December Macro Report

(Abridged version.  Complete report & data available on request)

US Bullishness Restored

Key Takeaway: Corporate Profit Growth collapsed in early 2011.

Restoring that growth was the story of 2011. Whether it will continue is the story for 2012 

 

 

 

Past


Falling profits drive immediate payroll & inventory cuts

  *   Q1 profit growth collapses. 

  *   Corporate payroll and inventory growth drops

  *   Profit growth rebounds from 3% to 11%.
 

 

 



Present

Profit growth restored, hiring and inventory growth resumes


Q4 Production surges....                                                        ....and Q4 Payroll surges:

October inventory growth equals Q3 total growth                   (normalized for Verizon strike: Q3 payroll drops 45K,

                                                                                                  Q4 jumps 45K)

 


 


 

 
  • Chicago PMI indicates business strength
  • Recent Fed Surveys reflect strong Q4 business expectation

 

US Future Bullishness Justified?

Projections are Bullish

S&P 500 Forecast: Decent Growth...                                      .... and US sentiment diverges from EU

 For illustrative purposes excludes Q4'03, Q4'08, Q4'09, Q1'10

 



 








But Data is Less Bullish



  • Domestic consumption is falling
  • Business capital spending already slowing with Tax credit expiration
  • AND Global economic contraction happening faster and deeper than expected. 

Singapore 2011 GDP

    • Consensus (IMF Sept. 2011):  2011 GDP 5.3%
    • Actual:    4.8%

Implies much deeper Q4 contraction than expected.

 

Semiconductor Projections: Reason for Optimism in Q3 2012

SouthBay Semiconductor Inventory Index

The SouthBay Semiconductor Inventory Index is a composite index of several factors indicating optimal levels of semiconductor inventory.  A measure below 1 indicates weak conditions (over supply) and a measure above  1 indicates strong conditions (under supply).


Signs of Life



Q3 Better than Predicted

Q3 came in slightly better

 

Q4 (est.) Signs of Improvement

2nd sequential quarter showing improvement

 

 



GDP Forecasts Still Too Bullish

As an economic leading indicator, the SouthBay Semiconductor Inventory Index leads GDP by 3~4 quarters. 

 

Forecast: Q4 GDP 1.5%~2%

Current Q4 GDP  Consensus forecast of 3% is too high.  GDP of 1.5%~2% is more consistent with the Index's call for 1.3% Y/Y GDP growth.