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421 matches for " supply":
In one line: Grim manufacturing, mixed money supply data.
Yesterday's January EZ money supply data offered support for investors betting on a further dovish shift by the ECB at next month's meeting.
Yesterday's money supply data in the Eurozone were solid across the board. Growth in headline M3 rose to 5.1% year-over-year in August, up from a 4.9% increase in July. A rebound in narrow money growth was the key driver of the gain, with seasonally- and calendar-adjusted M1 rising 8.9% year-over-year, up from July's 8.4%.
In one line: Not pretty PMIs; money supply details better than the headline.
We have been asked recently why we rarely talk about the signal from the U.S. money supply numbers, in contrast to the emphasis we give to real M1 growth in our forecasts for economic growth in both the Eurozone and China.
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.
In one line: No recession here.
In one line: Solid, but the devil is in the detail.
In one line: Cash positions were built up rapidly heading into the crisis.
In one line: Soft, but trend is still firm.
In one line: A good start to Q4; note the rebound in M1 growth.
In one line: Steady, and still solid.
In one line: M1 growth has slowed recently, but just a bit.
In one line: Ancient news, but these data are key to watch in the next few months.
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.
Yesterday's final manufacturing PMIs confirmed that all remained calm in the EZ industrial sector through February.
Japan's February trade data were a shocker, but not for the reasons we expected, given the signal from the Chinese numbers.
The PBoC announced on Saturday that it will publish a new Loan Prime Rate, from today, following a State Council announcement last Friday.
In one line: Still rising.
The PBoC cut the Reserve Requirement Ratio late on Friday--as signalled at last Wednesday's State Council meeting--by 0.5 percentage points, to be implemented from September 16.
In one line: Ugly headline, but the details were a bit better.
In one line: Very positive.
In one line: Any more or this, and we'll have to upgrade our 2020 GDP growth forecasts.
In one line: Robust, despite marginal dip in M1 growth.
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.
Headline money supply growth in the Eurozone accelerated further at the start of Q2.
Leading economic indicators in the Eurozone continue to send contradictory signals. Most of the headline surveys indicate that a further slowdown, and perhaps even recession, are imminent, while the money supply data suggest that GDP growth is about to re-accelerate.
Money supply data in the EZ continue to suggest that headline GDP growth will slow soon.
The surge in the broad money supply in March, as the U.K.'s lockdown began, suggests that businesses are in relatively good shape to survive a multi-month period of greatly depressed demand.
The headline in yesterday's EZ money supply report gave the illusion that monetary conditions are stable, but the details tell a different story. M3 growth accelerated marginally to 5.0% year-over-year in June, from 4.9%, but momentum in narrow money fell further. M1 growth slowed to 8.5% year-over-year, from 9.0% in May due to a fall in overnight deposits and currency in circulation.
Barclays hit the headlines yesterday with an announcement that it is bringing back no-deposit mortgages for first-time buyers and raising its maximum loan-to-income ratio for borrowers with an income of more than £50K to 5.5, from 4.4. With other lenders likely to follow suit and the supply of homes for sale still extremely low, house price inflation likely will remain brisk this year.
Money supply data in the euro area are sending an increasingly upbeat signal on the economy. The increase in narrow money growth is the key variable here, now pointing to a noticeable acceleration in GDP growth later this year. Allowing for the usual lags between upturns in M1 and the economy, we should start to see this in the second and third quarter.
Yesterday's EZ money supply data confirmed that liquidity conditions in the private sector improved in Q3, despite the dip in the headline.
Money supply growth in the Eurozone quickened last month, by 0.3 percentage points to 3.9% year- over-year, but the details were less upbeat.
Headline money supply growth in the Eurozone has averaged 5% year-over-year since the beginning of 2015; yesterday's October data did not change that story.
We argued in the Monitor on Friday--see here--that the Fed likely will increase the pace of its Treasury purchases, in order to ensure that the wave of supply needed to finance the next Covid relief bill does not drive up yields.
Economic data in the Eurozone are sending an increasingly upbeat message on the economy. Yesterday saw a barrage of numbers, but the most startling of them was the continued acceleration in the money supply.
Money supply data are sending an increasingly contrarian, and bullish, signal for the euro area economy.
The Covid-19 shock to the real economy in China, and now the world, is colossal. Asia is leading the downturn, both because the outbreak started in China, but also because of its place in the supply chain.
Yesterday's money supply data gave some respite after last month's disappointing slowdown. Broad money growth--M3--rose to 5.0% year-over-year, from 4.7% in December, but the details were less encouraging. The rebound was solely due slower declines in medium-term deposits, short-term debt issuance, and repurchase agreements.
A lot of ink has been spilled over the relative significance of the supply and demand effects of Covid-19, but the short-term story is clear.
Money supply dynamics in the Eurozone continue to signal a solid outlook for the economy. Headline M3 growth eased marginally to 4.9% year-over-year in January, from 5.0% in December; the dip was due to slowing narrow money growth, falling to 8.4% from 8.8% the month before. The details of the M1 data, however, showed that the headline chiefly was hit by slowing growth in deposits by insurance and pension funds.
Headline M3 money supply growth in the Eurozone was steady as a rock at around 5% year-over-year between 2014 and the end of 2017.
Data released over the holidays suggest that money supply dynamics in the Eurozone remain solid, but also that growth is no longer accelerating. M3 growth slipped to 5.1% year-over-year in November from 5.3% in October, partly due to a sharp monthly fall in the stock of repurchase agreements. Momentum in narrow money, however, also dipped. M1 growth slowed to 11.2% year-over-year from 11.8% in October, mainly due to a modest fall in overnight deposit growth.
Yesterday's money supply data in the Eurozone were alarmingly poor.
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.
Chief Eurozone Economist Claus Vistesen comments on the Eurozone's Money Supply
Lending conditions in the EZ economy continued to improve in Q1, according to the ECB's bank lending survey. Business and consumer credit supply conditions eased, but mortgage lending became more difficult to come by as standards tightened sharply in Germany, France, and the Netherlands. Demand for new loans also rose, but the increase was due entirely to gains in the mortgage and consumer credit components.
Momentum in the euro area's money supply slowed last month. M3 growth dipped to 4.7% year-over-year in February, from a downwardly-revised 4.8% in January. The headline was mainly constrained by the broad money components. The stock of repurchase agreements slumped 24.3% year-over-year and growth in money market fund shares also slowed sharply.
Yesterday's money supply report provided further relief for investors doubtful over the cyclical recovery following the market turmoil. Broad money growth, M3, accelerated to 5.3% year-over-year in July, up from 4.9% in June, and within touching distance of a new post-crisis high. Narrow money continued to surge too, rising 12.1% year-over-year, up from 11.1% in June, sending a bullish message on the Eurozone economy.
Chief U.K. Economist Samuel Tombs on U.K. Nationwide House Prices
Something of a debate appears to be underway in markets over the "correct" way to look at the coronavirus data.
The Bank of England issued a statement yesterday that it is "working closely with HM Treasury and the FCA--as well as our international partners--to ensure all necessary steps are taken to protect financial and monetary stability".
Modern Money Theory has come up at two consecutive BoJ press conferences.
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.
The ECB stood pat yesterday, keeping its key refinancing and deposit rates unchanged at zero and -0.4%, respectively. The marginal lending facility rate was also left at 0.25%, and the monthly pace of QE was maintained at €80B, with a preliminary end-date in the first quarter of 2017. Purchases of corporate bonds will begin June 8, and the first new TLTRO auction will take place June 22.
Don't be alarmed by the second straight jump in consumers' inflation expectations, captured by the Conference Board's May survey, reported yesterday.
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%.
Friday's advance Eurozone PMI reports capped a fine quarter for the survey. The composite PMI jumped to a 80-month high of 56.7 in March, from 56.1 in February, rising to a cyclical high over Q1 as a whole.
The coronavirus pandemic looks set to spread rapidly throughout LatAm.
Chile's near-term economic outlook is still negative after a sharp resurgence of coronavirus cases.
Yesterday's sole economic report in the EZ showed that consumer sentiment in Germany improved mid-way through the fourth quarter.
Yesterday's economic reports in the euro area were mixed.
Yesterday's FOMC , announcing a unanimous vote for no change in the funds rate, is almost identical to December's.
Chancellor Javid told the Financial Times earlier this month that he wants to lift the rate of GDP growth to between 2.7% and 2.8%, the average rate in the 50 years following the Second World War.
This week's main economic data from Korea--the last batch before the BoK meets on the 16th--missed consensus expectations, further fuelling speculation that it will cut rates for a second time, after pausing in August.
December's money and credit data support the MPC's decision last week to hold back from providing the economy with more stimulus.
The Fed will do nothing to the funds rate or its balance sheet expansion program today.
China's economic targets are AWOL this year, thanks to Covid-19 disruptions to the legislative calendar... and because policymakers seem unsure of what targets to set in such uncertain times.
The Redbook chainstore sales survey today is likely to give the superficial impression that the peak holiday shopping season got off to a robust start last week.
Sterling's shaky performance so far this year-- the trade-weighted index currently is 3% below its end-2019 level and was down 8% at the peak of the mid-March market frenzy--raises the question of whether a renewed depreciation would have a better chance of boosting GDP growth than last time.
The speculation is over: 3.283 million people filed a new claim for unemployment benefits last week, nearly double the 1.7M consensus forecast, which looked much too low.
The extent of shut downs within China is now reaching extreme levels, going far beyond services and threatening demand for commodities, as well as posing a severe risk to the nascent upturn in the tech cycle.
LatAm financial and FX markets have behaved relatively well in recent sessions, thanks to the array of monetary and fiscal measures taken to counter the severe risk-off environment.
Korea's government is mulling a further tightening of borrowing rules to mitigate the risks of an overheated property market.
Brazil's external accounts remain relatively solid, making it easier for the country to withstand any potential external or domestic threat.
Yesterday's French INSEE consumer confidence data provided a fascinating glimpse into the reality for households during these strange times. The headline index fell by "just" eight points in April, to 95 from 103 in March, comfortably beating the consensus for a crash to 80.
As we go to press, it appears that politicians in Italy have agreed on a 2019 budget deficit of 2.4% of GDP.
The Covid-19 outbreak has rattled equity markets, but has not had a major bearing on DM currencies, yet.
Data yesterday revealed that headline inflation in Germany was unchanged in March at 1.5%, thanks mainly to higher energy inflation, which offset a dip in food inflation.
The first economic report of 2020 confirmed the main story in the euro area last year; namely a recession in manufacturing.
President Trump's volatile diplomatic style is one of the biggest risks facing the Mexican economy in the near term, as we have discussed in previous Monitors.
The official PMIs suggest that the January survey data have escaped the worst of the hit from the virus.
Data released yesterday in Mexico highlighted the volatility in international trade resulting from the pandemic.
Survey data in Germany showed few signs of picking up from their depressed level at the start of Q4.
French consumers remained in great spirits midway through the fourth quarter. The headline INSEE consumer confidence index jumped to a 28-month high in November, from 104 in October, extending its v-shaped recovery from last year's plunge on the back of the yellow vest protests.
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.
We're expecting ADP today to report a 10M drop in private payrolls in May, but investors should be braced for surprises, in either direction, because ADP's methodology is not clear.
The German economy finished last year on the back foot.
The big talking point over the weekend was the report from Germany's Robert Koch Institute, RKI, that the Covid-19 reproductive rate jumped to 2.88 at the end of last week, driving the seven-day average up to 2.07.
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.
Japan's flash Jibun Bank PMIs for July showed continued improvement, but only just.
We're breaking protocol this week by delivering our preview for Thursday's ECB meeting in today's Monitor.
The Conference Board's index of leading economic indicators appears to signal that the U.S. economy is plunging headlong into recession.
The drop in the flash composite PMI in March will be one for the record books, unfortunately. We look for an unprecedented drop to 43.0, from 53.3 in February, which would undershoot the 45.0 consensus and signal clearly that a deep recession is underway.
Japan's January PMIs sent a clear signal that the virus impact is not to be underestimated. The manufacturing PMI fell to 47.6 in February, from 48.8 in January, contrasting sharply with the rising headlines of last week's batch of European PMIs.
Inflation in Mexico surprised to the upside in early Q3, but we still believe it will fall gradually in Q4.
If Congress passes another Covid relief bill early next month, as we fully expect, it will have to be financed quickly via increased debt issuance.
Brazilian inflation is off to a bad start this year, but January's jump is not the start of an uptrend, and we think good news is coming.
Friday's PMIs were supposed to provide the first reliable piece of evidence of the coronavirus on euro area businesses, but they didn't. Instead, they left economists dazed, confused and scrambling for a suitable narrative.
The flash readings of the Markit/CIPS surveys in February provide reassurance that GDP is on track to rebound in Q1, despite disruption to the global economy caused by the COVID-19 outbreak and bad weather in the U.K. this month.
Back-to-back elevated weekly jobless claims numbers prove nothing, but they have grabbed our attention.
The PBoC's quarterly monetary policy report seemed relatively sanguine on the question of PPI deflation, attributing it mainly to base effects--not entirely fairly--and suggesting that inflation will soon return.
Leading indicators are giving conflicting signals regarding the outlook for core goods CPI inflation.
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.
CPI inflation in India jumped to 4.6% in October, from 4.0% in September, marking a 16-month high and blasting through the RBI's target.
The recent increases in single-family housing construction are consistent with the rise in new home sales, triggered by the substantial fall in mortgage rates over the past year.
Hard data released in Argentina over the last month showed that the economy was struggling in early Q1, even before the Covid-19 hit.
Yesterday's final CPI report for April confirmed that the Eurozone is edging towards deflation.
PPI inflation in Korea slowed sharply in October, to a five-month low of 2.2%, from 2.7% in September.
Japan's trade surplus rebounded to ¥522B in April, on our adjustment, from ¥390B in March, around the same level as the official version, though from a higher base.
Investor sentiment data still indicate that EZ PMIs are set for a significant rebound at start of the year.
The BoJ kept its main policy settings unchanged yesterday, in another 7-to-2 split.
The government now has a 50:50 chance of getting the Withdrawal Agreement Bill--WAB--through parliament in the coming weeks, despite Letwin's successful amendment and the extension request.
Chainstores are continuing to struggle, even as the reopening of the economy continues.
All the evidence indicates that growth in Eurozone consumers' spending is slowing. We think data today will show that the advance GfK consumer sentiment index in Germany was unchanged at 9.5 in April, but the headline index does not correlate well with spending. The "business expectations" index is better, and while it likely will increase slightly, our first chart shows that it continues to signal a slowdown in consumers' spending growth.
Inflation in Mexico surprised to the upside in April, but the underlying picture has improved rapidly over recent months.
The November IFO report suggests that the headline indices are on track for a tepid recovery in Q4 as a whole, but the central message is still one of downside risks to growth
Q1 is not over yet, and we still await a lot of important data.
Mexican policymakers yesterday voted unanimously to cut the policy rate by 50bp to 5.00%, the lowest level since late 2016.
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.
After the disruption in repo markets last week, theories are flying as to what's going on.
The rate of growth of Covid-19 cases outside China appears to have peaked, for now, but we can't yet have any confidence that this represents a definitive shift in the progress of the epidemic.
The EZ economy's liquidity gears were well-oiled coming into the crisis.
June's surge in retail sales is not a sign that households' total spending is zipping back to pre- downturn levels.
The Chinese Communist Party looks set to repeal Presidential term limits, meaning that Xi Jinping likely intends to stay on beyond 2023.
The Covid-19 scare can be split into two stages, the initial outbreak in China, concentrated in Wuhan, and the now-worrying signs that clusters are forming in other parts of the world, primarily in South Korea, the Middle East and Italy.
Data released yesterday confirmed that Mexico's economy ended Q4 poorly, confounding the most hawkish Banxico Board members.
French consumer confidence and consumption have been among the main bright spots in the euro area economy so far this year.
Even the record-breaking slump in Markit's composite PMI probably understates the hit to economic activity from Covid-19 and the emergency measures to slow its spread.
The huge drop in the March Markit services PMI, reported yesterday, and the modest dip in the manufacturing index, are the first national business survey data to capture the impact of the Covid-19 outbreak.
Financial markets' inflation expectations have risen sharply since the spring. Our first chart shows that the two-year forward rate derived from RPI inflation swaps has picked up to 3.8%, from 3.5% at the end of April.
The participation rate--the proportion of people either in or looking for work--has held steady over the last decade, despite the ageing of the population and the rise in student numbers.
Yesterday was a watershed moment for investors.
LatAm governments and central banks have been busy implementing additional measures to contain the spread of the virus, and acting rapidly to ease the effect on the economy.
The PMIs in the Eurozone are still warning that the economy is in much worse shape than implied by remarkably stable GDP growth so far this year.
News that the Covid-19 virus has spread to more countries frayed investors' nerves further yesterday, with the FTSE 100 eventually residing 5.3% below its Friday close.
We have been very encouraged in recent months to see core capital goods orders breaking to the upside, relative to the trend implied by the path of oil prices.
The mortgage market is continuing to hold up surprisingly well, given the calamitous political backdrop.
The gaps in the third quarter GDP data are still quite large, with no numbers yet for September international trade or the public sector, but we're now thinking that growth likely was less than 11⁄2%.
India's government imposed a three-week nationwide lockdown on March 25 to combat the increasingly rapid spread of Covid-19.
Korea's manufacturing PMI fell for a fourth straight month in April, dropping to 41.6, which is the lowest reading since January 2009.
The RMB has been on a tear, as expectations for a "Phase One" trade deal have firmed.
Investors now see a 50/50 chance of the MPC cutting Bank Rate within the next nine months, following the slightly dovish minutes of the MPC's meeting, and its new forecasts.
The sharp 0.4% month-to-month fall in GDP in December and the slump in the Markit/CIPS PMIs towards 50 have created the impression the economy is on the cusp of recession.
So far, the MPC has been more timid with unconventional stimulus than other central banks. At the end of May, central bank reserves equalled 29.7% of four-quarter rolling GDP in the U.K., compared to 32.7% in the U.S. and 46.7% in the Eurozone.
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.
Most investors remain convinced that the MPC will raise Bank Rate when it meets next, on May 10.
Figures due on Friday likely will show that the increase in industrial production in December was much smaller than the 0.6% month-to-month assumed by the ONS in its preliminar y Q4 GDP estimate. We expect a 0.2% rise, which would leave production down 0.1% quarter-on-quarter, rather than up 0.1% as the ONS initially estimated.
The release of October's GDP report on Tuesday likely will be overshadowed by campaigning ahead of Thursday's general election.
Investors with long sterling positions should not pin their hopes on Friday's GDP report to reverse some of the losses endured over the last week.
Economic data have yielded the limelight in recent months to Brexit news and, alas, we doubt that February's GDP data, released on Wednesday, will reclaim investors' attention.
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 stock of bank lending to businesses is on course to fall in June, after a modest increase in May and huge jumps in March and April.
The Monetary Policy Committee of the Reserve Bank of India voted yesterday to cut the benchmark repo rate by a further 25 basis points, to 5.75%, a nine-year low.
April's GDP report, released on Monday, likely will add fuel to the fire of the re cent sharp decline in interest rate expectations.
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.
The short answer to the question posed by our title is: We don't know. But that's the point, because we shouldn't be needing to ask the question at all.
All the signs are that ADP will today report a solid increase in February private payrolls; our forecast is 200K, but if you twist our arms we'd probably say the mild weather last month across most of the country points to a bit of upside risk.
The economic data calendar for next week is so congested that we need to preview early September's GDP report, released on Monday.
The $10 increase in the price of Brent crude oil over the last three months to $68 is an unhelpful, but manageable, drag on the U.K. economy's growth prospects this year.
In the midst of heightened and potentially longerlasting Brexit uncertainty, the MPC revised down its forecast for GDP growth sharply yesterday and came close to endorsing investors' view that the chances of a 25bp rate hike before the end of this year have slipped to 50:50.
February's GDP report, released on Thursday, likely will show that the economy continued to struggle for momentum, despite the fillip to sentiment stemming from the general election.
Productivity statistics released yesterday continued to paint a bleak picture. Output per worker rose by a mere 0.1% year-over-year in Q3, despite jumping by 0.6% quarter-on-quarter.
The reported drop in mortgage applications over the holidays is now reversing, not that it ever mattered.
Job losses in the over-60 group pull Korea's unemployment rate higher in December. Japanese M2 growth holds steady in December. Still no clear signs of a recovery in machine tool orders in Japan.
Japan's M2 growth stabilises but the near three year downtrend leaves GDP growth looking exposed
Japan's machine tool orders remain nasty. Japan's M2 growth shows first signs of looming tax hike.
CPI inflation in China is nearing a peak, with pork prices starting to stabilise. November's data confirm that PPI deflation in China has bottomed out. Japan's M2 growth looks exposed to a downward revision. Japan's machine tool orders refuse to turn.
Our caution over China's March industrial production spike was justified. Chinese retail sales growth hits lows. Chinese FAI growth suggests private sector policy loosening isn't working. Japan's M2 growth upturn is a welcome break, but needs to be sustained. Korean unemployment jumps in April, showing the limits of the government's hiring spree.
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.
April's RICS Residential Market survey confirmed that housing market activity collapsed to negligible levels during the lockdown, which prohibited property viewings, depleted the work forces of lenders and prompted many people to defer big financial decisions.
In one line: Consistent with the economy retaining momentum ahead of the Brexit deadline.
Japan's money growth reverts back after a brief uptick. Japan's wage headline improves, details deteriorate. Japan's machine tool orders should turn stomachs.
China's export data for April were a mixed bag, to say the least.
We look for August's GDP report, released on Thursday, to show that output held steady, following July's 0.3% month-to-month jump.
April's GDP report probably will be the worst any of us will see in our lifetime.
The rollover in bank lending to commercial and industrial companies probably is over. On the face of it, the slowdown has been alarming, with year-over-year growth in the stock of lending slowing to just 2.6% in April, from a sustained peak of more than 10% in the early part of last year.
Mark Carney revealed last week that recent data had given him "greater confidence" that the weakness of Q1 GDP was almost entirely due to severe weather.
When trade-weighted sterling fell by 20% in 2016, it was widely expected that net trade would cushion GDP growth from the hit to households' real incomes.
Resistance is futile.
China's trade surplus jumped to a record high in May, defying expectations for a fall by spiking to $69.2B.
Britain's housing market appears to be going from bad to worse.
January's GDP report, released on Wednesday, was set to be one of the most important data releases of this year, due to its role in providing the first official steer on the economy's post-election performance.
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.
Our chief economist, Ian Shepherdson, set out our initial thoughts on the rising tensions between U.S. and Iran here.
Chile's near-term economic outlook is still negative, but clouds have been gradually dispersing since late Q4, due mostly to better news on the global trade front, China's improving economic prospects, and rising copper prices.
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 key story in Brazil this year remains one of gradual recovery, but downside risks have increased sharply, due mainly to challenging external conditions.
Covid-19 has taken a large and immediate toll on house prices, but bigger damage likely lies ahead.
The unexpectedly small 2,760K drop in the ADP measure of May private payrolls is consistent, at least, with the idea that the partial reopening of several states in the early part of the month prompted an immediate wave of rehiring.
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.
We look for a 150K increase in September payrolls, rather better than the August 130K headline number, which was flattered by a 28K increase in federal government jobs, likely due to hiring for the 2020 Census.
Speculation mounted yesterday that the MPC will follow the U.S. Fed and cut interest rates before its next meeting on March 26.
We set out the reasoning behind the big upward revision to our payroll forecast yesterday, in the wake of the much better-than-expected ADP report.
Our judgement that April was the low point for economic activity was challenged yesterday by the publication of results of the fifth wave of the Business Impact of COVID-19 Survey, conducted by the ONS between May 4 and 17.
The pick-up in the Markit/CIPS services PMI to an eight-month high of 55.1 in June, from 54.0 in May, has provided another boost to expectations that the MPC will raise Bank Rate at its next meeting on August 2.
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.
January's Markit/CIPS manufacturing survey suggests that the outcome of the general election has brought manufacturers some momentary relief.
We remain concerned that huge job losses are imminent, slowing the economic recovery after a mid-summer spurt.
Yesterday's first estimate of Q2 GDP in Mexico confirmed that the economy has been under severe stress in recent months.
Yesterday's BoJ statement, outlook and press conference raised our conviction on two key aspects of the policy outlook.
The MPC's decision yesterday was a "dovish hold", designed to keep market interest rates at current stimulative levels and to preserve the option of cutting Bank Rate swiftly and without surprise, if the economy fails to rebound in Q1.
A pair of closely-watched reports today will confirm that business and consumer confidence is tanking in the face of the coronavirus outbreak.
The virus outbreak has been relatively limited so far in Argentina, with 820 confirmed cases, but the numbers are rising rapidly.
Colombia's central bank has found a relatively sweet spot.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
As we showed in yesterday's Monitor--see here--EZ governments and the ECB have thrown caution to the wind in their efforts to limit the pain from the Covid-19 crisis.
Activity surveys picked up across the board in April, offering hope that the slowdown in GDP growth--to just 0.3% quarter-on-quarter in Q1-- will be just a blip. The headline indicators of surveys from the CBI, European Commission, Lloyds Bank and Markit all improved in April and all exceeded their 2004-to-2016 averages.
The recent March economic activity reports for Chile have been terrible, showing the first signs of the Covid-19 shock, and worse is to come.
Chancellor Sunak faces a tough first gig on Wednesday, when he delivers the long-awaited Budget.
The rapid escalation of Covid-19 cases in Korea in recent weeks has broadened the likely damage to the economy this quarter.
The recent deal between Greece and the EU shows that the appetite for a repeat of last year's chaos is low. But investors' attention has turned to whether Portugal is waiting in the wings to reignite the sovereign debt crisis. Complacency is dangerous, but economic data suggest that a Portuguese shock to the Eurozone economy and financial markets is unlikely this year.
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.
The wide spread in first quarter GDP growth "trackers"--which at this point are more model and assumption than actual data--is indicative of the uncertainty surrounding the international trade and inventory components.
Efforts to contain the coronavirus outbreak severely dented industrial activity in Brazil.
December's GDP report, released next Monday, likely will maintain the flow of negative news on the U.K. economy.
The Brazilian central bank cut the benchmark Selic interest rate by 25bp, to 4.25%, on Wednesday night, as expected.
Any model of payrolls based on the usual indicators--jobless claims, ISM hiring, NFIB hiring, and other sundry surveys--right now points to payroll growth at 250K or better. Indeed, the ISM non-manufacturing report on Wednesday is consistent with payroll growth closer to 400K, and the lagged NFIB hiring intentions number points to 300K. Yet the consensus forecast for today's October report is just 182K. Why so timid?
Friday's early EZ CPI data for December were red hot. Headline HICP inflation in Germany jumped to 1.5%, from 1.3% in November, while the headline rate in France increased by 0.4pp, to 1.6%.
Late last year, China said it would scrap residency restrictions for cities with populations less than three million, while the rules for those of three-to-five million will be relaxed.
The simultaneous decline in both ISM indexes was a key factor driving markets to anticipate last week's Fed easing.
Services will bear the brunt of the Covid-19 shock in the euro area, but manufacturing is not far behind.
The MPC has wasted no time in seeking to counter this week's undesirable pick-up in gilt yields, which reflects investors dumping assets for cash.
We're very comfortable with the idea that the coronavirus is a broad deflationary shock to the U.S. economy.
Chile's unadjusted unemployment rate fell to 7.1% in July-to-September, from 7.3% in June-to-August, but it was up from 6.7% in September last year.
The rise in Markit/CIPS services PMI to 55.0 in March, from 53.3 in February, brings some relief that GDP growth has not stalled in Q1, following manufacturing and construction surveys that signalled near-stagnation.
We are not concerned by the very modest tightening in business lending standards reported in the Fed's quarterly survey of senior loan officers, published on Monday.
The post-election run of upbeat business surveys was extended yesterday, with the release of the final Markit/CIPS services PMI for January.
A range of indicators show that the pace of the economic recovery shifted up a gear in July, when all shops were open for the entire month, and most consumer services providers finally were permitted to reopen.
July's money and credit figures provided more evidence that firms have become reluctant to invest following the Brexit vote. Lending by U.K. banks to private non-financial companies--PNFCs--rose by just 0.2% month-to-month in July, below the average 0.5% increase of the previous six months.
April's consumer prices report, released on Wednesday, likely will show that CPI inflation plunged and is heading quickly to a near-zero rate by the summer.
Brazilian political risk remains high, due mainly to President Bolsonaro's gross mismanagement of the Covid-19 crisis, but, as we have argued in previous Monitors, it is unlikely to deter policymakers from further near-term monetary easing.
We continue to expect core CPI inflation to drift up further over the course of this year, partly because of adverse base effects running through November, but it's hard to expect a serious acceleration in the monthly run rate when the rate of increase of unit labor costs is so low.
The U.S. Federal Reserve didn't quite deliver the shock-and-awe yield curve control this week which some observers had been expecting, but the message was clear enough.
Chancellor Sunak's "temporary, timely and targeted" fiscal response to the Covid-19 outbreak, and the BoE's accompanying stimulus measures, won't prevent GDP from falling over the next couple of months.
The 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.
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.
The escalation in the U.S.-Chinese trade wars has understandably pushed EZ economic data firmly into the background while we have been resting on the beach.
Inflation in Brazil surprised to the upside this week, with a sharp rebound that looks alarming at face value.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
The apparent thaw in the U.S.-China trade dispute is great news for LatAm, particularly for the Andean economies, which are highly dependent on commodity prices and the health of the world's two largest economies
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
Business investment in Japan took a nasty hit in the third quarter.
The sluggishness of consumers' spending and business investment in the first quarter means that hopes of a headline GDP print close to 2% rely in part on the noisier components of the economy, namely, inventories and foreign trade.
The stagnation of GDP in August, following five consecutive month-to-month gains, confirms that the economy's momentum in prior months was simply weather-related.
Financial assets of all stripes are, by most metrics, expensive as we head into year-end, but for some markets, valuations matter less than in others. The market for non-financial corporate bonds in the euro area is a case in point.
Mexico's industrial sector did relatively well in Q3, due mainly to the resilience of the manufacturing sector, and the rebound in construction and oil output, following a long period of sluggishness.
We're doing a wrap-up of the data that were released last week while we were away, and the Chinese numbers were both a hit and a miss.
PPI inflation has finally started to soften, after having increased steadily from 2.0% in April, and holding steady at 3.0% in Q3.
President Trump blinked again yesterday, delaying tariffs on some $150B-worth of Chinese consumer goods until December 15.
Chancellor Javid's resignation, only eight months after assuming the role, is the clearest sign yet that the Johnson-led government wants fiscal policy to play a bigger part in stimulating the economy over the next couple of years.
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.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
The consensus forecast for the October core CPI, which will be reported today, is 0.2%. Take the over. Nothing is certain in these data, but the risk of a 0.3% print is much higher than the chance of 0.1%.
More depressing economic numbers in LatAm have been released in recent days, and high frequency data continue to show a near-term bleak outlook.
GDP growth in Japan surprised to the upside in the second quarter, although the preliminary headline arguably flattered the economy's actual performance.
It's tempting to conclude that the pick-up in year over-year growth in average weekly wages, excluding bonuses, to a three-year high of 3.1% in July, from 2.8% in June, signals that employees' bargaining power has strengthened and that a sustained wage recovery now is under way.
LatAm governments and policymakers are bracing for a more dramatic and longer virus-led downturn than initially expected.
The measures to support the economy through the coronavirus crisis, unveiled by policymakers on Budget day, exceeded expectations.
The NY Fed's announcement yesterday restarts QE. The $60B of bill purchases previously planned for the period from March 13 through April 13 will now consist of $60B purchases "across a range of maturities to roughly match the maturity composition of Treasury securities outstanding".
China's October foreign trade headlines beat expectations, but the year-over-year numbers remain grim, with imports falling 6.4%, only a modest improvement from the 8.5% tumble in September.
Economic conditions in Brazil are deteriorating rapidly.
We can't quibble with the consensus that GDP likely rose by 0.2% month-to-month in December, reversing only two-thirds of November's drop.
The latest national accounts show that the economy is holding up much better in the face of heightened Brexit uncertainty than previously thought.
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
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 downward pressure from factory-gate prices on Chinese industrial profits will continue to ease in the coming months.
We expect May's GDP report, released on Tuesday, to provide an early blow to hopes that the economy will embark on a V-shaped recovery this year.
The more headline hard data we see in the Eurozone, the more we are getting the impression that 2019 is the year of stabilisation, rather than a precursor to recession.
We expect to see a 70K increase in October payrolls today.
Data released this week in LatAm are the last calm before the coronavirus storm.
Figures released today look set to reveal that industrial production rose in January by the biggest percentage since August. But this will simply reflect a rebound in demand for heating energy after extreme weakness late last year. The oil and manufacturing sectors remain on course for an extremely challenging year.
Data released in recent days have started to reveal a story of horror and misery in the Brazilian economy.
The drop in jobless claims to 3,839K in the week ended April 25, from 4,442K in the previous week, leaves the data still terrible, but markedly less terrible than at the 6,867K peak in late March.
Yesterday's first estimate of Q1 GDP in Mexico confirmed that growth was under severe pressure at the start of the year. GDP fell by 1.6% quarter- on-quarter, the biggest drop since mid-2009, well below market expectations and following a 0.1% drop in Q4.
Yesterday's third and detailed EZ GDP data confirmed the economy hit the wall in Q1.
Private consumption in Japan will take time to recover, even if some semblance of normality returns from this month.
The clear threat to demand posed by the coronavirus and China's efforts at containment have sent a shock wave through commodities markets.
Mexico's latest forward-looking indicators are showing tentative signs of stabilisation in the wake of recent evidence that growth slowed quicker than markets have been expecting.
The resolution of tensions in Italy and aboveconsensus U.K. PMIs for May last week persuaded investors that the MPC likely will press on and raise interest rates soon.
The Fed announced no significant policy changes yesterday, but the FOMC reinforced its commitment to maintain "smooth market functioning", by promising to keep its Treasury and mortgage purchases "at least at the current pace".
We expect the Budget today to underwhelm investors who are eager to see a quick and powerful government response to the coronavirus outbreak.
In about 100 days, the LatAm economy and financial markets will face a defining moment in the face of uncertainty, namely, the outcome of the U.S. presidential election.
China's November money and credit data were a little less grim, with only M2 growth slipping, due to unfavourable base effects.
The likely dip in the headline NFIB index of small business sentiment and activity today will tell us that business owners are unhappy and nervous about the potential impact of the latest China tariffs on their sales and profits.
We would be surprised, but not astonished, if the Fed were to announce a shift to explicit yield curve control at today's meeting.
The government's decision to shelve plans to reopen primary schools fully later this month will ensure that GDP remains greatly below its precoronavirus level throughout the summer months.
China's trade balance flipped to an unadjusted deficit of $7.1B in the first two months of the year, from a $47.2B surplus in December.
The collapse in oil prices was the immediate trigger for the 7.6% plunge in the S&P 500 yesterday, but the underlying reason is the Covid-19 epidemic.
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.
The Fed was more hawkish than we expected yesterday.
Collapsing oil prices add fresh deflationary pressure on China.
The plunge in oil prices in recent weeks is not a threat to the overall U.S. economic growth story in the near term--we have always expected growth to slow, but remain decent, once the boost from the tax cuts fades--but it will make a difference, at the margin.
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.
Retail sales fell back to earth in September, indicating that the pick-up in spending over the summer largely was a weather-related blip.
A no-deal Brexit is a remote possibility. The U.K. government and EU are closing in on a deal and Brexiteers within the Conservative party have failed, so far, to trigger a confidence vote on Mrs. May's leadership.
The duration and future scope of the current lockdown is the main uncertainty that U.K economic forecasters have to grapple with at present.
Within the space of two months, investors have gone from wondering whether the slowdown in manufacturing would spill-over into the rest of the EZ economy, to the realisation that the crunch in services is now driving the overall story on the economy.
The uncertainty over the strength and speed of the economic rebound is still a concern for investors in terms of putting money to work.
The first real glimpse of India's economic performance early this quarter is grim, adding weight to our below-consensus GDP forecast.
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.
Yesterday's final CPI data for May confirmed that the EZ economy is within touching distance of headline deflation.
CPI inflation held steady at 1.5% in November, marking the fourth consecutive below-target print, though it was a tenth above both the MPC's forecast and the consensus.
Yesterday's German ZEW investor sentiment survey provided the first clear evidence of the coronavirus in the EZ survey data.
June's retail sales figures provided a timely reminder that consumers aren't being haunted by the warnings of the damage that a no -deal Brexit would entail.
Last week's unprecedented surge in initial jobless claims, to 3,283K from 282K, prompted a New York Times front page for the ages; if you haven't seen it, click here.
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.
The number of Covid-19 cases is increasing at a faster rate, though 89% of the new cases reported Saturday were in China, South Korea, Italy and Iran.
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.
GDP growth currently is subdued by historical standards, but at least it is not debt-fuelled.
The dreadful September ISM manufacturing survey reinforces our view that the sector will be in recession for the foreseeable future, and that both business capex and exports are on the verge of a serious downturn.
Korea's unemployment rate tumbled to 3.7% in February, after the leap to 4.4% in January.
Banxico cut its policy rate by 25bp to 7.25% yesterday, as was widely expected, following similar moves in August, September and November.
The business cycle in the Eurozone tends to follow a fairly simply script, at least in broad terms.
The May auto sales numbers probably will be released just after our deadline at 4pm eastern time today, but all the signs are that a hefty rebound will be reported after April's plunge to just 8.6M, not much more than half the pre-Covid level.
While were out over the holidays, the single biggest surprise in the data was yet another drop in imports, reported in the advance trade numbers for November.
With campaigning for the general election intensifying last week, it was unsurprising that October's money and credit release from the Bank of England received virtually no media or market attention.
Data on EZ consumption were soft while we were enjoying our Christmas break. The advance EC consumer confidence index slipped to a three-year low of -8.1 in December, from -7.2 in November, breaking its recent tight range.
The economic calendar in the euro area was relatively quiet over Christmas, and broadly conformed to our expectations.
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.
Data over the past week give a near-complete picture of how India's economy fared in the fourth quarter.
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.
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%.
The economy will be a shadow of its former self over the remainder of this year, following the heavy pummelling from Covid-19.
Yesterday's data provided further evidence of the EZ economy's response to the Covid-19 shock, though we recommend that investors take the numbers with a pinch of salt. In Germany, the final CPI report for April showed that headline inflation slipped to 0.9% year-over-year, from 1.4% in March, trivially above the first estimate, 0.8%.
Friday's sole economic report showed that wage growth in France remained robust mid-way through the year. The non-seasonally adjusted private wage index, ex-agriculture and public sector workers, published by the Labour Ministry, rose by 0.3% quarter-on-quarter in Q3.
The incidence of the phrase "since the early nineties" has increased sharply in our Japan reports this year.
Economic activity remains under severe strain in the Andes.
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.
The costs of the government's failure to lock down quickly in response to the Covid-19 pandemic, ultimately necessitating long-lasting restrictions, were visible in May's GDP figures.
Korea's unemployment rate was unchanged in April, at 3.8%, beating even our below-consensus forecast for only a minor uptick, to 3.9%.
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.
The fall in CPI inflation to just 1.5% in October-- its lowest rate since November 2016--from 1.7% in September, isn't a game-changer for the monetary policy outlook.
Sterling leapt to $1.27, from $1.22 last week, amid some positive signals from all sides engaged in Brexit talks.
China's December foreign trade numbers were unpleasant, with both exports and imports falling year-over-year, after rising, albeit slowly in November.
Yesterday's data showed that growth in the EZ slowed in the second quarter.
The coronavirus outbreak and its associated movements in asset prices have radically changed the outlook for CPI inflation, which ultimately the MPC is tasked with targeting.
The House passage of a stimulus bill last Friday, seeking to ameliorate some of the damage done by the coronavirus outbreak, will not be nearly enough.
Mr. Macron will be in Berlin today with the message that France wants a strong Eurozone and a tight relationship with Germany. Friendly overtures between Paris and Berlin are good news for investors; they reduce political uncertainty while increasing the chance that the economic recovery will continue. But it is too early to get excited about closer fiscal coordination, let alone a common EZ fiscal policy and bond issuance.
The GM strike will make itself felt in the September industrial production data, due today.
China's activity data yesterday made pretty uncomfortable reading for policymakers.
As we reach our deadline on Sunday afternoon, eastern time, Tropical Storm Florence continues to dump vast quantities of rain on the Carolinas, and is forecast to head through Kentucky and Tennessee, before heading north.
The BoJ is likely to stay on hold this week for all its main policy settings.
Boeing's announcement that it will temporarily cut production of 737MAX aircraft to zero in January, from the current 42 per month pace, will depress first quarter economic growth, though not by much.
After four straight sub-consensus core CPI readings, we think the odds now favor reversion to the prior trend, 0.2%, over the next few months.
The stand-out news from August's labour market report was the pick-up in the headline three-month average rate of year-over-year growth in average weekly wages, excluding bonuses, to 3.1%--its highest rate since January 2009--from 2.9% in July.
The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term.
Peru's central bank kept the reference rate unchanged at 3.5% at Thursday's meeting, in line with our view and market expectations.
Data on air quality in China provide some useful insights into the economic disruptions--or lack thereof--caused by the outbreak of the coronavirus from Wuhan and the government's aggressive containment measures.
Over the past 30 years China's role in LatAm and the global economy has increased sharply. Its share of world trade has surged, and its exports have gained significant market share in LatAm.
The consensus forecast for a 0.6% month-to month rise in retail sales volumes in December--data released today--is far too timid.
Brazil's industrial sector keeps losing momentum, despite interest rates at record lows and improving confidence.
The stand-out development in yesterday's labour market report was the drop in the he adline, three-month average, unemployment rate to just 4.0% in June--its lowest rate since February 1975--from 4.2% in May.
The number of existing homes for sale continued to fall in September, ensuring that modestly increasing demand is putting renewed upward pressure on prices.
Reporting on German CPI data has been like watching paint dry in recent months, but that will change in the first half of the year.
Momentum in French manufacturing eased slightly in November, but the setback was modest. Industrial production dipped 0.5% month-to-month, only partially reversing the revised 1.7% jump in October.
Today's JOLTS survey covers August, which seems like a long time ago. But the report is worth your attention nonetheless.
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.
The current momentum in house prices partly reflects a dearth of homes offered for sale by existing homeowners. This scarcity reflects a series of constraints, which we think will ease only gradually. Further punchy gains in house prices therefore look sustainable and we expect average prices to rise by about 8% next year.
The flow of data pointing to strength in the labor market has continued this week, on the heels of last week's report of a 250K jump in October payrolls.
The unemployment rate has now been at 4.1% for six straight months. This does not mean, though, that it's safe to assume it will remain there, or indeed that this level of unemployment can be sustained without eventually triggering a meaningful increase in inflation.
The headline 250K October payroll number looked great.
ADP's report of a 235K increase in private payrolls in February is not definitive evidence of anything, but it is consistent with the idea that labor demand remains very strong.
The absence of hawkish undertones in the minutes of the MPC's meeting or in the Inflation Report forecasts took markets by surprise yesterday. The dominant view on the Committee remains that the economy will slow over the next couple of years, preventing wage growth from reaching a pace which would put inflation on trac k permanently to exceed the 2% target.
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.
Korean exports are often a useful gauge of Asian and global trade; the country sits near the beginning of the global supply chain. It also happens to publish early in the data cycle and provides a measure of exports in the first 20 days of the month.
November's labour market data were the last before the MPC's February meeting, when it will conduct its annual assessment of the supply side of the economy.
Looking through recent supply disruptions, Japan's adjusted trade balance seems likely to remain in the red until the new year.
The preliminary estimate of first quarter GDP likely will confirm that the economic recovery lost considerable pace in early 2016. Bedlam in financial markets in January and business fears over the E.U. referendum are partly responsible for the slowdown. The deceleration, however, also reflects tighter fiscal policy, uncompetitive exports, and the economy running into supply-side constraints.
Growth in South America disappointed last year, but prospects are gradually improving on the back of rising commodity prices and the global manufacturing rebound. These factors will help to ease the region's external and fiscal vulnerabilities, particularly over the second half of the year. On the domestic front, though, the first quarter has proved challenging for some countries, hit by temporary supply factors such as a mine strikes, floods, and wildfires.
Money supply growth in the Eurozone rebounded slightly last month, reversing some of the weakness at the start of the year.
Money supply growth in the Eurozone firmed last month. Broad money--M3--rose 5.0% year-overyear in August, after a tepid 4.5% rise in July.
Markets have responded strongly to the ECB's announcement that it will be buying corporate bonds as part of QE. Net corporate debt issuance of non-financial firms jumped €16B in March, the biggest monthly increase since January 2014. The 12-month average, however, was stable at €3.6B, and a sustained increase in net debt supply partly depends on firms' appetite for financial engineering
Money supply data continue to send a bullish message on the euro area economy. Broad money growth was unchanged at 5.0% year-over-year in June, but M1 growth surged to 11.8%, from 11.2% in May. Combined with low inflation, real M1--the best leading indicator in the Eurozone--indicates a surge in GDP growth on par with previous record business cycle upturns in 1999, 2005-06 and 2009-10.
Money supply data continue to support the continuation of cyclical recovery in the Eurozone. M3 growth accelerated to 4.0% year-over-year in February from a revised 3.7% in January. Revisions, however, mean that momentum in the beginning of the year was not as solid as we thought.
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.
Peru's April supply-side monthly GDP data confirm that the economic rebound lost momentum at the start of the second quarter.
The May NFIB survey and the April JOLTS report, both released yesterday, paint a coherent, if not yet definitive, picture of labor market developments which should alarm the Fed. The data suggest that the true labor supply, in the eyes of potential employers, is much smaller than implied by the BLS's measures of broad unemployment.
The consensus expectation that industrial production rose by 1.0% month-to-month in November is far too low; we expect Wednesday's data to show a jump of 2.0% or so. The rebound, however, should not be interpreted as another sign that the economy has been revitalised by the Brexit vote. Instead, we expect the rise chiefly to reflect volatility in oil production and heating energy supply.
Taken at face value, September's money supply data suggest that the economy is ebullient, quickly recovering from the shock referendum result. Year-over-year growth in notes and coins in circulation has accelerated to its highest rate since June 2002.
Money supply data in the euro area disappointed yesterday. Growth in M3 fell to 4.6% year-over-year in April, from 5.0% in March, due to an accelerated fall in the pace of narrow money growth. M1 rose 9.7% year-over-year, down from 10.1% in March. It was hit by lower growth in both overnight deposits and currency in circulation.
A dearth of properties for sale has helped to ensure that house prices have continued to rise since the Brexit vote, despite weaker demand. But now, signs are emerging that demand and supply are coming closer to balance
LatAm economies are being battered by high inflation triggered by currency sell-offs and El Niño supply shocks, so rates have had to rise despite the challenging global environment. Peru's central bank, the BCRP, was forced to increase interest rates by 25bp to 4.25% last Thursday, the fourth hike in six months, as inflation is far above the central bank's 1-to-3% target range.
Our view that the economy is slowing sharply appears, superficially, to be challenged by the surge in the money supply. Year-over-year growth in the value of banknotes and coins in circulation has shot up this year, to 8.3% in August, from 5.5% in December 2015.
Yesterday's money supply data in the Eurozone were solid across the board.
Rapid growth in labour supply has enabled the U.K. economy to grow quickly over the last three years without generating excessive wage or inflation pressure. The rise in the participation rate--the proportion of those aged over 16 in or looking for work--has been critical to this revival. But the rise in the participation rate largely has reflected cyclical factors rather than a sustainable upward trend, and the downward pressure on participation from demographic factors will build over the coming years.
The German inflation rate soared at the start of 2017, but it likely will fall in the next few months. Final February data yesterday showed that inflation rose to 2.2% in February, from 1.9% in January, consistent with the initial estimate. Since December, headline inflation in Germany, and in the EZ as a whole, has been lifted by two factors. Base effects from the 2016 crash in oil prices have pushed energy inflation higher, and a supply shock in fresh produce--due to heavy snowfall in southern Europe--has lifted food inflation.
January's money and credit data provided another warning sign that the economy has started 2017 on a weak footing. For a start, the three-month annualised growth rate of M4, excluding intermediate other financial corporations--the Bank's preferred measure of the broad money supply-- declined to 1.8% in January, from 3.1% in December.
Momentum in EZ money supply slipped marginally in September. Headline M3 growth slowed to 5.0%, from 5.1%, mainly due to a slowdown in narrow money. Overnight deposit growth slowed to 9.4%, from 9.9% in August, offsetting a slight rise in growth of currency in circulation.
China's new Loan Prime Rate amounts to a rate cut, but supply-side banking strains limit its efficacy. Chinese slowdown and pre-tax front-loading keeps Japan's trade balance in deficit.
Money supply dynamics in the Eurozone were broadly stable last month. M3 rose 5.0% year-over-year in May, accelerating slightly from a 4.9% increase in April, in line with the trend since the middle of 2015.
In one line: A supply-demand mismatch
For analysts with a broadly positive view of the U.S. economy, it is tempting to argue that the slowdown in payroll growth this year reflects supply constraints, as the pool of qualified labor dries up.
China's manufacturing PMI highlights supply-demand mismatch. China's non-manufacturing PMI reveals struggling services and rebounding construction. Retail sales in Japan started to turn sour before the state of emergency, but the overall picture for Q1 isn't bad. The worst is yet to come for Japanese industrial production.
In one line: Grim; manufacturing enjoyed another "boost" from a tighter supply side.
China's Growing Demand-Supply Mismatch...Three Straight Quarters Of Contraction In Japan...Covid Defeated, But Korea's Economic Hit Isn't Over...An H1 Recession In India Is All But Guarenteed
In one line: Supply chain disruptions to depress output in the spring.
In one line: Tariffs, labor costs, and tight rental home supply pushing up core inflation, plus some noise.
In one line: Supply shortages and falling mortgage rates are holding up prices.
January's money supply figures continued the nerve-jangling flow of data on the economy's momentum.
Supply hit slams Japan; demand hit just beginning.
We have focussed on the role of the trade war in depressing U.S. stock prices in recent months, arguing that the concomitant uncertainty, disruptions to supply chains, increases in input costs and, more recently, the drop in Chinese demand for U.S. imports, are the key factor driving investors to the exits.
A bullish EZ money supply report was the key highlight while we were away over the holidays. M3 growth in the euro area accelerated to 4.8% year-over-year in November from 4.4% in October.
Money supply growth in the euro area eased further towards the end of Q4.
In recent Monitors, we have highlighted the upturn in Q4 survey data pointing to a strong end of the year for the EZ economy. This story has not changed, but yesterday's money supply data tell a story of downside risks.
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.
Debt issuance by Eurozone non-financial firms is soaring, consistent with the ECB's hope that adding private debt to QE would boost supply. Our first chart shows that the three-month sum of net debt sold in the euro area jumped to a new record of €60.3B in May. A short-term decline in issuance is a good bet after the initial euphoria in firms' treasury departments.
Growth in the broad money supply slowed further in September, providing more evidence that the economy is losing momentum.
Bullish money supply data last week added to the evidence that the Eurozone's business cycle is strengthening. Broad money growth--M3--rose to 5.3% year-over-year in October from 4.9% in September. Most of the increase came from a surge in short-term debt issuance, rising 8.4% year-over-year, following an inexplicable 1.4% fall in September.
The business cycle upturn in the Eurozone likely will remain resilient in the first half of 2017. Friday's money supply data showed that headline M3 growth increased to 5.0% in December, from 4.9% in November.
Money supply data in the euro point to a cyclical peak in GDP growth this year. Headline M3 growth fell to 4.8% year-over-year in July, from 5.0% in June, chiefly due to a slowdown in narrow money. M1 growth declined to 8.4%, from 8.7%, as a result of weaker momentum in overnight deposits and currency in circulation.
While we were enjoying a rare sunny bank holiday in the U.K., data showed that Eurozone money supply growth slowed at the start of Q3. Broad money growth--M3--fell to a 10-month low of 4.5% year-over- year in July, from 5.0% in August.
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