Showing posts from August, 2019

India & China Update

First off....China ->

Economic growth dipped to a 27-year low in the second quarter, and the economy likely continues to falter in Q3 amid the trade war with the U.S. Throughout January–July, investment growth slowed, while, in July, industrial production expanded at a near two-decade low and retail sales growth moderated. Meanwhile, in mid-August, the U.S. postponed imposing a 10% tariff on some Chinese consumer products from 1 September to 15 December, which should aid exports ahead of the Christmas season. In the same month, the IMF applauded the government during an Article IV visit for strengthening financial regulations, continuing to open up the economy and tightening control over local government expenditure to reduce the speed of debt accumulation; however, the Fund also noted that further reforms regarding state-owned enterprises are needed in order to increase competition and improve credit allocation.

Uncertainty linked to the trade war with the U.S. will continue t…

Japan Machinery Orders Exceed Expectations

Japan’s machinery orders came in at +13.9% month over month for June, a swift turn from May’s -7.8%. Forecasters called for a decline so the increased orders were a surprise. Also, real estate and insurance clicked in at double digit month over month growth. - Chad
*Charts from Goldman Sachs

Housing Starts Down Third Straight Month

Despite the outpouring of positive sentiment the housing market is sputtering. Worries of a recession loom and geopolitical tensions are at an all time high. Don’t rush to refinance your mortgage too fast - another rate cut is in the cards.
From research: 
“The level of housing starts declined to 1,191k in July, below expectations, but details were firmer as single-family starts increased by 1.3%. Building permits increased by 8.4%, with an increase in both single-family and multi-family permits. Following the mixed report, we left our Q3 GDP tracking estimate unchanged on a rounded basis at +2.1% (qoq ar). We also left our past-quarter GDP tracking estimate for Q2 unchanged at +1.9% (compared to +2.1% as originally reported)” - Goldman Sachs

The Yield Curve Does Not Indicate Recession Risk

If the long bond decline and other rate declines have you worried it may be worthwhile to read the below from Goldman Sachs:

The historical correlation between yield curve inversion and recession is impressive. But what exactly is an inversion of, say, the 2s10s curve supposed to tell us? Roughly, an inversion indicates that the monetary policy stance is restrictive or is expected to become restrictive.This signal has worked well historically because US recessions have tended to follow overheating that led to restrictive policy. But it raises two problems. First, it is inconsistent: the decline in the term premium has dramatically changed the signal about the restrictiveness of policy. Second, it is narrow: recessions do not have to be preceded by restrictive monetary policy.This does not mean that the yield curve is useless for assessing recession risk. In our view, the “wisdom of the crowd” embodied in the yield curve can provide useful input on two questions. First, the near-term f…

Monopoly Power Is Bad For America

"Take the above and combine with with the fact that a large portion of of all business is an offshoot of businesses and supply chains for the top firms in the world, thereby controlling even more of the dynamics at play" - Chad

Soybean Outlook August 2019

Soybean prices rallied to an over one-year high in mid-July before reversing all monthly gains by early August. On 2 August, soybeans traded at USD 829 cents per bushel, which was 1.7% lower than on the same day last month. Moreover, the price was down 0.7% on a year-to-date basis and was 2.8% lower than on the same day last year. Prices were initially buttressed by continued adverse weather conditions causing major delays in U.S. soybean planting. However, a 29 July USDA report showed that, while still lagging the 5-year average, soybean crop conditions have recently improved sharply on more favorable weather, causing prices to pare back gains. Moreover, prices steeply fell in the wake of the escalation of the U.S.-China trade war on 1 August.

FocusEconomics Consensus Forecast - Commodities