Spot on as always Mish. One factor that I'm following closely in all this is what Biggs, Meyer, and Pick called "The Credit Impulse".Thanks Steve
This is the change in the change in debt, expressed as a percentage of GDP, something I've covered in a couple of recent posts:
A Fork in the Road?
Deleveraging, Deceleration and the Double Dip
It follows from my argument that aggregate demand in a credit-driven economy is the sum of GDP plus the change in debt, since it also follows that change in aggregate demand is the sum of the change in GDP plus the acceleration of debt.
Australia got out of the crisis in 2009 by exploiting the upside of this factor: if you can encourage people into debt, then aggregate demand grows as debt accelerates--so even slowing down the rate of deleveraging gives a positive boost to demand (this stuff is a bit hard to get one's head around, but it's correct and aligns with the impact of inventories on aggregate demand).
That's how the USA looked a bit better in recent months--you slowed down deleveraging. But since Australia went from marginal deleveraging to releveraging, the acceleration in debt was all the more extreme--and we had a apparent boom.
That appears to be ending now, since though the Credit Impulse is still positive on a yearly basis, it's turned negative in the last few months. So this should be a leading indicator of an "unexpected" (don't you love that word from the mainstream?) slowdown in Australia.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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