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571 matches for " q2":
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.
Friday's economic data in the euro area provided the first piece of evidence of the slump in Q2 GDP, but added to the picture of a relatively resilient German economy.
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.
Japan's Tankan survey for Q2 was unsurprisingly grim, given the devastation caused by the near- global lockdown in the first half of the quarter, and the nationwide state of emergency that enveloped April and May.
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.
We expect today's second estimate of Q2 GDP to confirm that the U.K. has been the slowest growing G7 economy this year.
In one line: Hit by crash in net exports and slower growth in consumers' spending.
In one line: Hit by slowdown in net trade and consumers' spending.
In one line: Germany edges closer to recession.
In one line: Avoiding a technical recession by small margin.
Capital outflow pressure is slowly rebuilding.
In one line: Decent July means net foreign trade unlikely to be a big drag on Q3 GDP growth.
In one line: A solid rebound but the trade war remains a key risk.
In one line: The calm before the export storm?
In one line: Both terrible, but could have been worse.
In one line: Revisions to the saving ratio leave households looking better placed to weather a future storm.
In one line: Persistently large deficit leaves sterling vulnerable in a Brexit crisis.
In one line: Disappointing, and the outlook remains challenging due to high external risks.
China's GDP report for the second quarter is due a week from today, and the prevailing wisdom is that the bounce-back was strong enough for headline growth to return to the black.
In one line: The bottom, but expect a long and slow climb ahead.
Efforts to contain the coronavirus outbreak severely dented industrial activity in Brazil.
July's BoJ meeting was a quiet one, with the Board keeping the -0.10% policy balance rate and the 10- year yield target of "around zero", as widely predicted.
France is solidifying its position as one of the Eurozone's best-performing economies.
We're now starting to see clear signs in unofficial data that households are slashing their expenditure on discretionary services, in order to minimise their chances of catching the coronavirus.
China's post-lockdown recovery broadly has surprised this quarter, particularly in the industrial sector.
China's GDP report for the second quarter sprung an upside surprise, with the economy growing by 3.2% year-over-year--on paper--marking a sharp reversal from the 6.8% plunge in the first quarter, due to the country's nationwide lockdown.
Data released on Friday confirmed an appalling end to the first quarter for the Brazilian and Colombian economies. In Brazil, the March IBC-Br, a monthly proxy for GDP, plunged 5.9% month-to-month, close to expectations.
We were not hugely surprised to see stocks tank again yesterday.
Incoming data continue to highlight the severe hit from the pandemic on the real economies of the region, but some surveys and leading indicators are already pointing to a gradual upturn from June onwards.
The first real glimpse of India's economic performance early this quarter is grim, adding weight to our below-consensus GDP forecast.
The Chilean economy was emerging in early Q1 from the self-inflicted shock from the social unrest in October, but the upturn was interrupted in early- March by the restrictive measures introduced to contain Covid-19.
Chile's near-term economic outlook is still negative after a sharp resurgence of coronavirus cases.
Korea's economy is shaping up largely in line with our expectations for the second quarter, with private consumption recovering, but exports and investment tanking.
Data released last week confirm that Argentina's economy remains a mess.
Looking beyond the potential hit from the lockdown in North Rhine-Westphalia, German consumer sentiment is improving steadily.
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.
Japan's economy contracted by 0.9% quarter-on- quarter in Q1, following a downwardly-revised 1.9% plunge in the previous quarter.
Korea's GDP report for the second quarter was a huge let-down.
Services will bear the brunt of the Covid-19 shock in the euro area, but manufacturing is not far behind.
In one line: Don't panic; inventories are to blame for the below-consensus print.
Data released in recent days confirmed the intensity of the Covid-related shock to the Chilean economy in Q2.
Friday's final June PMI data confirmed the survey's recovery through Q2. The composite index edged higher to 48.5, from 31.9 in May, extending its rebound from a low of just 13.6 in April.
China's official real GDP growth likely slowed to 6.0% year-over-year in Q3, from 6.2% in Q2.
Japan's tertiary index shows Q2 services strength was merely an April leap. Japan's PPI is slated for more deflation.
Yesterday's first estimate of Q2 GDP in Mexico confirmed that the economy has been under severe stress in recent months.
Data released over the last few weeks have confirmed that Colombia's economic performance in Q2 was grim, adding weight to our below-consensus GDP forecast.
Tracking the consumer services sector has become more important since Covid-19, as it was flattened by the lockdown in Q2 and it might prove to be an incubator of new infections, if it becomes too busy.
Recent data in Colombia have confirmed that virus containment measures caused much bigger declines in activity in early Q2 than initially expected.
Investors active in the government bond market will be awaiting today, at 07:30 BST, the publication by the Debt Management Office of its updated Financing Remit for the upcoming three months. The new Remit will show that gilt sales, net of redemptions, will be lower in Q3 than in Q2.
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%.
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 Q2 GDP was driven by the twin pillars of private consumption and capex.
Analysts have fiercely debated the consequences of the U.S. Treasury's plan to break the bank in Q2 with a whopping €3T issuance of new debt to cover the initial costs of Covid-19.
Analysis of the economy's potential to recover later this year from extreme weakness in Q2 has focussed largely on the extent to which virus-related restrictions will be lifted.
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.
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.
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.
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.
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.
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 economic data added further evidence that GDP growth in the EZ will slow in Q2.
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.
Japan's main activity data for April were massively disappointing, presaging the sharper GDP contraction we expect in Q2, compared with Q1.
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.
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.
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.
The Q2 GDP figures show that the economy has little underlying momentum.
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.
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.
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 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.
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.
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.
Q2's GDP figures create a terrible first impression, but a closer look suggests that the risk of a recession remains very low.
Revisions to Japan's real GDP growth, on Monday, left Q2 blisteringly hot.
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.
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.
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.
China's Q2 official GDP growth, to be released on Monday, likely slowed to 6.2% year-over-year, from 6.4% in Q1.
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.
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.
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.
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.
Chinese real GDP growth reportedly edged down to 6.7% year-over-year in Q2, from 6.8% in Q1.
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.
Yesterday's first estimate of Q2 GDP in Mexico confirmed that the economy lost momentum in recent months.
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.
Yesterday's second EZ Q2 GDP report was slightly more upbeat than the advance estimate.
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.
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.
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.
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
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.
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.
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.
Yesterday's economic data provided further evidence that GDP growth in the EZ economy slowed in Q2.
Where will EURUSD go in Q2? How about nowhere
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.
Yesterday's sole economic report in the Eurozone closed the book on the initial Covid-19 shock in French manufacturing.
Governor Bailey signalled a potential shift in the Bank of England's approach to withdrawing monetary stimulus--whenever the time comes--last month in an article for Bloomberg Opinion.
Brazil's industrial sector is still suffering, but the pain is easing as the economy gradually reopens. That said, full recovery is a long way off, and the pandemic is still far from over, adding downside risks to the recent upbeat picture.
Yesterday's trade data in Germany added to the evidence of a relatively slow rebound as the domestic and European economies emerged from lockdown.
Friday's manufacturing data in Germany weren't pretty, but fortunately, the report is old news. Factory orders crashed by 25.8% month-to-month in April, extending the slide from a revised 15.4% fall in March.
The collapse in global demand last month will have derailed China's trade recovery, causing exports to drop unpleasantly month-on-month after the bounce of around 45% in March; the January/February breakdown is not provided, so we can't be sure of the extent of the March rebound.
The People's Bank of China likely will be more than content with the latest money and credit data, to the point where it probably won't see the need to cut interest rates further anytime soon.
This week real data in Brazil supported the idea that the worst of the recession is likely over, but a V-shaped rebound is not in the cards.
The MPC's pause for breath last week disappointed a majority of investors, who thought that it would at least tweak aspects of the support programmes put in place in March.
Wednesday's industrial production report in Brazil was terrible, despite overshooting market expectations.
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.
Economic conditions remain challenging in Mexico, despite a modest improvement in leading indicators. The usual surveys currently are not well-suited to capture the economy's upturn from the Covid-19 collapse.
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.
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.
The Andean countries were quick to implement significant measures in response to the initial stage of the pandemic, adopting a broad range of economic and social policies to ease the effects.
Last week finished as it started, with more depressing economic numbers in the Eurozone, this time from manufacturing in the core economies.
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.
Economic conditions in Brazil are deteriorating rapidly.
The trade war with China is not big enough or bad enough alone to push the U.S. economy into recession.
The recent March economic activity reports for Chile have been terrible, showing the first signs of the Covid-19 shock, and worse is to come.
April's GDP report probably will be the worst any of us will see in our lifetime.
Yesterday's final EZ manufacturing PMIs for July extended the run of gains since the nadir during lockdown.
Emerging evidence suggests that the economy has passed the period of peak Covid-19 pain.
Resistance is futile.
Under normal circumstances, sustained ISM manufacturing readings around the July level, 54.2, would be consistent with GDP growth of about 2% year-over-year.
Headline Eurozone PMI data have declined steadily since the beginning of the year, but the June numbers stopped the rot.
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.
The continued gradual rise in new confirmed cases of Covid-19 lends more weight to the idea that the economy already has reopened as much as possible while containing the virus.
Traders looking for a sustained move in the euro have been left disappointed in the past six-to-12 months, but it is now teasing investors with a break to the upside against the dollar.
The release of pent-up Japanese consumer demand in June was emphatic, with retail sales values jumping by 13.1% month-on-month.
Yesterday's national accounts showed that the downturn in the economy on the eve of the Covid-19 outbreak was sharper than first estimated.
In one line: A bold cut to help the economic recovery, more to come.
Recent economic indicators in Mexico have been terrible. The worst of the recession seems to be over, but recent hard data have underscored the severity of the shock and made it clear that the recovery has a long way to go.
China's economy looks to have shrugged off the supposed "second wave" of Covid-19, sparked by a cluster in Beijing's largest wholesale market for fruit and veg, looking at June's PMIs.
The Q1 GDP figures, released on Wednesday, likely will show that the quarter-on-quarter decline in economic activity eclipsed the biggest decline in the 2008-to-09 recession--2.1% in Q4 2008--even though the U.K. went into lockdown towards the very end of the quarter.
China's export data for April were a mixed bag, to say the least.
Yesterday's EZ data showed that French households came out swinging as the economy reopened. Consumers' spending, ex-services, jumped by 36.6% month-to-month in May, driving the year-over-year rate up to -8.3%, from -32.7% in April.
The Fed made no changes to policy yesterday, as was almost universally expected.
Data released in recent days have started to reveal a story of horror and misery in the Brazilian economy.
Yesterday's third and detailed EZ GDP data confirmed the economy hit the wall in Q1.
Some normality has returned in India, more than three weeks from the end of the nationwide lockdown and the start of "Unlock 1.0" on June 1.
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 Jibun Bank services PMI for Japan saw a heftier increase in June, to 42.3, from 26.5 in May, signalling a substantial easing of the industry's downturn.
Yesterday's national business confidence data for June provided further evidence that the EZ economy is rebounding.
The final numbers for China's balance of payments in the first quarter showed that the current account descended to a $34B deficit, from a surplus of $30B a year earlier.
The official data lag developments in the real economy even at the best of times, but on this occasion the gap has turned into a chasm.
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.
Mexican policymakers yesterday voted unanimously to cut the policy rate by 50bp to 5.00%, the lowest level since late 2016.
Inflation in Mexico surprised to the upside in early Q3, but we still believe it will fall gradually in Q4.
The rate of growth of new coronavirus infections across Europe slowed yesterday, in some cases quite markedly. We can quibble about the reliability of the data in individual countries, given variations in testing regimes, but the picture is strikingly uniform.
The coronavirus pandemic is wreaking havoc in Brazil.
Economic activity is rebounding in LatAm, but the recovery will be slow and uneven.
Yesterday's final CPI report for April confirmed that the Eurozone is edging towards deflation.
It seems that yesterday's PMI data left investors and analysts more confused than enlightened.
Japan's export data for April unsurprisingly were abysmal, driving a massive deterioration in the trade balance, which flipped from a modest ¥5B surplus in March, to a ¥930B deficit.
Chancellor Sunak looks set to announce more fiscal stimulus next month to reinforce the economic recovery, despite recent record levels of public borrowing.
The BoJ kept policy unchanged yesterday, with the policy balance rate remaining at -0.1% and the 10-year yield target remaining around zero.
Data released on Friday in Brazil and recent political events helped to open the door further to a final rate cut in August. The IPCA-15--which previews the full CPI-- rose 0.3% month-to-month in July, well below market expectations, 0.5%.
This week's detailed Q1 GDP data confirmed that the German economy is in dire straits, alongside its euro area peers, but there's a silver lining.
The end of Korea's first Covid-19 wave, coupled with the government's economic support measures, has been a boon for the retail industry.
The release today of the final reading of the composite PMI for June will provoke further debate over its usefulness in charting the economy's recovery from the Covid-19 shock.
We were expecting the pandemic in the Andes to reach a plateau over the coming weeks, given the quick response of regional governments to fight the virus.
This week's economic reports have provided clear, and uplifting, evidence that EZ consumers came out swinging as lockdowns were lifted.
April's money and credit figures show that relatively few firms suffered from a lack of liquidity at the beginning of the Covid-19 crisis.
The recovery of consumer confidence in Korea remains undeterred by the lingering risk of a second wave.
French finance minister Bruno Le Maire had bad news for his compatriots yesterday.
The Monetary Policy Board of the Bank of Korea yesterday voted unanimously to lower its base rate by 25 basis points to a record low of 0.50%.
Data released on Friday in Mexico strengthened the case for further interest rate cuts in Q3. The monthly IGAE economic indicator for April, a proxy for GDP, plunged 19.9% year-over-year, a record drop since the series started in 1993, and down from -2.3% in March.
The downturn in Japan's all-industry activity index slowed in May to -3.5% month-on-month, from April's significantly revised 7.6% plunge.
Data released yesterday in Mexico highlighted the volatility in international trade resulting from the pandemic.
Data released yesterday in Brazil support our base case that the IPCA inflation rate will remain relatively stable over the coming months, hovering around 2%.
Beyond the immediate wild swings in prices for food, clothing, hotel rooms and airline fares, the medium-term impact of the Covid outbreak on U.S. inflation will depend substantially on the impact on the pace of wage growth.
The early damage in India from Covid-19 and the nationwide lockdown likely was significant enough to hammer the GDP report for the first quarter, due tomorrow.
Industrial profits in China continued to strengthen in June, rising by 11.5% year-over-year, marking an acceleration from 6.0% in the previous month.
Brazil's external accounts remain relatively solid, making it easier for the country to withstand any potential external or domestic threat.
Core machine orders in Japan held up surprisingly well in March, slipping by just 0.4% month-on-month, erasing only part of the 2.3% increase in February.
The closer we look at the data, the less concerned we are at the painfully slow decline in the number of new daily confirmed Covid-19 cases.
Yesterday's ECB meeting was a snoozer, just as we predicted.
May's activity data in the Andes underline the severe hit from the pandemic on economic activity.
The Covid-19 crisis has turned the tables on the Spanish economy.
Yesterday's labour cost data in the EZ are misleading. Eurostat's headline index jumped by 3.4% year-over-year in Q1, accelerating from a revised 2.3% increase in Q4,
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.
Policymakers in Brazil and Chile took another big step this week in assuring markets that they won't hesitate to act in the fight against the virus.
The year-over-year collapse of industrial production in India eased substantially in May, to -35%, from -58% in April, close to our -32% forecast.
India's shocking PMIs for April leave little doubt that the second quarter will be bad enough to result in a full-year contraction in 2020 GDP, even if economic activity recovers strongly in the second half.
All major EZ governments are now in the process of lifting lockdowns, but investors should expect less a grand opening, more of a careful tip-toeing.
Friday's June inflation data in Brazil confirmed that the ripples from the worst of the Covid shock were still being felt at the end of the quarter.
China's September imports missed expectations, but commentators and markets tend to focus on the year-over-year numbers.
German inflation data are more noise than signal at the moment.
Japan's GDP likely dropped by 1.1% quarter- on-quarter in the first quarter, even from the favourable Q4 base, when it fell by 1.8%.
Economic activity remains under severe strain in the Andes.
The U.K.'s property obsession has been immune to Covid-19, so far.
May's money and credit data show that Covid-19 has not pushed many businesses immediately over the edge.
Friday's economic data in the Eurozone provided further evidence of a sharp rebound in manufacturing output as the economy reopened. Industrial production in France jumped by 19.6% month-to-month in May, lifting the year-over-year rate to -23.4% from -35.0% in April.
The BoE has lived up to its reputation again as one of the most unpredictable central banks.
Friday's second Q1 GDP estimate confirmed that lockdowns to halt the spread of Covid-19 hurt the EZ economy in Q1. Real GDP plunged by 3.8% quarter-on- quarter, following a 0.1% rise in Q4, in line with the first estimate.
The business cycle in the Eurozone tends to follow a fairly simply script, at least in broad terms.
China's trade surplus plunged to $46.4B in June, from $62.9B in May, largely in line with our below- consensus forecast.
We take little comfort from the fact that the 2.0% quarter-on-quarter drop in Q1 GDP was a bit smaller than the consensus forecast, 2.5%, and the 3.0% fall pencilled-in by the MPC in its Monetary Policy Report.
We remain convinced by other evidence that manufacturing output now is recovering, though pre-virus levels of production likely will not be realised for several years.
We understand the desire of investors and individuals to see the economy re-opening as soon as possible, but the data right now support only a limited opening in some parts of the country and, hence, a limited late spring/summer rebound in the economy.
Hard data released in Argentina over the last month showed that the economy was struggling in early Q1, even before the Covid-19 hit.
As painful as it is, the decision to lock down economies to curb the spread of Covid-19 was easy. The next step, however, is considerably more difficult.
One of the key positive signs in the Eurozone data since the virus hit has been the evidence that households' liquid money balances have been well supported by job retention schemes, extended unemployment insurance, and aggressive monetary stimulus.
Manufacturers in China continued to trudge along in May, with their post-lockdown recovery looking increasingly fragile.
Korea's unemployment rate rose faster than expected in May, jumping to 4.5%, from 3.8% in April. We've been arguing for some time that the delayed impact of the economic growth slowdown from late- 2017 to early-2019 would eventually push the jobless rate to the mid-4% level this year; the sudden stop caused by Covid-19 merely sped up this process.
The economy will be a shadow of its former self over the remainder of this year, following the heavy pummelling from Covid-19.
June's money and credit data show that firms have accumulated a large cash pile since the start of the Covid-19 outbreak, despite sales falling through the floor.
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.
Mexico's industrial recession deepened in April, though some leading indicators suggest that the worst is over as the economy gradually reopens. But downside risks have increased dramatically in recent weeks, as the pandemic seems to be gathering renewed strength.
Colombian policymakers on Friday cut the reference rate by 50bp, for a third straight month, to 2.75%.
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.
The French manufacturing sector slowed more than we expected in Q1.
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.
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.
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%.
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.
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.
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.
Korean exports continued to fall year-over-year in April, but the story isn't as bleak as the headlines suggest.
Argentina's latest hard data suggest that activity is softening, but we don't see the start of a renewed downtrend.
Forecasting BoJ policy for this year is trickier than it has been in a long time.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
LatAm currencies fell sharply in Q1 but the hit hasn't yet pushed inflation higher.
Leading indicators and survey data in Brazil still suggest a rebound from the relatively soft GDP growth late last year and in Q1.
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.
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.
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.
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.
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.
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.
Brazil's December economic activity index, released last week, showed that the economy ended the year on a relatively weak footing. The IBC-Br index, a monthly proxy for GDP, fell 0.3% month- to-month, pushing down the adjusted year-over- year rate to 0.3%, from a downwardly-revised 0.7% increase in November.
Momentum in the EZ auto sector rebounded at the end of the second quarter.
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.
China's real GDP growth was unchanged at 6.4% year-over-year in Q1, above the consensus for a slowdown to 6.3%.
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.
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.
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.
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.
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%.
Official, real GDP growth was low in Q1, at 1.4% quarter-on-quarter, down from 1.6% in Q4.
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.
Friday's data force us to walk back our recession call for Germany. The seasonally adjusted trade surplus rose in September, to €19.2B from €18.7B in August, lifted by a 1.5% month-to-month jump in exports, and the previous months' numbers were revised up significantly.
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.
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.
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.
Data on Friday showed that the upturn in French manufacturing petered out at the end of Q1.
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 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.
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.
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.
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.
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.
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.
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.
LatAm data in recent days have confirmed that efforts to contain the coronavirus, plunging global trade, and the collapse in oil prices, are dealing a severe economic and financial blow.
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.
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.
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.
The U.K. services sector has vanished overnight, following the introduction of tough restrictions on everyday life to stem the spread of Covid-19.
Korean exports hit a brick wall in April, unsurprisingly, as lockdowns across the non- China world dealt a body blow to demand.
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.
Manufacturers in the Eurozone are still suffering, but yesterday's final PMI data for April offered a few bright spots.
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.
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.
Argentina's Recession Has Ended, Supporting Mr. Macri's Odds
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.
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.
June's money and credit figures showed that the economy still doesn't have much zing, even though lending has picked up since Q1.
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.
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.
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.
Manufacturers in Germany endured another miserable quarter in Q3.
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.
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.
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%.
Industrial production data in Germany continued to defy the signal of doom and gloom from leading indicators.
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.
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.
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.
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.
Odds-on, the consensus forecast for May's GDP report, released on Wednesday, will miss the mark.
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.
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.
New orders data increasingly suggest that German manufacturers all but shut their production lines at the start of the year.
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 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.
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.
After strong real GDP growth in Q1, China commentators called the peak, claiming that growth would slow for the rest of 2017.
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%.
Data released yesterday in Mexico strengthened the case for interest rate cuts this year.
The IFO continues to tell a story of a German economy on the ropes.
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%.
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.
CPI inflation was steadfast at 1.9% in March, undershooting the consensus and our forecast for it to rise to 2.0%.
Korean GDP contracted by 1.4% quarter-on- quarter in Q1, erasing the 1.3% jump at the end of last year. The pullback was sharper than we expected, with the cliff-edge drop in private consumption, in particular, catching us by surprise.
India's trade data for March highlight the immediate severity of the country's sudden nationwide lockdown.
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.
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.
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%.
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.
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.
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.
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 expect to learn today that first quarter GDP fell at a 4.3% annualized rate, but the margin of error here is bigger than usual. Under normal circumstances we're disappointed if our quarterly GDP estimate is out by more than a few tenths, but this time around, the uncertainties are huge. Anywhere between -2% and -6% wouldn't be a big surprise.
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.
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 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.
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.
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.
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 expectations components of both the Michigan and Conference Board measures of consumers' confidence have risen sharply since gasoline prices rolled over.
Yesterday's ECB meeting was comfortably uneventful for markets.
The INSEE's manufacturing sentiment data in France are slightly confusing at the moment.
India's GDP report for the second quarter, due on Friday, is likely to show a decent rebound in growth from the first quarter.
Net trade in India likely contributed positively to headline GDP growth in the lockdown-plagued second quarter, but for all the wrong reasons.
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.
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%.
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.
In one line: Core PCE deflator back on track; Q2 consumption headed for 3%.
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.
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.
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.
Data released on Friday confirmed that Colombian activity lost momentum in Q4, following an impressive performance in late Q2 and Q3. Retail sales rose 4.4% in November, down from 7.4% in October and 8.3% in Q3.
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.
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.
China's real GDP growth officially slowed to 6.5% year-over-year in Q3, from 6.7% in Q2.
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.
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.
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.
Yesterday's detailed Mexican GDP report confirmed that growth was relatively resilient in Q2, despite the lagged effect of external and domestic headwinds.
Yesterday's economic data provided the first glimpse of the crash in EZ sentiment at the start of Q2, ahead of today's more substantial barrage of numbers, including French INSEE data, GfK confidence numbers in Germany and the advance PMIs.
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.
The construction sector remains a stand-out performer in the Eurozone economy, despite stumbling at the end of Q2.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Brazil's economic outlook is gradually improving following a challenging Q2, which was hit by political risk, putting business and consumer confidence under pressure.
China's official real GDP growth slowed to 6.0% year-over-year in Q3, from 6.2% in Q2 and 6.4% in Q1. Consecutive 0.2 percentage points declines are significant in China.
In one line: Rising spending through Q2 means base effects guarantee a big increase in Q3.
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.
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.
Mexican GDP was unchanged quarter-on-quarter in Q2, according to the final report, a tenth worse than the preliminary reading.
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.
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.
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.
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.
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.
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.
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.
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.
The verdict from the German business surveys is in; economic growth probably slowed further 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.
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.
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.
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.
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.
China's official manufacturing PMI implies a modest gain in momentum in Q2, at 51.4, compared with 51.0 on average in Q1.
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.
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.
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.
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.
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.
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.
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.
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.
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%.
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.
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.
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.
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
Eurozone GDP growth likely slowed in Q2...teeing up a deposit rate cut in September
Q2 slowdown in the EZ economy confirmed...Now we wait for the ECB's response next month
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
The EZ economy finally stretches its legs...but it won't sustain Q1 and Q2 momentum for long
The economy is struggling to rebound in Q2...an August rate hike is far from a done deal
Punchy Q2 Implies A Quieter Q3 In China...Expect A Quieter Secord Half For The BOJ...Korean Exports Look Poised To Turn The Corner..No Bullet Was Dodged In India; Unlock 1.0 Is Risky
Data Are Starting To Show The Covid Shock...Q2 Will Be A Write-Off
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
China's Unsustainable V-Shaped Recovery...Japan's Q1 GDP Contraction Is Just A Taster...Korea's Grim April Exports Is A Warning Shot...India's Lockdown Will Kill Q2, Despite Relaxation
Markets are still cheering the solid Q1 GDP data...but we are worried about a setback in Q2
The EZ Economy Will Crumble Under Covid-19 In H1...The Rebound Should Begin By The End Of Q2, If We're Lucky
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 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.
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.
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.
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.
Industrial production growth in China appears to be stabilising, following the slowdown in Q2.
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.
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.
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.
Most of the Andean economies have been hit by the turmoil roiling the global economy in the past few quarters. But modest recovery in commodity prices in Q3, and relatively solid domestic fundamentals helped them to avoid a protracted slowdown in Q2 and most of Q3.
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.
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.
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.
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.
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%.
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 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.
Japan's GDP growth came roaring back in Q2, thanks to a strong rebound in private consumption, and an acceleration in business capex.
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.
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.
Manufacturers in the Eurozone stood tall mid-way through Q2, despite still-subdued leading indicators.
Equities in the Eurozone are off to a strong start in Q2, building on their punchy 12% gain in the first quarter.
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.
Yesterday's second Q3 GDP estimate confirmed that the EZ economy expanded by 0.2% quarter-on- quarter in Q3, the same pace as in Q2, leaving the year-over-year rate unchanged at 1.2%.
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.
Brazil's recession carried over into the middle of Q2, but with diminishing intensity in some economic sectors.
Surveys released yesterday failed to support the MPC's view that the economy has bounced back in Q2.
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.
In one line: Weak, and coronavirus now casts a shadow over the Q1/Q2 numbers.
In one line: Solid, but risks loom for the Q2 numbers.
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.
In one line: Weak, and Q2 as a whole likely will be bleak.
In one line: Solid production data in Q1, but setback looms 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.
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: Positive details, but Q2 as a whole will be grim.
In one line: Domestic demand to the rescue, but inventories will be a drag in Q2.
In one line: Solid, but Q2 as a whole was a disaster for net exports.
Friday's money supply data in the euro area show that liquidity support for the economy remained firm mid-way through Q2. Headline M3 rose by 8.9% year-over-year in May, accelerating from a revised 8.2% increase in April, and extending its ascent from around 5% before the Covid-19 shock.
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.
Korea's modest consumption rebound in Q2 barely cushioned the trade blow
Japan's trade balance should recover as domestic weakness sets in; Japan's manufacturing PMI undermines H2 recovery hopes; Japan's services PMI paints a damning picture of Q2; Korea's export recovery from the April low will be more gradual than the descent; A lot more downside left for PPI deflation in Korea before Q3 trough
A grim start to Q2, as developed world demand collapses
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.
Punchy output gains from China's manufacturers will soon give way. A mixed bag for China's non-manufacturing sectors at the start of Q3. Don't be fooled by the June slip in Japan's unemployment rate. Expect only a mild recovery in Japanese industrial production, for now. Korean production ended Q2 on a strong note.
In one line: French consumers roared back mid-way through Q2; deflation ahead for the CPI?
In one line: That's Q2 done then; stabilisation slightly above 50 in Q3?
June moderation confirms May nadir in Chinese PPI deflation. Food price disinflation in China stalls in June. No signs of Japan's M2 growth spike tapering anytime soon. The surprise bounce in Japanese core machine orders was fairly narrow. Machine tool orders in Japan end Q2 on an encouraging note.
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.
In one line: Soft, and the outlook for Q2 isn't great.
In one line: Core inflation will fall back this month; construction jumped in Q1, but a setback looms in Q2.
In one line: Q1 net trade hit confirmed; a rebound in Q2?
In one line: Pronounced weakness in Q2 likely a consequence of the original Brexit deadline.
In one line: Poor, growth slowed rapidly in Q2.
In one line: Ignore the un-adjusted headline; production did well at the start of Q2.
In one line: An ugly end to the first quarter, but output likely will stabilize in Q2.
In one line: Lower energy prices push inflation down at the end of Q2.
In one line: The import surge will unwind in Q2.
Latam started the year in low gear...but expect a gradual acceleration in Q2 and Q3
In one line: Consumption on track for 3-to-3.5% in Q2; core inflation mean-reverting.
In one line: Trade will be a small drag on Q2 GDP growth.
In one line: Little sign of the feared trade hit on Q2 GDP growth, so far.
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 sharp contraction in Q1, but the economy is set to shrink much more rapidly in Q2.
In one line: Robust; the Q2/Q3 recession call is now even more difficult to sustain.
In one line: A surprising upward revision, but the recession will worsen sharply in Q2.
In one line: Not pretty; sales fell over Q2 as a whole.
In one line: More poor Q2 data; EZ core inflation rebounds, but it is not going anywhere fast.
In one line: Consumers on track for a solid Q2; services inflation on the rebound?
In one line: Disinflation will resume in Q2; core pressures are easing
In one line: A bad-looking start to Q2, but the y/y rate was hurt by an unfavourable base effect.
In one line: Non-mining activity collapses in April; Q2 is a write-off.
In one line: A decent Q1, but Q2 will be terrible.
In one line: A solid start to the year, but Q2 will be awful.
In one line: Terrible, but a gradual upturn likely will emerge in late Q2.
In one line: Lower energy prices push inflation down at the end of Q2.
Chinese banks send a message: no rate corridor cut, no LPR reduction, PPI deflation in Korea in Q2 seems inevitable
Korea's modest consumption rebound in Q2 barely cushioned the trade blow
Data yesterday showed that Momentum in the EZ retail sector stumbled through middle of Q2.
We are revising down our forecasts for quarteron-quarter GDP growth in Q1 and Q2 to 0.3% and 0.2%, respectively, from 0.4% in both quarters previously, to account for the likely impact of the coronavirus outbreak.
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.
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.
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.
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.
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.
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.
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.
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.
China's consensus-beating Q2 GDP signals that it is done easing. Chinese industry drove the Q2 rebound... now comes the hard part. The recovery in manufacturing capex in China continues to disappoint. The upward momentum in China's property market is unlikely to last. The BoK held, but Governor Lee's rhetoric suggests it should've cut.
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.
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%.
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.
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.
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.
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.
Headline money supply growth in the Eurozone accelerated further at the start of Q2.
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.
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.
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.
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.
Hard data released in Argentina over recent weeks showed that the economy was resilient in Q1 and early Q2.
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.
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.
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.
In one line: A grim start to Q2, as developed world demand collapses
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.
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.
In one line: Better, but Q2 still looks like a lost cause
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.
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.
Short-term trends in Chinese industry continued to soften in May, with catch-up growth fading, No noticeably May Day lift, as retail sales in China continue to fall behind, Chinese investment looks to have taken a breather in May, Don't put too much stock into the stronger increase in Chinese home prices, Japan's tertiary index should rebound from April, but Q2 is a write-off
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.
Manufacturers in China are skating on thin ice. Construction is still doing most of the heavy lifting for China's non-manufacturing index. MoF data suggest that Japan probably avoided a technical recession in Q1, just. Korean exports stabilise in May, but Q2 still looks like a lost cause. Korea's PMI continued to sink in May, with no clear signs of a turnaround in export orders.
Tankan suggests downside risks to our -6% y/y Q2 GDP forecast. Private manufacturers in China continue to play catch-up. Expect a bumpy recovery for Korean exports in Q3. Korean business sentiment is finally recovering.
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.
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.
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.
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.
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 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.
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.
China's unadjusted current account was effectively in balance in Q2, after the deficit in Q1.
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.
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%.
Friday's GDP report should show that the economy narrowly avoided contracting in Q2.
China's unadjusted current account surplus widened to $16.0B in the preliminary report for Q3, from $5.3B in Q2.
At first glance, car sales appear to be staging a strong recovery, mirroring the better news on high street spending in Q2.
Last week we reported on the V-shaped recovery in German retail sales--see here--as lockdowns ended mid- way through 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.
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.
What do the protests mean for Chile's economy?
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