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382 matches for " Q2":
Taken at face value, the preliminary estimate of Q2 GDP suggests that the economic recovery weathered Brexit risk well. But growth received support from some unsustainable sources, and also probably was boosted by a calendar quirk. Meanwhile, with few firms or consumers expecting a vote for Brexit prior to the referendum, Q2's brisk growth tells us little about how well the economy will cope in the current climate of heightened uncertainty.
China's Q2 real GDP growth officially slowed to 6.2% year-over-year, from 6.4% in Q1, which already matched the trough in the financial crisis.
We expect today's second estimate of Q2 GDP to confirm that the U.K. has been the slowest growing G7 economy this year.
On the face of it, June's retail sales figures suggest that households have splurged in Q2, re-energising GDP growth after its slowdown in Q1. Sales volumes rose by 0.6% month-to-month in June, completing a 1.5% quarter-on-quarter jump in Q2.
In one line: Germany edges closer to recession.
Capital outflow pressure is slowly rebuilding.
France is solidifying its position as one of the Eurozone's best-performing economies.
In one line: Decent July means net foreign trade unlikely to be a big drag on Q3 GDP growth.
Today's preliminary estimate of GDP likely will show that the economy continued to struggle in response to high inflation, further fiscal austerity and Brexit uncertainty.
In one line: Hit by slowdown in net trade and consumers' spending.
In one line: Don't panic; inventories are to blame for the below-consensus print.
In one line: Revisions to the saving ratio leave households looking better placed to weather a future storm.
In one line: The calm before the export storm?
In one line: Persistently large deficit leaves sterling vulnerable in a Brexit crisis.
In one line: A solid rebound but the trade war remains a key risk.
In one line: Hit by crash in net exports and slower growth in consumers' spending.
In one line: Avoiding a technical recession by small margin.
In one line: Disappointing, and the outlook remains challenging due to high external risks.
Japan's Q2 GDP was driven by the twin pillars of private consumption and capex.
Brazil's April economic activity index--a monthly proxy for GDP--surprised to the downside, again. The IBC-BR index was unchanged month-to-month but contracted a dreadful 4.8% year-over-year, down from a revised 3.2% contraction in March. These results imply Q2 GDP of about -1.9% quarter-on-quarter, much worse than the 0.2% contraction in Q1. The release offers no details, but the report signals a continued steep, steady deterioration.
Japan's tertiary index shows Q2 services strength was merely an April leap. Japan's PPI is slated for more deflation.
Japan: Monetary base growth slowed to 2.8% y/y in August, from 3.7% in July. Bloomberg reports no consensus, Korea: Q2 GDP growth was revised down to 1.0% q/q, from 1.1% in the preliminary report, below the no-change consensus. • Korea: CPI inflation fell to 0.0% in August, from 0.6% in July, below the consensus, 0.2%.
China's official real GDP growth likely slowed to 6.0% year-over-year in Q3, from 6.2% in Q2.
The preliminary April PMIs due today will provide the first economic sentiment data for Q2, and likely will point to a continuation of the cyclical recovery. We think the composite PMI was unchanged at 54.0 in April, driven by a small gain in manufacturing offset by a slight decline in services.
China's official GDP data, published on Monday, showed year-over-year growth edging down to 6.7% in Q2, from 6.8% in Q1.
GDP data for Q2 are due July 26; we expect the report to show a marginal dip in growth, to a seasonally adjusted 0.8% quarter-on-quarter, from 1.0% in Q1.
The headline in yesterday's ECB Q2 bank lending survey seemed almost tailor-made for the central bank to deliver a dovish message to markets this week.
Yesterday's barrage of French business sentiment data suggest that confidence in the industrial sector was a little stronger than expected in Q2.
Yesterday's final Q2 GDP report in Germany confirmed the initial data showing that the economy slowed less than we expected last quarter. Real GDP rose 0.4% quarter-on-quarter in Q2, after a 0.7% jump in Q1. The working-day adjusted year-over-year rate fell marginally to 1.8%, from 1.9% in Q1.
Yesterday's economic data added further evidence that GDP growth in the EZ will slow in Q2.
Yesterday's economic data provided further evidence that GDP growth in the EZ economy slowed in Q2.
Chinese real GDP growth reportedly edged down to 6.7% year-over-year in Q2, from 6.8% in Q1.
Today's construction data in the Eurozone will inject a dose of optimism amid the series of poor economic reports at the start of Q2.
Yesterday's EZ construction data confirmed that capex in the building sector plunged in the second quarter. Construction output fell 0.5% month-to-month in May, pushing the year-over-year rate up trivially to -0.8%, from a revised -1.0% in April. Our forecast for construction investment in Q2 is not pretty, even after including our assumption that production rebounded by 0.5% month-to-month in June.
German retail sales always have to be taken with a pinch of salt, given their monthly volatility and often substantial revisions, but the preliminary Q2 data don't look pretty.
Japan's real GDP seems unlikely to have risen in Q3, and could even have edge down quarter-on- quarter, after the 0.7% leap in Q2.
Japan's June retail sales data add to the run of numbers suggesting a strong rebound in real GDP growth in Q2, after the 0.2% contraction in activity in Q1.
Business surveys released over the last week have made us more confident in our call that quarter-on- quarter GDP growth will recover to about 0.4% in Q2, from Q1's weather-impacted 0.1% rate.
Markets likely will be particularly sensitive to May's industrial production and construction output figures, released today, as they will provide a guide to the strength of the preliminary estimate of Q2 GDP, released shortly before the MPC's key meeting on August 3.
New orders data indicate that German manufacturing enjoyed a strong start to the second quarter. Factory orders rose 1.4% month-to-month in April, equivalent to a modest 0.4% gain yearover- year, down from a revised 2.0% in March. The numbers put new orders on track for a solid 1.8% quarter-on-quarter gain in Q2--assuming no change in May and June--but these data are volatile, making this estimate highly uncertain.
German GDP growth jumped in the first quarter, but monthly economic data suggest the economy all but stalled in Q2. Yesterday's industrial production data are a case in point. Output slid 1.3% month-tomonth in May, pushing the year-over-year rate down to -0.4% from a revised 0.8% gain in April. Adding insult to injury, the month-to-month number for April was revised down by 0.3 percentage points
The Brazilian economy enjoyed a decent Q2, with GDP rising 0.2% quarter-on-quarter, despite the disruptions caused by the truck drivers' strike, after a 0.1% decline in Q1.
Colombian activity data released this week were weak, but mostly better than we expected. Real GDP rose 0.7% quarter- on-quarter in Q2, in contrast to the 0.3% fall in Q1, when the economy was hit by the lagged effect of last year's monetary tightening and the one-off VAT increase.
Japanese data continue to come in strongly for the second quarter. The manufacturing PMI points to continued sturdy growth, despite the headline index dipping to 52.0 in June from 53.1 in May. The average for Q2 overall was 52.6, almost unchanged from Q1's 52.8, signalling that manufacturing output growth has maintained its recent rate of growth.
The German statistical office will supply a confidential estimate to Eurostat for this week's advance euro area Q2 GDP data. Our analysis suggests this number will be grim, and weigh on the aggregate EZ estimate. Our GDP model, which includes data for retail sales, industrial production and net exports, forecasts that real GDP in Germany contracted 0.1% quarter-on-quarter in the second quarter, after a 0.7% jump in Q1.
Data released this week confirmed that economic activity deteriorated sharply in Argentina in Q2.
Korean GDP data for Q2, released yesterday, were largely in line with our expectations, in that net exports cushioned softer domestic demand.
Today's Eurozone data schedule is very hectic, but attention likely will focus on advance Q2 GDP data. France, Austria and Spain will report advance data separately ahead of the EZ aggregate estimate, which is released 11.00 CET. This report will include a confidential number from Germany.
The preliminary estimate of Q2 GDP, published today, likely will show that growth was immaterially different from Q1's 0.4% quarter-on-quarter rate. But this should not be interpreted as a sign that the economy will be able to shrug off the impact of last month's vote to leave the E.U.
We're nudging down our estimate of Q2 GDP growth, due today, by 0.3 percentage points to 1.8%, in the wake of yesterday's array of data.
China's official manufacturing PMI slipped in June, but the overall picture for Q2 is sound despite the uncertainty posed by rising trade tensions with the U.S.
Last week's industrial production and construction output figures for May were surprisingly weak. They have compelled us to revise down our expectation for the preliminary estimate of Q2 GDP to 0.2% quarter-on-quarter, from 0.3% previously.
Revisions to Japan's real GDP growth, on Monday, left Q2 blisteringly hot.
This is the final report before your Eurozone correspondent dials down for the summer, and heads for the beach. Advance Q2 GDP data next week is the key release while we are away, with the latest Bloomberg consensus--published July 20th--looking for a 0.4% increase quarter-on-quarter. Everything we look at suggests the consensus is right on this one, with risks tilted to the upside due to strong net exports in Germany.
Friday's data deluge suggests that EZ economic growth slowed less than we expected in the second quarter. The advance estimate indicates that real GDP in the euro area rose 0.3% quarter-on-quarter in Q2, down from a 0.6% jump in the first quarter. This was in line with the consensus, but it likely doesn't tell the whole story.
Yesterday's second EZ Q2 GDP report was slightly more upbeat than the advance estimate.
Yesterday's first estimate of Q2 GDP in Mexico confirmed that the economy lost momentum in recent months.
Brazil's economic situation has improved this year, and we still expect the recovery to continue over the second half, despite recent political volatility and soft Q2 data.
China's Q2 official GDP growth, to be released on Monday, likely slowed to 6.2% year-over-year, from 6.4% in Q1.
The Q2 GDP figures show that the economy has little underlying momentum.
Last week's consumption releases were the first data from the real economy in the second quarter. In Germany, retail sales jumped 1.7% month-to-month in April, equivalent to a 1.0% rise year-over-year, an impressive start to the quarter. But our first chart shows that this still points to a moderate slowdown in Q2, consistent with mean-reversion following rapid gains in Q4 and Q1.
A rebound in quarter-on-quarter growth in households' spending in Q2, following the slowdown to just 0.2% in Q1, looks less likely following April's money data.
Japanese domestic demand probably strengthened in Q2, with both private consumption and fixed investment accelerating. Trade and inventories are the key swing components for GDP growth.
Friday's data provided the first bit of evidence that manufacturing in the Eurozone is headed for a slowdown in Q2, partly reversing the strength in Q1.
Q2's GDP figures create a terrible first impression, but a closer look suggests that the risk of a recession remains very low.
The rebound in GDP growth in the second quarter seems not to have been enough to prevent year-over-year productivity growth slowing to about zero. The consensus forecast for the first estimate of Q2 productivity growth, due today, is a 1.6% annualized increase, pushing the year-over-year rate down to 0.3% from 0.6% in the first quarter, but we think this is too optimistic.
Markets usually ignore the monthly import price data, presumably because they are far removed, especially at the headline level, from the consumer price numbers the Fed targets.
Headline Eurozone PMI data have declined steadily since the beginning of the year, but the June numbers stopped the rot.
The BoJ kept policy unchanged yesterday, with the policy balance rate remaining at -0.1% and the 10-year yield target remaining around zero.
The trade war with China is not big enough or bad enough alone to push the U.S. economy into recession.
We have argued consistently for some time that the next year will bring a clear acceleration in U.S. wage growth, because the unemployment rate has fallen below the Nairu and a host of business survey indicators point to clear upward wage pressures. Nominal wage growth has been constrained, in our view, by the unexpected decline in core inflation from 2012 through early 2015, which boosted real wage growth and, hence, eased the pressure from employees for bigger nominal raises.
We were surprised to see Japan's services PMI edging up to 51.9 in June, from 51.7 in May. We attributed apparent service sector resilience in April and May to the abnormally long holiday this year.
German inflation data are more noise than signal at the moment.
China's September imports missed expectations, but commentators and markets tend to focus on the year-over-year numbers.
In one line: A bold cut to help the economic recovery, more to come.
Mrs. May looks set to lose the second "meaningful vote" on the Withdrawal Agreement-- WA--today, whether she decides on a straightforward vote or one asking MPs to b ack it if some hypothetical concessions are achieved.
We can't finalize our forecast for residential investment in the second quarter until we see the June home sales reports, due next week, but in the wake of yesterday's housing starts numbers we can be pretty sure that our estimate will be a bit below zero.
Evidence of slowing economic activity in Colombia continues to mount. Retail sales fell 2.0% year- over-rate in April, down from a revised plus 3.0% in March; and the underlying trend is falling. This year's consumption tax increase, low confidence, tight credit conditions, and rising unemployment continue to put private consumption under pressure.
On the face of it, British manufacturers are weathering the global slowdown well. The Markit/CIPS PMI jumped to 55.1 in March, from 52.1 in February, and now comfortably exceeds those for the Eurozone, U.S. and Japan.
Growth in Eurozone car sales slowed slightly at the end of the first quarter. New car registrations in the euro area rose 5.8% year-over-year in March, down from a 14.4% increase in February. But the 12-month average level of new registrations jumped to new cyclical highs of 440,000 and 252,000 in the core and periphery respectively.
The construction sector in the Eurozone probably stumbled in March. Advance data for the major economies suggest that output fell 1.2% month-to-month, pushing the year-over-year rate down to 1.6% from 2.4% in February.
If we're right in our view that the strength of the dollar has been a major factor depressing the rate of growth of nominal retail sales, the weakening of the currency since January should soon be reflected in stronger-looking numbers. In real terms--which is what matters for GDP and, ultimately, the lab or market--nothing will change, but perceptions are important and markets have not looked kindly on the dollar-depressed sales data.
Economic data in Brazil over the second quarter were relatively positive, and June reports released in recent weeks, coupled with leading indicators for July, are encouraging.
When the advance estimate of first quarter GDP growth is revised, on May 29, we expect the new data to show that net foreign trade subtracted an enormous 1.9 percentage points from growth. With GDP likely to be revised down to -0.7% from +0.2%, that means domestic demand likely will be reported up 1.2%.
Eurozone inflation pressures remained subdued in April. Today's final data likely will show that inflation fell to -0.2% year-over-year in April, from 0.0% in March. The main story in this report will be the reversal in services inflation from the March surge, which was due to the early Easter.
China's real GDP growth was unchanged at 6.4% year-over-year in Q1, above the consensus for a slowdown to 6.3%.
Momentum in the EZ auto sector rebounded at the end of the second quarter.
We are becoming increasingly convinced that momentum is starting to build in the housing market. That might sound odd in the context of the recent trends in both new and existing home sales, shown in our first chart, but what has our attention is upstream activity.
Final inflation in the Eurozone was confirmed at 0.0% year-over-year in April, up slightly from -0.1% in March. The recovery since the trough in January has been driven mostly by a reduced drag from lower energy prices, a trend which should continue in the second quarter.
With the MXN up more than 7% since the low of 21.9 against the dollar in January, investors are pondering just how high the Mexican currency can go. We believe that the MXN will continue to hover around its recent range, 20.1-to-20.5, in the near term, but will come under pressure again as protectionist policies in the U.S. take real shape in the spring or summer.
Looking back at the numbers over the past few weeks, it is pretty clear that the gap between the strong payroll reports and the activity data widened to a chasm in the first quarter. We now expect GDP growth of about zero--the latest Atlanta Fed estimate is +0.3% and the New York Fed's new model points to 0.8%--but payrolls rose at an annualized 1.9% rate.
Korea's preliminary export numbers rebounded quite spectacularly in June, with growth at 24.4% year-on-year, compared with just 3.4% in May. This reading is important as it comes early in the monthly data cycle. Korea's position close to the beginning of the global supply chain, moreover, means its exports often lead shifts in global trade.
The Eurozone's current account surplus extended its decline in May, falling to a nine-month low of €22.4B, from €29.6B in April.
Back on May 14, we argued--see here--that the stars were aligned to generate very strong second quarter GDP growth, perhaps even reaching 5%.
We still don't have the complete picture of what happened to EZ consumers' spending in Q1, but the initial details suggest that growth acceleretated slightly at the start of the year.
The Eurozone's external surplus fell further at the end of Q1, and has now fully reversed the jump at the start of the year.
Forecasting BoJ policy for this year is trickier than it has been in a long time.
March auto sales were much weaker than expected, falling by 5.5% month-to-month to a 25-month low, 16.5M. The average for the previous six months was 17.8M. The sudden drop in March likely was driven in large part by the huge snowstorm which tracked across the Northeast in the middle week of the month, so we think a decent rebound in April is a good bet.
Markets weren't impressed by the sub-consensus consumption numbers for April, reported yesterday, but the undershoot was all in the we ather-related utility component, where spending plunged 5.1% month-to-month. The process of post-winter mean reversion is now complete.
Korean exports continued to fall year-over-year in April, but the story isn't as bleak as the headlines suggest.
Inflation in Brazil remained subdued at the start of the second quarter, strengthening the odds for an additional interest rate cut next month, and opening the door for further stimulus in June.
Argentina's latest hard data suggest that activity is softening, but we don't see the start of a renewed downtrend.
Yesterday's final May manufacturing PMIs confirmed that the EZ industrial sector is in fine form. The PMI for the euro area was unchanged at a cyclical high of 57.0 in May, in line with the initial estimate.
China's industrial production grew at an annualised 7.2% rate by volume in Q1, according to our estimates, up from an average 5.9% rate in the six quar ters through mid-2016.
Swings in energy output continue to add volatility to French manufacturing data. Industrial production fell 0.9% month-to-month in April, equivalent to a 0.1% fall year-over-year. This was a weak report, even if we factor in the 0.3% upward revision to the March numbers,but it was also he avily tainted by a 10.8% month-to-month collapse in oil refining.
April's GDP data give a grim firs t impression, though the details provide reassurance that the economy isn't on the cusp of a recession.
The German trade data on Friday completed a poor week for economic reports in the Eurozone's largest economy. The seasonally adjusted trade surplus fell to €22.1B in May, from €24.1B in April, mainly due to a 1.8% month-to-month fall in exports. Imports, on the other hand, were little changed.
French manufacturing came roaring back at the end of Q1. Industrial production jumped 2.0% month-to- month in March, driving the year-over-year rate higher to +2.0%, from a revised -0.7% in February.
We fully expect to learn today that import prices rose in March for the first time since June last year. Our forecast for a 1% increase is in line with the consensus, but the margin of error is probably about plus or minus half a percent, and an increase of more than 1.2% would be the biggest in a single month in four years. Most, if not all, of the jump will be due to the rebound in oil prices.
Official, real GDP growth was low in Q1, at 1.4% quarter-on-quarter, down from 1.6% in Q4.
Yesterday's data showed that industrial production in the Eurozone accelerated at the end of spring. Output, ex-construction, jumped 1.3% month-to-month in May, much better than the downwardly-revised 0.3% rise in April; the rise pushed the year-over-year rate up to a six-year high of 4.0%.
Inflation in Mexico fell significantly in September. Data yesterday showed that the CPI rose just 0.3% month-to-month, pushing the year-over-year rate down to 6.4% from 6.7% in August, its highest level in 16 years.
The French manufacturing sector slowed more than we expected in Q1.
Headline inflation in the Eurozone eased at the start of the year, but leading indicators suggest that the dip will be short-lived.
Just two components of first quarter GDP were weak enough together to depress growth by 2.0 percentage points. Net foreign trade subtracted 1.25 percentage points, while falling investment in non-residential structures reduced growth by 0.75pp.
The first look at real consumers' spending for the second quarter will be discouraging, at least at the headline level. We expect to see a 0.1% month-to-month decline in real consumers' spending in April, below the +0.1% consensus.
Chile's April retail sales data, released on Monday, show that private consumption started the second quarter on a solid footing. Sales rose 3.0% month-to-month, pushing the year-over-rate up to 7.9% from 1.4% in March and an average of 4.0% in Q1. The headline was boosted by a favourable calendar effect, as April this year had two more trading days than April 2015.
Germany's external balance was virtually stable at the beginning of the second quarter. The seasonally adjusted trade surplus rose marginally to €23.9B in April from a revised €23.7B in March, mainly due to weakness in imports. Demand for goods abroad fell 0.2% month-to-month, which pushed up the surplus despite amid unchanged exports. Imports fell 1.5% year-over-year in April, up slightly from a 2.5% decline in March.
Friday's industrial production reports in the Eurozone were sizzling. In Germany, headline output rose 1.2% month-to-month in May--after a downwardly-revised 0.7% rise in April--which pushed the year-over-year rate up to a six-year high of 4.9%.
Yesterday's economic data in Brazil suggest that retailers suffered in the second quarter, hit by the effect of the truckers' strike, but private consumption remains somewhat resilient.
Manufacturing in the Eurozone rebounded midway through the second quarter.
The gap between the official measure of the rate of growth of core retail sales and the Redbook chainstore sales numbers remains bafflingly huge, but we have no specific reason to expect it to narrow substantially with the release of the April report today.
Recent industrial data for Mexico point to renewed upside risks for GDP growth, despite the likely headwind to consumption from high inflation and depressed confidence.
Brazil's retail sales improved at the start of the second quarter, increasing 0.5% month-to-month in April, partially reversing the 0.9% contraction in March. But the details were less upbeat than the headline.
Yesterday's wave of data suggested that a good part of the strength in final demand in the second quarter was sustained into the first month of this quarter, and perhaps the second too.
Net exports should come roaring back as a driver of Eurozone GDP growth in the second quarter. The euro area trade surplus leapt to €24.3B in April, a new all-time high, up from a revised €19.9B in March. A 1.7% month-to-month fall in imports--mean-reversion from a 3.9% increase in March--was a big contributor to the higher surplus.
Yesterday's economic reports confirmed that the Eurozone economy had a strong start to 2017. Real GDP rose 0.5% quarter-on-quarter in Q1, similar to the pace in Q4, and consistent with the first estimate. The year-over-year rate fell marginally to 1.7%, from 1.8% in Q4, mainly due to base effects.
Leading indicators and survey data in Brazil still suggest a rebound from the relatively soft GDP growth late last year and in Q1.
The June batch of the French statistical office's business surveys continues to signal a firming cyclical recovery. The aggregate business index rose to cyclical high of 106 in June from a revised 105 in May, continuing an uptrend that began in the middle of 2016.
Yesterday's industrial production report was grim reading, with volatility in Greece and the Netherlands, as well as revisions, throwing off our own, and the market's, forecasts. Output fell 0.4% month-to-month in May, well below the consensus and our expectation for a 0.2% rise, pushing the year-over-year rate higher to 1.6%, from a revised 0.9% in April.
Activity in the Eurozone industrial sector cooled at the end of the first quarter. Manufacturing production declined 0.8% month-to-month in March, pushing the year-over-year rate down to 0.2% from a revised 1.0% in February. Over Q1 as a whole, though, the story was positive.
As we go to press, Mrs. May's last-minute scramble to Strasbourg appears to have failed to persuade enough rebels to back the government.
Data yesterday showed that industrial production in the Eurozone stumbled in May. Production fell 1.2% month-to-month, driven by weakness in all major economies and falling output in all sub-industries. The poor headline follows an upwardly revised 1.4% jump in April, which means that production rose marginally in the first two months of the second quarter.
Data today likely will show that manufacturing in the Eurozone was off to a strong start to the second quarter. Advance country data suggest that industrial production jumped 1.1% month-to-month in April, pushing the year-over-year rate up to 1.9% from 0.1% in March. The rise in output was driven mainly by Germany and France, but decent month-to-month gains in Ireland, Portugal and Greece also helped.
Last week's industrial report confirmed that the Mexican economy softened at the end of the second quarter. Industrial production was unchanged year- over-year in June, calendar-and seasonally adjusted, down marginally from +0.1% in May.
Data on Friday showed that the upturn in French manufacturing petered out at the end of Q1.
Data today likely will show that the seasonally adjusted trade surplus in the Eurozone jumped to €23.0B in March, from €20.2B in February. The headline was boosted, though, by sharp month-to-month falls in German and French imports, partly due to the early Easter.
We are revising our forecast for Fed action this year, taking out two of the four hikes we had previously expected. We now look for the Fed to hike by 25bp in September and December, so the funds rate ends the year at 0.875%. The Fed's current forecast is also 0.875%, but the fed funds future shows 0.6%.
We've been surprised by the fast rate of Japanese GDP growth in the first half, though the Q1 pop merely was due to a plunge in imports.
Activity surveys picked up across the board in April, offering hope that the slowdown in GDP growth--to just 0.3% quarter-on-quarter in Q1-- will be just a blip. The headline indicators of surveys from the CBI, European Commission, Lloyds Bank and Markit all improved in April and all exceeded their 2004-to-2016 averages.
The latest drop in crude oil prices me ans that sub-zero headline CPI inflation in the spring is now more likely than not. We expect a lurch down from November's 1.3% to 0.7% in December, then 0.3% in January. The rate will remain close to that level for the next few months before hitting zero in May and slipping into negative territory--just--in June and July.
Eurozone consumers had a slow start to the second quarter. Retail sales increased a modest 0.1% month- to-month in April, but the March headline was revised up by 0.3 percentage points, and the year-over-year rate increased by 0.2pp to 1.7% due to base effects.
CPI inflation was steadfast at 1.9% in March, undershooting the consensus and our forecast for it to rise to 2.0%.
The forecasts compiled by Bloomberg for today's June German factory orders data look too timid to us. The consensus is pencilling in a 0.5% month-to month rise, which would push the year-over-year rate down to -2.1%, from zero in May. But survey data point to an increase in year-over-year growth, which would require a large month-to-month rise due to base effects from last year.
The relative strength of the investor and consumer confidence reports for March, released this week, signal a better outlook for the Mexican economy.
Colombia's second quarter GDP data, released Monday, revealed a dismal 2.0% year-over-year growth rate, down from 2.5% in Q1. GDP rose by a very modest 0.2% quarter-on-quarter, for the second consecutive quarter. The year-over-year rate was the slowest since the end of the financial crisis, but it is in line with our 2.1% forecast for this year as a whole.
Argentina's Recession Has Ended, Supporting Mr. Macri's Odds
June's money and credit figures showed that the economy still doesn't have much zing, even though lending has picked up since Q1.
The downbeat tone of Markit's May manufacturing survey shouldn't come as a surprise, given the weak global backdrop and the inevitable fading of the boost to output from Brexit preparations.
The April foreign trade numbers strongly support our view that foreign trade will make a hefty positive contribution to second quarter GDP growth, after subtracting a massive 1.9 percentage points in the first. The headline April deficit fell further than we expected, thanks in part to an unsustainable jump in aircraft exports and a decline in the oil deficit, but the big story was the 4.2% plunge in non- oil imports.
A plunge in imports saved the EZ economy from a contraction in second quarter GDP. Yesterday's final data showed that real GDP growth rose 0.3% quarter- on-quarter, slowing from a 0.5% jump in Q1. A 0.4 percentage points boost from net exports was the key driving force.
The return to normal in the March payroll numbers, with a 196K headline increase, is another nail in the coffin of the "imminent recession" theory.
Friday's industrial production data in Germany added to the manufacturing optimism following the sharp rise in new orders--see here--reported earlier in the week.
Brazil's recent data show that inflation is still falling, allowing the central bank to ease further next month, while economic activity is improving, though the rate of growth has slowed.
Economic reports released yesterday indicate that the German economy was off to a solid start early in the second quarter. Industrial production rose 0.9% month-to-month in April, equivalent to a 1.4% increase year-over-year, up from a revised tiny 0.2% gain in March. This is the biggest annual jump in production since July last year, but the underlying trend is turning up only slowly, in line with the moderate improvement in survey data this year.
If the Redbook chain store sales survey moved consistently in line with the official core retail sales numbers, it would attract a good deal more attention in the markets. We appreciate that brick-and-mortar retailers are losing market share to online sellers, but the rate at which sales are moving to the web is quite steady and easy to accommodate when comparing the Redbook with the official data.
Industrial production data in Germany continued to defy the signal of doom and gloom from leading indicators.
Economic growth in Chile slowed in Q1, despite a relatively strong end to the quarter, and the chances of an accelerating recovery remains disappointingly low, due to both global and domestic headwinds.
April's production data, released today, look set to indicate that the industrial sector's recession--its third in the last eight years--deepened in the second quarter. We think the consensus expectation that industrial production held steady in April is too upbeat. We look for a 0.3% month-to-month drop.
German GDP growth likely accelerated in the second quarter, following a disappointing 0.3% quarter-on-quarter expansion in Q1. Growth in the manufacturing sector remains modest, and the trend in consumers' spending remains solid. Industrial production was unchanged in May, pushing year-over-year growth to 2.1% from a revised 1.1% in April.
Odds-on, the consensus forecast for May's GDP report, released on Wednesday, will miss the mark.
New orders data increasingly suggest that German manufacturers all but shut their production lines at the start of the year.
The latest iteration of the Atlanta Fed's GDPNow model of second quarter GDP growth shows the economy expanding at a 4.5% annualized rate.
The third estimate of euro area growth in the first quarter provides clear evidence that measuring GDP is not an exact science. Real GDP rose 0.6% quarter-on-quarter in Q1, accelerating from 0.4% in Q4. This latest estimate is higher than the previous estimate, 0.5%, but in line with the first calculation. Eurostat and all the large Eurozone economies now provide early estimates of GDP, before data for the full quarter is available.
Manufacturers in the Eurozone are still suffering, but yesterday's final PMI data for April offered a few bright spots.
Markets often pay little attention to the monthly foreign trade numbers, but today's May data are important because they could easily make a big difference to expectations for second quarter GDP growth. The key question is the extent to which exports have recovered since the port dispute on the West Coast, which severely distorted trade flows in the early part of the year.
The IFO did its part to alleviate the stock market gloom yesterday, with the business climate index rising slightly to 108.3 in August from 108.0 in July. The August reading doesn't reflect the panic in equities, though, and we need to wait until next month to gauge the real hit to business sentiment. The increase in the headline index was driven by businesses assessment of current output, with the key expectations index falling trivially to 102.2 from a revised 102.3 in July. This survey currently points to a stable trend in real GDP growth of about 0.4% quarter-on-quarter, consistent with our expectation of full year growth of about 1.5%.
We're expecting to learn today that the economy expanded at a 2.6% annualized rate in the first quarter, rather better than we expected at the turn of the year--our initial assumption was 1-to-2%--and above the consensus, 2.3%.
The INSEE's manufacturing sentiment data in France are slightly confusing at the moment.
Yesterday's ECB meeting was comfortably uneventful for markets.
India's GDP report for the second quarter, due on Friday, is likely to show a decent rebound in growth from the first quarter.
Detailed GDP data yesterday showed that the domestic German economy fired on all cylinders in the first quarter. Real GDP rose 0.7% quarter-on-quarter in Q1, up from 0.3% in Q4, lifted by strong investment and spending. Domestic demand rose 0.8%, only slightly slower than the 0.9% ris e in the fourth quarter. Net exports fell 0.3%, a bit better than in Q4, when gross exports fell outright.
The IFO continues to tell a story of a German economy on the ropes.
Inflation pressures in the Eurozone are building rapidly, setting up an "interesting" ECB meeting next week. Yesterday's advance CPI report showed that inflation edged up further in February to 2.0%, from 1.8% in January. The headline rate is now in line with the ECB's target, and up sharply from the average of 0.2% last year.
After strong real GDP growth in Q1, China commentators called the peak, claiming that growth would slow for the rest of 2017.
The June durable goods, trade and inventory reports today, could make a material difference to forecasts for the first estimate of second quarter GDP growth, due tomorrow.
Data released yesterday in Mexico strengthened the case for interest rate cuts this year.
Yesterday's raft of data had no net impact on our forecast for second quarter GDP growth, which we still think will be about 21⁄4%.
The economy's resilience in the first quarter of this year, in the midst of heightened Brexit uncertainty, can be attributed partly to a boost from no-deal Brexit precautionary stockpiling.
Money supply data today should provide further confirmation of a moderate upturn in the Eurozone credit cycle. We think broad money growth, M3, accelerated to 5.0% year-over-year in April, up from 4.6% in March.
The biggest single driver of the downward revision to first quarter GDP growth, due this morning, will be the foreign trade component. Headline GDP growth likely will be pushed down by a full percentage point, to -0.8% from +0.2%, with trade accounting for about 0.7 percentage points of the revision.
We expect China's quarterly real GDP growth in the second quarter to edge down from Q1, but only because Q1 growth was unsustainable. The official data shows real GDP growth at 1.3% quarter-onquarter in Q1.
We were a bit surprised to see our forecast for the April trade deficit is in line with the consensus, $44B, down from $51.4B in March, because the uncertainty is so great. The March deficit was boosted by a huge surge in non-oil imports following the resolution of the West Coast port dispute, while exports rose only slightly. As far as we can tell, ports unloaded ships waiting in harbours and at the docks, lifting the import numbers before reloading those ships.
We think today's consumer sentiment survey in France will show that the headline index was unchanged at 94 in May. The survey's forward looking components have weakened modestly in recent months, due to declines in households' outlook for their financial situation and standard of living in the coming 12 months.
Last week's second estimate of GDP reaffirmed that quarter-on-quarter growth declined to 0.1% in Q1--the lowest rate since Q4 2012--from 0.4% in Q4.
Brazil's recession eased considerably in the first quarter, due mainly to a slowing decline in gross fixed capital formation, a strong contribution from net exports, and a sharp, albeit temporary, rebound in government spending. Real GDP fell 0.3% quarter-on-quarter, much less bad than the revised 1.3% contraction in Q4.
Whatever number the BEA publishes this morning for first quarter GDP growth -- we expect zero -- you probably should add about one percentage point to correct for the persistent seasonal adjustment problem which has plagued the data for many years. Reported first quarter growth has been weaker than the average for the preceding three quarters in 21 of the 31 years since 1985 -- and in eight of the past 10 years.
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
Yesterday's detailed GDP data in Germany confirmed that the economy shrank slightly in the second quarter, by 0.1% quarter-on-quarter, following the 0.4% increase in Q1.
The expectations components of both the Michigan and Conference Board measures of consumers' confidence have risen sharply since gasoline prices rolled over.
We covered the detailed German Q1 GDP report in Friday's Monitor--see here--but the investment data could do with closer inspection. The headline numbers looked great.
In one line: Lower energy prices push inflation down at the end of Q2.
In one line: Pronounced weakness in Q2 likely a consequence of the original Brexit deadline.
In one line: Little sign of the feared trade hit on Q2 GDP growth, so far.
In one line: The import surge will unwind in Q2.
In one line: Q1 net trade hit confirmed; a rebound in Q2?
In one line: Capex orders and trade are net neutral for Q2 GDP estimates.
In one line: A soft start to Q2, following an ugly Q1.
In one line: A bad-looking start to Q2, but the y/y rate was hurt by an unfavourable base effect.
In one line: Trade will be a small drag on Q2 GDP growth.
In one line: Lower energy prices push inflation down at the end of Q2.
In one line: An ugly end to the first quarter, but output likely will stabilize in Q2.
In one line: Ignore the un-adjusted headline; production did well at the start of Q2.
In one line: Poor, growth slowed rapidly in Q2.
In one line: Not pretty; sales fell over Q2 as a whole.
Back to 2014/2015 for China? A Weak Q3 for Japan, After Rocket-Charged Q2...The BOK Will Kick Its Rate Hike Into the Long Grass
Markets are still cheering the solid Q1 GDP data...but we are worried about a setback in Q2
Strong real M1 growth suggests the cyclical recovery is in good shape. But recent economic data indicate GDP growth slowed in Q4, and survey evidence deteriorated in January. This slightly downbeat message, however, is a far cry from the horror story told by financial markets. The recent collapse in stock-to-bond returns extends the decline which began in Q2 last year, signalling the Eurozone is on the brink of recession.
Final Italian Q4 GDP data on Friday confirmed that the economy stumbled at the year-end. Real GDP rose 0.1% quarter-on-quarter in Q4, slowing from 0.2% in Q3, in line with the initial es timate. But the details were better than the headline. Inventories shaved off a hefty 0.4 percentage points, reversing boosts in Q3 and Q2, so final demand rose a robust 0.5%. Consumption added 0.2pp, while public spending contributed 0.1pp.
China's official manufacturing PMI, published on Monday, implies the industrial complex has maintained momentum going into Q3. The official manufacturing PMI moderated slightly to 51.4 in July from 51.7 in June. The July reading was unchanged from the average in Q2 and only modestly down from the 51.6 in Q1.
The economy is struggling to rebound in Q2...an August rate hike is far from a done deal
Eurozone GDP growth likely slowed in Q2...teeing up a deposit rate cut in September
The EZ economy finally stretches its legs...but it won't sustain Q1 and Q2 momentum for long
In one line: Consumption on track for 3-to-3.5% in Q2; core inflation mean-reverting.
Chia faces a u-shaped recovery..Japan's domestic demand strentgh is fragile...The bank of Korea is likely to pause, for now...Expect a respectable Q2 GDP rebound in India
Q2 slowdown in the EZ economy confirmed...Now we wait for the ECB's response next month
After June respite, China will hit Q3 headwinds...Japan probably dodged a Q2 GDP contraction...The BOK's surprise cut in July is a one-and-done...The case for additional RBI cuts narrows further
In one line: Core PCE deflator back on track; Q2 consumption headed for 3%.
In one line: Consumers on track for a solid Q2; services inflation on the rebound?
Eurozone consumers' spending jumped in Q2, but we are pretty certain that a slowdown in retail sales constrained growth in Q3.
April's public finances indicate that the economy has remained weak in Q2, casting doubt on the suggestion from recent business surveys that the slowdown in Q1 was just a blip.
The PMI survey yesterday painted a more upbeat picture on the Eurozone economy than we expected. The composite index rose to 54.1 in June from 53.6 in May, taking the quarterly average to its highest level since Q2 2011.
Last week's advance PMI data suggest that economic activity in the Eurozone was stable at the beginning of Q2. The composite EZ PMI fell trivially to 53.0 in April, from 53.1 in March, because a dip in manufacturing offset a small rise in the services index.
The four-quarter average growth trend in private investment, excluding dwellings, fell to 0.1% in Q4, and the recent improvement in the PMIs indicates only a modest upturn in Q2. The dearth of investment by non-financial corporates remains one of the biggest threats to long-term growth in the Eurozone.
Yesterday's German IFO survey suggests that economic momentum in the Eurozone's largest country remained modest at the start of Q2. The headline business climate index fell trivially to 106.6 in April, from 106.7 in March, lower than the consensus expectation of an increase to 107.2.
Japan's September PMI report showed some slippage, but overall, it suggests that GDP growth in Q3 was a little stronger than the 0.3% quarter- on-quarter rate in Q2.
Yesterday's economic data in Germany confirmed that the economy slowed in Q3, but also added to the evidence that growth will rebound in Q4. The second estimate for Q3 showed that real GDP rose 0.2% quarter-on-quarter, slowing from a 0.4% gain in Q2.
Data released yesterday support our view that the Brazilian retail sector has gathered strength in recent months, following a weak Q2, when activity was hit by the truckers' strike.
Our base case remains that the slowdown in quarter-on-quarter GDP growth to about zero in Q2 is just a blip, and that the economy will regain momentum in Q3 and sustain it well into 2020.
China's real GDP growth officially slowed to 6.5% year-over-year in Q3, from 6.7% in Q2.
The sharp currency sell-off in Q2 and Q3, the financial crisis and tighter monetary and fiscal policies have pushed the Argentinian economy under stress since Q2.
We have to pinch ourselves when looking at economic data in Spain at the moment. Real GDP rose a dizzying 0.9% quarter-on-quarter in Q1, driven by solid gains of 0.7% and 1.1% in consumer's spending and investment respectively. Retail sales and industrial production data indicate GDP growth remained strong in Q2, even if survey data lost some momentum towards the end of the quarter. We will be looking for signs of further moderation in Q3, but surging private deposit growth indicate the cyclical recovery will continue.
Japan's GDP growth came roaring back in Q2, thanks to a strong rebound in private consumption, and an acceleration in business capex.
Yesterday's detailed Mexican GDP report confirmed that growth was relatively resilient in Q2, despite the lagged effect of external and domestic headwinds.
Mexican consumers' spending improved toward the end of Q2. Retail sales jumped by 1.0% month-to-month in June, pushing the year-over-year rate up to 9.4%, from an already solid 8.6% in May. Still, private spending lost some momentum in the second quarter as a whole, rising by 2.5% quarter-on-quarter, after a 3.8% jump in Q1. A modest slowdown in consumers' spending had to come eventually, following surging growth rates in the initial phases of the recovery.
Mexico's economy gathered momentum in Q3, thanks mainly to solid gains in industrial and services activity. Real GDP rose 0.8% quarter-on-quarter in Q3, the fastest pace since Q3 2013 and the ninth consecutive increase. Year-over-year growth rose to 2.6% year-over-year, from 2.3% in Q2. In short, a positive report, surprising to the upside, and above the INEGI's advance estimate, released in late October.
The Mexican economy shrank by 0.2% quarter-on-quarter in Q2, according to the final GDP report, a tenth better than the preliminary reading. The year-over-year rate rose marginally to 2.5% from 2.4% in Q1. But the year-over-year data are not seasonally adjusted, understating the slowdown in the first half of the year, as shown in our first chart.
French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.
Today's second estimate of Q2 GDP likely will restate the preliminary estimate that quarter-onquarter growth picked up to 0.6%, from 0.4% in Q1. Over the last two decades, the second estimate of GDP has differed from the preliminary estimate just 38% of the time.
Last week's detailed Q3 GDP data in Germany verified that GDP fell 0.2% quarter-on-quarter, down from a 0.5% rise in Q2, a number which all but confirms the key story for the economy over the year as a whole.
The second estimate of Q1 GDP confirmed that the recovery has lost momentum and revealed that growth would have ground to a halt without consumers. GDP growth likely will slow further in Q2, as Brexit risk undermines business investment.
Mexican inflation pressures eased towards the start of Q2. Inflation fell to 2.5% year-over-year in April from 2.6% in March, due to a sharp fall in energy inflation--as a result of the introduction of new electricity tariffs in the warm season--and a fall in the rate of increase of fresh food prices. Depressed energy prices will continue to constrain inflation in coming months, but base effects will reduce the drag later this year.
Korean real GDP growth rebounded to 1.4% quarter-on-quarter in Q3, from 0.6% in Q2. The main driver was exports, with government consumption also popping, and private consumption was a little faster than we were expecting.
In one line: More poor Q2 data; EZ core inflation rebounds, but it is not going anywhere fast.
Korean real GDP growth slumped in Q2 to 0.6% quarter-on-quarter, from 1.1% in Q1, as both the main drivers--construction and exports--ran out of steam simultaneously. Construction investment grew by 1.0%, sharply slower than the 6.8% in Q1 and contributing just 0.2% to GDP growth in Q2, a turnaround from the 1.1 percentage point contribution in the first quarter.
We have no choice but to revise down our forecast for GDP growth in Q2, now that the threat of a no-deal Brexit likely will hang over the economy beyond March, probably for three more months.
The Mexican economy shrank by 0.2% quarter- on-quarter in Q2, according to the final GDP report, a tenth worse than the preliminary reading.
Chinese PPI inflation dropped again in March to 3.1%, from February's 3.7%. Commodities were the driver, but base effects should mean the headline rate won't fall further in coming months; it is more likely to rise in Q2.
GDP rose by 0.3% quarter-on-quarter in Q2, according to the ONS' preliminary estimate, confirming that the economy has fundamentally slowed since the Brexit vote. The modest growth has reduced further the already-small risk that the MPC will raise interest rates at its next meeting on August 3.
Data on Friday showed that German wage growth is firming. Nominal labour costs rose 2.5% year-overyear in Q3, accelerating from a revised 1.9% increase in Q2. The main driver was a strong rebound in gross earnings growth, which rebounded to 2.4% year-over-year from an oddly weak 1.2% in Q2.
The Eurozone PMIs stumbled at the end of Q2. The composite index slipped to a five-month low of 55.7 in June, from 56.8 in May, constrained by a fall in the services index. This offset a marginal rise in the manufacturing index to a new cyclical high. The dip in the headline does not alter the survey's upbeat short- term outlook for the economy.
Markets are looking for the BCCh to remain on hold and the BCRP to ease on Thursday; we think they will be right. In Chile, the BCCh will hold rates because inflation pressures are absent and economic activity is stabilizing following temporary hits in Q1 and early Q2.
The verdict from the German business surveys is in; economic growth probably slowed further in Q2.
Sharp falls in energy prices have been a boon for consumers, freeing up considerable funds for discretionary purchases. Domestic energy and motor fuel absorbed just 4.7% of consumers' spending in Q2, the lowest proportion for 12 years and well below the 6.7% recorded three years ago.
Mexican GDP was unchanged quarter-on-quarter in Q2, according to the final report, a tenth worse than the preliminary reading.
Mr. Abe yesterday called a snap general election, to be held on October 22nd; more on this in tomorrow's Monitor. For now, note that the election comes at a reasonably good stage of the economic cycle, hot on the heels of very rapid GDP growth in Q2, while the PMIs indicate that the economy remained healthy in Q3.
While we were out, the key economic news in the Eurozone was mostly positive. The main upside surprise came from the advance Q2 German GDP report, which showed that real GDP rose 0.4% quarter-on-quarter, slowing from the 0.7% jump in the first quarter.
Exports rebounded sharply in Q3 so far, after the Q2 weakness. This will be a useful boost to GDP growth in Q3, as domestic demand likely will soften.
Chinese official headline data paint a picture of a strengthening economy in Q2. Our analysis shows a sharply contrasting picture. China's nominal GDP, real GDP and deflators are often internally inconsistent.
It's easy to claim from yesterday's labour market data that the economy is weathering the uncertainty caused by the E.U. referendum. Employment rose by 172K, or 0.5%, between Q1 and Q2, and the claimant count fell by 7K month-to-month in July. These numbers, however, flatter to deceive.
Colombia's economic activity surprised to the upside in February, despite the challenging domestic environment. Private spending rose more than expected, but leading indicators suggest that household consumption will remain weak in Q2. Retail sales jumped 4.6% year-over-year in February, up from a 2.1% increase in January, and the fastest pace since August 2015.
Manufacturers in the Eurozone stood tall mid-way through Q2, despite still-subdued leading indicators.
Yesterday's labour market figures revealed that employment growth has picked up this year, despite the shadow cast over the medium-term economic outlook by Brexit. The 122K, or 0.4%, quarter-on-quarter rise in employment in Q1 was the biggest since Q2 2016.
Solid trade data for April indicate a strong start to Q2 for the Eurozone's external balance, though a €3.2B fall in German net factor income will weigh on the primary income number.
Japanese real Q2 GDP growth surprised analysts, increasing sharply to a quarterly annualised rate of 4.0%, up from 1.0% in Q1 and much higher than the consensus, 2.5%. But its no coincidence that the jump in Japanese growth follows strong growth in China in Q1.
The Portuguese economy has faltered recently. In the year to Q2, real GDP rose only 0.8%, down from a 1.5% increase in the preceding year. Slowing growth in investment has been the key driver, but consumers' spending has weakened too.
Final data for Eurozone inflation yesterday revealed that inflation fell slightly to 0.1% year-over-year in August, from 0.2% in July, a tiny downward revision from the original estimate of 0.2%. Depressed energy prices will continue to constrain inflation in coming months, but base effects will reduce this drag, and core inflation is rising. Nominal GDP growth accelerated to 2.9% year-over-year in Q2, up from 2.4% in Q1, sending a convincing signal of higher core inflation.
Chinese PPI inflation continued to rise sharply in September, jumping to 6.9% from 6.3% in August. Our initial reaction to the data was that this was an overshoot after inflation was understated in Q2, thanks to seasonal effects.
Japanese GDP growth in the third quarter corrected the imbalances of the second. Domestic demand took a breather after unsustainable growth in Q2, while net exports rebounded.
Eurozone GDP data on Friday were better than we expected, but were still soft compared to upbeat market expectations. Real GDP rose 0.3% quarter-onquarter in the third quarter, down slightly from 0.4% in Q2, and lower than the consensus forecast for another 0.4% gain. These data are not a blank check for ECB doves, but they probably are enough to push through further easing in December. This looks odd given growth in the last four quarters of an annualised 1.6%--the strongest since 2011--and probably slightly above the long-run growth rate.
Wednesday's money data confirmed that Chinese households have continued to borrow into Q2 but at a slower rate than in 2016. The slowdown will really set in during the second half, and into 2018. Households have done a sterling job of taking over the borrowing baton from corporates, but they can't do everything.
Industrial production growth in China appears to be stabilising, following the slowdown in Q2.
Equities in the Eurozone are off to a strong start in Q2, building on their punchy 12% gain in the first quarter.
Retail sales data released yesterday for Brazil confirmed that weakness in private consumption remains a key challenge for the economy. Retail sales plunged 0.9% month-on-month in May, equivalent to a 4.5% fall year-over-year, the lowest rate since late 2003. On a quarterly basis, sales are headed for a 2% contraction in Q2, pointing to a -0.5% GDP contribution from consumer spending.
Upbeat survey data and relatively resilient consumer spending numbers indicate that the Mexican economy is in good shape, despite a marginal slowdown in most of Q2.
The cyclical upturn in the euro area's economy is going from strength to strength. Yesterday's second Q2 GDP estimate confirmed growth at 0.6% quarter- on-quarter, marginally stronger than the 0.5% rise in the first quarter.
Brazil's recession is getting uglier. Real GDP in Brazil fell 1.7% quarter-on-quarter in Q3, much worse than expected, though marginally less terrible than the downwardly revised 2.1% contraction in Q2. Year-over-year, the economy plunged by 4.5% in the third quarter, down from -3.0% in Q2, and -2.5% in the first half. The disappointment was widespread in Q3; though rising mining output was a positive, the underlying trend in mining is still falling. The key story here, though, is that the economy has sunk into its worst slump since the Great Depression.
The Greek economy escaped recession in the second half of last year. Real GDP rose a cumulative 1.2% in Q2 and Q3, following a 0.6% fall in Q1. And industrial production and retail sales data suggest that the advance GDP report released later this month will show that the momentum was sustained in Q4. Headline survey data, however, indicate that downside risks to the economy remain.
Chile's Q2 GDP report, released on Friday, confirmed that the economy gathered momentum in recent months, following an alarmingly weak start to the year.
We still don't have the complete picture of what happened to the EZ construction sector in Q2, but we have enough evidence to suggest that it rolled over.
The information available to date--which is still very incomplete--suggests that new housing construction will decline in the third quarter. This would be the second straight decline, following the 6.1% drop in Q2. We aren't expecting such a large fall in the third quarter, but it is nonetheless curious that housing investment--construction, in other words--is falling at a time when new home sales have risen sharply.
The construction sector remains a stand-out performer in the Eurozone economy, despite stumbling at the end of Q2.
Chile's Q2 GDP report, released yesterday, confirmed that the economy gathered strength in the first half of the year, consolidating a strong recovery that started in Q3 2017.
Incoming data confirm our view that the Chilean economy to rebound steadily in the second half of the year, with real GDP increasing 1.5% quarter-on-quarter in Q3, after a relatively modest 0.9% increase in Q2 and a meagre 0.1% in Q1.
While we were away, the advance Q2 GDP report in the Eurozone confirmed our expectations of a strong first half of the year for the economy. Real GDP rose 0.6% quarter-on-quarter, the same pace as in Q1, lifting the year-over-year rate to a cyclical high of 2.1%.
The national accounts, released on Friday, likely will restate that quarter-on-quarter GDP growth picked up to 0.4% in Q3, from 0.3% in Q2.
On the official gauge, China's real GDP growth fell minimally to 6.8% year-on-year in Q3, from 6.9% in Q2. Growth edged down to 1.7% quarter-on-quarter from an upwardly revised 1.8% in Q2.
Brazil's recession carried over into the beginning of Q2, but with diminishing intensity. The IBC-BR economic activity index, a monthly proxy for GDP, fell 5.0% year-over-year in April, up from a revised 6.4% contraction in March. The index's underlying trend has improved in recent months, suggesting that the economy is turning around, slowly.
While we were on holiday, the data confirmed that inflation in Mexico is rapidly unwinding the increases posted earlier in the year; that the economy was under severe strain in late Q2 and early Q3; and that the near-term outlook has grown increasingly challenging.
The manufacturing sector's recovery has sped up since Q1, according to Markit's latest survey, but growth still looks too weak to prevent the overall economy from struggling again in Q2.
The PMI survey points to a slow, but steady improvement, in Eurozone manufacturing. The gauge rose marginally to 52.5 in June, up from 52.2 in May. This pushed the quarterly average in Q2 to 52.2, up from 51.1 in Q1. The survey is also telling a story of broad-based manufacturing strength in the two major peripheral economies, despite declines in June.
Final inflation data yesterday confirmed Eurozone inflation pressures are still low. Inflation rose to 0.2% year-over-year in December from 0.1% in November, lifted by easing deflation in energy prices. Base effects likely will lift energy price inflation in January and February, but the year-over-year rate will dip in Q2, if the oil price remains depressed. Food inflation fell in December due to a decline in unprocessed food prices, and we see further downside in Q1. Core inflation was unchanged, with the key surprise that services inflation fell to 1.1% from 1.2% in November. We think this dip will be temporary, however, and our first chart shows that risks to services inflation are tilted to the upside.
Today's advance Q2 GDP report in Germany will add evidence that the EZ economy performed strongly in the first half of 2017. We can be pretty sure that the headline will be robust. The German statistical office reports a confidential number to Eurostat for the first estimate of EZ GDP--two weeks ahead of today's data--which was a solid 0.6%.
The Eurozone's current account surplus slipped at the start of Q2, falling to €28.4B in April from an upwardly-revised €32.8B in March.
The cyclical recovery in Italy likely strengthened in the second quarter. Real GDP rose 0.3% quarter-on-quarter in Q1, and we think the e conomy repeated, or even slightly, beat this number in Q2. This would mark the strongest performance in four years, but it will take more than a business cycle upturn to solve the Italian economy's structural challenges. Government and non-financial corporate debt has risen to 220% of GDP since 2008, and non-performing loans--NPLs--have sky rocketed.
This is the final report before your scribe disappears into the Scottish Highlands for a few weeks, and we are leaving you with a Eurozone economy in fine form. The calendar will be relatively light in our absence and will tell us what we already know; namely that the euro area economy maintained its strong momentum in Q2.
August's mortgage lending data from the trade body U.K. Finance provided more evidence that the pick-up in housing market activity in Q2 simply reflected a shift from Q1 due to the disruptive weather, rather than the emergence of a sustainable upward trend.
Friday's detailed Q2 growth data in the EZ broadly confirmed the advance numbers.
April's 2.0% month-to-month leap in industrial production was the biggest upside surprise on record to the consensus forecast, which predicted no change. The surge, however, just reflects statistical and weather-related distortions. These boosts will unwind in May, ensuring that industry provides little support to Q2 GDP growth. Make no mistake, the recovery has not suddenly gained momentum.
Latam started the year in low gear...but expect a gradual acceleration in Q2 and Q3
Final Q2 GDP data yesterday indicate the euro area economy was stronger than initially estimated in the first half of the year. Real GDP rose 0.4% quarter-on-quarter in Q2, slightly higher than the initial estimate of 0.3, following an upwardly revised 0.5% increase in Q1. Upward revisions to GDP in Italy were the key driver of the more upbeat growth picture. The revisions mean that annualised Eurozone growth is now estimated at 1.8% in the first six months of the year, up from the previous 1.4%, consistent with the bullish message from real M1 growth and the composite PMI.
Tankan reinforces our impression of a nasty Q2. China's manufacturing PMIs show why the authorities are eager for a trade deal. China's non-manufacturing sector holds steady for now. Korean exports disappointed in June, but this probably is as bad as it will get. Ignore Korea's volatile PMI readings... sentiment is improving gradually.
April's money and credit figures suggest that GDP growth has remained sluggish in Q2. Households' broad money holdings increased by just 0.3% month-to-month in April.
China's firms aren't passing on tax hikes after all. China takes full advantage of previous oil price declines. Japan's core machine orders better than expected, but that won't help Q2. Japan is heading for a spell of sustained PPI deflation in H2. Better May jobs report will help to keep any BoK rate cuts at bay.
China's trade surplus rejoins previous uptrend. China's FX reserves; strong valuations boost outweighs sales. Japan's Q1 GDP gets an upgrade, at the expense of Q2. Japan's current account surplus.
Last week's news that output per hour jumped by 0.9% quarter-on-quarter in Q3--the biggest rise since Q2 2011--has fanned hopes that the underlying trend finally is improving.
Friday's GDP report likely will fuel concerns the economy has little underlying momentum. Granted, quarter-on-quarter growth probably sped up to 0.6% in Q3--exceeding the economy's potential rate--from 0.4% in Q2.
At first glance, car sales appear to be staging a strong recovery, mirroring the better news on high street spending in Q2.
Yesterday's detailed EZ GDP report showed that real output rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2. The year-over-over rate rose marginally to 1.7% from 1.6%, trivially higher than the first estimate, 1.6%. The details showed that consumers' spending and public consumption were the key drivers of growth in Q3, offsetting a slowdown in net trade.
China's unadjusted current account was effectively in balance in Q2, after the deficit in Q1.
The outlook for French consumers' spending improved this month, at the margin. The headline consumer sentiment index was unchanged at 98 in November, but most forward-looking indicators rose. Consumers' spending in was flat in Q2 and Q3, following a 1.1% jump in the first quarter.
The two major EZ economic reports released while we were away conformed to the consensus. Advance data suggest that real GDP in the euro area rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2, and the year-over-year rate was similarly unchanged at 1.6%.
Data released on Wednesday confirmed that the Brazilian economy was relatively resilient in Q1. Leading indicators suggest that it will do well in Q2 and Q3, but downside risks are rising.
The Mexican economy maintained its relatively strong momentum in Q2. The first estimate of Q2 GDP, released last week, confirmed that growth was resilient during the first half of this year, despite the confidence hit caused by domestic and external headwinds.
Friday's GDP report should show that the economy narrowly avoided contracting in Q2.
China's Caixin gauge still to register renewed tariff threat. Japan's Capex growth on borrowed time. Korean exports stumble in May, but Q2 is shaping up to be better than Q1. Korea's PMI for May highlights the still-huge downside risks facing exporters.
The big story in global macro over the past 18 months or so has been the gigantic transfer of income from oil producers to oil consumers. The final verdict on the net impact of this shift--worth nearly $2T at an annualized rate--is not yet clear, because the boost to consumption takes longer than the hit to oil firms ' capex, which began to collapse just a few months after prices began to fall sharply. But our first chart, which shows oil production by country as a share of oil consumption, plotted against the change in real year-over-year GDP growth between Q2 2014 and Q2 2015, tells a clear story.
In one line: So-so, but downside risks to the Q2 GDP headline linger.
In one line: Robust, but base effects are challenging for manufacturing in Q2.
In one line: Not pretty; downside risks remain for industrial production in Q2.
In one line: Not terrible, but outlook for Q2 as a whole is grim.
In one line: Great, but probably not enough to salvage the Q2 number.
Yesterday's Q2 GDP report in Germany was solid, but the headline disappointed slightly. GDP growth slowed to 0.6% quarter-on-quarter from an upwardly- revised 0.7% rise in Q1. The year-over-year rate, however, rose to 2.1% from a revised 2.0% in Q1.
In one line: Core inflation will fall back this month; construction jumped in Q1, but a setback looms in Q2.
In one line: Soft, and the outlook for Q2 isn't great.
In one line: Solid production data in Q1, but setback looms in Q2.
In one line: Solid, but risks loom for the Q2 numbers.
Japan's Q2 GDP growth was not all it's cracked up to be. M2 growth in Japan inched up in July, but trends at the margin have rolled over. China's July inflation uptick shows that the swine flu outbreak is nowhere near under control. China officially enters PPI deflation... but it shouldn't last beyond Q3.
Japan's services PMI points to Q2 GDP contraction. China's Caixin services PMI highlights the reasons for official concern over employment. Korea's current account slips into deficit for the first time since 2012.
China's manufacturing PMIs suggest the private sector is recovering ahead of SoEs. China's non-manufacturing PMI again masks construction/services cross currents. Japan's industrial production continues to languish. OK so now Japanese households are front-loading spending. Korean IP corrects from the bumper July; the momentum from the Q2 recovery is waning.
In one line: Domestic demand to the rescue, but inventories will be a drag in Q2.
In one line: Weak, and Q2 as a whole likely will be bleak.
In one line: Core inflation will fall back this month; construction jumped in Q1, but a setback looms in Q2.
In one line: A solid start to Q2 for French consumers.
Chile's economy remains under pressure, at least temporarily. After signs of recovery in Q1, activity deteriorated in Q2 and at the start of the third quarter. The sluggish global economy--especially China, Chile's main trading partner--is exacerbating the domestic slowdown, hit by low business and consumer confidence.
China's unadjusted current account surplus widened to $16.0B in the preliminary report for Q3, from $5.3B in Q2.
Yesterday's data in the French economy provided the final confirmation that growth remained sluggish in Q2, and showed that households had a slow start to the third quarter.
Survey and money supply data remain consistent with an improving Eurozone economy. Yesterday's EC sentiment index fell to 103.7 in April, from 103.9 in March, due to weakness in France and Germany, but it is consistent with GDP growth of about 0.4% quarter-on-quarter in Q2.
Friday was a busy day in the Eurozone. The final and detailed GDP report confirmed that growth in the euro area slowed to 0.2% quarter-on-quarter in Q3, from 0.4% in Q2, with the year-over-year rate slipping by 0.6 percentage points to 1.6%, just 0.1pp below the first estimate.
Over the sleepy August holidays, a view has gained traction in the media that the U.K. economy is showing little damage from the Brexit vote. Optimists argue that the size and composition of the 0.6% quarter-on-quarter rise in Q2 GDP, the 1.4% month-to-month jump in retail sales volumes in July, and the slight dip in the unemployment claimant count demonstrate that the recovery is in good shape.
Hard data released in Argentina over recent weeks showed that the economy was resilient in Q1 and early Q2.
Banxico's Quarterly Inflation Report--QIR--for Q2 2017, published this week, confirmed that the central bank has become more upbeat about the economic recovery and the outlook for inflation. Banxico believes that the balance of risks to inflation and growth are neutral.
The pullback in CPI inflation in June and continued slow GDP growth in Q2 mean that the MPC almost certainly will keep Bank Rate at 0.25% on Thursday.
Brazil's industrial sector came roaring back at the start of Q3, following a poor end to Q2. Industrial production jumped 0.8% month-to-month in July, driving the year-over-year rate higher to 2.5%, from 0.5% in June and just 0.1% on average in Q2.
One of the more disheartening aspects of the Q2 national accounts, released last week, was the downward revision to business investment. Quarteron-quarter growth was revised to -0.7%, from +0.5% previously.
The second quarter is over but it is too early to give a reliable forecast of the pace of Brazilian GDP growth. However, an array of leading and coincident indicators points to a steep contraction in Q2 and a bleak second half of the year. Unemployment is leaping higher, along with inflation and household debt, and the ongoing monetary and fiscal tightening will further hurt the real economy ahead.
Friday was a busy day in the Eurozone economy. The third detailed GDP estimate confirmed that growth was unchanged at 0.4% quarter-on-quarter in Q2, pushing the year-over-year rate down by 0.4 percentage points to 2.1%, marginally below the first estimate,2.2%.
Brazil's economic outlook is gradually improving following a challenging Q2, which was hit by political risk, putting business and consumer confidence under pressure.
The preliminary estimate of Q3 GDP, showing quarter-on-quarter growth slowing only to 0.5% from 0.7% in Q2, has kiboshed the chance that the MPC cuts Bank Rate next Thursday.
Surveys released yesterday failed to support the MPC's view that the economy has bounced back in Q2.
Headline money supply growth in the Eurozone accelerated further at the start of Q2.
Japan's Q2 Tankan survey wasn't all bad news, but the positives won't last long. The large manufacturers index dropped to 7 in Q2, after the decline to 12 in Q1.
Friday's Q3 GDP report for Colombia confirmed the message from hard data and surveys, showing that the economy slowed sharply. Real GDP growth dropped to 1.2% year-over-year, its slowest pace since early 2009, from 2.0% in Q2.
We're maintaining our estimate of Mexico's Q2 GDP growth, due today, namely a 0.2% year- over-year contraction, in line with a recent array of extremely poor data.
Brazil's recession has deepened. Overall, the economy has sunk into its worst slump in six years, and the recovery will be painful and slow. This is not surprising, but the sharper than expected 3% contraction over the first half of the year may have thrown a further bucket of cold water on President Rousseff, whose popularity ratings have fallen to a level not seen since 1992, when President Collor de Mello was forced out of office after being impeached for corruption. Real GDP in Brazil fell 1.9% quarter-on-quarter in Q2, much worse than the downwardly revised 0.7% contraction in Q1.
Headline GDP growth in Korea was revised down, to a seasonally-adjusted 0.6% quarter-on-quarter in Q2, from 0.7% in the preliminary report.
Japan's Nikkei services PMI dropped to 51.0 in September from 51.6 in August, continuing the downtrend since June. For Q3 as a whole, the headline averaged 51.5, down from 52.8 in Q2; that's a clear loss of momentum.
Wednesday's Brazilian industrial production data were worse than we expected but the details were less alarming than the headline. Output slipped 1.8% month-to-month in March, the biggest fall since August 2015, setting a low starting point for Q2.
The widespread view, which we share, that GDP will rebound in Q2 following the disruption caused by bad weather in Q1, was supported yesterday by the E.C.'s Economic Sentiment survey.
Yesterday's economic data point to a sea of calm in the Eurozone economy. The composite PMI was unchanged at 53.1 in June, a slight upward revision from the initial estimate, 52.8. The index suggests real GDP growth was stable at 1.5%-to-1.6% year-overyear in Q2, though the quarter-on-quarter rate likely slowed markedly, following the jump in Q1.
Chile's growth dynamics were robust in August, according to the latest data. Production rose and consumption remained strong during most of Q3. Indeed, industrial output increased 5.1% year-over- year, up from an already strong 3.1% increase in July, and contrasting sharply with the 2% fall in Q2.
The latest U.K. PMIs were unambiguously dreadful. The manufacturing, construction and services PMIs all fell in April, and their weighted average points to quarter-on-quarter growth in GDP slowing to zero in Q2, from 0.4% in Q1. The U .K.'s composite PMI also undershot the Eurozone's for the second month this year.
China's official manufacturing PMI implies a modest gain in momentum in Q2, at 51.4, compared with 51.0 on average in Q1.
Corporate bonds will not be included in the ECB's monthly QE purchases until the end of Q2, but markets are already preparing. The sale of non-financial corporate debt jumped to €49.4B in March, from about €25B in February, within touching distance of the record set in Q1 last year.
China's service sector slowed again in June, with the Caixin PMI falling to 51.6 from 52.8 in May. The Q2 average of 52.0 was only minimally lower than the 52.6 in Q1.
The Tankan survey powered ahead in Q2, pulling away from Q1 and mostly beating consensus. This confirms our impression of the strength of the recovery ,just as Prime Minister Abe's Liberal Democratic Party is trounced at the polls in Tokyo. The drubbing is understandable as the main benefits of Abenomics have gone to the business sector, at the expense of the household sector.
While we were out, the economic news in LatAm was mostly positive. The main upside surprise came from Mexico, with the IGAE activity index--a monthly proxy for GDP--rising 2.9% year-over-year in August, up from 1.2% in July, and an average of 2.4% in Q2. A modest rebound was anticipated, but the headline was much better than we and the markets expected.
Yesterday's data kicked off the release of Eurozone Q3 growth numbers with a robust Spanish headline. Real GDP in Spain rose 0.8% quarter-on-quarter, slowing slightly from 0.9% in Q2, and le aving the year-over-year rate unchanged at 3.1%.
Data yesterday showed that Momentum in the EZ retail sector stumbled through middle of Q2.
The Mexican economy had a decent start to the second half of the year, thanks to resilient domestic demand, amid signs of recovery in industrial activity. GDP rose 0.6% quarter-on-quarter in Q3, a bit faster than in Q2, lifting the year-over-year rate to 2.4% from 2.2% in Q2. This is the first time the statistics office, INEGI, published an advance reading on GDP, reducing the time between the end of the quarter to the report date to 30 days from 52.
Mexico's economy grew 1.0% quarter-on-quarter in Q3, the fastest pace since 2014, following a 0.2% contraction in Q2, according to the preliminary report published yesterday.
China's current account surplus was revised down last week to $46.2B in Q2, from $57.0B in the preliminary data, marking a dip from $49.0B in Q1.
Activity data from Colombia over the past quarter have been strong. Real GDP expanded by a relatively robust 2.8% year-over-year in Q2, and is on track to post a 3.2% increase in Q3.
Payroll growth rebounded to 223K in May, after two sub-200K readings, and we're expecting today's June ADP report to signal that labor demand remains strong.
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