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291 matches for " budget":
If the Chancellor is true to his word, Wednesday's Budget will be a pedestrian affair with few major policy changes designed to prevent the economy from slowing this year. In an article in The Sunday Times, Philip Hammond asserted that "we cannot take our foot off the pedal" in the mission to eliminate the budget deficit by the end of the next parliament.
Chancellor George Osborne has invested considerable personal capital in attaining a budget surplus by the end of this parliament, and he has passed a 'law' to ensure he and his successors achieve this goal. But the current fiscal plans, which will be reviewed in the Budget on March 16, make a series of optimistic assumptions on future tax revenues and spending savings.
AMLO unveiled on Saturday Mexico's budget plan for 2019, calling for a moderate increase in spending, focused mainly on social programs, without raising taxes or the country's debt.
The Mexican government last week unveiled its 2017 fiscal budget proposal. The plan makes clear that the shocks which have battered the economy and public finances since 2015 will linger in to next year. Mexico's government has been eager to cut spending in recent years.
The CBO reckons that the April budget surplus jumped to about $179B, some $72B more than in the same month last year. This looks great, but alas all the apparent improvement reflects calendar distortions on the spending side of the accounts.
Chancellor Sunak faces a tough first gig on Wednesday, when he delivers the long-awaited Budget.
Italian bond yields have remained elevated this week, following the release of the government's detailed draft budget for 2019.
The trend in public borrowing has improved significantly over recent months, but it is far too soon to conclude that the Chancellor is on track to meet his goal of running a budget surplus by the end of this decade. The recent economic slowdown has not impacted the public borrowing numbers, yet.
The two-year budget deal agreed between the administration and the Republican leadership in Congress will avert a federal debt default and appears to constitute a modest near-term easing of fiscal policy. The debt ceiling will not be raised, but the law imposing the limit will be suspended through March 2017, leaving the Treasury free to borrow as much as necessary to cover the deficit. As a result, the presidential election next year will not be fought against a backdrop of fiscal crisis.
Bond investors in Italy voted with their feet on Friday with news that the government has agreed a 2019 budget deficit of 2.4%.
The BoJ is likely to be thankful next week for a relatively benign environment in which to conduct its monetary policy meeting.
Bond yields in Italy remain elevated, but volatility has declined recently; two-year yields have halved to 0.7% and 10-year yields have dipped below 3%.
The prospect of fiscal stimulus in the euro area-- ostensibly to "help" the ECB reach its inflation target-- remains a hot topic for investors and economists.
In one line: Not holding back.
In one line: Not holding back.
In one line: The costs of Covid-19 are rising.
In one line: France is breaking the bank, but the ECB is here to help.
The Chancellor probably can't believe his luck. Public borrowing has continued to fall this year at a much faster rate than anticipated by the OBR, despite the sluggish economy.
Yesterday's data provided further evidence of the rising costs of supporting the EZ economy through the Covid-19 shock.
The EU Commission and Italy's government remain at loggerheads over the country's fiscal plans next year.
In one line: Deteriorating, fast.
As the dust settles from Wednesday's budget proposal by the EU Commission--see here--economists and investors are left with a myriad of questions.
Fiscal policy is in limbo until a new leader of the Conservative party has been elected on September 9. Shortly after, however, a new Budget--or a Budget disguised as an Autumn Statement--will be held.
The economic downturn and the Chancellor's unprecedented fiscal measures mean that public borrowing likely will be about four times higher, in the forthcoming fiscal year, than anticipated in the Budget just over two weeks ago.
This Budget will be remembered as the moment when the Government finally threw in the towel on plans to run sustainable public finances.
As expected, the Chancellor kept his powder dry in the Spring Statement, preferring instead to wait for the Budget in the autumn to deploy the funds technically available to him to support the economy.
It seems pretty clear from press reports that the White House budget, which reportedly will be released March 14, will propose substantial increases in defense spending, deep cuts to discretionary non- defense spending, and no substantive changes to entitlement programs. None of this will come as a surprise.
The public finances continue to heal rapidly, suggesting that the Chancellor should have scope to soften his fiscal plans substantially in the Autumn Budget.
The Chancellor's Autumn Statement dashed hopes that the fiscal consolidation will be paused while the economy struggles to adjust to the implications of Brexit. Admittedly, Mr. Hammond has another opportunity in the Spring Budget to reduce next year's fiscal tightening.
April's public finances show that borrowing still is falling more slowly than the Chancellor had envisaged. This casts further doubt over whether he will be able to keep his pledge to run a budget surplus before the end of this parliament in 2020.
The latest public finance figures make it virtually inevitable that the Chancellor will scrap the existing fiscal rules when he delivers his first Budget.
Companies' profit margins have fared relatively well during this recovery, and on many measures, they are back to pre-crisis levels. But looking ahead, corporate profitability is set to be squeezed as labour takes a larger share of national income and the Government gets to grips with the budget deficit by increasing corporate taxation.
The Budget on March 11 will be the first time that the new government's ambition and bluster collide with reality.
The measures to support the economy through the coronavirus crisis, unveiled by policymakers on Budget day, exceeded expectations.
This week, Mexico's government unveiled its 2020 fiscal budget proposal.
We expect the Budget today to underwhelm investors who are eager to see a quick and powerful government response to the coronavirus outbreak.
The Office for Budget Responsibility has decided to press ahead with the publication of new fiscal forecasts on November 7, despite the government's decision to postpone the Budget until after the next election.
PM Abe last week asked the cabinet to put together a package of measures in a 15-month budget aimed at bolstering GDP growth through productivity enhancement, in addition to the shorter-term goal of disaster recovery.
The budget sequestration process, which cut discretionary government spending by a total of $114B in fiscal 2013 and fiscal 2014, was one of the dumbest things Congress has done in recent years.
The Chancellor kept his word and made only trivial policy changes in the Spring Statement, but he hinted at higher spending plans in the Autumn Budget.
The new fiscal year began on April 6, marking the post-election intensification of the fiscal squeeze for many households. The Office for Budget Responsibility estimates net tax and benefit changes will subtract 1.2 percentage points from year-over-year growth in households' disposable incomes in 2016.
The Treasury has tried to dampen expectations for Tuesday's Spring Statement, which has replaced the Autumn Statement since the Budget was moved last year to November.
In Friday's Monitor we analysed the draft Japanese budget, as reported by Bloomberg. We suggested that the GDP bang-for-government-expenditure- buck is likely to be less than that implied by the authorities' forecasts.
The White House budget proposals, which Roll Call says will be released in limited form on March 14, will include forecasts of sustained real GDP growth in a 3-to-3.5% range, according to an array of recent press reports.
The Chancellor's Budget today looks set to prioritise retaining scope to loosen policy if the economy struggles in future, rather than reducing the near-term fiscal tightening. In November, the OBR predicted that cyclically-adjusted borrowing would fall to 0.8% of GDP in 2019/20, comfortably below the 2% limit stipulated by the Chancellor's new fiscal rules.
Chancellor Hammond likely will broadly stick to the current plans for the fiscal consolidation to intensify next year when he delivers his second Budget on Thursday.
Reforms to Stamp Duty Land Tax paid by first-time buyers likely will take centre stage in the Budget. At the Conservatives' party conference, Theresa May pledged another £10B to expand the Help to Buy Scheme, which helps first-time buyers obtain a mortgage which just a 5% deposit.
Germany's newly-appointed finance minister, Olaf Scholz, proudly announced earlier this month that his country would be running a budget surplus of €63B over the next four years--about 1.9% of GDP between now and 2022--some €14B more than initially estimated.
The Chancellor must feel a sense of foreboding before his pre-Autumn Statement meetings with the Office for Budget Responsibility. Even minor revisions to the independent body's economic forecasts could shred into tatters his plans for a budget surplus by the end of the parliament, given the lack of wiggle room in the July Budget borrowing projections. The OBR won't present the Chancellor with disastrous news ahead of next Wednesday's Autumn Statement, but the already slim margin for error he has in meeting his surplus goal likely will be reduced.
The White House Budget for fiscal 2018, released last week, has no chance of becoming law in anything like its current form, so we don't propose to spend much time dissecting it. But we do need to set out our view on what might actually happen to fiscal policy over the next few months, because it potentially could make a material difference to the pace, and ultimate extent, of Fed tightening.
The new fiscal projections in the Budget today likely will be based on implausible economic projections, which assume that wage growth will accelerate soon, lifting inflation, but that interest rates won't rise for three more years. You can coherently forecast one or the other, but not both.
Brazil's Vice-President, Michel Temer, has taken over as interim president, following the approval of the impeachment motion against President Dilma Rousseff, accused of using creative accounting to hide large budget deficits. The impeachment motion suspends Ms. Rousseff for now; she will be removed from office permanently if a two-thirds majority finds her guilty.
Italy's economy was in trouble before the Covid-19 hammer-blow. The new government's ill-fated threat in 2018 to leave the Eurozone, unless Brussels allowed a looser budget, threw the economy into a technical recession, from which it never made a convinicing recovery.
The latest public finance figures continue to imply that the Chancellor will be able to change course later this year in the Autumn Budget so that fiscal policy doesn't drag on GDP growth next year.
The Chancellor chose in his Budget to increase the total size of the forthcoming fiscal consolidation, to ensure that the Office for Budget Responsibility continues to forecast that a budget surplus will be obtained in 2019/20.
The Chancellor warned last week that he would hold an Emergency Budget shortly after a vote to leave the E.U. to address a £30B black hole in the public finances. The £30B--some 1.6% of GDP-- is the mid-point of the Institute for Fiscal Studies' estimates of the impact of Brexit on public borrowing in 2019/20, which were based on the GDP forecasts of a range of reports.
Public sector borrowing still is on course to greatly undershoot the March Budget forecasts this year, despite October's poor figures.
Public borrowing was below consensus expectations in August, fuelling speculation that the Chancellor might pare back the remaining fiscal tightening in the Autumn Budget on November 22.
Today is a busy day in the Eurozone economic calendar, but we suspect that markets mainly will focus on the details of Italy's 2019 budget.
Italy's political leadership faces its first biggest test in autumn, when it has to deliver its first budget.
Chief U.K. Economist Samuel Tombs discussing next months budget
Is Japan's pending 15-month anything to write home about?
Chief U.K. Economist Samuel Tombs on U.K. Public Finances
Chief Eurozone Economist Claus Vistesen on Eurozone Growth
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.
Public borrowing has continued to fall more rapidly than anticipated in the latest official plans.
The Prime Minister's refusal last week to reaffirm her party's 2015 election pledge not to raise income tax, National Insurance or VAT has fuelled speculation that taxes will rise if the Conservatives are re-elected on June 8. Admittedly, Mrs. May asserted that her party "believes in lower taxes", and the tax pledge s till might appear in the Conservatives' manifesto, which won't be published for a few weeks.
India's Finance Minister Nirmala Sitharaman finally brought out the big guns on September 20, announcing significant cuts to corporate tax rates.
British politics remains a complete mess, with many outcomes, ranging from no-deal Brexit to revoking Article 50, possible in the second half of this year.
The public finances are in better health than appeared to be the case a few months ago.
The main measure of public borrowing--PSNB excluding public sector banks--came in at £2.6B in December, well below the £5.1B in December 2016 and lower than in any other December since 2000.
On the face of it, the trend in public borrowing deteriorated sharply late last year. In the three months to December, borrowing on the main "PSNB ex ." measure, which excludes banks owned by the public sector, was a trivial £0.3B, or 1.6%, lower than in the same months of 2017.
The run of better-than-expected public borrowing figures ended abruptly with the publication of March data yesterday.
Mexican policymakers likely will stick to the script tomorrow and vote by a majority to cut the main rate by 50bp to 5.00%, which would be its lowest level since late 2016.
The second estimate of GDP left the estimate of quarter-on-quarter growth unrevised at 0.3%, a trivial improvement on Q1's 0.2% gain.
Friday's detailed GDP data in Germany confirm that the euro area's largest economy performed strongly in the second quarter.
Developments over the last month have heightened our concern about the near-term outlook for households' spending.
okThe weekend's election result in Spain provided relief for investors anxiously looking for another "surprise." Exit polls on Sunday showed a big majority for the anti-establishment party Podemos, but in the end Spanish voters opted for safety. The incumbent Partido Popular, PP, was the election's big winner compared with the elections six months ago, gaining 15 seats.
The Prime Minister's resignation and the stillborn launch of the Withdrawal Agreement Bill last week has forced us to revise our Brexit base case, from a soft E.U. departure on October 31 to continued paralysis.
Argentina's near-term economic outlook remains murky, as recent data has highlighted, hit by tighter financial conditions.
Yesterday's big news in the Eurozone was the EU Commission's proposed recovery fund.
China's annual "two sessions" conference is due to start on Sunday, with the economic targets for this year set to be made official over the course of the meetings.
A decade of public deficit reduction was fully reversed in April, as the coronavirus tore through the economy.
The Monetary Policy Board of the Bank of Korea is likely to keep its benchmark base rate unchanged, at 1.25%, at its meeting this week.
The gap between U.K. and U.S. government bond yields has continued to grow this year and is approaching a record.
The speed of sterling's rally this month has caught us by surprise.
August's public finances figures, released last week, were an unwelcome but manageable setback for the Chancellor.
Mortgage approvals by the main high street banks collapsed to 36.1K in December--the lowest level since April 2013--from 39.0K in November, according to trade body U.K. Finance.
Yesterday's detailed Q2 GDP report in Germany confirmed that economic output nosedived during lockdown, but also showed that the economy was resilient compared to the rest of the EZ.
If we analyse the Covid-19 shock as a normal downturn, the clock has now been reset on the business cycle, which in turn implies that it is a great time to be invested in EZ equities.
The euro area's record-high external surplus has prompted commentators to suggest that the zone has room to loosen fiscal policy to support growth, or at least relax the deficit reduction rules.
November's labour market report provided timely reassurance, after last week's downside data surprises, that the economy did not grind to a halt at the end of last year.
Investors have been treated to good news in the past week, at least if they've managed to side-step the barrage of terrible economic data.
First, apologies for a much more dense report than usual; there's a lot of ground to cover here. The most likely outcome of the November 3 election right now is a Democrat sweep.
Brace yourselves; GDP growth forecasts are being slashed left and right, as our colleagues take stock of the economic damage Covid-19 likely will inflict in the U.S. and across Europe, where outbreaks and containment measures have escalated significantly.
The federal debt ceiling was re-imposed last week, with no fanfare, and no reaction in the markets. All eyes were focussed instead on the Fed's rate hike and Chair Yellen's press conference.
CPI inflation took a big step in April towards the near-zero rate we anticipate by the summer.
Yesterday's Japanese activity data were grim.
The Chancellor can go on his Christmas vacation content that the public finances have weathered the economy's slowdown relatively well this year.
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.
Data released on Monday confirmed that the Colombian economy slowed in August, following a solid rebound since mid Q2.
The euro's ascent in the past few months raises two main questions for investors.
CPI inflation in India jumped to 4.6% in October, from 4.0% in September, marking a 16-month high and blasting through the RBI's target.
Expectations that the MPC will cut Bank Rate at its meeting on January 30 received a further shot in the arm at the end of last week, when December's retail sales figures were released.
On the face of it, the latest public finance data suggest that the economy has lost momentum.
The public finances are in better shape than October's figures suggest in isolation. Public sector net borrowing excluding public sector banks--PSNB ex.--leapt to £11.2B, from £8.9B a year earlier.
As we write, markets see a 70% chance that the MPC will cut Bank Rate on January 30.
By any yardstick, progress in reducing public sector borrowing so far this fiscal year has been poor. While the borrowing trend should improve in the final four months of this year--including December's figures, published Friday--the Chancellor has only a slim chance of meeting the forecasts set out in the Autumn Statement.
The conventional wisdom that the U.K. economy will comfortably weather the coming fiscal squeeze is misplaced. The planned adjustment is large, designed to minimise its political, not economic, impact, and based on overly optimistic assumptions. What's more, the economy is in many respects less well-placed to cope with the tightening than when the previous government applied the fiscal brakes. And when the recovery slows, the Chancellor is less likely to change tack and ease the squeeze this time.
In recent public appearances, the Chancellor has made a concerted effort to downplay expectations of fiscal loosening in Wednesday's Autumn statement. On Sunday, he labelled the deficit "eye-wateringly" large and he warned that he was "highly constrained".
The recent revival in housing market activity reflects more than just a temporary boost provided by imminent tax changes. The current momentum in market activity and lending likely will fade later this year, but we think this will have more to do with looming interest rate rises than a lull in activity caused by a shift in the timing of home purchases.
The BoJ held firm, for the most part, during this year's bout of central bank dovishness.
Complacency and wishful thinking seem to be creeping back into the government's approach to containing Covid-19.
The MPC was more hawkish than we and most investors expected yesterday. The vote to keep Bank Rate at 0.50% was split 6-3, f ollowing Andy Haldane's decision to join the existing hawks, Ian McCafferty and Michael Saunders.
Economic activity in Chile in the first half of the year is now a write-off, due to Covid-19. The country is in a deep recession, and the impact of lockdowns on labour markets and businesses will cause long-lasting economic damage, which will hold back the recovery.
The PBoC late on Wednesday announced measures to provide medium-term funding for smaller businesses.
The Chancellor was bolder than widely expected yesterday and scaled back the fiscal consolidation planned for the next two years significantly, even though his borrowing forecast was boosted by the OBR's gloomier prognosis for the economy.
The PBoC yesterday cut its 7-day and 14-day reverse repo rate by 10bp, to 2.40% and 2.55% respectively, while injecting RMB 1.2T through open market operations.
If you had predicted at the start of the year that the ECB balance sheet would leap by just over €1.5T in H1, you would have been laughed out of the room.
The record 1,178-point drop in the Dow will garner all the headlines today, but a sense of perspetive is in order, despite the chaos. The 113-point, or 4.1%, fall in the S&P 500 was very startling, but it merely returned the index to its early December level; it has given up the gains only of the past nine weeks.
The jump in the Caixin services PMI in the past two months looks erratic, with holiday effects playing a role, though there could be more going on here.
November's monetary indicators provide an upbeat rebuttal to the swathe of downbeat business surveys. Year-over-year growth in the MPC's preferred measure of broad money--M4 excluding intermediate other financial corporations--rose to a 19-month high of 4.0% in November, from 3.5% in October.
The rapid escalation of Covid-19 cases in Korea in recent weeks has broadened the likely damage to the economy this quarter.
Yesterday's detailed Q3 growth data in the Eurozone offered no surprises in terms of the headline.
We have consistently flagged the likelihood that Japan's government would boost spending after the consumption tax hike was implemented.
The MPC's "Super Thursday" communications left markets a little more confident that interest rates will rise again in May, shor tly after the likely start of the Brexit transition period.
The surge in the broad money supply in March, as the U.K.'s lockdown began, suggests that businesses are in relatively good shape to survive a multi-month period of greatly depressed demand.
Markets tend to take an eclectic view on macroeconomic data in the Eurozone.
Judging solely by yesterday's PMI and retail sales data, the EZ economy has shaken off the virus and is going from strength to strength.
The Chancellor lived up to his reputation for fiscal conservatism yesterday and is pressing ahead with a tough fiscal tightening. He hopes that this will create scope to loosen policy if the economy struggles after the U.K. leaves the EU in 2019, but we remain concerned his "fiscal headroom" will be much smaller than he currently anticipates.
If 2017 really is the year of "reflation", somebody forgot to tell the gilt market. Among the G7 group, 10-year yields have fallen only in the U.K. during the last three months, as our first chart shows.
Many analysts were alarmed earlier this week by news from across the pond that the U.S. treasury is planning to break the bank in the fight against Covid-19.
Colombia was the fastest growing LatAm economy in 2019, due mostly to strong domestic demand, offsetting a sharp fall in key exports.
Data on Friday showed that manufacturing in Germany improved further at the start of Q3. Factory orders increased by 2.8% month-to-month in July, lifting the year-over-year rate to -7.3% from a revised -10.6% in June.
So far, the MPC has been more timid with unconventional stimulus than other central banks. At the end of May, central bank reserves equalled 29.7% of four-quarter rolling GDP in the U.K., compared to 32.7% in the U.S. and 46.7% in the Eurozone.
India's prime minister, Narendra Modi, yesterday held his last cabinet meeting before the general election.
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
The daily number of confirmed new U.S. Covid-19 cases has leveled-off over the past couple weeks, and the rate of increase of hospitalizations has slowed appreciably.
The Chancellor will struggle to make his Spring Statement heard on March 13 over the noise of next week's key Brexit votes in parliament, likely spanning from March 12 to 14.
Judging by interactions with readers in the past few weeks, fiscal policy is one of the most important topics for EZ investors as we move into the final stretch of the year.
The MPC's penchant for providing interest rate guidance reached new heights last week.
Markets were jolted yesterday by news that the U.S. Fed is mulling ending, or at least slowing, the reinvestment of Treasuries and mortgage-backed securities later this year. Such a move would reduce liquidity in global markets that has underpinned soaring equity prices in recent years.
Demand in German manufacturing rebounded powerfully at the end of the second quarter, accelerating from an initially modest rebound when lockdowns were lifted.
Speculation mounted yesterday that the MPC will follow the U.S. Fed and cut interest rates before its next meeting on March 26.
The flow of downbeat business surveys continued yesterday, with the release of the Markit/CIPS construction survey.
The Bank of England issued a statement yesterday that it is "working closely with HM Treasury and the FCA--as well as our international partners--to ensure all necessary steps are taken to protect financial and monetary stability".
French finance minister Bruno Le Maire had bad news for his compatriots yesterday.
The CPIH--the controversial, modified version of the existing CPI that includes a measure of owner occupied housing, or OOH, costs--will become the headline measure of consumer price inflation when February's data are published on March 21.
Investors have concluded that Italy's political crisis will compel the U.K. MPC to increase interest rates even more gradually than they thought previously.
The risk of a snap general election has jumped following Theresa May's resignation and the widespread opposition within the Conservative party to the compromises she proposed last week, which might have paved the way to a soft Brexit.
Last week's May CPI data in the major EZ economies all but confirmed the story for this week's advance estimate for the euro area as a whole.
China's manufacturing PMIs put in a better performance in November, with the official gauge ticking up to 50.2 in November, from 49.3 in October, and the Caixin measure little changed, at 51.8, up from 51.7.
The defeat in the House of Lords of the Government's plans to cut spending on tax credits by £4.4B next year is not a barrier to their implementation. But it has prompted speculation that the Chancellor will reduce the size of the fiscal consolidation planned for next year. The plans may be tweaked in the Autumn Statement on 25 November, but we think the economy will still endure a major fiscal tightening next year.
The real Boris Johnson will have to stand up this year.
Later today, the Chancellor likely will take the first step towards abandoning plans for further fiscal tightening. In
The two main developments in the EZ economy while we were away seem contradictory.
Yesterday's final manufacturing PMIs confirmed that the headline index in the euro area rebounded further last month.
Markets see a strong possibility, though not a probability, that the BoJ will cut rates on Thursday.
The MPC likely will raise interest rates on Thursday, for the first time since July 2007, in response to the uptick in GDP growth and the upside inflation surprise in Q3.
We're relatively optimistic--yes, you read that correctly--on the outlook for the U.K. economy in 2019.
Korea's final GDP report for the third quarter confirmed the economy's growth slowdown to 0.4% quarter-on-quarter, following the 1.0% bounce-back in Q2.
Yesterday's data showed that the euro area PMIs were a bit stronger than initially estimated in November.
India's headline GDP print for the third quarter was damning, with growth slowing further, to 4.5% year- over-year, from 5.0% in Q2.
Over the summer, both Chancellor Javid and PM Johnson appeared to be repositioning the Conservatives, claiming that the era of austerity was over and that higher levels of spending and investment were justified.
Implied volatility on the euro is now so low that we're compelled to write about it, mainly because we think the macroeconomic data are hinting where the euro goes next.
Yesterday's final EZ manufacturing PMIs for July extended the run of gains since the nadir during lockdown.
As we showed in yesterday's Monitor--see here--EZ governments and the ECB have thrown caution to the wind in their efforts to limit the pain from the Covid-19 crisis.
On a headline level, last week's European Parliament elections were an excellent occasion for the EU.
The Japanese unemployment rate fell again in September, to 2.3% from 2.4%. In the same vein, the job-to-applicant ratio rose to 1.64, from 1.63.
The Chancellor's decision immediately to spend all the proceeds from the OBR's upgrade to its projections for tax receipts appears to leave his plans exposed to future adverse revisions to the economic outlook.
Consumer confidence in Korea plummeted in September for the first time since its first wave of Covid-19 earlier this year, in line with our view that the August increase was a fluke.
The U.K. Monitor will be on a short break soon for paternity leave, so we are taking this opportunity to preview next week's data releases.
China's money and credit data for February were reassuring, at least when compared with the doomsday scenario painted, so far, by other key indicators for last month.
Chancellor Sunak's "temporary, timely and targeted" fiscal response to the Covid-19 outbreak, and the BoE's accompanying stimulus measures, won't prevent GDP from falling over the next couple of months.
The 0.1% dip in the core CPI in March was the first outright decline in three years, but we expect another-- and bigger--decline in today's April numbers.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
Core machine orders in Japan collapsed in April, as expected, falling by 12.0% month-on-month, worse than the minor 0.4% slip in March.
Investors moved rapidly last week to price-in renewed easing by central banks around the world, in response to the rapid growth in coronavirus cases outside China and the resulting sell-off in equity markets.
China concludes its annual Central Economic Work Conference today, where the economic targets and the agenda for next year are set.
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
In previous Monitors--see here--we've suggested that, thanks to the coronavirus, China simply will lose some of the spending that would have gone on during the holiday this year.
Next week is so crammed full of data releases that we need to preview November's consumer price data early, in the eye of the storm of the general election.
Today's November retail sales numbers are something of a wild card, given the absence of reliable indicators of the strength of sales over the Thanksgiving weekend, and the difficulty of seasonally adjusting the data for a holiday which falls on a different date this year.
The effects of Covid-19--both negative and positive--on Korea's labour market certainly were felt in February.
The NY Fed's announcement yesterday restarts QE. The $60B of bill purchases previously planned for the period from March 13 through April 13 will now consist of $60B purchases "across a range of maturities to roughly match the maturity composition of Treasury securities outstanding".
The consensus forecast for the October core CPI, which will be reported today, is 0.2%. Take the over. Nothing is certain in these data, but the risk of a 0.3% print is much higher than the chance of 0.1%.
In the olden days, by which we mean the 15 years or so leading up to the financial crisis, a 100bp rise in long yields would be enough to slow GDP growth by about three percentage points, other things equal, after a lag of about one year.
We often hear that the large gap between the slowing rising path for interest rates anticipated by the MPC and the flat profile expected by markets is justified because markets have to price-in all of the downside risks to the economic outlook posed by Brexit.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
China's October activity data showed signs of the infrastructure stimulus machine sputtering into life. Consensus expectations appear to hold out for a continuation into November, but we think the numbers will be disappointing.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
Japan's tertiary index fell further in December,by 0.3% month-on-month, after the downwardly- revised 0.4% drop in November.
EZ investors remain depressed. The headline Sentix confidence index fell to 12.0 in September, from 14.7 in August, and the expectations gauge slid by three points to -8.8.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
China's January trade data were scheduled for release on Friday, but instead, the customs authority delayed the publication, saying it would publish the numbers with the February data
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
The market-implied probability that the MPC will cut Bank Rate in the first half of this year leapt to 50% yesterday, from 35%, following Mark Carney's speech.
The MPC's new inflation forecasts usually take centre stage on "Super Thursday" and provide a numerical indication of how close the Committee is to raising interest rates again.
The more headline hard data we see in the Eurozone, the more we are getting the impression that 2019 is the year of stabilisation, rather than a precursor to recession.
We agree wholeheartedly with the consensus view that the economy would enter a recession in the event of a no-deal Brexit on October 31.
Trade talks between the U.S. and China officially resumed this week, with the first face-to-face meeting of the main negotiators taking place yesterday in Shanghai.
Yesterday's national accounts showed that the downturn in the economy on the eve of the Covid-19 outbreak was sharper than first estimated.
China's trade balance flipped to an unadjusted deficit of $7.1B in the first two months of the year, from a $47.2B surplus in December.
The collapse in oil prices was the immediate trigger for the 7.6% plunge in the S&P 500 yesterday, but the underlying reason is the Covid-19 epidemic.
Collapsing oil prices add fresh deflationary pressure on China.
It's just not possible to forecast the reaction of businesses and consumers to the coronavirus outbreak.
China's October foreign trade headlines beat expectations, but the year-over-year numbers remain grim, with imports falling 6.4%, only a modest improvement from the 8.5% tumble in September.
Banxico's monetary policy meeting on Thursday was the first to be attended by the two new deputy governors, Jonathan Heath and Gerardo Esquivel, economists appointed by AMLO.
A reader pointed out Friday that the standard measurement of the impact of the weather on January payrolls--the number of people unable to work due to the weather, less the long-term average--likely overstated the boost from the extremely mild temperatures.
Markets tend to look to Italy as the canary in the coalmine for signs of stress in the EZ economy and financial markets, but we recommend keeping a close eye on Spain too.
We see clear upside risk to the inflation data due before the FOMC announcement, from three main sources.
The clear threat to demand posed by the coronavirus and China's efforts at containment have sent a shock wave through commodities markets.
Data released yesterday in Brazil are consistent with our view that private consumption will continue to drive the recovery over the second half, offsetting the ongoing weakness in private investment.
Chair Powell broke no new ground in his semi-annual Monetary Policy Testimony yesterday, repeating the Fed's new core view that the current stance of policy is "appropriate".
The latest official data continue to understate the collapse in labour demand since Covid-19.
The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term.
The fall in CPI inflation to 3.0% in December, from 3.1% in November, likely marks the first step in its journey back to the 2% target.
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.
We look for yet another unanimous vote by the MPC to keep Bank Rate at 0.75% on Thursday, with no new guidance on the near-term outlook.
The sovereign debt crisis in the euro area was a macroeconomic horror story
Economic activity remains under severe strain in the Andes.
EZ investors are still trying to come to grips with last week's terrifying price action, culminating in the 12.5% crash in equities on Thursday
Mr. Macron will be in Berlin today with the message that France wants a strong Eurozone and a tight relationship with Germany. Friendly overtures between Paris and Berlin are good news for investors; they reduce political uncertainty while increasing the chance that the economic recovery will continue. But it is too early to get excited about closer fiscal coordination, let alone a common EZ fiscal policy and bond issuance.
CPI inflation has undershot the consensus forecast six times this year, but surprised to the upside only twice.
No subject in the EZ economy is a source of more dispute than Germany's ballooning current account surplus. The Economist recently identified he German surplus as a problem for the world economy.
For the record, we think the Fed should raise rates in December, given the long lags in monetary policy and the clear strength in the economy, especially the labor market, evident in the pre-hurricane data.
The key detail in Friday's barrage of economic data was the above-consensus increase in EZ inflation.
China's official manufacturing PMI was unchanged at 50.2 in December, marking a weak end to the year. But it could have been worse; we had been worried that the return to above-50 territory in November had been boosted by temporary factors. December's print allays some of those fears.
Last week, while we were taking our spring break at home, markets behaved relatively well in LatAm.
December's retail sales figures, released today, likely will show that the surge in spending in November was driven merely by people undertaking Christmas shopping earlier than in past years, due to Black Friday.
China's monetary and credit data--released yesterday, two days behind schedule--suggest that monetary conditions are loosening at the margin, while credit conditions have remained stable, but easier than in the first half.
CPI inflation held steady at 1.5% in November, marking the fourth consecutive below-target print, though it was a tenth above both the MPC's forecast and the consensus.
India's industrial production data last week are the last set of key economic indicators for the fourth quarter, before next week's Q4 GDP report.
Swap markets currently price-in RPI inflation falling to 3.0% this time next year, from 3.2% in November, before recovering to 3.8% at the start of 2020.
Japan's economy contracted by 0.9% quarter-on- quarter in Q1, following a downwardly-revised 1.9% plunge in the previous quarter.
With just days to go until the Government triggers Article 50, the consensus view remains that Britain is heading for a "hard" Brexit, which will leave it without unrestricted access to the single market and outside the customs union. We think this view overlooks how political pressures likely will change over the next two years.
The fall in CPI inflation to just 1.5% in October-- its lowest rate since November 2016--from 1.7% in September, isn't a game-changer for the monetary policy outlook.
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
Japan's PPI data yesterday confirmed that October was a turning point for prices--due to the consumption tax hike--despite the surprising stability of CPI inflation in Tokyo for the same month.
The Johns Hopkins database shows a mixed coronavirus picture in the Andes, with the trend in new cases still rising in Argentina and Colombia, but relatively flat for about the past two weeks in Peru.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
Ahead of the release of the retail sales report for December 2018, markets expected to see unchanged non-auto sales.
The Korean unemployment rate edged back up to 3.7% in November from October's 3.6%. Young graduates--the usual suspects--accounted for most of the rise.
Chancellor Javid's resignation, only eight months after assuming the role, is the clearest sign yet that the Johnson-led government wants fiscal policy to play a bigger part in stimulating the economy over the next couple of years.
Expectations are running high that the Autumn Statement on November 23 will mark the beginning of a more active role for fiscal policy in stimulating the economy. The MPC's abandonment of its former easing bias earlier this month has put the stimulus ball firmly in the new Chancellor's court.
Our base case is that the core CPI rose 0.2% in December, but the net risk probably is to the upside. We see scope for significant increases in sectors as diverse as used autos, apparel, healthcare, and rent, but nothing is guaranteed.
ate last week, China and the U.S. reached an agreement, averting the planned U.S. tariff hikes on Chinese consumer goods that were slated to be imposed on December 15.
"Is EZ fiscal stimulus on the way?" is a question that we receive a lot these days.
Friday's data added further colour to the September CPI data for the Eurozone.
The weekly jobless claims numbers are due Thursday, as usual, but in the wake of a flood of emails from readers, all asking a variant of the same question-- should we be worried about the rise in continuing jobless claims?--we want to address the issue now.
The rate of growth of nominal core retail sales substantially outstripped the rate of growth of nominal personal incomes, after tax, in both the second and third quarters.
In a world where the ECB is inclined to ease first and ask questions later, yesterday's detailed German inflation data gave further indication that more stimulus is on the way.
Economic news last week in Mexico was net positive, as industrial production rose by a solid 6.9% month-to-month, following a 17.9% rebound in June, but the bigger picture is less encouraging.
Hard data for Brazil and Mexico, released last week, support the case for further interest rate cuts.
The Chancellor's Summer Statement contained a targeted package of measures aiming to sustain employment and support the ailing hospitality sector. In total, these measures could inject up to £30B into the economy, depending on take-up by households and firms.
The Chancellor claims he can eliminate public borrowing without raising taxes. But the latest borrowing overshoot and the continual optimistic bias of the OBR's forecasts cast doubt on whether his approach will be sufficient to meet his self-imposed surplus target.
The stubbornly slow rate of decline of public borrowing casts doubt on whether the Chancellor will run a budget surplus before the end of this parliament, as his fiscal rule stipulates. But downward revisions to debt interest forecasts by the Office for Budget Responsibility are likely to absolve him again from intensifying the impending fiscal squeeze in the Budget on March 16.
The Chancellor has prepared the public and the markets for a ratcheting-up of the already severe austerity plans in the Budget on Wednesday. George Osborne warned on Sunday that he would announce "...additional savings, equivalent to 50p in every £100 the government spends by the end of the decade", raising an extra £4B a year.
Media reports allege that the Chancellor's Budget pared back the fiscal squeeze planned for the next couple of years. The Director of the Office for Budget Responsibility, Robert Chote, even compared the Chancellor to Saint Augustine, who supposedly said "make me pure, but not yet."
Brazil's President Dilma Rousseff was removed from office on Wednesday, following an impeachment trial triggered by allegations that Ms. Rousseff used "creative" accounting techniques to disguise Brazil's growing budget deficit, ahead of her re-election in 2014. The Senate voted 61-20 to convict Ms. Rousseff; only 54 votes were needed to oust her. For Ms. Rousseff's leftist Workers' Party, her removal marks the end of 13 years in power.
The details of next year's Japanese budget are not yet official and the Chinese budget remains unknown. But the main figures of the Japanese budget are available, while China's Economic Work Conference, which concluded yesterday, has set out the colour of the paint for the budget, if not the actual brush strokes.
Argentina's government continues to show signs of reining in fiscal policy, with the primary budget balance improving steadily over the last year.
At next Wednesday's Budget, the Chancellor will have the rare pleasure of announcing lower-than- anticipated near-term borrowing forecasts. But hopes that he will prevent the fiscal tightening from intensifying when the new financial year begins in April look set to be dashed, just as they were at the Autumn Statement in November.
January's public finance data, released today, take on particular importance because they are the last to be published before the Chancellor delivers his first Budget on March 8. The public finances nearly always swing into surplus in January, primarily because the deadline for individuals to submit self-assessment--SA--tax returns for the previous fiscal year is at the end of the month. Firms also pay their third of four payments of corporation tax for their profits in the current fiscal year.
The Budget on March 16 is set to mark the end of Chancellor George Osborne's lucky streak. Without corrective action, his self-imposed debt rule-- one of the two specified in the 'legally-binding' Charter for Budget Responsibility--looks set to be breached.
Investors in the gilt market would be wise not to take the new official projections for borrowing and debt issuance at face value. The forecast for the Government's gross financing requirement between 2017/18 and 2021/22 was lowered to £625B in the Budget, from £646B in the Autumn Statement.
• U.S. - The April NFP report was terrible; reality is worse • EUROZONE - How to spy to a rebound in the EZ economy • U.K. - The BOE will boost its QE program in due course • ASIA - China's 2020 budget deficit is set to soar • LATAM - Brazil is suffering from the government's Covid-19 mismanagement
Many commentators have assumed that the new Chancellor's pledge to "reset" fiscal policy and to stop targeting a budget surplus in this parliament means that fiscal policy will support growth in economic activity next year.
This week's key market event likely will be the Monetary Policy Committee's meeting on Thursday, rather than the Budget on Wednesday, which probably will see the Chancellor stick to his previous tough fiscal plans.
The Chancellor indicated yesterday that the current fiscal plans--which set out a 1% of GDP reduction in the structural budget deficit this year--will remain in place until a new Prime Minister is chosen by September 2. So for now, the burden of leaning against the imminent downturn is on the MPC's shoulders.
Colombia's central bank, BanRep, increased the monetary policy rate by 25bp to 6.25% on Friday, as expected, and also announced budget cuts and a new FX strategy to try to protect the COP. These measures are similar to those taken by Banxico on Wednesday. The press release, and the tone of the conference after the decision, suggest that more hikes are coming.
Argentina's overdue policy tightening, aimed at dealing with the country's severe inflation and fiscal problems, is underway. Printing of ARS at the central bank, the BCRA, to finance the budget, deficit has slowed and will be curbed further. Welfare spending, which accounts for nearly half of government spending, has been put on the chopping block.
Covid-19 efforts in Korea, plus Q1 front-loading of jobs budget, result in February surprise.
Japan's CPI inflation has troughed; Japan's budget forecasts for next year are on the rosy side; China's LPR stability reflects precarious banking sector; Korea should make a complete exit from PPI deflation this month
In one line: Slowdown confirmed; budget surplus stronger than expected, again.
Recent political and economic developments in Brazil make us more confidence in our forecast of a gradual recovery. On Wednesday, interim President Michel Temer scored his first victory in Congress, winning approval for his request to raise this year's budget target to a more realistic level. Under the new target, Brazil's government plans to run a budget gap, before interest, of about 2.7% of GDP this year.
As we go to press, it appears that politicians in Italy have agreed on a 2019 budget deficit of 2.4% of GDP.
October's surprise jump in public borrowing is not a material setback for the Chancellor, who will stick to his new Budget plans for modest fiscal stimulus next year.
Progress in reducing the budget deficit has ground to a virtual halt, despite the ongoing fiscal consolidation. Public sector net borrowing excluding public sector banks--PSNB ex.--was £10.6B in September, exceeding the £9.3B borrowed in the same month last year.
At the halfway mark of the fiscal year, public borrowing has been significantly lower than the OBR forecast in the March Budget.
December's public finance figures suggest that borrowing is on track to come in a bit below the forecasts set out in the Autumn Statement in November. But we caution against expecting the Chancellor to unveil a material reduction in the scale of the fiscal consolidation set to hit the economy in his Budget on 8th March.
Two fiscal deadlines are on the near-horizon.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, discusses Italy's budget and deficit and the potential for the nation to leave the Eurozone.
Chief U.K. Economist Samuel Tombs on U.K. house prices
Will the EU's recovery fund be delayed?
Chief U.K. Economist Samuel Tombs on the government's fiscal policy
Chief U.K. Economist Samuel Tombs on UK Government Borrowing
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