Macro review for w/c 10 September 2018 – The week ended with threats of escalation in the trade dispute between US and China. Reports of possible retaliation from China amounts to what would be a major disruption to US supply chains in China. Escalation from China will be contingent on whether the US moves ahead with the next round of tariffs.
US data continues in line with the Fed’s rate trajectory. Good results from JOLTs data highlights further growth in employment. Consumer credit growth was stronger again, likely to help underpin expenditure growth – although, the motor vehicle component of non-revolving loans has been slowing. This is was highlighted in the slower retail sales growth this month. Retail sales growth was slower across most areas, but notably in auto’s. US CPI data was stable this month and annual rates of growth have been moderating. Slowing PPI suggest lower price pressure coming through the supply chain. Industrial production continued to grow.
The Eurozone industrial production looks like it could be rolling over, consistent with slowing GDP growth, slower German industrial production and slower growth in manufacturing PMI’s. Eurozone international trade data further confirmed the recent anecdotes from the PMI’s of slowing export growth. This will be important to watch.
ECB kept rates on hold – note that after Sept, the ECB will reduce net asset purchases by half to €15b/month.
Despite the increasingly negative and destabilising Brexit process, UK growth remains surprisingly robust. The rolling quarterly GDP was led higher by stronger retail activity throughout May-Jul. Some caution around labour market trends with employment growth clearly slowing. The BoE kept rates on hold.
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 10Sept2018
The outlook for w/c 17 September 2018 – Moderate supply of treasuries this week. The US Treasury will auction approx. $135b in ST bills and settle a total of approx. $208b in bills and coupons (including auctions from last week). The 4wk bill is yet to be announced. The US Treasury will raise approx. $21b in new money this week.
Trade will be a key focus this week. Threats of escalation over the weekend after Vice Premier Lui He was invited to Washington to re-start trade talks. Reports are that China may not accept the invitation if the next round of tariffs are implemented. There is a threat that China could retaliate by creating disruptions to US supply chains in China (such actions would have obvious implications for any other country considering operating within China in the future).
Brexit will be a key focus of an unofficial summit of EU leaders in Salzburg this week 19-20 Sept. No final agreement is likely, but it is hoped that the meeting will create new momentum leading into the final stages of the negotiations.
BoJ rates decision this week.
Important data out this week; Prelim PMI’s across US, Europe and Japan, providing an important read on growth momentum going into the final month of Q3. CPI reports from the Eurozone, UK, Japan and Canada. Australian house price index for Q2 and UK retail sales for Aug.
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
