Macro Review for w/c 30 July 2018 – The US Fed kept rates on hold but affirmed its view of a ‘strong’ economy. This further increased the probability for rate increases in Sept and Dec 2018. The BoJ kept rates on hold and made adjustments to the implementation of monetary policy – widening the trading range of the 10yr yield, among other measures, in order to improve the sustainability of the framework. The BoE increased rates citing future inflation expectations.
US data – The acceleration in the growth of personal consumption and real disposable income data for June were highlights of the week. These helped to underpin stronger consumption growth in the Q2 GDP data. PCE price index was higher, around the Fed target rate. Growth in non-farm payrolls slipped and was below the current 12month average. Regional manufacturing and business surveys were stronger. The PMI’s for July show that overall private sector activity continues to grow, but without the acceleration seen in recent months.
Eurozone data was softer – GDP flash for Q2 highlighted slowing growth, headline CPI growth was influenced by energy prices, CPI ex energy coming in at 1.4%, Eurozone PMI’s for July highlighted weaker expansion in private sector activity, with slower growth in new orders across member states – the exception was Germany.
UK Services and Manufacturing PMI’s for the start of Q3 also highlighted slower growth across the private sector.
The PMI’s out of China highlighted slower growth, weaker demand and optimism reaching some of the lowest on record (esp Services). From the Chinese PMI report; “In July, the State Council, China’s cabinet, said the country will adopt a more proactive policy to support the economy in response to uncertainty abroad. The risk of an economic downturn has diminished.”
The US and China continued the tit-for-tat approach to tariffs.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 30July2018
The outlook for w/c 6 August 2018 – A quieter week on the liquidity front with the US Treasury auctioning and settling approx. $141b in ST bills raising approx. $16b in new money (4wk bill TBA). The US Treasury will also auction $78b in 3,10, 30yr treasury securities that will settle next week.
Central bank decisions this week from the RBA and the RBNZ.
Key data this week will be US CPI (July) and prelim Q2 GDP growth for the UK and Japan.
On the trade front. NAFTA negotiations have taken on a higher gear between US and Mexico. Mexico is keen to finalise an agreement, but Canada is yet to re-join the negotiations. There are US public hearing outcomes still due for various tariff proposals that may influence the direction on potential auto tariffs and US-China discussions.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
