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2017-12-21Macro `n Cheese

The Christmas Shopping Championships!

Will Your Country be the Regional Champion of Christmas Shopping?

A small aside: It seems Roger wanted to help us out with our Christmas gifts this time around, or maybe he’s just planning on migrating to Norway. Anyhow, at the very end of this post he’s left us all a graph he thinks we should keep in our chart libraries (oh, the perks of being a Macrobond user). Have a wonderful holiday season dear Readers! Over to Roger...

This week, I’m going populist. There are few other questions that whip up an interest quite like our own wallets1- “Wallet wallowing” – if you will. Now, spice that up with some competitive chauvanism, and this thing might even go viral! (…let’s see about that…). Also, there’s a fancy prize for the winner2!

1In Sweden politicians and the media talk a lot about “matters close to the wallet” (plånboksfrågor), and I humbly suggest “Wallet Wallowing” as an English translation.
2An enormously complex (I had to have help from more intelligent colleagues) Macrobond file that plots, cuts and dices, FED Funds Futures.

The basic idea is simple. We use the fourth quarter seasonal factors for per capita personal consumption expenditures on goods as a proxy for “holiday consumption”. Now, if you wanted to go all in, you might want to use a more detailed estimate of consumption, adjust for inflation or purchasing power etc. However, to keep it simple I only adjust for the currency of the countries involved. The 2017 fourth quarter forecast is based on the OECD’s latest economic outlook3 (feel free to substitute it for your own forecasts) and the UN’s population statistics.

3Assuming that the consumption of goods grows in proportion to total consumption.

The result is the per capita seasonal goods consumption factor for the 4th quarter, also known as; “the holiday shopping budget”. Personally, I use this number to explain to my family why they, after the traditional food and drinks have been discounted, won’t get very many presents. Unfortunately, the adjustment by and large falls on the money spent on yours truly. Darn it, us economists and our averages…

Here, nevertheless, I thought we could use the holiday shopping budget for comparative purposes and make it into a deadly serious competition between proud nations.

With that said, let’s have a look at the numbers!

The Nordics

We start off with our home region, the Nordics. By seasonally adjusting the numbers for Denmark, Finland, Norway and Sweden we find that the 2017 Nordic regional champion of Christmas shopping is…

Macrobond Document
Chart 1: The Norwegians dominate, not only in cross-country skiing.

– You probably guessed it: It’s Norway!

Those pesky oil-rich, salmon-eating, top-of-the-income-league, Norwegians do their holiday consumption to the tune of all-in-cash SEK 2968 (approx. EUR 300) per person! Finishing way behind, in the usual second place, is Sweden, buying Christmas-y stuff for some (probably borrowed) SEK 2283 per person, but it’s only a whisker between them and Denmark, at SEK 2128 per person, who finished strong in 2017. And, as expected, the plain-speaking, sauna-loving, no-frills neighbors to the East commemorate a fitting Christmas using an ascetic, non-credit card induced, SEK 1261 per person.

The Continent and...

For centuries, the war-torn European continent has been beset by the intense rivalry between Germany and France, balanced only by the slowly sinking British Isles. In what might be a conclusive battle for European domination, the winner is…

Macrobond Document
Chart 2: For once, the UK beats Germany for an important title

United Kingdom! What?! – No Brexit can hold the English-speaking consumer at bay it seems. The average Tommy has bestowed in excess of EUR 210 per person in Christmas gifts, food, and mainly beer. Thankfully the British-constructed terror-balance between the Frenchies and the Jerries remains in place and it’s a tie at circa EUR 114! How’s that for excitement! And will this mean that the Brits abandon their Brexit-plans and loosen their stiff upper lips?

North America

That said, no measure of indulgence and consumerism is complete without the “American consumer”, eternal favorite to the overall world championship title in shopping. But can they remain true to form, even in the decisive fourth quarter, or do they run the risk of getting Trump-ed (couldn’t help myself!) by the peak-performing, housing-doped, Canadians..?

Macrobond Document
Chart 3: More prestigious than winning the National Hockey League.

I don’t think anyone will be surprised to hear that “Joe six-pack” held his ground, splashing out USD 352 per person for the Holiday season. To be honest, with “only” USD 219 of Christmas spending per person, the poor Canadians didn’t stand a chance and come across as frugal in comparison4, despite being high on housing and at least Trump-ing (couldn’t resist) their southern neighbor with one of the sassiest world leaders (do we really need such a list?).

4Admittedly, the true answer remains elusive as the US national accounts data is always seasonally adjusted. However, here we used the seasonal factors for the retail sales control group (which is closer to the national accounts definitions) to get a rough estimate.

The Kicker

But wait. Running the numbers for all countries yet again, but in USD, we see that the pound for pound heavy-weight Christmas shopper of the world is not at all the expected American consumer. Instead, it is an almost unknown Norwegian contender who, with more than USD 424 per person, easily dismisses the short-priced favorite!

To celebrate the winning Norwegian consumer, my colleagues and I put together – the grand prize – a graph that I think many will appreciate having in their chart libraries. It is a real master piece by our resident Macrobond magician, who despite being French and thus receiving only a puny fraction of the Christmas gifts the rest of us will, agreed to create an updated FED Funds Future Rate Curve with the future contracts cut at the correct dates.

Macrobond Document
Chart 4: The grand prize!

The above graph should actually give a more correct view of the probability of a FED rate hike (or cut) at the next meeting than what the WIRP-function in Bloomberg does, something that bugged me immensely when those kinds of details were my main source of income. That said, there is still room for improvement as this FED-research shows. In the future, with your benign feedback, we will hopefully be able to make these types of calculations and manipulations more convenient than they currently are. (Yes, again, keep those support tickets coming.)

For those who want to control the calculations in the graph above or look further into the future (but not beyond the 9th contract please) I also put together a graph with the CME’s calculated probabilities (also better than BBG’s ditto), where you nonetheless have to update the data set as contracts are added and FOMC-meetings pass.

Macrobond Document
Chart 5: What markets say on FED

Alright then, this analysis Nadir (albeit with a silver lining) concludes my blog posts for 2017, but I’ll try to work my way up again during the course of 2018. If all goes according to plan, I will occasionally receive the help of external contributors of considerably higher analytical standards than myself – As always, if you have any ideas or suggestions, don’t be shy.

I, we at Macrobond, wish you a wonderful holiday season and look forward to seeing you around next year!

Chart 6: A little internal holiday surprise from our development team

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We don’t usually have views and opinions about economic and financial states of affairs, (not ones that we express publicly as a company, anyway). We do believe, however, that people can and do appreciate a variety of perspectives. What you’ve just read is the perspective of our resident chief economist. While we think he’s very smart, Macrobond Financial does not expressly endorse the views he presents here. And, as the old adage goes, you shouldn’t believe everything you read (not without finding the data, performing a few analyses and presenting it in a nice chart). We want to make it clear that we are not offering this information as investment advice. That being said, if you have the application you can easily check everything that’s mentioned here, and decide for yourself. If you don’t have the application, now you have a great reason to get it.