Macro review for w/c 1 October 2018 – “Stalling export trade” was a key theme from the latest round of PMI’s for September. This was evident in the manufacturing PMI’s for the Eurozone, including Germany, Japan, China and Canada. There was ‘modest’ improvement in the US and UK export orders.
The manufacturing PMI for China is on the verge of contraction. The PBOC announced a reduction of 1% in the RRR for some banks. Chinese officials are also considering further fiscal stimulus measures.
The US ISM Manufacturing PMI and the Markit Manufacturing PMI, although not as strong as each other, were consistent with the final US Factory Orders data for Aug. Growth in factory orders for all manufacturing industries recorded the second strongest growth in new orders for the last year. Stronger factory orders data can be traced back to transport equipment manufacturing activity.
The divergence remains between the US ISM non-manufacturing PMI and the Markit Services PMI data. Activity in the ISM non-manufacturing reached all-time highs in Sep while growth in the US Markit Services PMI continued to slow in Sep.
US payrolls data was lower for Sep, but previous months were revised higher. From the household survey (16yrs+), annual employment growth continued to slow, and participation declined over the last year. Real earnings continued to grow at a constant rate.
US Consumer credit growth continued to accelerate in Aug, which is likely to support consumption/spending growth.
A busy week of US Federal Reserve speeches. A full range of views were expressed from hiking rates to a point that are somewhat restrictive, to taking a more cautious path and a slower rate of hikes. Chairman Powell’s interview garnered the most attention, but also noteworthy was Atlanta Fed President/CEO Bostic speech. He has previously been more cautious on hikes but admitted that the strength of the economy had surprised to the upside – with the potential for overheating, a higher path for rates would be required.
The RBA kept rates on hold and Australian retail sales rebounded in Aug after a weaker Jul.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
The outlook for w/c 8 October 2018 – Light supply of US Treasuries this week with the US Treasury auctioning and settling $156b in ST bills, raising approx. $1b in new money. Only $26m will roll off the Fed balance sheet this week on 11 Oct. The US Treasury will also auction approx. $74b in longer-term notes and bonds which will settle next Monday 15 Oct.
The key releases this week;
US PPI and CPI data for Sep
Eurozone and German Industrial production and German trade data – providing further insight on the slow-down in export/manufacturing demand
Aussie housing lending data for August – as we track the slowdown in the housing market
UK monthly GDP for Aug
Brexit is approaching critical timings – likely a heightened level of activity over the next week and a half. At the EC meeting next week on 17-18 Oct it will be decided whether there has been enough progress on the Brexit withdrawal agreement to call an additional EC summit on 17-18 Nov to agree and formalise the agreement.
Further detail and the calendar of key releases is provided in the full briefing document – 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
