent months and forecasts that the boom for hedge fund activity is drawing to a close, the scale and scope of hedge funds is staggering, over $1.3 trillion has been invested in thousands of funds across the world; to put this into context there is a global investment ‘universe’ estimated to be worth $50 trillion, including currencies, bonds and equities. So more than one in every fifty dollars is now invested through a hedge fund. So-called ‘sophisticated investors’ entrust their capital to these funds, the money is pooled together and invested by the fund’s chief investment officers.

Chart of the Day: UK Trade Balance in Commodities

The UK is now a net importer of all types of commodity. For nearly thirty years we have been a net exporter of oil but this has now come to an end with the long-term decline in North Sea crude oil output. The monthly deficit in finished manufactured goods has more than doubled since 2000.

PowerPoint Chart
Commodity_Trade_UK.ppt