Comment: Economic truth is never easy to decipher

DIVINING truth in raw economic data is an art rather than a science. This week’s UK GDP figures suggested a double dip recession.

But the markets reacted quietly because everyone thinks these numbers will be revised upwards in due course.

Likewise, there are similar mixed economic signals across the pond. The Q1 growth figure, published yesterday, was 2.2 per cent. That is a lot healthier than in the UK or the beleaguered eurozone. But it is down on the 3 per cent of the last quarter of 2011, and well below analysts’ expectations.

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The GDP numbers followed Wednesday’s shock that orders for US durable household goods and machinery fell in March by the most in three years – 4.2 per cent. And news that only 120,000 jobs were created in March, half the 240,000 gain in February.

However, look deeper into the US data and you find cause for optimism. The durable goods data represents wholesale orders, not current sales to the final customer. In fact, Q1 purchases of cars and trucks were the best in four years, suggesting the US consumers are spending again.

The Q1 slowdown in growth, and the underlying fall in orders for durable goods, can be explained by the fact that US companies have finished the round of restocking that followed on from the recession of 2009. That could have negative consequences in the second half of 2012.

However, even with business investment adding less to growth, there are clear signs that US consumers – who are responsible for 70 per cent of GDP – are taking up the economic strain again.

There is one important data set that suggests the US is not moving into a period of slower growth: the money supply. Money supply reflects the demand for, and availability of, credit. This is a good proxy for consumer and business intentions. Generally speaking, a robust expansion of the money supply indicates faster GDP growth six or more months down the line. (Yes, I’m an old fashioned monetarist of sorts.)

M3, the broadest definition of US money supply, grew at a reasonably healthy rate of 5.8 per cent rate in the 12 months to March. M1 and M2, the narrower measures, grew at 17.4 per cent and 9.8 per cent, respectively. Since last July, US consumer credit has started to expand at a faster clip, on the back of demand for mortgages and car loans.

This scenario is in marked contrast to the eurozone, where money supply is contracting. In the first quarter, demand for house loans fell 70 per cent in Portugal, 44 per cent in Italy, and even 42 per cent in Holland. And that’s despite the massive injection of liquidity by the European Central Bank in December and February.

Worse could come, as the EU demands banks increase their reserves. The IMF is predicting that Europe’s big banks will shrink balance sheets by a further 7 per cent this year.

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Welcome to Japanese-style deflation – the opposite of what is happening in America.

Early kick-off expected for match of the decade

HOW have the political travails of the Murdoch empire affected pay-TV giant BSkyB? The share price is down from 850p last July to circa 670p yesterday, despite a buy-back.

But politics aside, BSkyB faces a familiar business problem: new competitors on the block.

First, its lucrative satellite movie channels are under threat from new, online streaming companies such as Lovefilm and Netflix.

Sky has hit back with its own movie streaming, and by the launch of the Sky Go platform for mobile phones and tablets. It has the deep pockets to succeed.

Sky could face a steeper challenge from Al Jazeera, the Qatari television network, when the English Premier League (EPL) rights come up for auction this summer. Live sports coverage has been BSkyB’s bread and butter since its launch in 1989. In 2010, it forked out some £1.6 billion for a three-year deal to show 115 EPL matches each season.

Now Al Jazeera, owned by the sports-mad billionaire Sheikh of Qatar, wants a share of the action. It has just set up a French pay-TV channel to broadcast matches from Euro 2012, which kicks off in Poland on 8 June.

Forget Levenson. A BSkyB-Al Jazeera fixture could end in a penalty shoot-out.

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