The Peru GDP sweepstakes

We get Peru's GDP reading for August published today by the nice stats people at the INEI. Here's how the country has been faring since 2008....

...and my oh my, can't you see the strength, the resilience, the way that "Peru is armour-plated against the financial crisis" (Twobreakfasts dixit)? Today's consensus is for another drop, by the way. The average is for -0.5% with the recent scales-from-eyes people at Morgan Stanley punting for -1.1%. If you ask me I'd pitch around -1% as well, but in the end a monthly snapshot of GDP reading isn't a reliable number and can vary like crazy one way or the end. It's the trend that's your friend and that trend is easy to spot in the above chart. So rather than run a sweepstakes on the actual number, today's big question is:

"How long before Spongebob is quoted by the media channels as saying "This time we really have touched bottom and the only way is up. Really. Honest, guv. not kidding this time."?

Your choices:

• one hour after GDP number is published
• one day after GDP number is published
• he announces his resignation instead
• i like pie

UPDATE: The numbers are out and according to the INEI, Peru's GDP grew by 0.25%!! We're supposed to take them seriously, too. The amazing country called Peru, where exports, imports, tax collection and manufacturing can all drop by large amounts and the GDP still goes up. Welcome to Argentina.

More on Peru's economic miracle (and owls)

The INEI stats office has just published the July 2009 GDP figures. According to the normal Reuters poll analysts* expected a drop of 0.5%

The actual result?: a drop of 1.38%

Yet again, manufacturing (i.e. the real economy) dropped badly by 12.35%

Expect Spongebob Carranza to say that "we're at the bottom" AGAIN and expect our friend the owl to pop up and reply with a cheery

Here's the official INEI bulletin.

*dumbasses in suits

Mysteries of economics forecasting explained (Peru finance ministry edition)

El Comercio is today running this report on how Peru's Ministry of Economy and Finances (MEF) is forecasting the local currency, Peru's Nuevo Sol (PEN), to reach a foreign exchange rate of S/2.90 versus the US Dollar in 2012. The MEF forecast is part of its tome-like "MultiAnnual Macroeconomic Update" published last weekend.

Now this all sounds very, but very important and calculatory and I'm sure you're mystified as to which powerful algorithmic formulae those MEF suits are using to come to their extrapolated conclusions, so let's just explain how things really work chez Spongebob Carranza.

All you really need to make official economic forecasts like these are:

1) A chart ripped from Yahoo Finance
2) A straight-edged ruler

(click to enlarge)

Five minutes later you have your three year forecast for the national currency. Six minutes later you're off for that long lunchbreak you and your MEF colleagues so desperately deserved.

Cusqueña and canchita served. The end

SpongeBob Carranza prepares his excuses

"Be Prepared" as they say in Scouting Circles, and so the spin begins to prepare FinMin and Liar Luis Sponge Bob Carranza (that's a long name...we'll cut it down next time, don't worry) and give him an excuse as to why his 5%...no 4%...no 3.5%....no 3% GDP growth forecast is going to miss by a nautical mile.

It's the swine flu, y'see.

This report on the musings of some dude named Gustavo Yamada, an economist at Universidad del Pacífico in Lima, is tailor-made for the job. Yamada has Peru missing out on no less than 1.9% of its GDP growth this year because of the wretched flu (that the Health ministry says will peak in August, for what it's worth). He also has AH1N1 as being as devastating as the El Niño weather of 1998 which sounds a bit over the top to me. Oh by the way, El Niño is back this year..should be a lotta fun!

But back to this swine flu GDP thingy, and I can't help noticing that if you subtract Yamada's 1.9% from SpongeBob's 3% forecast you end up with a number so very close to your humble servant's guesstimate made in April this year (1.28% for 2009). FinMin's probably preparing his Not my fault, sir! speech for Twobreakfasts already.

Peru's Nuevo Sol (PEN) currency weakens sharply

On the back of the 1+% drop in the Nuevo Sol (PEN), the currency dropped another 1.5% today. The move is being explained by "strong demand from local banks to cover short dollar positions".

Or in other words, the dumbasses in suits in Peru actually started to believe the hype that FinMin Carranza has been dishing out recently. In the end, money talks and BS walks and the move charted out above isn't some orderly downward move conducted by the Central Bank. It's semi-panic as people with money run for cover. Joe Public will find out the truth once the money dudes have covered their tushes. DYODD.

Shock Horror! Economists wildly overestimate Peru's GDP figure again

Twobreakfasts' secretary reads the INEI press
release and wonders how to break the news

¡Pero que sorpresa!

Over at Reuters, the economists* polled put Peru's January GDP figure at an average of 4.0%. Meanwhile Bloomberg (who must have bothered to interview one bearish guy) had the average of those polled at 3.4%. As late as last week Peru's Finance Ministry estimated January GDP at 4.5%.

The Peru stats office, INEI, reported the figure two hours ago. Peru's January GDP growth came in at 3.14%, way below 'expert' opinion. In amongst the numbers manufacturing dropped by 2.69%, commerce grew by 2.53% and the building/construction sector upped by 4.5% (which sounds good but is a very disappointing result and way below expectations). Agro dropped by 1.46% and fishery by 21.05%. Mining activity grew by 10.69% (not export prices but oh my, hard landing for Month-over-Month figures coming in that sector in the months to come) and the mining services sector upped 5.99%.

But don't let that worry you, because Twobreakfasts says it's going to be 5% this year, and Carranza says 5% this year, and the Central Bank says 5% this year, and the IMF says 5% this year. I mean, why on earth should you listen to me and ignore all those utterly reliable and impartial sources?

*dumbasses in suits

And on the subject of Peruvian economics.......

....the Peruvian Central Bank's (BCRP) newly revised forecast for 2009 has some very strange assumptions. This report from Reuters lays out the general scenario, but the key changes are:

• Domestic demand down from 7.1% to 5% growth
• The projected fiscal surplus of 1.1% is now a fiscal deficit of 1.0%
• Export growth down from 6.2% to 1.9%
• Import growth down from 9% to 2.1%
• Inflation down from last year's posted 6.65% to a forecast of 2% in 2009
• The GDP growth forecast is unchanged, staying at 5%

If this isn't bistromatics of the highest order, I'm Chinese. And I'm not Chinese. Look, even taking the BCRP's own metrics don't you think that simple logic points you in the general direction of saying "This is BS, dude"? Seriously, how can domestic demand, imports, exports and inflation all drop and the GDP forecast stay the same? And that's only the start of things, really. Here's a chart showing Peru's exports in the period 2005 to February 2009:

Please note the Feb 2009 figure is the total and not broken down into
mining/non-mining parts as the figures are not yet available at BCRP

Can you seriously tell me that Peru is going to beat its 2008 export total this year? Even Carranza's Finance Ministry recognizes that exports will drop from around $32.47Bn to around $28Bn this year (which is also exaggerated imho, it's more likely around $25Bn), so I'd be interested in finding out what BCRP top cheese Julio Velarde was smoking when he came up with a 1.9% YoY export growth prognostication. To labour the point, Peru is staring a 15% to 20% drop in exports in the face, not 1.9% growth.

It's the same story with imports, of course. Growth in 2009? Oh c'mon guys, at least make your bullshit survive more than a cursory glance at reality.

Click to enlarge charts

It does make me wonder what Velarde is trying to achieve here. I actually basically respect the guy and know full well he's not a klutz. Perhaps by making such outrageous claims he's trying to send a signal to people that look further than the headlines in El Comercio. Perhaps he's trying to say "Twobreakfasts is making me manipulate the GDP number, so I may as well make them look as silly as possible". I'm just trying to find a thread of logic where there is none.

Peru interest rates: Otto 1, Dumbasses 0

As predicted yesterday, Peru's Central Bank just cut its base lending rate by a quarter point. Beats me why you're still reading the dumbass economists of this world. As a final auto-horntoot, here's how yesterday's post began*.

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This Reuters article tonight reports that seven of nine economists (a.k.a self important dumbasses) say that Peru's Central Bank (BCRP) will not cut its prime lending rate from the current 6.5% at its meeting tomorrow. Well, let's go out on a limb and say that Velarde&Co will show those seven to be wrong. Otto is siding with the other two and says the BCRP will in fact cut rates by 0.25%. Reasons:

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*As my wife will quickly tell you, I'm insufferable when I'm right and even worse when wrong

Peru's central bank should cut its rate tomorrow

This Reuters article tonight reports that seven of nine economists (a.k.a self important dumbasses) say that Peru's Central Bank (BCRP) will not cut its prime lending rate from the current 6.5% at its meeting tomorrow. Well, let's go out on a limb and say that Velarde&Co will show those seven to be wrong. Otto is siding with the other two and says the BCRP will in fact cut rates by 0.25%. Reasons:

1) CPI inflation came in at a benign 0.11% for January. With less inflationary pressure clearly in the pipeline, the worry about paying more for imports is lessened.

2) A lot of the "feared" drop in the Nuevo Sol has already been baked into the market. The Sol has appreciated significantly in the last couple of weeks, now standing at S/3.245 to the greenback.
3) It will go hand-in-hand with FinMin Carranza's crisis planning (even though his own plan is pissing somewhat into the wind). During Carranza's first term as FinMin there was no love lost between himself and bank chairman Velarde, but this will be a chance to show that Peru's two main macro institutions can work together.

4) Exports (and the lamentable "buy Peruvian" campaign just re-started by Twobreakfasts) will benefit from a weaker Nuevo Sol.

5) The BCRP will have to cut anyway! So it may as well start now.

So it's Otto versus the local pros. Look out for the announcement this time tomorrow.