Showing posts from September, 2018

Global Economic Outlook September 27, 2018

Mounting headwinds will weigh on global growth further down the road...
Mounting headwinds will weigh on global growth further down the road Global economic growth appears to be losing some steam in Q3 following Q2’s strong result. A strengthening U.S. dollar and higher borrowing costs are unnerving financial markets in developing economies, while rising trade protectionism is starting to weigh on business sentiment. Moreover, economic dynamics are softening in China and the Eurozone. On the flip side, the U.S. economy continues to fire on all cylinders, while Japan is holding up relatively well due to strong investment. A GDP growth estimate for the global economy projects year-on-year growth at 3.3% for Q3. While the print was a notch below the result from the previous period, it matched last month’s forecast. The escalation in the ongoing trade war between China and the United States topped the headlines in recent weeks. On 24 September, the U.S. enforced a 10% tariff …

Hong Kong Economic Outlook

Recent data suggests that economic dynamics remain soft in the third quarter following a weaker-than-expected second-quarter expansion. Growth in retail sales, a proxy for private consumption, fell to a six-month low in July on the back of rising external uncertainties and reduced tourist arrivals. Hong Kong’s Purchasing Managers’ Index remained in negative territory in August for the fifth month in a row as escalating trade tensions between China and the United States weigh on economic sentiment. Despite staying at historically low levels, the unemployment rate climbed to an eight-month high in August. Moreover, the island’s high-flying property market is losing steam and could experience a sharp correction in 2019 due to receding capital flows from China and tighter financial conditions.
Although economic growth will remain strong this year due to a robust domestic economy, risks are clearly skewed to the downside. A sharp economic downturn in China, spillovers from the tra…

Venezuela Deterioration Continues

The economy remains stuck in a deep depression. Despite oil prices hovering at over three-year highs in recent months, oil production continues to fall, plunging by over a third in July in annual terms according to OPEC secondary data. Moreover, although the number of oil rigs—a leading indicator of oil output—ticked up in the same month, it remains close to historical lows. This suggests a continuation of declining production, and with it, diminishing vital oil revenues. On a somewhat positive note, on 20 August, the state-owned oil firm PDVSA reached a payment agreement with ConocoPhillips to settle the USD 2 billion arbitration it was awarded back in April. If PDVSA meets the agreed payment schedule, it could enable the firm to regain control of its Caribbean oil facilities and potentially recoup some of its export losses, as the U.S. company had already moved to seize these assets to enforce its claim. Meanwhile, a series of economic measures started to come into effect th…

Federal Reserve Bank of Atlanta: Beige Book Sept 2018

Federal Reserve Bank of AtlantaSummary of Economic Activity Sixth District business contacts indicated that economic activity expanded at a moderate pace since the previous report. On balance, the outlook among firms for the remainder of the year was positive, despite some uncertainty surrounding trade policy. Firms continued to cite hiring challenges, especially for low-skilled and hourly positions. Some businesses reported growing wage pressure. Rising nonlabor costs for select inputs such as transportation and steel were noted, as was an improved ability to pass through price increases. Retailers reported growth in sales, and automotive dealers indicated sales were up year-over-year. Tourism in the District was described as solid over the late summer months, on balance. Residential builders and brokers indicated modest growth compared with year-ago levels; however, diminished lot and land inventory constrained builders' ability to meet demand. Commercial real estate contacts rep…

Recession Talk....

Blanchard says the Fed should buy stocks -in addition to treasuries and MBS...during the next down turn. When will this happen? based on the chart below (from the Atl Fed) we are due for one. Everyone loves the new talk about recessions and the latest "25 year business cycles" but how soon does a US recession loom around the corner? When I was speaking in NYC a while back recession was the only topic on the table. Not so much today. Few care to discuss it, and even fewer think it will happen. Animal instincts (economic indicators) aside, we need to seriously consider the next recession, and if that means the Fed begins to buy equities we could have a new era of stability ussured in.

Thailand Inflation Ticks Up (Key Numbers)

The following information was originally transmitted by Goldman Sachs research:

Thailand's August headline inflation inched up to 1.6% yoy, from 1.5% in June, led by unfavorable base effects. The reading was above Bloomberg consensus expectations but below ours. Core inflation moderated to 0.7% yoy in August from 0.8% in July. Today's inflation reading takes the annual average of headline inflation (the inflation target measure of the BOT) to 1% yoy, within the 1%-4% target band for the first time since March 2015.

Key numbers: Headline August CPI: +1.6% yoy (+0.2% mom s.a. by GS) vs. Bloomberg consensus: +1.5% yoy; GS forecast: +1.7% yoy; Previous: +1.5% yoy (+0.2% mom s.a.) Core CPI: +0.7% yoy vs. Bloomberg consensus: +0.8% yoy (+0.0% mom s.a.); Previous: +0.8% yoy (+0.0% mom s.a.)