The weekly macro review for w/c 26 August 2019 – US data was more positive regarding manufacturing growth. The Dallas Fed, Richmond Fed, and Chicago PMI regional manufacturing surveys recorded at least moderate growth and improved conditions in Aug (after the much weaker Jul readings). The Jul data reported this week still reflected the somewhat weaker production conditions. Chicago Fed National Activity Index fell further below average due to lower production and income growth. Growth in durable goods orders for Jul was led predominantly by an improvement in new orders for aircraft (non-defense aircraft and parts). Excluding transportation, new orders declined in the month and on an annual basis. Shipments declined in the month and inventory growth remains higher than orders.
The large decline in the Uni of Michigan consumer sentiment, expectations and conditions data was an important highlight. The decline was led by concern over increased tariffs. Despite the large one-month decline, sentiment remains at a level consistent with a more moderate rate of consumption growth.
US personal incomes grew at a slower pace in Jul led mostly by much slower growth in wages and salaries. Lower growth in taxes somewhat offset the weaker income growth resulting in only slightly slower growth in disposable income (versus the month prior). Personal consumption expenditures increased at a faster pace in Jul – providing a relatively strong start to Q3. Personal savings declined as a result of disposable income growth < consumption growth.
There was little change in the annual growth of the headline PCE price index this month, growing at +1.38% and remaining well below the Fed 2% target. Core PCE prices growth was similarly little changed on an annual basis. Faster growth in the PCE price index for the month was led by energy goods and services. Core prices grew at a slightly slower pace in the month.
Prelim Eurozone data indicated that CPI growth was constant at 1% in Aug. The fall in annual energy prices was offset by faster growth in food, alcohol and tobacco prices and slightly faster growth in services prices.
Industrial production in Japan for Jul increased moderately as expected, after larger falls in the month prior. Japanese retail sales recorded a relatively large decline in Jul.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 2 September 2019 – The Aug PMI’s will be released this week across the major economies providing further insight into the scale of the current slowdown in private sector activity across, Europe, Asia, and the US. So far, US regional manufacturing surveys for Aug have posted improved manufacturing conditions.
Main US data highlights this week; ISM’s, factory orders and employment.
US Fed Chairman Powell will give a speech on Friday in Zurich. Several regional Fed Presidents will also speak throughout the week. Chicago Fed President Evans will speak about trade and the auto sector on Wednesday
UK/Brexit – the return of the UK Parliament to session this week may add to volatility given the announced/planned suspension of Parliament in the lead up to the second Brexit deadline on 31 Oct. The suspension of Parliament has been seen as a tactic to avoid any attempts to block a no-deal Brexit.
New factory orders and industrial production for Germany will also be released this week – both important given the scale of the current weakness in manufacturing activity.
The RBA meets on rates this week – current expectations are for rates to remain on hold (as of 2 Sep 2019) https://www.asx.com.au/prices/targetratetracker.htm. The rates decision will come ahead of the Aussie Q2 GDP release.
New tariff rates have gone into effect from 1 Sep – implemented by both the US and China. The US will continue to run public hearings on the remaining tariff increases due in Oct.
US Treasury issuance will remain heavy this week. The US Treasury will settle approx. $295bn in ST bills and notes raising approx. $74bn in new money.
More detail (including a calendar of events) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
