Making Sense

""Objective analysis should be made of the reaction to the event rather than the formation of the Opinion" US Q4 GDP grew 2.90% vs consensus expectations of a 2.60% growth and Q3 growth at 3.20%. The US Markets rallied on the economic news with S&P 500 closing the session at 4060.  GDP = C + I + G + NX Though the headline print is strong, the internals paint a mixed picture.  Consumer spending +2.1% vs +2.3% prior Net trade added 0.56% to GDP vs adding 2.86% in Q3 Inventories added 1.46% vs a cut of 1.19% in Q3 Govt added 0.64% vs +0.65% in Q3 Within residential fixed investment, the leading contributors to the decrease were new single-family construction as well as brokers' commissions.  Hopes of a soft landing increased as the headline number is strong but the activity is slowing and the growth in inventories in the context of the current global macro environment is not construed as a positive. Instead of a hard landing, the market narrative has been increasing...

  "Believe. Think. Visualize" India trade deficit* in November improved to $ 24 bn on a 7% mom growth in merchandise exports to $ 32 bn and de-growth of 1% in mom imports to $ 56 bn. Electronic exports rose sharply while textiles, chemicals and other categories showed contraction. The table below shows Apr - Nov actuals and projected numbers for the FY. This will be the largest current account deficit posted by India.  For Dec - Mar numbers, exports are assumed at $ 30 bn. If the global recession fears materialize on aggressive tightening by Central Banks, the extent of demand destruction in the export basket will need to be closely watched especially since the Indian currency continues to be overvalued. The trade weighed REER index eased from 103.06 to 101.62 in Oct. Assuming a 10% destruction in exports, the export number for balance of the year is estimated at $ 108 bn. On the import side, $ 55 bn of imports per month is assumed. Savings of $ 1 - $1.2 bn are likely to accr...