by Kim | Aug 26, 2019
The weekly macro review for w/c 19 August 2019 – Trade uncertainty, and escalation in tariff levies on US-China trade, slower growth, and central bank policy responses were the main themes this week.
The most pressing development late last week was the
announcement by US President Trump of a further increase in tariffs to be applied
to imports from China. This has amounted to a further escalation in the trade
dispute between the US and China. A candid speech from the RBA Governor Phillip
Lowe at the Jackson Hole symposium provides an interesting perspective;
“One way of looking at the world economy at the moment is that we are experiencing a series of significant political shocks – the serious issues between the United States and China, Brexit, the problems in Hong Kong, the tensions between Japan and South Korea, and the stresses in Italy.”
“…these shocks are generating considerable uncertainty.”
The minutes of central bank meetings of the US Fed, ECB and RBA released this week, all mentioned similar risks; slowing global growth, trade policy, and weak inflation. In this same speech, the RBA Governor goes on to question whether monetary policy can effectively deal with these shocks;
“Central banks are seeking to offset the effects of these shocks with lower interest rates and/or more monetary stimulus. This is entirely understandable, although it remains to be seen how effective it will be.”
“… monetary policy is just one of the levers that are potentially available for managing the economy. And, arguably, given the challenges we face at the moment, it is not the best lever.”
This acknowledgment doesn’t mean that CB’s won’t continue to ease policy in response though. The Fed minutes indicate an easing bias, although guided by incoming data. The ECB has indicated that further easing is likely at the next meeting. The RBA has already shifted to easing policy. All three CB’s also cite weak or muted inflation as reasons for further easing.
Adding to concerns over trade and growth, the prelim PMI’s
provided little expectation of any improvement in manufacturing activity into Aug.
Broadly, services activity continues to offset some of the manufacturing
weakness – except for in the US and Australia this month.
The US Prelim composite PMI showed that private sector growth
had slowed to a slight pace – with manufacturing falling into contraction and
signs that the usually stronger services sector also experienced weakness in
Aug. The Kansas City Fed manufacturing index also declined further in Aug and
respondents cited concerns over tariffs (before this latest escalation);
“Regional factory activity had its largest monthly drop in over three years, and over 55 percent of firms expect negative impacts from the latest round of U.S. tariffs on Chinese goods,”
US housing is showing some promise with continued improvement in existing home sales, as interest rates fall.
Employment growth has been a bright spot for the US economy. The BLS released the prelim revision to non-farm payroll growth this week, expecting that US non-farm payrolls will be revised lower by -501k persons in the Jan 2020 release. This likely will undermine one important point of confidence in the US economy.
The prelim composite PMI out of Eurozone was little changed
overall – services growth was slightly higher while manufacturing activity continued
to contract. Broadly, Euro area CPI growth slowed further – likely a large
concern for the ECB. The ongoing slowdown in the German PPI reflects the weaker
demand conditions.
The decline in Japanese exports continues to confirm the
current weaker demand conditions in Asia. The overall decline in Japanese
exports in Jul versus a year ago was mostly led by Asia (esp. China). The
prelim PMI was improved due to stronger growth in services while manufacturing
continued to contract.
The prelim composite PMI for Aust was concerning with the composite index falling into contraction. This was led by much weaker activity in services in Aug while manufacturing growth was little changed.
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 26 August 2019 – The focus this week will be on key economic releases and fall-out from the re-escalation in the US-China trade dispute.
At this stage, we are awaiting any details of a recommencement
of face to face talks between the US and China. On other trade issues, a
decision by the WTO on the US-EU airline subsidy dispute is expected shortly.
In the US, data will focus on growth, consumption, and manufacturing. The key releases are; advance durable goods orders for Jul and regional manufacturing surveys for Aug, Q2 GDP 2nd estimate, personal incomes and outlays for Jul and final consumer sentiment for Aug.
Euro CPI and detailed Q2 GDP for Germany will be the key
highlights.
In Australia, investment, housing & credit growth data will be in focus – private capex and construction data for Q2, new home sales, and RBA credit data for Jul will be released.
Of note in Japan, the prelim industrial production data for
Jul. Surveys expected an increase in production for Jul, yet PMI output data for
Jul indicated further contraction.
US Treasury issuance will be slightly heavier this week, but new money raised will remain elevated, in line with the increase in ST bills issuance and the recent suspension of the debt ceiling. The US Treasury will settle $207bn in ST bills, TIPS and FRN’s raising approx. $62bn 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
by Kim | Aug 19, 2019
The weekly macro review for w/c 12 August 2019 – Economic and sentiment data, as well as US-China trade tariffs, was the main focus of the week.
The US softened its stance on the next 10% of tariffs on the
remaining $300bn of US imports from China. Some tariffs will still go ahead on 1
Sep, but others, importantly on consumer goods, will be postponed until 15 Dec.
The US consumer and consumption expenditure has been
resilient over the last quarter and a brighter spot in the US economy, so the sharp
decline in the prelim Aug consumer sentiment data is a red flag. Uncertainty
created by further tariffs and the US Fed rate cut were key drivers behind the
fall in Aug. Interestingly, the rate cut had increased consumer apprehension
about the economy. The Jul retail sales result was broadly stronger, so it will
be interesting to see whether the more “heightened uncertainty” expressed in
the Aug sentiment spills over into expenditure next month. Growth in consumer
prices accelerated in Jul including underlying measures of consumer prices. There
was little change in the two regional surveys for Aug – although there was some
improvement in new orders across both.
Concerns over global growth remain elevated especially for manufacturing/industrial output. Further declines in industrial production were recorded in Jun across the US, Eurozone, and Japan. While not declining, industrial production growth in China had slowed from a year ago, reaching the slowest pace of growth in a year – despite stimulus measures.
US industrial production declined as a result of a decline
in manufacturing and a likely temporary decline in mining activity. Manufacturing
production shifted back into decline on an annual basis.
Even after small upward revisions, Japanese industrial production
declined in Jun and on an annual basis. Several industries contributed to the decline
in the month and of note was the deterioration in passenger car production and
shipments in the month (which had been improving).
At the broad EZ level, industrial production declined on a
monthly and annual basis across the main industries as well as across most member
states. As a result, the Q2 prelim GDP growth slowed/halved across the broader Eurozone
and prelim Q2 GDP declined in Germany – led by weaker trade.
UK data was mixed as we head into the final months leading
up to Brexit in Oct. Retail sales increased, but at a slower pace, due only to growth
in online sales. Consumer prices accelerated in Jul. The labour market outcome
for the Apr-Jun period indicated that despite faster employment growth, the larger
increase in participation resulted in a much smaller annual decline in total
unemployed persons. On a quarter basis, the increase in participation resulted
in a further increase in total unemployed.
In Aus, the monthly bus conditions survey deteriorated further – led by further falls in trading and employment conditions. A further decline in forward orders suggests little near-term improvement. Business confidence increased slightly. Wage growth in Q2 was constant for the private sector while public sector wage growth accelerated. The labour market report for Jul was mixed; while employment growth remains elevated, it is not growing fast enough to absorb the increase in participation, which reached another new all-time high. We’ve been noting the monthly increase in total unemployed persons for the last several months and this month, the labour market recorded the first annual increase in total unemployed persons in two years. The unemployment rate increased. This will be something that the RBA will continue to monitor closely. For the moment, the continued employment growth will remain a positive, but it will likely take time for any monetary stimulus to start to reduce unemployment and underemployment. Until then, it’s difficult to see wage growth accelerating in a consistent fashion to support consumption growth.
Data out of China continued to indicate weaker economic activity. New loan growth was much weaker than expected especially as demand for household and corporate loans fell compared to the prior month. Retail sales growth slowed in Jul. The slower growth in industrial production was consistent with the annual decline in the PPI reported last week indicating weaker demand conditions and the manufacturing PMI’s that remain in contraction.
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 19 August 2019 – The focus this week will be on central bank minutes, Jackson Hole, the G7 summit and the prelim PMI’s for Aug.
This week, minutes for
the most recent meetings of the US Fed, ECB and RBA will be released.
The Jackson Hole
Economic Symposium will commence this Thursday hosted by the Kansas City Fed.
The agenda is yet to be released but the key topic will be ‘challenges for
monetary policy’. Further details; https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2019
The G7 summit in France will commence on 24 Aug. The key topic will be dealing with inequality. It’s also likely that other issues will be discussed on the sidelines – including Brexit and trade negotiations. The invited guest countries are Australia, India, and Spain.
On the data front, we
will receive our first view of Aug activity with the prelim private sector
manufacturing and services PMI across the US, Europe, Japan (mfg), and Australia.
On trade negotiations,
it will be important to watch for progress on the US-Japan trade talks. Talks
will continue this week in Washington and are at an important stage in order to
reach a deal by the end of Sep. On other trade issues, US representatives will
continue to hold discussions with China this week in the hope of moving negotiations
forward. A decision by the WTO on the US-EU airline subsidy dispute is expected
shortly.
US Treasury issuance will be lighter but new money raised will remain elevated, in line with the increase in ST bills issuance and the recent suspension of the debt ceiling. The US Treasury will settle $182bn in ST bills raising approx. $37bn 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
by Kim | Aug 12, 2019
The weekly macro review for w/c 5 August 2019 – Tensions between the US and China escalated at the start of the week after the US announced plans to implement a further 10% tariff on imports from China. The USD/CNY moved above 7.00 for the first time in ten years – while no longer trading at its highs, the CNY fix remains above 7.00. A further round of trade talks between the US and China is scheduled for Sep after this next round of tariffs are implemented on 1 Sep.
This was the first of two weeks of economic data out of
China and data continues to indicate weaker growth. Producer prices for the
manufactured goods sector declined on an annual basis in Jul after slowing
consistently through the last year. Manufacturing activity overall continued to
contract, and services activity growth slowed. The Chinese trade surplus
increased further in Jul – the result of continued moderate growth in exports
and declining imports. The weaker import demand continues to hit trade partners.
The next round of tariffs on 1 Sep – some front loading in the Aug data is possible.
US data this week also continued to indicate a slowing of
activity. Services PMI’s showed that activity continued to grow but the pace remained
lower. Both ISM and Markit reports cited firms somewhat downbeat – with comments
remaining mixed about business conditions and the overall economy.
The US PPI showed that broadly, growth in US producers’ selling prices are continuing to slow – across both goods and services. Annual growth in the PPI has halved over the last year and the more underlying measure of producer prices (ex food, energy and trade) has also continued to slow also at a faster pace this month.
JOLTS data continued to deliver mixed results. The measures
of job openings and hires are now declining on a year ago basis. Separations
data is not so clear cut – firms were not reducing workforces, but workers were
also less inclined to voluntarily leave their jobs.
Data confirmed weaker manufacturing activity continued in Germany. While factory orders were stronger overall in Germany in Jun, it was led by non-Eurozone foreign countries and capital goods orders. Orders from the domestic market and Euro-area countries declined in the month. Overall industrial production in Germany fell harder in Jun and declined at an accelerated pace versus a year ago. The decline in production was broad with manufacturing, mining, and utilities all declining the month. Construction activity stabilized after a larger decline in the month prior.
We continue to track the data flow on Australia after recent stimulus measures. The RBA kept rates on hold this month after cutting in the two months prior. Housing lending growth started to pick up in the Jun data – which incorporates the first of the two recent rate cuts. New lending for housing remains 18% below a year ago and 26% below the peak. There was little improvement across the AiG performance of industry indices for Jul though. Manufacturing activity rebounded to moderate growth in the month but services and construction activity both deteriorated markedly. Only the new orders growth in manufacturing provides some hope that production will lift in the near future. The ongoing contraction in new orders across services and construction suggest little chance for a rebound in the near term.
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 12 August 2019 – Economic and sentiment data will be the key focus this week. Data out of the US, China, and Europe will be especially important in the context of slower growth and the escalation of trade tensions.
US data will continue to
track slowing production/activity growth and the impact on business and
consumer sentiment from the escalation in trade tensions with China. Of note
this week will be US industrial production for Jul, several regional surveys
with an early read on Aug activity, CPI, prelim consumer sentiment for Aug and
retail sales. US housing data will also be out this week, gauging the impact of
lower mortgage rates on housing activity.
This will be the second week of key economic data out of China for Jul – including retail sales, industrial production, and new loans.
This week we’ll see the impact of weaker manufacturing and
trade activity in Germany and across the Eurozone with prelim Q2 GDP growth. The
Zew survey will continue to provide some insight into economic sentiment.
UK data this week will focus on retail sales, the labour
market, and consumer and producer prices. Activity may start to lift as
preparations commence for the next Brexit deadline.
Important data this week for Australia includes the labour market survey and Q2 wages growth – two areas considered relevant by the RBA in relation to monetary policy at the moment.
US Treasury issuance will be heavier this week and the issuance of ST bills has increased in line with the recent suspension of the debt ceiling. The US Treasury will settle $286bn in ST bills, notes and bonds this week, raising approx. $54.6bn in new money. Approx. $54bn in US Treasury securities will mature on the Fed balance sheet on 15 Aug and will be rolled over at treasury auctions.
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
by Kim | Aug 5, 2019
The weekly macro review for w/c 29 July 2019 – The US Fed and the BoJ made changes to policy and guidance citing downside risks from weak global growth and trade policy uncertainty. The US Fed cut the FFR by 25bps and has ended quantitative tightening. The BoJ added to its guidance that “the bank will not hesitate to take additional easing measures” in the case where downside risks regarding developments from overseas economies are significant.
Both decisions were issued before the announcement made by
US President Trump that another 10% tariff would be applied on the remaining
$300bn of imports from China from 1 Sep. This has amounted to a re-escalation
of tensions with China. At the time of writing, China has allowed its currency
to fall through the 7.00 level and Chinese state-owned enterprises have been asked
to suspend the import of US agriculture products.
Uncertainty on trade and the implications for growth has
impacted firms and consumer sentiment.
Consumer sentiment data for Jul indicated that US consumers
had a ‘renewed sense of personal financial optimism’ – while there was no
expectation of a rapid acceleration in income, there was also no expectation of
changes in
inflation and unemployment rates. That said, US consumers are taking
precautionary measures and that policy uncertainties might outweigh any falls
in interest rates on spending decisions;
“Consumers have not ignored mounting policy uncertainties as they have begun to take precautionary measures to increase savings and reduce debt. Favorable buying attitudes toward homes and vehicles have significantly receded from their cyclical peaks despite declining interest rates.”
This sentiment mirrored the income and consumption data for
Jun – with incomes growing slightly faster and consumption expenditure growth
slowing. Savings increased.
For the Fed this week, the headline PCE price index growth
continued to slow, but core price growth increased at a faster pace to +1.6%.
Of note this week was US non-farm payrolls – the growth of which continues to slow. But the household employment survey is also showing some concerning employment trends – especially in the core working-age group of 25-54yrs with annual employment growth declining for the first time since 2013.
Growth of average weekly hours worked, and overtime hours of manufacturing employees are also starting to mirror the weaker manufacturing reports – both declined at an accelerated pace this month.
The Jul manufacturing and output data were mostly weaker. The ISM index continues to grow at a slower pace with firms reporting a notable slowdown in production and employment growth. Across most reports, with weaker new orders growth, production growth continues to be supported for the moment as firms work through order backlogs. Global risks, trade tensions, and lower growth expectations were the key concerns facing firms. The latest escalation with China this week will likely weigh further.
Trade concerns and slower global growth were also issues cited across the continued contraction of manufacturing activity across the broad Eurozone and Japan in Jul. Industrial production in Japan declined faster in Jun. Firms cited issues around China and escalating conflict with South Korea. In Europe, Q2 GDP growth slowed and both headline and core CPI growth also slowed.
Aussie CPI growth picked up slightly but growth in core
measures continued to slow led by lower growth in prices from the domestic
economy. Retail sales growth (vol) returned to positive territory but, despite
the election result and one rate cut, growth remains moderate. Annual growth in
retail sales volumes of just +0.2% is a new low in momentum since the GFC.
Late in the week, the US signed into law a two-year agreement that increases the US government’s borrowing limit and suspends the debt ceiling until Jul 2021. The US Treasury reissued the Q3 funding requirements with an additional $273bn in new money to be raised in Q3 (ST bills).
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 5 August 2019 – This week, the focus is on the re-escalation of trade tensions between the US and China and the implementation of punitive measures by both countries. The data so far suggests that the implications of the trade tensions and now, a further escalation including the currency depreciation by China, has wider-reaching economic impacts.
The RBA will announce its interest rate decision early this
week. The Q2 CPI from last week lifted slightly but core measures continued to slow
led by slower price growth from the domestic economy. Rates were cut at the
last two meetings and guidance suggested a ‘wait and see’ approach herein – but
the ASX 30-day interbank cash rate futures has shifted to a 50-50 chance of another
cut this week (as of 2 Aug) https://www.asx.com.au/prices/targetratetracker.htm
Other Aussie data of note; the AiG performance of industry
indexes and housing lending for Jun. The Jun data will incorporate the first of
the two recent rate cuts.
In the US, the focus will be on the ISM non-manufacturing
PMI, consumer credit and JOLTS data.
Across a range of economies, the services PMI’s will round
out the broader view of business activity.
Other important data points this week; Germany new orders
and industrial production, Japan prelim Q2 GDP, UK prelim Q2 GDP and a raft of data
out of China (trade, lending, CPI and PPI).
Treasury issuance will be lighter this week. The US Treasury will issue approx. $148bn in ST bills this week with a net paydown of $5bn. We expect to see further increases in the size of ST bill issuance in the following week due to the suspension of the debt ceiling.
More detail (including a calendar of events) is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jul 29, 2019
The weekly macro review for w/c 22 July 2019 – Data out this week confirmed lower US growth momentum. The Q2 advance GDP release showed that annual growth slowed to 2.1% (SAAR). Revisions to annual GDP growth had several impacts; the annual growth by quarter was revised higher between Q4 2016 and Q3 2018, while the latest Q4 2018 and Q1 2019 growth was revised notably lower and the overall shape of the trend shows that US growth has been slowing since Q2 2018.
The bright spot for the Q2 GDP release was the much faster
growth in personal consumption expenditure.
The data out this week for Jul, especially in manufacturing, indicates continued weakness. The prelim US composite PMI was little changed. Manufacturing activity slowed to zero growth – growth in new orders remains ‘marginal’, firms appear to be managing inventory in light of slower growth in orders and manufacturing employment indicators are weakening. Services activity improved but noted was the sharper fall in future business expectations.
The two US regional surveys for Jul showed manufacturing activity
contracting, with several key areas deteriorating markedly. The advance durable
goods orders for Jun showed a small, welcomed improvement in new orders for the
month.
Across the manufacturing releases in the US, the dynamic remains unchanged;
new orders growth has been slowing (if not declining) and shipment growth has slowed
but remains positive. In the absence of accelerating growth in new orders,
firms are working through order backlogs and this is helping to support output.
As an indicator of future output growth, new orders will remain a key focus.
In Europe, last weeks’ fall in the Zew
economic expectations index for Jul was backed up by further weakness in the prelim
PMI’s for Jul. Services activity slowed slightly but much weaker manufacturing
activity dragged the overall index lower. The broad Eurozone manufacturing
indicators remain concerning with stagnating growth in new orders and an
accelerated decline in new export orders. Unsurprisingly, future expectations for
output growth declined to the lowest levels since 2014. The prelim PMI’s for
the largest EU economy, Germany, showed that growth slowed more broadly across
both manufacturing and services in Jul.
While the ECB kept policy unchanged,
there was a significant shift in guidance signalling the likelihood of policy
easing in the near future;
“The Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020”
“In this context, the Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.”
Tensions between the US and EU continue to weigh on
sentiment. The EU expects the WTO to give the US approval to apply tariffs on
EU imports valued at between $5-7bn. The EU has a similar case pending against
Boeing. The US has already opened a second S.301 investigation to identify additional
EU products for tariffs.
In Australia, the RBA Governor, Philip Lowe, gave a speech on inflation and
inflation targeting. The main feature from a policy perspective was that
Governor Lowe provided some forward guidance on rates in Australia;
“Whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates.
In the UK, the leadership of the Conservative party was resolved as Boris Johnson won the PM ballot. Johnson has been a strong proponent of leaving the EU on 31 Oct with or without a deal. No details have been released regarding a restarting of negotiations with the EU on the withdrawal agreement. The UK government has instead committed to further spending in preparation for leaving the EU on 31 Oct.
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 29 July 2019 – A big week in the global macro sphere. Interest rate decisions will be announced by three major central banks this week – the BoJ, the BoE, and the FOMC.
It
is expected that the FOMC will cut rates by 25bps and, at this stage, there remains
a lower probability applied to a 50bps cut. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?utm_source=cmegroup&utm_medium=friendly&utm_campaign=fedwatch&redirect=/fedwatch
Of note this week will
be important data out of the US; non-farm payrolls and employment, personal
consumption expenditure, the PCE price index and consumer sentiment. We will
also get a further read on manufacturing activity with the ISM and Markit
Manufacturing PMI’s for Jul, the final factory orders data for Jun and several
regional surveys.
The final PMI’s for July
will also begin to be released this week across the major economies with
manufacturing in focus.
In Europe, Q2 GDP will
be published along with Jul prelim CPI.
In Australia, the
important Q2 CPI will be released along with retail sales. Both will be
important considerations for the RBA meeting on rates next week.
On trade, US and Chinese
officials will meet for the first time since the G20 on trade. Further meetings
with officials in Japan are also expected as officials agreed to ‘speed-up’ negotiations.
US Treasury supply will be heavier this week – the US Treasury will settle approx. $289bn in ST bills and coupons, raising approx. $20bn in new cash. As its also month-end, approx. $19bn in securities will mature on the Fed balance sheet. Of this, approx. $5.8bn will be reinvested.
More detail (including a calendar of events) is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jul 22, 2019
The weekly macro review for w/c 15 July 2019 – Speeches by US Fed officials created confusion over signalling this week. Chairman Powell signalled the likelihood of a rate cut at the next meeting. An expectation for a 50bp cut had somehow become embedded and the Williams speech was widely interpreted as signalling that the rate cut would be 50bps. This was then walked back. Current target rate probabilities continue to suggest that a 25bp cut is likely.
US data this week was better and absent was evidence of a deterioration in performance.
The first look at Jul manufacturing
data saw both regional surveys rebound. The Empire State headline index rebounded
back to positive territory – the outlook for 6-months ahead was more positive
while current conditions were slightly less positive – measures of demand
remained weaker and declining inventories suggested firms are still wary of
conditions. The Philly Fed rebound was very strong – new orders growth was very
strong and employment growth was a highlight.
It’s possible that the Jun-specific spike
lower in these regional surveys a response to the heightened uncertainty
created by the threat of tariffs on imports from Mexico (as well as the
uncertainty regarding US-China tariffs). That said, weaker manufacturing
conditions have persisted throughout 2019 – confirmed by the lower trend in the
ISM index, durable goods and also in the manufacturing component of the industrial
production report so far this year. Manufacturing output was slightly higher
this month but remains below the Dec 2018 peak. Overall industrial production growth
this month slowed to zero %.
On the consumer side, US retail sales continued to grow in Jun with sales increasing across many categories and more than offsetting a relatively large decline in the value of gasoline sales. The first look at consumer sentiment for Jul was little changed.
The improvement in retail sales over
the last few months has yet to impact inventories. The manufacturing and trade
inventories and sales data highlighted that despite an improvement in sales, the
sales to inventory ratio remained unchanged in May.
In Europe, economic expectations (Zew) fell further into
negative territory. There was no obvious trigger for the spike lower, instead;
“…the experts seem to lose confidence that current uncertainty factors like the trade conflict between China and the US, the design of Brexit and resolve the recent escalation in the Iran conflict in the medium term. The experts’ expectation of an imminent depreciation of the dollar against the euro is also likely to be a source of economic pessimism.”
Euro area CPI and core CPI both
increased at a faster pace in Jun. The ECB meets in the next week and there is some
uncertainty surrounding further monetary accommodations.
In Japan, both exports and imports
declined in Jun (versus a year ago), continuing the trend of weaker growth. CPI
growth and the BoJ measure of core CPI both slowed further in Jun. Core prices
excluding energy remained unchanged.
The RBA minutes indicated that the easing bias remains in place but expectations for a third cut in Aug are low. There was little change in the employment report – with the annual view of employment growth remaining positive. But the monthly trend of increasing unemployment continued. Employment growth in Australia will need to accelerate in order to a) continue to absorb the increase in participation and b) reduce unemployment at a faster pace.
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 22 July 2019 – There are no US Fed speeches scheduled ahead of the FOMC meeting next week.
The ECB meets this week on interest rates and monetary
policy – there is some uncertainty as to whether the ECB will apply further
accommodations in July.
Although it will be a quieter week on the data front, there are
several important releases this week.
We will get the first view of July manufacturing and services
activity with the prelim PMI’s released across the major markets.
In the US, the prelim Q2 GDP will be released later in the week along with the advance durable goods report for Jun. The PMI’s and regional surveys will help to clarify the extent to which weaker manufacturing results have persisted into July.
US earnings will remain in focus with both major tech and industrial
companies reporting earnings this week.
In the UK, the results of the ballot for the Conservative
Party leadership will be announced on Tuesday.
US Treasury supply will be lighter this week – the US Treasury will settle approx. $142bn in ST bills, with a net paydown of approx. $14bn.
More detail (including a calendar of events) is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
