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46 matches for " domestic economy":
The Fed yesterday toned down its warnings on the potential impact on the U.S. of "global economic and financial developments", and upgraded its view on the domestic economy, pointing out that consumption and fixed investment "have been increasing at solid rates in recent months". In September, they were merely growing "moderately". Policymakers are still "monitoring" global and market developments, but the urgency and fear of September has gone. The statement acknowledged the slower payroll gains of recent months--without offering an explanation--but pointed out, as usual, that "underutilization of labor resources has diminished since early this year" and that it will be appropriate to begin raising rates "some further improvement in the labor market".
The slowdown in the EZ economy is well publicised.
Barring a meteor strike, the ECB will leave its main refinancing and deposit rates unchanged today, at 0.00% and -0.5% respectively.
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.
Argentina's economy is on the verge of a renewed recession; available data for August and the effect of the recent financial crisis, driven by the result of the primaries, suggest that output will come under severe strain.
The INSEE business sentiment data in France continue to tell a story of a robust economy.
Yesterday's IFO data in Germany heaped more misery on the Eurozone economy.
Data today will show that the EZ construction sector finished 2017 on a decent note.
Following a challenging start to this year, Andean economic prospects are improving gradually, thanks to falling interest rates, lower inflation, relatively stable currencies and--in some cases--increased infrastructure spending.
Italy's economy is still bumping along the bottom, after emerging from recession in the middle of last year.
Brazilian inflation is off to a bad start this year, but January's jump is not the start of an uptrend, and we think good news is coming.
The EZ economic survey data for April were disappointing in our absence.
Japan's monetary base growth slowed to just 4.6% year-over-year in February, from 4.7% in January, well below the 17% rate needed to keep the base expanding at a pace consistent with the BoJ's JGB quantity target.
Demand in German manufacturing slid at the start of Q3.
Demand for German manufacturing goods remained subdued at the end of Q4.
China's authorities recognised, around the middle of this year, that activity was slowing and that monetary conditions had become overly tight.
We have spent the past few weeks shifting our story on the EZ economy from one focused on slowing growth and downside risks to a more balanced outlook. It seems that markets are starting to agree with us.
LatAm assets and currencies enjoyed a good start to the week, following the agreement between the U.S. and China to pause the trade war.
Our colleagues have been telling some unpleasant stories recently.
Yesterday's money supply data in the Eurozone were solid across the board.
Friday's advance Q4 growth numbers in the EZ were a bit of a dumpster fire.
Yesterday's barrage of survey data were a mixed bag. The composite EZ PMI edged higher in May to 51.6, from 51.5 in April, but the details were less upbeat, and also slightly confusing.
Downward revisions to Japan's Q4 real GDP growth, published on Wednesday, lead us to revisit our main worry over the durability of the recovery; namely, that monetary conditions appear to be signalling a slowdown.
Manufacturing in France remained on the front foot at the start of Q4.
The two major central banks of Asia have chosen hugely divergent policies. The BoJ has chosen to fix interest rates, while the PBoC appears set on preventing a meaningful depreciation of the currency.
External conditions continue to favour Brazil. The recovery in domestic demand in the world's major economies, particularly the rebound in business investment, has driven a gradual revival of global exports.
The French manufacturing data delivered another upside surprise last week, following the solid numbers in Germany; see here. French industrial production rose slightly in November, by 0.3% month-to-month, extending the gains from an upwardly-revised 0.5% rise in October.
The ECB will rest on its laurels today.
The BoJ is likely to stay on hold this week for all its main policy settings.
The Fed's insistence this week that U.S. rates will rise only twice more this year helped to ease pressures on LatAm markets this week, particularly FX. The way is now clear for some LatAm central banks to cut interest rates rapidly over the coming months, even before U.S. fiscal and trade policy becomes clear. We expect the next Fed rate hike to come in June, as the labor market continues to tighten. If we're right, the free-risk window for LatAm rate cuts is relatively short.
Data released last week in Brazil reinforced our view of a modest, final, interest rate cut this week, despite the recent strength of the USD and volatility in global markets.
Mexico's structural reforms, robust fundamentals, and its close ties to the U.S. should have conferred a degree of protection from the turmoil in EMs over the past year. But its markets have been hit as hard as other LatAm countries by the sell-off in global markets in recent weeks. The MXN fell about 5% against the USD in January alone, and has dropped by 20% over the last year.
The Colombian economy has been able to grow this year despite the plunge in oil prices since the middle of 2014. Gains in consumers' spending and investment have offset part of the hit from falling exports. But private spending growth, nonetheless, slowed considerably during the first few months of the year, as shown in our char t below, in part due to rising prices for imported goods after the depreciation of the COP, as well as broad-based concerns over the state of the economy.
Colombia's industrial and retail sectors surprised to the upside in August, suggesting that the domestic economy has been resilient during most of the third quarter, despite the hit from an array of external headwinds. Industrial production increased by a solid 2.6% year-over-year in August, up from an upwardly revised 0.6% expansion in July, and above its recent trend. In the first half of the year, industrial activity fell on average by 1.1%, the worst performance since 2013, due mainly to the oil hit and ex tended works at Reficar, the country's second biggest oil refinery. But Colombia's manufacturers appear to have shrugged off part of the oil pain in recent months.
Markets initially objected to last week's ECB package, but the tune has since changed. The decision to focus on direct credit easing to the domestic economy, via more attractive TLTROs and corporate bond purchases--rather than by lowering rates further--is now seen by many analysts as a stroke of genius.
When the dust settles after today's wave of data, we expect to have learned that core retail sales continued to rise in June, core inflation nudged back up to its cycle high, and manufacturing output rebounded after an auto-led drop in May. None of these reports will be enough to push the Fed into early action, but they will add to the picture of a reasonably solid domestic economy ahead of the U.K. Brexit referendum.
A reader sent us last week a series of five simple feedback loops, all of which ended with the Fed remaining "cautious". For example, in a scenario in which the dollar strengthens--perhaps because of stronger U.S. economic data--markets see an increased risk of a Chinese devaluation, which then pummels EM assets, making the Fed nervous about global growth risks to the domestic economy.
Mexico's economy slowed marginally in Q4, due mainly to the challenging external environment, but the domestic economy remains relatively healthy. Real GDP rose 0.5% quarter-on-quarter in Q4, following a 0.8% solid expansion in Q3. Year-over-year growth dipped to 2.5% from 2.8%.
Good news keeps on coming from Mexico, and the outlook is still favourable. Overall inflation pressures remain subdued and the domestic economy remains reasonably solid, despite a modest slowdown in recent months. Job creation remains robust, and real wages have been growing at a solid, non-inflationary pace.
Mexico's underlying inflation pressures and financial conditions are gradually stabilizing. Eventually, this will open the door for rate cuts in order to ease the stress on the domestic economy, particularly capex.
Markets currently judge that U.K. interest rates will rise about six months after the first Fed hike. But the Bank of England seldom lagged this far behind in the past. Admittedly, the slowdown in the domestic economy that we expect will require the Monetary Policy Committee to be cautious. But wage and exchange rate pressures are likely to mean six months is the maximum period the MPC can wait before following the Fed's lead.
Mexico's data over the last few weeks have confirmed our view that private consumption remains the key driver of the current economic cycle. Solid economic fundamentals, thanks to stimulative monetary policy and structural reforms, have supported the domestic economy in recent quarters. Falling inflation has also been a key driver, slowing to 2.5% by mid-September, a record low, from an average of 4% during 2014.
We were happy to see upside surprises from both sides of the domestic economy yesterday, but we doubt that the August readings from both the Conference Board's consumer confidence survey and the Richmond Fed business survey can hold.
Mexico's economy continues to bring good news, despite the tough external environment for all EM economies. According to the economic activity index, a monthly proxy for GDP, growth gained further momentum in Q4. Activity rose 2.7% year-over-year in November, supported by stronger services activities, which expanded 0.3% month-to-month. The services sector has been the main driver of the current cycle, growing 3.8% year-over-year in November, bolstering our optimism about the domestic economy in the near-term.
Will EZ services hold their own amid weakness in manufacturing?
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