The outlook in Turkey has worsened.

Economics

Recent indicators suggest the economy slowed sharply in the third quarter. Consumer and business confidence continued to plummet in September and are now both firmly in negative territory, while in the same month the manufacturing PMI sank lower on stronger contractions in output and new orders. Moreover, annual retail sales growth reached an over one-year low in July. Retail sales likely softened further in the remainder of Q3, on higher inflation and weaker sentiment. On the plus side, the gaping current account deficit has begun to narrow thanks to the weaker currency and softer domestic demand. This comes after recent figures show that growth held up well in the second quarter, buoyed by a stronger external sector, a pre-election government spending boost and robust private consumption. On the political front, in late September Treasury and Finance Minister Berat Albayrak, presented the much-anticipated New Economic Plan, which sets out a more constrained fiscal stance and far lower growth forecasts. • The economy will likely lose considerable steam in the next few quarters on tight financial conditions, weak sentiment and sky-high inflation. Further exchange rate volatility and an escalation of geopolitical tensions pose significant downside risks. FocusEconomics panelists expect growth of 3.6% this year and 1.0% in 2019, down 2.0 percentage points from last month’s forecast. • Inflation rose from 15.8% in July to 17.9% in August, pushed up by the weaker lira. Inflation is likely to rise even further in the coming months given the recent currency crash but should then dip on softer domestic demand. Our panel sees inflation ending 2018 at 20.7% and 2019 at 13.7%. • At its 13 September meeting, the Central Bank jacked up the repo rate from 17.75% to 24.00%. The decisive move was designed to support the currency and temper price pressures, and it should go some way to restoring investors’ faith in the Bank’s independence. The Bank is likely to maintain its tight stance in the near-term to consolidate recent lira gains and check runaway inflation. Our panelists see the one-week repo rate ending 2018 at 24.25% and 2019 at 19.97%. • On 28 September, the lira traded at TRY 6.06 per USD, strengthening 3.5% from the same day in the previous month. The appreciation followed announcements of tighter fiscal and monetary policy. Nevertheless, the currency has still lost a huge amount of value since the start of the year. Going forward, the lira is likely to remain highly volatile, due to geopolitical tensions with the U.S. and ongoing market skepticism of the government’s policy agenda. Our panelists see the exchange rate ending 2018 at TRY 6.46 per USD and 2019 at TRY 6.73 per USD at end-2019.

Politics

Treasury and Finance Minister Berat Albayrak presented the New Economic Program (NEP) (formerly the Medium-Term Program, MTP) on 20 September. The plan provided more credible macroeconomic forecasts—including for reduced growth and markedly higher inflation—and set out a more cautious fiscal stance. As a result, the program should go some way to restoring investors’ faith in the government’s macroeconomic policymaking, reduce economic imbalances and support the lira. However, full implementation of the announced measures will be key to rebuilding investors’ trust, while concrete proposals for the banking sector were limited. The program established TRY 60 billion of cost savings and TRY 16 billion of extra revenue for 2019 (around USD 12 billion in total). The vast majority of cost savings are expected to come from investment programs, incentives and

the social security system, while extra revenue will be raised by broadening the tax base through a reduction in exemptions. The government also announced changes to public-private partnership (PPP) initiatives to boost affordability. This comes after the IMF warned the country earlier this year

about the fiscal risks associated with such schemes, which have played a key role in infrastructure development under President Erdogan and were recently valued by the Fund at around USD 61 billion. Thanks to this fiscal austerity, the NEP forecasts a rising primary surplus and a central budget deficit contained below 2% of GDP going forward. Moreover, the plan sees the economy growing just 2.3% next year and 3.5% in 2020, in contrast to a target of 5.5% growth in both those years in last year’s MTP.  

The 2019 target is still markedly above FocusEconomics panelists’ expectations, but the overall message is that—at least in the near-term—President Erdogan appears willing to temper his growth-at-all-costs approach to economic policymaking. Regarding inflation, the plan sees it ending next

year at around 16%, and only returning to single digits in 2020. Looking at the external sector, the government aims to sharply reduce the current account deficit going forward. As well as the weaker lira aiding competitiveness, the program also aims to achieve this by boosting domestic production in areas such as pharmaceuticals, energy and machinery, where Turkey is currently extremely dependent on imports. This will take time, however, and FocusEconomics panelists predict a more modest narrowing of the current account deficit over the coming years. Regarding the banking sector, the NEP stated that the government will conduct a review of banks’ financial soundness. However, there were no concrete steps to address concerns over non-performing loans—which could rise as firms struggle with a hefty external debt burden—or banks’ access to international financing. According to ING analysts, the “programme is a step in the right direction with rebalancing on growth and reviving a commitment to fiscal prudence, though the inflation path is to remain elevated longer.”

Economists at Nomura also agree that the NEP—together with the Central Bank’s recent rate hike—is a sign that “the authorities are gradually adjusting to reality.” However, they go on to state: “We do not believe they [the NEP and rate hike] are enough to reverse the long-running trend of erosion of policy making credibility in Turkey. Even if these are credible policy changes, it is probably too late to reverse the economic downturn because of the negative effects of currency depreciation on private sector balance sheets.” The more conservative fiscal stance should provide support to the beleaguered lira going forward. However, ING and Nomura highlight that the Plan’s implicit 2019 exchange rate assumption—calculated by both firms at around TRY 5.60 per USD—could be slightly optimistic. FocusEconomics panelists concur, and see the currency ending 2018 at TRY 6.46 per USD and 2019 at TRY 6.73 per USD. Despite tighter fiscal and monetary policy, a sustained improvement in the exchange rate outlook will likely be dependent on a reduction in geopolitical tensions, particularly a normalization of relations with the United States. As economists at Nomura comment: “We also need a de-escalation on the foreign policy front. […] If there is no resolution […] and if this is followed by further US sanctions on Turkey (and a possible fine on state-owned Halkbank), then the pressure on Turkish assets will resume forcefully.”

Looking ahead, economic growth is expected to decelerate. This reflects China’s more mature economic cycle and the impact of previous economic reforms, as well as the tit-for-tat trade war with the United States and the cooling housing market. However, a looser fiscal stance and a more accommodative monetary policy should cushion the slowdown. FocusEconomics panelists see the economy growing 6.3% in 2019, which is unchanged from last month’s forecast. In 2020 the economy is seen expanding 6.1%.

The People’s Bank of China (PBOC) uses a complex system to implement monetary policy, including the use of key benchmark rates, open market operations and reserve requirement ratios. On 6 October, the Bank announced a cut of 100 basis points to the reserve requirement ratio for most banks, which will release around CNY 750 billion. The move is intended to spur credit growth amid softening economic conditions. Panelists expect that the one-year deposit and lending rates to close 2019 at 1.52% and 4.32% respectively and 2020 at 1.58% and 4.33%

Export growth surges in September despite escalating U.S.-China trade tensions Export growth accelerated from 9.8% in August to 14.5% in September. The reading surprised market analysts as they had expected a slowdown to an 8.9% rise. The surge in export growth likely reflected a hike of the export tax rebate rates for selected products effective 15 September as well as front-loading shipments to the United States before the implementation of additional tariffs on USD 200 billion of Chinese products by the United States on 25 September. Although imports expanded at double-digit figures for the seventh consecutive month, import growth softened from 19.9% in August to 14.3% in September. The print was below the 15.0% rise that market analysts had expected and reflected weaker domestic demand. The trade surplus consequently rose from USD 28.5 billion in September 2017 to USD 31.7 billion in September 2018 (August 2018: USD 27.9 billion). The 12-month moving sum of the trade surplus increased from USD 350 billion in August to USD 355 billion in September. Our panelists forecast that exports will expand 5.7% in 2019 and imports will rise 8.0%, bringing the trade surplus to USD 316 billion. In 2020, FocusEconomics panelists expect exports will expand 2.9%, while imports will rise 5.8%, bringing down the trade surplus to USD 258 billion

Geopolitical tensions are at a boiling point, and despite the slight reprise for the upcoming elections there is no end in sight. - CH

“The world should brace for an escalation in the trade war between China and the US following the American mid-term elections, that could see Donald Trump test the strength of Chinese resolution with steeper tariffs”...

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Does China has universal health care? In a way yes, but it is a combination of a few programs in theory. These programs range from the UK, US and German models. China runs a mixed system with additives, much like the US VA program. In fact, you can even buy a ticket for around $10.00 and access mega-hospitals in the city centers of China and have consultations with the countries supreme specialists at will. What could be be the draw back? You may wait for hours. 

"How to provide health care for millions of people is a question that has vexed countries and governments around the world. It’s a modern notion, but nowadays we take for granted the idea that people have the right to access health services, regardless of their wealth or social standing. We also demand that the government play some role in keeping people healthy. Americans have been arguing about whether medical insurance should be mandatory. In the UK, people are more worried that their free-for-all health care, the National Health Service, will not survive in the face of rising costs. All countries are urgently looking for a way to achieve so-called “universal health coverage” – a commitment all members of the World Health Organization made in 2005" - 

Read the article at Inkstone News - part of South China Morning Post

At the time of writing, the Italian government budget deficit target is 2.4% in 2019, 2.1% in 2020 and 1.8% in 2021. This misses the ECB target of 1.6% each consecutive year. Politicians are hoping to stimulate the country’s lacklustre economy and fulfil pre-election pledges including: the introduction of a guaranteed basic income; the adoption of a flat rate of income tax and the repeal of the previous government’s pension reforms. For the Five Star Movement, the agreement to enlarge the budget deficit and implement their flagship policies is an important step forward, as polls suggest that the party has been losing ground to its coalition partner. However, Italy’s fiscal space is already limited and, despite running a primary surplus, the government’s debt repayments equate to roughly 4% of GDP. According to Fathom calculations, the coalition’s current spending plans would see government debt hit 134% of GDP in 2020. Markets have taken a dim view of the proposed fiscal expansion and are currently pricing in a nearly 15% probability that the Italian government defaults on its debt within the next five years. Several rating agencies had already revised Italy’s outlook to negative ahead of the budget proposals, and any downgrade to the country’s credit rating could spark a new wave of volatility.

- Fathom Consulting

October 2018: Greece is now in a stable status. 

The economy lost pace in the second quarter as domestic demand waned. Sustained austerity measures and sky-high unemployment dented private consumption growth, despite signs of a moderate improvement in the labor market. In addition, public spending dipped in the quarter as the government remained committed to its fiscal consolidation plans. On a brighter note, booming inbound tourism propped up the external sector in the quarter. Available economic indicators appear more upbeat for the third quarter: economic sentiment shot up to an over four-year high in August, and a solid outturn by the manufacturing sector buoyed otherwise lackluster industrial output growth in July. On the heels of exiting its third government bailout, on 28 August, Prime Minister Alexis Tsipras reshuffled his cabinet. The reshuffle involved few key posts and was likely aimed at shoring up government support before next year’s election.

Hard-earned momentum should carry into next year as the economy finally emerges from eight years of creditor bailouts. Improving labor market dynamics and a pick-up in investment activity should drive the recovery. However, doubts remain over long-term debt sustainability and the government’s willingness to maintain fiscal discipline. FocusEconomics panelists see GDP expanding 2.0% in 2018 and 2.0% in 2019, unchanged from last month’s projection. Harmonized inflation ticked up to 0.9% in August (July: 0.9%). Our panel sees harmonized inflation averaging 0.8% in 2018 and 1.1% in 2019.

REAL SECTOR | Recovery loses traction in Q2
According to provisional data released by the Hellenic Statistical Authority (ELSTAT), the Greek economy lost some momentum in the second quarter, after expanding at the fastest pace in over 10 years at the start of the year. GDP expanded 1.8% annually in Q2, down from 2.6% in Q1. The print matched FocusEconomics’ expectations. While the economy has come a long way since the height of the crisis, growth is still moderate and gradual considering the depth of the country’s recession. The slowdown was driven by a deterioration in the domestic economy in the second quarter. Private consumption growth slowed from Q1’s 1.3% to 0.4%. While the labor market has tightened in recent quarters, unemployment is still elevated and austerity measures have dented households’ spending power. Government consumption plunged 2.0% in the quarter, the biggest drop in over a year, as the government pursues fiscal consolidation. In addition, fixed investment fell 5.3% in Q2, a softer drop than Q1’s 9.9% decrease which was largely due to strong base effects.

Unemployment rate dips in June According to data released by the Hellenic Statistical Authority (EL.STAT), the number of unemployed workers fell by 12,624 in June compared with May, while those in employment rose by 17,656 in the same period. In turn, the seasonally-adjusted unemployment rate moderated to 19.1% from a revised 19.3% in the previous month (previously reported: 19.5%). Moreover, June’s unemployment rate was 2.2 percentage points lower compared to the same month of last year (June 2017: 21.3%). Meanwhile, youth unemployment—categorized by individuals between the ages of 15-24—inched down slightly to 39.1% in June, although still the highest in the Eurozone by far. FocusEconomics Consensus Forecast panelists expect the unemployment rate to average 19.8% in 2018, which is down 0.1 percentage points from last month’s forecast. For 2019, the panel expects the unemployment rate to average 18.6%, unchanged from last month’s projection.

Italy’s economic recovery moderated further in the second quarter, weighed on by a weak external sector and anemic consumer spending. This was despite the significant rebound in fixed investment, on the back of robust growth in transport equipment and rising housing investment. Monthly data for the third quarter, meanwhile, suggests the economy has shifted into a lower gear. In July industrial production contracted significantly, as was seen more broadly across the Eurozone, while in August economic sentiment cooled and the manufacturing sector neared stagnation. As for household spending, retail sales dropped in July and consumer sentiment dipped in August. Nevertheless, sentiment remains positive and, although the level of employment dropped, the unemployment rate fell to its lowest levels in over six years in July. This, coupled with the formation of a government in June, could have supported spending in Q3. However, ongoing 2019 budget negotiations within the government continue to worry investors; interest rates on Italian bonds remain extremely sensitive to government announcements concerning the future fiscal stance. • Next year, the pace of recovery will remain sluggish. Although credit growth is expected to strengthen thanks to improvements within the banking sector, expansion in demand will likely be modest, and employment growth will slow. A loose fiscal stance may also lead to a hike in interest rates as markets question the sustainability of Italy’s huge public debt, while political uncertainty is unlikely to dissipate due to the entrenched ideological differences within the governing coalition. Escalating trade tensions and potential financial instability could further darken the outlook. FocusEconomics panelists project growth of 1.2% in 2018 and 1.1% in 2019, down 0.1 percentage points from last month’s forecast. • Harmonized inflation eased to 1.6% in August from a 15-month high of 1.9% in July. FocusEconomics panelists expect inflation to average 1.3% in 2018 and 1.4% in 2019.

The recovery is set to continue this year, albeit at a slower pace. Fixed investment should continue to strengthen in the second half of the year. The unemployment rate ticked down to 10.4% in July, the lowest level since March 2012, which should bode well for household spending in H2. However, longstanding problems including the second-highest public debt-to-GDP ratio in the European Union, sluggish productivity growth, a slow judicial system, high taxes and cumbersome bureaucracy, continue to weigh on Italy’s outlook. Moreover, protracted domestic political instability and uncertainties surrounding the direction of the government’s economic policy are also substantial risks.

-FocusEconomics

Mounting headwinds will weigh on global growth further down the road...

REAL SECTOR
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 on USD 200 billon of Chinese products, which will rise to 25% on 1 January. President Trump also warned that the U.S. will pursue additional levies on USD 267 billion of Chinese imports if Beijing retaliates against “our farmers, ranchers and industrial workers”. Nevertheless, China immediately fired back with tariffs of between 5% and 10% on USD 60 billion of U.S. goods imported into China. The direct impact of these tariffs is expected to be rather limited given that they only represent around 1.5% of global trade, while some of the production could be quickly diverted to other countries, especially in Asia. However, a worsening trade environment could have an impact on business sentiment, deterring global investment and affecting supply chains. Moreover, it could also exacerbate economic imbalances in China as authorities once again rely on investment and lending to rekindle economic growth. The recent selloff in emerging markets has stressed the vulnerability of some countries to sudden changes in capital outflows. Argentina and Turkey were particularly affected by the financial turmoil, with both countries nearing full-blown exchangerate crises, and sharp currency depreciations occurred across most developing economies ranging from Brazil to India and South Africa. That said, the consequences are expected to greatly diverge, especially hitting those with large current account deficits and/or high exposure to external borrowing.

Finally, in Europe, Brexit negotiations between the European Union and the United Kingdom remain at an impasse after the Global outlook stable 2.4 2.8 3.2 3.6 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 2.9 3.1 3.3 3.5 May Aug Nov Feb May Aug 2018 2019 World Economic Growth Change in GDP forecasts Note: GDP, real annual variation in %, Q1 2015 - Q4 2019. Note: GDP, evolution of 2018 and 2019 forecasts during the last 18 months. FOCUSECONOMICS Summary FocusEconomics Consensus Forecast | 3 October 2018 European Union rejected the UK’s Chequers plan at the 20 September meeting in Salzburg. The president of the European Council, Donald Tusk, stated that Theresa May’s proposal “risks undermining the single market”. The UK prime minister now has until 18 October to present an alternative plan and the possibility of a no-deal Brexit increases as each day passes. OUTLOOK | Dark clouds gather following a bright start to the year Although global economic growth will remain resilient this year mainly due to an outstanding H1 2018 performance, dark clouds have begun to swell above the global economy. Escalating trade tensions between the United States and the rest of the world, especially China, represent the main downside risk to the global economic outlook next year. Moreover, although the global economy has been supported by stellar dynamics in the U.S. due to brash government spending and tax cuts, fiscal tailwinds will start to wane next year, which could lead to a sizable deceleration in the world’s largest economy. Despite an uncertain economic outlook, the Federal Reserve has continued to tighten its monetary policy and another rate hike is already penciled in for September. Higher interest rates in the United States are fueling volatility across the global financial markets and have triggered capital outflows from emerging markets.

In Europe, populism is still on the rise, while the long-awaited Brexit deal is still not in sight. Finally, China, which has been a key engine of the global economy over the past few decades, is facing severe challenges such as aggressive financial deleveraging and spillovers from the trade war with the United States. FocusEconomics Consensus Forecast panelists expect the global economy to expand 3.4% this year, which, if confirmed, would represent the strongest expansion in seven years. Panelists see global growth decelerating to 3.2% next year, which is unchanged from last month’s estimate. This month’s unrevised 2019 growth prospects for the global economy is the result of stable economic outlooks for the Eurozone and the United Kingdom. Meanwhile, Canada, Japan and the United States saw upward revisions to their growth forecasts. The Asia (ex-Japan) region is starting to feel the pinch from rising trade disputes, cooling growth in China and financial volatility, which is dragging on the region’s economic outlook for next year. Growth estimates for Eastern Europe are under strain owing to slowing growth in the European Union—a key trading partner— heightened volatility in the financial markets and fading fiscal stimulus in some large economies, including Turkey. While the economic outlook for Latin America for this year remains dim, next year growth should pick up as the economic recovery strengthens in key countries, especially Brazil. Despite higher oil prices, mounting geopolitical risks continue to dent growth prospects in the Middle East and North Africa. The economic recovery in Sub-Saharan Africa will gather steam in 2019 due to stronger performances by heavyweights Nigeria and South Africa.

Overview
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 trade war between China and the United States, a strengthening of the HKD against regional peers and higher interest rates all threaten to derail Hong Kong’s solid growth trajectory. FocusEconomics panelists expect growth of 3.6% in 2018 and 2.7% in 2019, which is down 0.1 percentage points from last month’s forecast. Inflation stabilized at June’s 2.4% in July. Rising energy prices and higher residential rents are expected to fan inflationary pressures in the coming months. Moreover, a tight labor market continues to push up domestic inflation. FocusEconomics panelists expect inflation to average 2.3% in both 2018 and 2019. The Hong Kong Monetary Authority (HKMA) manages the Hong Kong dollar within a tight tolerance band to the U.S. dollar, between 7.75 and 7.85 HKD per USD. In an attempt to support a weakening HKD, on 23 August the HKMA intervened in the foreign currency market once again, this time buying HKD 1.8 billion and selling USD 255 million. Panelists expect the island to maintain its current currency peg with the USD at least until the end of our forecast horizon in 2022.

Business Outlook
The Nikkei Hong Kong Purchasing Managers’ Index (PMI), which is released by IHS Markit, inched up from 48.2 in July to 48.5 in August. Despite the increase, the index remains below the 50-point threshold that separates expansion from contraction in the private sector. August’s reading reflected soft client demand, which pushed down new orders and output. Poor demand conditions also weighed on employment and purchasing activities. Export sales to China fell markedly in August on the back of ongoing trade disputes with China. Against this backdrop and in order to boost sales, businesses reduced selling prices despite the increase in input costs as a result of a weaker HKD and higher commodity prices.

Retail Sector
REAL SECTOR | Retail sales growth falls to a six-month low in July Retail sales volumes expanded 5.9% in annual terms in July, decelerating from June’s 9.8% increase and marking the weakest reading since February. The slowdown mainly reflected declining sales for food, alcoholic drinks and tobacco as well as for supermarket sales. Despite remaining robust, sales of luxury items decelerated notably in July. On the flip side, sales of fuels accelerated in July largely due to higher oil prices, while sales of consumer durable goods also gained steam. On a seasonally-adjusted, three-month-moving-average basis, retail sales in the May–July period decreased 1.4% from the preceding three-month period ending in April. The print followed the 0.1% decrease in the three-month period ending in June and represented the largest decline since December 2016. Meanwhile, annual average variation in retail sales volumes inched up to an over four-year high of 8.3% in July from 8.2% in June.

ECONOMY
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 that same day with President Nicolás Maduro’s latest attempt to contain hyperinflation and stabilize the freefalling currency. Although it includes moves in the right direction, the reform package is unlikely to achieve its objectives according to analysts. • The outlook remains bleak. The economy will continue to be beleaguered by spiraling inflation, collapsing oil output and exchange rate misalignments. Upcoming hefty external debt repayments and the government’s constrained ability to access financing due to international financial sanctions further compound the country’s woes. Given the severity of the crisis, conditions may emerge for a political transition, a scenario that some of our panelists have already begun to factor into their forecasts. FocusEconomics panelists see the economy contracting 12.1% in 2018, which is down 0.8 percentage points from last month’s forecast. In 2019, the panel sees GDP falling 4.2%. Panelists estimate that inflation ended 2017 at 2,532%. The authorities have introduced a new currency, the bolivar soberano, by knocking off five zeroes from the previous bolivar fuerte, and anchoring it to the petro, the government-created cryptocurrency whose value is linked to the price of the Venezuelan oil basket. However, this is highly unlikely to stem rampant hyperinflation. Our panel forecasts inflation will surge to 679,849% by the end of this year but fall to 456,772% by the end of 2019. • The bolivar underwent a massive devaluation following the recent monetary reconversion, which brought the official exchange rate roughly up to par with that of the parallel market. Nevertheless, the gap between the two has again started to widen. The official DICOM exchange rate ended the 7 September auction at 61.7 VES per USD while the parallel market rate declined to 90.5 VES per USD on the same day. Our panelists expect the official rate to end 2018 at 90.5 VES per USD and 194.0 VES per USD at the end of 2019.

POLITICS
Government enacts sweeping reforms in latest attempt to revive crisis-stricken economy
On 20 August, a series of far-reaching economic reforms came into effect as President Nicolás Maduro once again strived to tackle spiraling inflation, stabilize the freefalling currency and overcome the deep economic crisis gripping the country. His economic recovery plan seeks to address various dimensions of the economy, most noteworthy among which are proposed measures for monetary reconversion, an epic devaluation and a substantial minimum wage hike. Although some policy moves could certainly be considered steps in the right direction, inconsistencies, ambiguities and implementation risks of the reform package are likely to compromise its effectiveness, thus suggesting that the laid-out objectives will not be met. As its headline reform, the government overhauled the currency system by knocking off five zeroes from the bolívar fuerte (VEF) and renaming it as the bolívar soberano (VES). The new currency has been anchored to the petro, the government-created cryptocurrency which is pegged to the price of the Venezuelan oil basket. There are serious doubts, however, over the feasibility of the petro’s use among the public as well as its intended purpose of raising desperately-needed hard currency. Firstly, the petro remains inaccessible to the general population and, while authorities state that sales have already raised USD 3.3 billion for the government, no verifiable evidence has been presented to support these claims. Furthermore, there is little evidence of buoyant trading activity of the petro and it is not sold on any major cryptocurrency exchange platform. The monetary confusion was increased by the announcement that in addition to the exchange rate, the system of prices and wages will also be tied to the petro. It is not clear, however, what this means in practical terms as prices have been linked to a token which selling price is unknown, and thus lacks market value. Despite the ambiguities, the value of one petro was set at USD 60 and VES 3,600, implying a VES 60 per USD official exchange rate. This massive currency devaluation of roughly 95%—one of the largest in history—brought the official exchange rate roughly up to par with the one offered in the parallel market, marking the first time that the government recognized the black-market exchange rate. However, given the significant dependence of the economy on imports, such a steep devaluation will have an enormous impact on prices. Imports will become even more expensive, pushing domestic prices higher via pass-through effects. Finally, despite an attempt to unify the official and black-market exchange rates, recent data shows that the gap has continued to widen, indicating that rampant inflation will persist. Maduro also announced a minimum wage hike, taking effect this month in a bid to shore up household purchasing power, to VES 1,800 (equivalent to half a petro or USD 30), representing a whopping 6,000% increase from the minimum wage last set in June. Monthly pensions were also set at this amount. However, the huge nominal gains are likely to be wiped out in real terms amid the hyperinflationary environment. Moreover, businesses would likely pass on the substantially higher costs to selling prices, thus pushing up inflation. On the other hand, the sudden and sizeable hike in labor costs also runs the risk of squeezing businesses, particularly small- and mediumsized enterprises (SMEs), likely forcing them to lay off workers or shut down operations, especially considering the context of depressed private consumption. Thus, although the measure can be deemed sensible in that FOCUSECONOMICS Venezuela LatinFocus Consensus Forecast | 119 September 2018 it seeks to support buying power for households, it can backfire as it could lead to higher unemployment, lower domestic demand or further inflationary pressures. Moreover, Maduro pledged to pay the difference between the new minimum wage and private sector salaries in SMEs for a 90-day transition period while holders of the government’s Fatherland Card will receive a one-time reconversion bonus of VES 600 (approximately USD 10) to ease the monetary transition. Simultaneously, Maduro ambitiously promised to eliminate the fiscal deficit and halt its monetization. These measures reveal major inconsistencies, however. Foremost, the publicsector wage bill will soar due to the hefty increases in the minimum wage and pensions, allotment of bonuses and transitional costs for businesses. Although a series of tax reforms and other revenue measures are in the works, including a 4 percentage point VAT hike to 16%, higher taxes on upper-income households and partial elimination of costly fuel subsidies, analysts contend the government will not be able to raise sufficient revenue, particularly given the economy is in a state of depression, to cover the surge in expenditures. Therefore, contrary to the stated goals, the fiscal gap will likely continue to widen and would force the government to resort to monetary financing once again—only to stoke inflationary pressures further. All in all, although some measures may appear sensible at first glance— namely the devaluation of the official exchange rate to its effective rate set by the black market and the minimum wage hike to recoup some of the lost purchasing power of households—the reform package as a whole is unlikely to resolve the country’s economic woes. Furthermore, as international financial sanctions continue to constrain the government’s room for maneuver, particularly its ability to access external sources of financing, it is expected that the economy will remain in dire straits.

Federal Reserve Bank of Atlanta

Summary 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 reported strong demand. Manufacturers noted increases in new orders and production.

Employment and Wages

Business contacts reported that labor market growth in select regions was being restrained by firms' inability to recruit staff, particularly among the low-skill/hourly workforce. In response, firms shared plans to move to locations with larger labor pools, to change/reduce personnel standards and requirements, or continue to pursue automation to replace workers.

Contacts continued to report that wage pressure was growing; however, increases greater than 2 to 3 percent remained targeted, rather than broad-based. In response, firms continued to approach compensation creatively (e.g., offer enhanced flexibility, use bonuses and other incentive pay, and offer profit sharing or other forms of temporary compensation that can be discontinued if necessary). Reports from some firms indicated that they were unable to pay the higher wages demanded by experienced job seekers. Instead, they shifted their focus on higher margin business lines or planned to "wait it out" and not to fill the positions.

Prices

Businesses across the District continued to report some increases in nonlabor input costs, specifically relating to transportation and steel, noting slightly more ability to pass along these price increases than in the previous report. Anticipation of rising costs related to tariffs continued to contribute to vendor price increases for commodities. The Atlanta Fed's Business Inflation Expectations (BIE) survey showed year-over-year unit costs were up 2.0 percent in August. Survey respondents indicated they expect unit costs to rise 2.1 percent over the next twelve months.

Consumer Spending and Tourism

District retail contacts reported growth in sales volume since the last report. Solid tourism activity was cited as benefiting retailers and heavily influencing sales activity in some markets. Retailers expect continued positive momentum for the remainder of the year. Automobile dealers reported an increase in year-over-year sales volume.

On balance, District tourism and hospitality contacts reported a strong summer season compared to the same time last year. Summer was robust for Florida tourism activity as occupancy and average room rate surpassed expectations. However, August turned in some mixed results as West Coast beaches were negatively impacted by the "red tide" algae bloom. New Orleans reported a decrease in July occupancy while the average daily rate was up, year-over-year. Preliminary August occupancy reports for New Orleans were stronger than expected. The outlook for the fourth quarter is mixed; some markets expect softer tourism activity year-over-year while others expect growth.

Construction and Real Estate

On balance, reports from District residential real estate contacts indicated modest but ongoing growth. Many builders reported that construction activity was up from the year-ago level. The lack of lot and land availability remained a constraint on building activity. Several contacts stated that even if they had the developed land, construction labor market conditions would keep them from being able to meet current levels of housing demand. District builders expect home sales activity to hold steady over the next few months.

Many District commercial real estate contacts noted continued strong demand. The majority of commercial contractors indicated that on balance, the pace of nonresidential construction activity at least matched the year-ago level, with the exception of retail construction, which was characterized as unchanged to down. Most contacts reported a healthy pipeline of activity, with backlogs greater than or equal to the previous year. Many contacts expressed concerns that uncertainty over increasing materials prices was making bidding and fulfilling projects more challenging. The outlook for nonresidential and multifamily construction among commercial contractors across the District remained positive, with the majority anticipating activity to match or exceed the current level.

Manufacturing

Manufacturing contacts reported strong overall business conditions from mid-July through August. Most firms cited increases in new orders and production. Supplier delivery times were said to be getting longer, while finished inventory levels remained elevated. Uncertainty regarding tariffs and trade policy continued to weigh heavily on manufacturers' sentiment as expectations for future production levels decreased from the previous period. Slightly less than one-third of contacts are expecting higher production over the next six months.

Transportation

District transportation contacts noted increased activity during the reporting period. On a year-over-year basis, railroad traffic was up notably, primarily due to double-digit increases in shipments of grain, petroleum and petroleum products, pulp and paper products, and iron and steel scrap. District ports cited substantial growth in container traffic, breakbulk, and dry bulk freight. Air cargo contacts noted that domestic activity was up due to increased e-commerce shipments; international cargo from Latin America was described as robust, but exports to Europe had softened. Transportation contacts noted no significant disruptions in the movement of freight as a result of changes in trade policy.

Banking and Finance

Earnings continued to improve for financial institutions, driven by a stronger net interest margin. Asset growth continued to slow due to lower demand for credit amid higher interest rates and savings from tax reform. Credit quality remained strong among most financial institutions although underwriting standards loosened for some credit products, particularly residential mortgages. Transaction accounts still comprised the majority of financial institutions' funding, but borrowings were increasingly funding new loan growth.

Energy

Fuel refining capacity utilization continued at a record pace and crude production remained strong. Exports of petroleum products continued to rise. Contacts noted increasing activity offshore in the Gulf of Mexico, including lease purchases for exploration spots. Utilities power generation projects picked up, particularly involving maintenance on power facilities. Utilities sector contacts continued to cite increases in the share of power generation from natural gas. Some contacts expressed concern that tariffs on steel and aluminum may influence the viability of planned industrial construction and plant expansion projects in Louisiana.

Agriculture

Agriculture conditions across the District continued to be mixed. Drought conditions were little changed from the previous report; most of the District remained drought free although there were reports of abnormally dry conditions in much of Louisiana and in parts of Mississippi and Alabama. August production forecasts indicated year-over-year increases in rice, soybean, and cotton, while peanut production was down. Year-over-year prices paid to farmers in June were up for corn, cotton, rice, soybeans, broilers, and eggs, while beef prices were down. However, since the last report, weekly comparisons indicated lower commodity cash prices for some recently tariffed agriculture exports such as soybeans, and the USDA has announced a financial relief program for affected agriculture producers.

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.  

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.)

Momentum continued to wane into the second quarter as the anticipated “Ramaphoria”-driven liftoff of the domestic economy failed to materialize. Although economy-wide sentiment got a boost from Cyril Ramaphosa’s appointment to the country’s top post earlier in the year, employment gains have been muted since, while consumer-spending metrics have deteriorated. Moreover, manufacturing output has stumbled in recent months and survey-based data points to sluggishness across the private sector. On the external front, the ongoing global risk-off sent the rand into a freefall in early August and looks bound to fan inflationary pressures over the coming months. Meanwhile, a quarter-on-quarter contraction in the first quarter—held back by a fall in investment and moderating household spending—highlights the economic hurdles facing Ramaphosa as next year’s general election looms. 

• Full-year growth prospects have taken a hit from weak early-year readings, but greater political stability and firm credit ratings should help the economy ride out the remainder of the year with reasonable growth metrics. On the domestic side, real wage gains should support stronger household spending this year while the government’s push to attract investment should bolster capital outlays. On the other hand, fiscal slippage and a slow reform agenda are likely to constrain growth over the medium term. FocusEconomics analysts expect growth of 1.5% in 2018, down 0.1 percentage points from last month’s forecast, and 2.0% in 2019. 

• Inflation climbed to 4.6% in June (May: 4.4%) on growing pass-through pressures from the weak rand, and higher global oil prices are expected to keep it elevated through the remainder of the year. FocusEconomics analysts see inflation averaging 4.7% in 2018 and 5.1% in 2019. • On 19 July, the South African Reserve Bank (SARB) kept the repurchase rate unchanged at 6.50%, in line with market expectations. Officials, however, took a more hawkish stance in the face of the global risk selloff’s pressure on the rand, making clear that a rate hike could be on the table before year-end should it fuel inflationary pressures. That said, a majority of FocusEconomics analysts see the SARB staying put over the short term in an effort to spur economic growth. Consensus is for the repurchase rate to end this year at 6.53% and 2019 at 6.64%. 

• On 17 August, the ZAR traded at 14.78 per USD, 11.8% weaker than on the same day last month as contagion from Turkey’s lira crisis spread to the rand. Investors have fled the currency over concerns about the economy’s dollar-denominated debt. Despite the prospect of further riskoff this year amid mounting global trade fears, still-solid fundamentals look set to cushion the rand. The rand is seen ending this year and next year at 13.27 and 13.06 per USD, respectively.

Analysis from Focus Economics

• The economic recovery is gathering pace mostly due to OPEC’s decision to increase oil production in order to keep markets adequately supplied and high oil prices, which have stoked activity in the all-important oil sector. Moreover, the recovery is broadening as the impact of the VAT implemented in January fades, and gains from the recovery in the oilsector are slowly trickling down to the rest of the economy. The nonhydrocarbon PMI hit a six-month high in June, while credit growth and foreign reserves improved in Q2. Higher production and oil prices are also translating into an improvement in the government’s fiscal position and the current account balance, which recorded a healthy surplus in Q1. On the flip side, the government’s Saudization policy, which is expelling foreign workers, could create labor shortages in some sectors, while the crackdown on corruption implemented last year is deterring investment and spurring capital outflows. Rising oil production and higher prices for the black gold will fuel this year’s economic recovery. However, the VAT implementation that disrupted activity at the outset of the year, persistent regional threats and domestic political unrest will weigh on growth this year. FocusEconomics Consensus Forecast panelists expect growth of 1.7% in 2018, which is up 0.1 percentage points from last month’s projection. In 2019, growth is seen picking up pace to 2.3%. Inflation fell from 2.3% in May to 2.4% in June. A relatively strong currency and firms cutting prices to spur sales are exerting downward pressure on inflation. Panelists project that inflation will average 3.3% in 2018 before moderating to an average of 2.4% in 2019. The riyal has been officially pegged to the U.S. dollar at a rate of 3.75 SAR per USD since January 2003. That said, the currency has had a de facto peg to the greenback since 1986. To defend the currency peg against the USD, the Saudi Arabian Monetary Authority hiked its repo and reverse repo rates by 25 basis points on 13 June following a similar decision by the U.S. Federal Reserve on the same day. Our panelists do not foresee a change in the current exchange rate system during the entire forecast horizon, which ends in 2022.

REAL SECTOR | Non-oil PMI jumps to six-month high in June The Purchasing Managers’ Index (PMI) sponsored by Emirates NBD and produced by IHS Markit rose from 53.2 in May to 55.0 in June. June’s print represented the highest reading so far this year. Therefore, the index remains above the 50-threshold that indicates expansion in business activity in the non-oil private sector. June’s increase was driven by stronger output growth and a healthy expansion in new orders. Solid growth momentum translated into higher backlogs of work. Despite the overall improvement, job creation increased only marginally. On the price front, higher prices for raw material boosted input prices faced by Saudi companies. That said, output charge inflation declined due promotional activities in June.

“The rise in the headline PMI to the highest level this year reflects a strong recovery in new orders (including export orders) and output. Firms had been anticipating this for several months, as reflected in the very strong ‘future output’ readings since February. It isn’t surprising then that the future output index declined sharply in June, with most firms now expecting their output to be relatively stable over the next twelve months.”

- Khatija Haque, Head of MENA Research at Emirates NBD

Oil is back in a big way - investments are picking up and many are going deep. The current US administration is heavy on fossil fuels and that has reinvigorated supply and demand. Of course the tariffs send a message counterproductive to this. It’s hard to think about how many oil and gas exports we are missing out on because of the tariff scare.

- Chad Hagan

"Increased supply pushed oil prices down over the past three weeks"

+ Despite somewhat stronger global demand expectations, a perceived loosening in supply led to a fall in oil prices over the past three weeks. In 2018:Q2, increasing demand expectations and decreasing anticipated supply led to rising oil prices.

+ Developments in global demand expectations since 2017:Q3 have reversed the largely supply-induced weakness in oil prices throughout the first half of 2017

+ Overall, since the end of 2014:Q2, both lower global demand expectations and looser supply have held oil prices down, though this trend seems to have reversed in 2016:Q2 and 2016:Q4, and notably since 2017:Q3.

See Link To Report

Ukraine’s recovery appears to have persisted in the second quarter, after growth picked up at the outset of the year. Domestic demand is expected to have remained in the driver’s seat in Q2: The sustained easing of inflationary pressures, coupled with improving labor market dynamics and strong remittance inflows, likely buttressed private consumption. In addition, household lending surged in the first half of the year against an increasingly stable banking sector. Meanwhile, the IMF has backed the country’s revised plans for an anti-corruption court after the amended law was approved by the Rada on 12 July. On a less positive note, in a move likely influenced by next year’s presidential and parliamentary elections, the government recently extended the gas-price freeze until the beginning of September, once again failing to fulfill one of the Fund’s key conditions and thereby reducing the prospects of receiving another tranche of funding in the coming months. • Domestic demand should remain healthy and lead the sustained recovery this year amid heavy investment activity and robust household consumption growth. Nevertheless, downside risks are significant and stem from mounting political tensions domestically and slow reform momentum. FocusEconomics panelists see GDP rising 3.1% in 2018, unchanged from last month’s forecast, and 3.1% again in 2019. • Inflationary pressures continued to ease throughout the second quarter, with inflation down to 9.9% in June from 11.7% in May, marking the lowest reading since September 2016. Our panelists expect inflation to remain elevated amid firm energy prices and recovering domestic demand. Inflation is seen closing 2018 at 9.3% and dropping to 7.2% by the end of 2019. • At its 12 July meeting, the National Bank of Ukraine unexpectedly hiked the key policy rate by 50 basis points to 17.50%. The decision came against the backdrop of heightened upside risks to short- and mediumterm inflation and elevated inflation expectations; a further rate hike in the second half of the year is unlikely. Our panelists forecast the rate to end 2018 at 16.30% and 2019 at 13.67%. • The hryvnia exhibited some weakness against the U.S. dollar in recent weeks. On 27 July, the UAH traded at 26.73 per USD, 1.6% weaker month-on-month. Nevertheless, since the beginning of the year the hryvnia has gained 5.1% on the USD and has been among the world’s best performing currencies this year. Our panelists see the hryvnia ending the year at 28.39 per USD and weakening to 29.75 UAH per USD at the end of 2019.

Production is forecasted to remain above consumption.

From Focus Economics:

Prices fell to multi-year lows in July as China imposed retaliatory tariff s on U.S. soybean exports. On 6 July, soybeans traded at USD 843 cents per bushel, which was down 12.1% from the same day last month. The price was 8.3% lower on a year-to-date basis and was down 11.7% from the same day last year. On 6 July, the U.S. imposed widely-anticipated tariff s on imports from China, leading the Asian giant to retaliate with tariff s of its own, including on soybean imports from the United States. China is the world’s largest consumer of soybeans, so the increased cost of sending supplies there for U.S. farmers, coupled with broader concerns of the depressing eff ect of a trade war on the global economy, has hit market prices. Moreover, on 12 June, the U.S. Department of Agriculture upwardly revised its projection for world soybean production for the season ending in 2019. Prices are expected to recover as demand from China for the world’s supply of soybeans, despite higher tariff s on U.S. imports, will continue to remain high. For Q4 2018, panelists expect prices to average USD 1,010 cents per bushel. For Q4 2019, panelists project prices will average USD 1,056 cents per bushel.

Outlook is stable...FocusEconomics: Japan

Recent data corroborates that the anticipated recovery in Q2 was likely weaker than expected. Subdued wage growth continues to dent consumer confidence. Industrial production, furthermore, declined in May for the first time in four months. However, with a smaller-than-expected drop in industrial production and robust export growth in June, external demand appears to be fueling activity within Japanese factories. Leading indicators for Q3 signal that economic activity will remain relatively weak, mostly reflecting mounting global economic uncertainties. The Tankan survey for manufacturers showed a less positive assessment of the country’s economic outlook as trade barriers increase globally and geopolitical risks threaten to strengthen the yen. On the upside, the 2020 Tokyo Olympics is boosting capital expenditure, providing stimulus to the economy, while the new trade deal with the European Union should support the external sector. Despite decelerating from 2017’s outstanding performance, the economy should continue to expand at a brisk pace this year, supported by the Bank of Japan’s (BoJ) ultra-loose monetary policy, a tightening labor market and construction projects related to the 2020 Tokyo Olympics. Rising protectionism globally and a sharp appreciation of the yen due to persistent geopolitical threats are the main downside risks to the outlook. FocusEconomics panelists see the economy growing 1.1% in 2018, which is unchanged from last month’s forecast, and 1.0% in 2019. Inflation stabilized at May’s 0.7% in June. Although the economy is running above potential, inflationary pressures remain subdued on the back of sluggish household consumption, and are mostly supported by higher energy prices. FocusEconomics panelists expect inflation to average 1.0% in 2018, which is unchanged from last month’s estimate. Next year, the panel sees inflation inching up to 1.2%. • The BoJ left its ultra-loose monetary policy program unchanged at its 14–15 June meeting, as expected. At the upcoming 30–31 July meeting, the Bank will release its quarterly economic review, in which the BoJ could decide to yet again push back when it expects to meet its inflation target. A large majority of our FocusEconomics panelists expect the BoJ’s shortterm policy rate to remain unchanged at minus 0.10% until at least the end of 2019. The yen has depreciated to a six-month low in recent days despite rising geopolitical tensions; the yen usually acts as a safe-haven asset during episodes of uncertainty. This time, however, widening interest-rate differentials with the U.S. likely spurred the weakening. On 20 July, the currency traded at 111.4 JPY per USD, a loss of 1.0% compared to the same day in June. Panelists see the yen trading at 109.5 JPY per USD at the end of 2018 and at 106.3 per USD by the end of next year.

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Charts listed below are from Mizuho Research Institute, Ltd. 

COTTON
In recent weeks, prices have fallen substantially due to trade tensions. On 6 July, the spot price was USD 79.4 cents per pound, which was down 6.9% from the same day last month. However, the price was 4.0% higher on a year-to-date basis and was up 19.4% from the same day last year. Prices dropped recently due to concerns over the impact of the 25% tariff China imposed on U.S. cotton exports effective 6 July, which will likely lower demand. China, the world’s largest consumer of cotton, strongly affects markets, and prices are unlikely move significantly going forward. Our panelists expect prices to average USD 85.9 cents per pound in Q4 2018. In Q4 2019, panelists expect prices to average USD 79.8 cents per pound. 

WOOL
Wool prices rose throughout most of June, likely on solid demand from key consumer China and tight supply. However, prices pulled back in early July as the new selling season began. On 6 July, wool traded at AUD 2,027 cents per kilogram. The print was 0.4% higher than on the same day last month and was up 15.2% on a year-to-date basis. Moreover, the price was 33.0% higher than on the same day last year. Prices are seen dipping from their elevated levels going forward, as the new season brings fresh supply to market. FocusEconomics panelists project an average price of AUD 1,675 cents per kilogram in Q4 2018. Prices are projected to ease further, to AUD 1,624 cents per kilogram, in Q4 2019.