No more speculation on a slowdown - it is finally here. Best to get it behind us and get going. Expect two mor rates cuts by year end. - CH

ING Economics: Evidence of the spreading US slowdown
The disappointing run of US data has continued with today’s retail sales numbers for September, which posted the first decline for seven months. Rather than rise 0.3% month-on-month as expected, they actually contracted 0.3% with the report showing broad-based weakness. Just five of the 13 major categories within the report experienced an increase, namely furniture, health, clothing, miscellaneous and eating/drinking. Motor vehicles/parts fell 0.9%, gasoline stations sales fell 0.7%, building materials fell 1% and department store sales fell 1.4% (-7.3% year-on-year). Stripping out the volatile components we find that the “control” group, which better reflects movements in the broader consumer spending component of GDP, was flat on the month versus expectations of a 0.3% MoM gain. With the rate of employment growth clearly slowing and the latest wage growth coming in much softer than expected, there are have been valid questions regarding how long consumer spending can continue to prop up the economy. Today’s report is not encouraging.

The case for more rate cuts:
With the major business surveys such as the ISM and National Federation of Independent Business reports seemingly in freefall and investment lead indicators pointing to contraction, we expect to see the economy to experience sub 2% growth in 4Q19. Add in weaker global growth, the strong dollar and a nagging doubt about the imminent prospects of a meaningful de-escalation of trade tensions and we see the economy expanding just 1.3% in 2020. Given this growth backdrop and the fact recent inflation indicators show signs of softening and the University of Michigan consumer inflation expectations series hit an all-time low, the Federal Reserve will be increasingly nervous about hitting its inflation target. We expect the Federal Reserve to follow up the July and September rate cuts with a further 25bp move in October and another in December.

To download the original paper visit THINK - ING Economics

Crude OilBrent crude oil prices were volatile in recent weeks, with prices hitting a nearly four-month high on 16 September before falling sharply afterwards. On 4 October, oil prices traded at USD 59.1 per barrel, which was 2.6% lower than on the same day last month. While the benchmark price for global crude oil was 31.3% lower than on the same day last year, it was up 16.9% on a year-to-date basis. Oil prices surged at the start of September, reflecting news that China and the United States would resume trade talks. The upward trend was reinforced by an alleged attack by Iran-backed Yemeni Houthis on Saudi oil facilities on 14 September. The drone attack shut down more than half of Saudi oil production, which represented the worst sudden disruption to supply in history and prompted Brent crude oil prices to record the biggest jump on record in over three decades. In the following days, oil prices receded as the possibility of a retaliatory attack against Iran by Saudi Arabia and the United States diminished and oil production gradually recovered in the Kingdom. Later in the month and in October, weak economic data among most of the world’s key economies, which could hit demand for the black gold, weighed on prices.

West Texas Intermediate (WTI) crude oil prices declined slightly in recent weeks, weighed on by weak global growth and rising inventories in the United States. WTI crude oil prices traded at USD 52.8 per barrel on 4 October, which was down 6.0% from the same day last month. While the price was down 29.0% from the same day last year, it was 17.0% higher on a year-to-date basis. WTI crude oil prices declined in recent weeks, mostly reflecting weak economic data in the United States as the impact of bold fiscal stimulus implemented in previous years started to fade and trade tensions against China began to erode business confidence. Moreover, the labor market appears to have peaked, which bodes poorly for private consumption going forward. As a result, inventories are building up and, according to EIA data for the week ending 27 September, U.S. crude supplies rose for a third week in a row, by 3.1 million barrels. Low demand and severe financial stress in the shale industry is forcing U.S. energy firms to reduce the number of oil rigs and they are now at levels not seen since May 2017. Fewer oil rigs could lead to a sizeable reduction in oil production in the United States next year.

Natural Gas
Natural gas prices tapered over the prior month on higher than-expected build-ups in storage levels due to weaker demand for electricity and cooling. On 4 October, the Henry Hub Natural Gas price was USD 2.35 per one million British thermal units (MMBtu), which was 3.7% lower than on the same day in the previous month. Moreover, the price was down 20.1% on a year-to-date basis and was 25.8% lower than on the corresponding day in 2018. Prices decreased in mid-September as storage levels jumped to the upper limit of market analysts’ forecast range for the week ending 13 September. Production levels were virtually stable but a drop in cooling demand along the U.S. East Coast and in Texas bolstered natural gas inventories. This trend continued in the second half of September as underground storage inventories increased significantly in the weeks ending 20 and 27 September. Pleasant weather conditions, which led to softer demand for natural gas, coupled with ample production levels, drove the continued build-up in storage. Prices are seen rising going forward, supported by a global shift away from coal towards gas, which is a relatively cleaner non-renewable energy. However, strong U.S. supply due to the burgeoning shale sector could temper any increase.


Coking & Thermal Coal
Coking Coal - Prices for coking coal from Australia fell through mid September, and subsequently remained at a three-year low. On 4 October, Australian coking coal traded at USD 137 per metric ton, which was down 12.3% from the same day in August. Moreover, the price was 36.1% lower on a year-to date basis and was down 35.7% from the same day last year. Excess supply and weaker European demand have weighed on prices, offsetting strong Chinese demand despite weakness in its manufacturing sector. Manufacturing PMI data showed that operating conditions remained under pressure in China through September, while industrial output expanded at the slowest pace in three years in August. Nevertheless, Chinese import growth of coking coal hit an all-time high in August, which will likely prompt the authorities to respond with stricter import rules. Prices should rise going forward on the back of demand from rapidly growing emerging markets like India. However, the deteriorating global outlook remains a risk. Our panelists expect prices to average USD 156 per metric ton in Q4 2019 and USD 162 per metric ton in Q4 2020.

Thermal Coal
Prices were volatile in recent weeks as a short-lived spike at the end of September, due to a pick-up in European demand amid fears of disruptions to Russian gas imports and uncertainty over France’s nuclear power generation outlook, but prices retreated sharply in early October as concerns dissipated. On 4 October, the commodity traded at USD 65.2 per metric ton, which was down 1.7% from the same day last month. Moreover, the price was 36.1% lower on a year-to date basis and was down 42.7% from the same day last year. China’s manufacturing sector—which accounts for the substantial portion of power consumption in the country— remained under pressure in August–September, according to manufacturing PMI data. Despite this, trade data showed strong demand for thermal coal, which is largely used for power generation. Chinese imports of thermal coal rose robustly in August and early data for September hints at the continuation of this trend, despite government efforts to reduce pollution. Therefore the Chinese government will likely ramp up its environmental efforts and tighten import restrictions, which would weigh on prices. Japanese demand, on the other hand, dropped in August amid weakness from steel producers. Compounding demand woes, the Indian government recently announced plans to reduce thermal coal imports, as India moves towards cleaner energy sources. Prices are projected to rise ahead on tight supply as large mining corporations have lost their appetite to expand thermal coal operation amid a global push towards less-polluting energy sources. However, reduced price competitiveness of the commodity and slowing global economic momentum will cap gains. The panel projects that the price of thermal coal will average USD 70.5 per metric ton in Q4 2019 and USD 69.4 per metric ton in Q4 2020.

GasoilEuropean low sulfur gasoil prices are relatively unchanged month-on-month. On 4 October, gasoil traded at USD 562 per metric ton, which was 0.7% lower than on the same day last month. The price was up 15.0% on a year-to-date basis, but was 23.0% lower than on the same day last year. Gasoil prices spiked in mid-September following the attack on Saudi oil facilities, along with prices for oil and its other derivatives, due to the possibility that this could significantly impact supply. However, gasoil prices tailed off thereafter, likely linked to concerns over the health of the global economy and easing worries over the prospects for Saudi oil production. Gasoil prices are seen losing some steam next year, despite the International Maritime Organization’s (IMO) emissions regulations on high-sulfur fuels that come into effect in 2020. The EU’s shift away from diesel vehicles is likely to continue, dampening prices. FocusEconomics panelists see prices averaging USD 586 per metric ton in Q4 2019 and USD 537 per metric ton in Q4 2020.

GasGasoline prices have risen sharply over the last month on supply issues. On 4 October, reformulated blendstock for oxygenate blending (RBOB) gasoline traded at USD 2.67 per gallon, which was up 25.9% from the same day last month. The price was 71.4% higher on a year-to-date basis and was up 13.4% from the same day last year. Gasoline prices have increased over the last month, supported by the lagged impact of the attack on Saudi oil facilities in mid-September, which temporarily boosted oil prices and thus fed through to higher gasoline prices. Moreover, supply in California has been tight in recent weeks, due to unplanned maintenance work at several refineries. This has put further upward pressure on prices even as the impact of the Saudi attack began to ease from late September. Prices will likely retreat moving forward as Californian refineries come back online and U.S. oil production increases. Developments in the U.S.-China trade dispute will remain an important price determinant. FocusEconomics panelists expect gasoline to trade at an average of USD 1.62 per gallon in Q4 2019 and USD 1.66 per gallon again in Q4 2020.

Uranium
The price of uranium rose slightly in recent weeks, trading at USD 25.7 per pound on 4 October. The price was 1.4% higher than on the same day last month. However, the price was down 10.0% on a year-to-date basis and was 6.4% lower than on the same day last year. Prices were partially supported by opposition to exploratory uranium mining in the Nallamala Forest in eastern India, which is causing problems for the mining industry there and highlights the challenge the domestic industry faces in raising uranium production. On the other hand, calls in the U.S. by Republican lawmakers to ease restrictions on uranium mining in federal lands likely had the opposite effect on prices. Growing global demand for nuclear power and lower output from Kazakhstan and Canada, the world’s leading producers, should support uranium prices in the coming months. Our panelists forecast that prices will average USD 26.5 per pound in Q4 2019 and USD 32.1 per pound in Q4 2020.

German Economic Outlook Worses October 2019 The economy was hamstrung in Q2 by the external sector: Exports contracted strongly and domestic demand was unable to cushion the downturn. Private consumption growth slowed noticeably and fixed investment contracted. Data for the third quarter, meanwhile, continues to signal diverging trends. Industrial activity remained in a tough spot amid severe weakness in the manufacturing sector. In addition, consumer sentiment averaged lower in Q3 compared to the previous quarter. On the upside, the unemployment rate hit a record low in July, while the services sector expanded robustly in July and August. Against this backdrop, the government unveiled a somewhat looser budget as the fiscal surplus is expected to narrow and announced, on 20 September, a package of stimulus measures to fight climate change; the impact of the latter on the economy should be modest, however. • Economic growth should moderate notably this year, before accelerating slightly next year on rebounding exports. External downside risks, global trade tensions and Brexit, are seen dragging on export demand and the economy at large. However, resilient domestic demand—supported by a tight labor market and loose credit conditions—should buttress economic growth. FocusEconomics Consensus Forecast panelists expect the economy to expand 0.6% in 2019 and 0.9% in 2020, which is down 0.2 percentage points from last month’s forecast.

Harmonized inflation inched down to 1.0% in August from 1.1% in July, owing to cheaper prices for clothing and footwear; accommodation; and transportation offsetting more expensive food and non-alcoholic beverages as well as education. Going forward, inflation should remain subdued on weak economic momentum. Our panelists project average inflation of 1.4% in 2019 and 1.5% in 2020, which is down 0.1 percentage points.

Economy contracts in Q2 as external sector faltersA detailed breakdown of national accounts data saw no revisions to preliminary growth figures. As such, the economy contracted 0.1% on a seasonally and calendar-adjusted quarter-on-quarter basis in Q2, contrasting the 0.4% expansion logged in the first quarter. Meanwhile, on an annual basis, the economy flatlined in Q2 (Q1: +0.8% year-on-year)—marking the first time output has not grown since Q1 2013. A downturn on the external front drove the overall contraction, as the drop in exports outweighed that of imports in the second quarter. In quarter-onquarter terms, exports of goods and services shrank 1.3% in Q2, contrasting a strong 1.8% increase in Q1. Imports of goods and services, meanwhile, fell a relatively modest 0.3% on a quarterly basis in Q2 (Q1: +0.9% quarter-onquarter). As a result, trade subtracted 0.5 percentage points from economic growth in the second quarter, swinging from a 0.5 percentage point contribution in the prior period.

Domestically, dynamics were more upbeat but remained lackluster nonetheless. Private consumption growth stumbled forwards (Q2: +0.1% qoq; Q1: +0.8 qoq), amid deteriorating consumer sentiment and an uptick in the unemployment rate. Furthermore, fixed investment contracted 0.1% quarteron-quarter in Q2 following the robust 1.6% quarter-on-quarter expansion in Q1, due to a considerable downturn in investment activity in the construction sector. That said, government consumption rose 0.5% qoq in Q2 (Q1: +0.8% qoq), which, coupled with a positive contribution from inventories, supported overall domestic demand growth in the second quarter. Looking ahead, most eyes are on the international scene: Ongoing trade conflicts, a disorderly Brexit and an economic slowdown in the Eurozone all threaten to derail the German economic engine further. On top of that, while the second-quarter result suggests that domestic economy continued to perform relatively well, the headwinds at home. As summarized by Carsten Brzeski, chief economist at ING Germany: “On the back of weak confidence indicators, the risk of another contraction of the economy in the third quarter and hence a technical recession has recently increased, not decreased. The resilience of the domestic economy against the industrial slowdown and external woes has only started to weaken since the summer. […] a further escalation of the trade conflict and global uncertainty combined with no fiscal stimulus at all, is currently probably the worst of all nightmares for the German economy.” Calls for increased fiscal stimulus are growing as the Europe’s largest economy is slowing down and faces several downside risks. On 20 September, the government unveiled a EUR 54 billion (approximately 1.5% of GDP) package of green measures for 2020-2023, targeted at fighting climate change. The package still needs to be approved by parliament and includes extra spending and tax breaks. In addition, among the measures are a carbon price and tax incentives for businesses and households to reduce their CO2 emissions. Holger Schmieding, Chief Economist at Berenberg, commentated that “I stick to my earlier estimate that, for the year 2020, the additional fiscal impulse of the two packages combined will be close to €8bn (0.2% of GDP). Unwilling to cut taxes significantly and unable to raise public investment beyond the impressive 10.6% yoy nominal growth rate reached in H1 2019, Germany continues to deliver no more than a slow-motion stimulus. After a fiscal expansion of 0.3%-0.4% of GDP in 2019, we look for an additional fiscal easing of 0.4%-0.5% per year in both 2020 and 2021. It will add up over time and support domestic demand. However, the German stimulus will not be a European let alone a global game changer.” The Central Bank expects economic activity to increase 0.6% in 2019 and 1.6% 2020. FocusEconomics Consensus Forecast panelists foresee economic growth of 0.6%, which is down 0.1 percentage points from last month’s forecast. For 2020, however, the panel expects GDP growth to accelerate to 0.9%, down 0.2 percentage points from last month.

Business confidence slumps to near seven-year low in August, raising concerns of recession
Business sentiment among German firms sank to a near seven-year low in August, with the Ifo business climate index falling to 94.3 points from a revised 95.8 in July (previously reported: 95.7). August’s result marked the fifth consecutive month of tumbling confidence and reflected deepening gloom over the German economy. “There are ever more indications of a recession in Germany. […] Not a single ray of light was to be seen in any of Germany’s key industries”, noted Clemens Fuest, president of the Ifo Institute. August’s result reflected a broad-based deterioration. The all-important manufacturing sector was increasingly pessimistic over the current situation and the expected climate in the months ahead, with confidence hovering at the lowest levels since 2009. Moreover, overall sentiment within the trade sector slipped into negative territory, while confidence in the services sector fell sharply in August—chiefly due to a less favorable assessment of the current climate—although remained positive nonetheless. Similarly, despite falling mildly due to a less positive assessment of the current situation, overall sentiment in the construction sector remained firmly in positive territory.

All in all, Eurozone’s largest economy is suffering from the effects of rising external headwinds, chiefly due to its significant exposure to escalating global trade conflicts and Brexit-related uncertainty. The downturn in the German manufacturing sector appears to be spreading to the wider economy, with domestic demand, which has been solid to date, seemingly losing momentum, and thus raising calls for government stimulus. Looking ahead, the chief economist of ING Germany, Carsten Brzeski, noted that: “The German manufacturing sector still seems to be in free fall. At least in the short run, there is very little hope for a rebound. […] the manufacturing downturn and never-ending external woes have started to bruise the domestic economy. […] The more and harder the domestic economy will be hit by the current slowdown, the higher the likelihood of a significant fiscal package”


From Focus Economic, Major Economies Economic Outlook, October 2019

Turmoils is in the air and October markets tend to be wobbly. Hold tight! - Chaganomics 

EU Area
Growth shifted into a lower gear in the second quarter. An adverse external environment caused exports to flatline, while household spending lost momentum amid downbeat confidence and diminishing returns to job gains. Data for Q3 suggests that the economy remains stuck in a soft patch and continues to be defined by divergent dynamics in the export-oriented manufacturing sector and the services sector. Industrial production recorded its fourth drop in five months in July and the manufacturing PMI remained in contractionary territory in August, underscoring the sector’s persistent weakness. Conversely, the services PMI rose further into expansionary territory in the same month. Amid soft dynamics, the ECB unveiled a broad stimulus package in September to kick-start activity. However, given already ultra-accommodative conditions, it appears unlikely that it will notably shore up the outlook. Consequently, ECB President Mario Draghi also called on governments with fiscal space to unleash stimulus and some officials are starting to respond.

Headwinds from slowing global growth, trade war uncertainties and issues in the manufacturing sector are seen dragging growth to an over five-year low in 2019. Next year, momentum is expected to be broadly unchanged. Slowing activity in China is expected to weigh on exports, while investment is seen staying soft. Risks linger from trade tensions, a no deal-Brexit and politics. Growth is seen at 1.1% in 2019 and 1.1% again in 2020, which is down 0.1 percentage points from last month’s forecast.

The euro hovered around the lowest levels seen since mid-2017 in September. On 19 September, the currency ended the day at USD 1.11 per EUR, a 0.4% depreciation from the same day in August. Waning economic momentum, muted inflation, ultra-accommodative monetary policy and trade uncertainties have kept the euro weak and these factors are seen lingering ahead. Our panel sees the euro ending 2019 at USD 1.12 per EUR and 2020 at USD 1.16 per EUR.


Growth Sinks
A third estimate confirmed that the Eurozone economy lost traction in the second quarter, suppressed by a weaker performance from both the domestic and external sides of the economy. According to Eurostat, GDP increased a seasonally-adjusted 0.2% in Q2 from the previous quarter, half that of Q1’s 0.4% expansion. Q2’s reading was unchanged from the two flash estimates and marks one of the slowest readings in the past four years. Household spending growth decelerated to 0.2% over the previous quarter in Q2, from Q1’s 0.4% and driving the slowdown in the domestic economy. Diminishing gains in the labor market and lower confidence likely contributed to the slowdown. On a brighter note, fixed investment growth accelerated from 0.2% in Q1 to 0.5% in Q; government consumption, however, slid from 0.4% growth to 0.3%. The external sector subtracted marginally from growth in the quarter as exports growth stalled. Exports growth flatlined in Q2, amid a subdued global economy and overall adverse external environment (Q1: +0.9% quarter-onquarter). Import growth also slowed, coming in at 0.2% in Q2, from 0.4% in Q1. Compared with the same quarter of 2018, seasonally-adjusted GDP rose 1.2% in Q2, slightly below Q1’s 1.3%. The ECB sees the Eurozone economy growing 1.1% in 2019 and 1.2% in 2020. FocusEconomics Consensus Forecast panelists expect the Euro area economy to expand 1.1% in 2019, which is unchanged from last month’s forecast. For 2020, panelists also expect the economy to grow 1.1%, which is down 0.1 percentage points from the previous month’s estimate.

Composite PMILeading indicators point to slightly improved dynamics in August in the Euro area’s economy. The Flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, came in at 51.9, up from July’s 51.5. That said, the reading still marked one of the worst results in the past six years. The PMI lies just above the 50-point threshold that distinguishes expanding business activity in the Eurozone. The details of the release revealed a continued two-speed Eurozone economy. The manufacturing PMI came in at 47.0 in August, up from July’s 46.5 but still signaling contractionary conditions in the sector. Manufacturing output fell for the seven consecutive month and firms shed jobs once again. In contrast, the Services PMI Activity index edged further into expansionary territory in August, coming in at 53.4 (July: 53.2). On a sour note, confidence dropped sharply in August across both sectors. Regarding the Eurozone’s two largest economies, both France and Germany’s composite PMIs edged up in August. However, while France’s manufacturing PMI returned to growth territory, Germany’s continued to point to contractionary conditions. Elsewhere in the region, activity was broadly stable. FocusEconomics Consensus Forecast panelists expect fixed investment to grow 2.6% in 2019, which is unchanged from last month’s forecast. For 2020, panelists see fixed investment increasing 1.6%, which is down 0.2 percentage points from last month’s projection.

Industrial Output continues To DragIndustrial output contracted once again in July, recording the fourth drop in five months. Industrial production fell a seasonally-adjusted 0.4% over the previous month, a softer drop than June’s revised 1.4% decrease (previously reported: -1.6% month-on-month). June’s result had marked the worst reading since September 2018. July’s result undershot market expectations of a mild 0.1% fall. Energy, intermediate goods and non-durable consumer goods output all contracted in July, driving the fall. However, rebounds in capital goods production and durable consumer goods output softened headline figure.

Monetary Policy Changing
The European Central Bank (ECB) unveiled a broad package of stimulus at its meeting on 12 September, in order to revive growth and inflation in the downbeat Eurozone economy. The ECB decided to cut the deposit rate by 10 basis points deeper into negative territory, announced it was restarting quantitative easing, opened up its forward guidance, along with other changes to targeted longer-term refinancing operations (TLTRO III) and reserve remuneration. At large, the measures represented slightly more stimulus than market analysts had expected. Accordingly, the deposit rate now sits at a new record-low of minus 0.50%, while the other main interest rates are unchanged: the refinancing rate at 0.00% and the marginal lending rate at 0.25%. The Bank’s asset purchase programme (APP) will be restarted on 1 November, at a pace of EUR 20 billion per month, slightly below market analysts’ expectations. However, notably, the APP was left open-ended, with President Mario Draghi stating in the accompanying press conference that it will run “for as long as necessary to reinforce the accommodative impact of our policy rates”. Adding to the accommodative measures, the Bank stated it will reprice its TLTRO III’s and include an incentive for banks to increase lending. Moreover, the Bank will introduce a two-tier system for reserve remuneration, which should further support monetary policy transmission and reduce pressure on banks’ lending margins. Soft economic data, persistently low inflation, modest inflation expectations and ample downside risks to the outlook drove the ECB to unleash the shot of stimulus to shore up prospects. While, all-in-all, the measures should loosen monetary conditions and boost activity, it remains to be seen, however, if it will be enough to improve the outlook. A weak industrial sector, a less favorable global backdrop and geopolitical concerns have hampered growth in recent quarters and are seen continuing to plague the outlook ahead.

"This is serious" said the email subject from the economist.

Official Release from the ISM:
New Orders, Production, and Employment Contracting Supplier Deliveries Slowing at a Slower Rate; Backlog Contracting Raw Materials Inventories Contracting; Customers’ Inventories Too Low Prices Decreasing; Exports and Imports Contracting.

Economic activity in the manufacturing sector contracted in September, and the overall economy grew for the 125th consecutive month.

From Goldman Sachs:
The ISM manufacturing index fell against expectations for a rebound in September. The composition of the report was weak, as the key components remained or fell further into contractionary territory, and the new export orders index fell to its lowest level since March 2009. Construction spending rose by less than expected in August and was revised down in prior months. We lowered our Q3 GDP tracking estimate by one tenth to +2.0% (qoq ar). Our September Current Activity Indicator remained unchanged at 1.2% (vs. 1.5% in August).

In what seems to be a fantastic example of regulatory overreach and with added extra levels of industrial inability, California has single-handedly made the whole situation surrounding gig work and freelance work one massive, unthinkable disaster. The disruptors that have chosen to build companies in Silicon Valley have been handled a red card checking them for taxes and regulation. While this very well may end much of the rabid "regulatory innovation" systems that go on in NorCal, it will not end the platform of freelancing across the US, just in California. Dependent on Nevada law, companies could relocate and still hire SF area employees, in some capacity. Granted, that sort of activity now would be a risk as new law allows the state to file suit against corporations for breaking such laws. Overreach in our book. - Chaganomics 

From the LA Times:

Groundbreaking new California legislation impeding many companies from claiming workers are independent contractors takes effect in 2020. California businesses will soon face new limits in their use of independent contractors under a closely watched proposal signed into law by Gov. Gavin Newsom on Wednesday, a decision praised by organized labor but unlikely to quell a growing debate over the rules and nature of work in the 21st century economy (link).   

From the San Francisco Chronicle:

“The law also gives cities in the state the right to sue companies for violating the law, where previously I they could not. The California Attorney General's office and local prosecutors can also sue companies

(link).

From Focus Economics:
Hong Kong's Outlook Worsens


Ongoing protests contributed to the softest expansion in nearly a decade in Q2 and data for Q3 suggests activity remains dismal. Retail sales plunged in July, while the PMI continued declining in July-August. Moreover, public unrest, trade tensions and weaker domestic growth are weighing on the all-important Hong Kong real estate market, which bodes poorly for investment and business confidence. That said, July’s pick up in domestic credit growth should be buffering domestic demand. In other news, Fitch Ratings downgraded Hong Kong’s credit rating one notch from AA+ to AA with a negative outlook on 6 September, citing turmoil with China denting the island’s reputation for stability and ease of doing business. In politics, Carrie Lam, Hong Kong’s chief executive, announced the withdrawal of the extradition bill in early September, however, the move did little to calm protests.

Hong Kong’s outlook continues to moderate amid civil unrest, escalating global trade tensions and deteriorating prospects for China. Turning to 2020, growth will likely gain momentum on stronger household spending and an expected rebound in fixed investment, although the outlook will partly hinge on current political developments. Our panel expects growth of 0.9% in 2019. Moving to 2020, the panel expects the economy to grow 1.8%, which is down 0.2 percentage points from last month’s forecast.

The IHS Markit Purchasing Managers’ Index (PMI), plunged from 43.8 in July to 40.8 in August, marking the lowest reading since February 2009 amid mass protests and elevated global trade tensions.

The decline was mainly driven by sharper falls in production and new orders. Record-low demand from mainland China, mainly the result of a weaker yuan, the U.S.-China trade war and protests, was behind the steep plummet in new order intakes. Moreover, business sentiment deteriorated sharply. On the price front, both input and output prices were reduced in August. Commenting on August’s print, Bernard Aw, an economist at IHS Markit, noted: “The latest PMI data reveal a Hong Kong economy flirting with recession in the third quarter as business activity is increasingly aggravated by protest-related paralysis. The survey is now broadly indicative of the economy contracting at an annual rate of around 4.0-4.5%.”

From Goldman Sachs:
The S&P/Case-Shiller 20-city home price index remained flat in July (mom sa), below consensus expectations for a small increase. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-on-year reading, which decelerated to +2.0% from +2.2% in June and the slowest pace since August 2012. Prices rose in 17 of 20 cities (mom sa), with San Diego (+0.6%), Seattle (+0.5%), and Charlotte (+0.5%) showing the largest month-on-month increases, and New York (-0.4%), Los Angeles (-0.4%), and Washington D.C. (-0.1%) showing the largest month-on-month decreases.

The FHFA house price index increased by 0.38% in July (mom sa), and the year-over-year rate rose by 0.1pp to +5.0%. Home prices rose in all 9 regions in July, with the Mountain (+1.2%), New England (+0.8%), and Pacific (+0.5%) regions showing the largest month-on-month increases.

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From Marketwatch August 27, 2019:
Home prices are rising at the slowest pace since 2012, Case-Shiller finds: just 2.1%

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From Chad Hagan:
Let's chat about this for a moment. It was my impression last fall we were entering a recession. Irregardless, there are grand signals of a recession popping up in the American economy left and right.  Mortgage underwriting and housing is a very fragmented in the US , so what is felt by some is not felt by all. However, it is important to note that housing coast to coast is experiences some set back, and it is largely a buyers market.

Here is a number of news reports on the recent news. 

"Thomas Cook, a 178-year-old British travel company and airline, declared bankruptcy early Monday morning, suspending operations and leaving hundreds of thousands of tourists stranded around the world. The travel company operates its own airline, with a fleet of nearly 50 medium- and long-range jets, and owns several smaller airlines and subsidiaries, including the German carrier Condor. Thomas Cook still had several flights in the air as of Sunday night but was expected to cease operations once they landed at their destinations." - Insider

"The UK's Civil Aviation Authority (CAA) is co-ordinating the repatriation, the biggest in peacetime, after the tour operator "ceased trading with immediate effect". Thomas Cook's administration puts 22,000 jobs at risk worldwide, including 9,000 in the UK. Boss Peter Fankhauser said the collapse was a "matter of profound regret". Thomas Cook, whose roots go back to 1841, went bust after last-ditch talks to raise fresh funding failed. The BBC understands the government was asked to fund a bailout of £250m, which was denied." - BBC

Bosses took “serious” payouts from Thomas Cook - DailyMail 

“The science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” - Lord Lionel Robbins (1935)

The principles of supply and demand are foundation of economics. In this we find the product (supply) that the consumer wishes to buy (demand) and in that we find price discovery and many other dynamics inside supply and demand like premiums, discounts and inventory. - Chad Hagan

"Market Clearing"
The price and quantity that equates the quantity demanded and quantity supplied; equates the demand price and supply price; and achieves market equilibrium. In other words, the market is “cleared” of shortages and surpluses. - AmosWeb

Adapted from Chad Hagan's presentation at Skytop Strategies Impact Investment Conference; Boston, Massachusetts, September 17, 2019

Electric Cars: The Impact of Changing Societal Values on the Auto Industry

The impact of changing societal values on the auto industry is one we are all well aware of and I will attempt to point out a few bits of insight I see in the market from my research.

The recent attacks on multiple Saudi Arabian petroleum processing facilities has shaken up what is roughly 5% of global supply. 

While there are long term oil reserves, they are largely strategic, and the recent unlocking of US reserves helps illuminate how dependent we are on global oil.

Our daily burn rate of oil is staggering around 90 - 100 million barrels per day. 

“The total worldwide oil consumption was 93 million barrels per day (bbl/day) 2015” - International Energy Agency (IEA)

While changing values in society have created a market for EV’s - this has come after a period of deep neglect. 

One of the central issues with automobiles is their dependency on oil and the carbon footprint from such heavy industry.

Electric vehicles are better but the manufacturing of electric automobiles is far from carbon free. From plastics to textiles and electronics; not to mention the constant roll out of new models, ad campaigns and marketing spends - there is a massive amount of cultural and environmental waste. 

The US is the second largest polluter behind China, and China has been active a third the amount of time. If this were thirty years ago, the US would surely be the largest. 

I had a great talk about this in London last week, and sadly if you add in California with the fires and earthquakes, the US simply tops the charts. Despite the green revolution in California, one must admit the state creates a staggering amount of carbon organically, let alone from their mega cities.

Automobile manufacturing is a form of great pride to many families, nations and empires. FIAT heir Gianni Agnelli said it best in the 1970’s when he spoke about building the cars first, giving cars to the consumer and then watching policy follow suit by building roads, and entrepreneurs developing destinations and so forth and so forth. Think of Citronen, Porsche, Ford, Fiat, Delorean, and Tesla - but no matter the destination, the United States did it best.

The US defined the automobile way of life - numerous regions had deep car cultures with subsets and segments like drag racing and surfing; the family station wagon or perhaps a Jeep for camping and hunting. Cars in America guaranteed part of the American dream, they even promised teenage independence. Even Hollywood stepped in. Hollywood helped make the idea of a road trip common place. At a broader level an extended domestic rail system for the commuter and traveler in the States never happened. 

We exported that way of life. Look only to South Korea to confirm the example of heavy industry American style. The South Koreans have in turn exported our model back to us in the form of foreign direct investment and employment base. They are intertwined in the southeast, specifically in Georgia and Alabama where they have holdings which provides thousands of local high paying jobs 

A bit of history:

It wasn’t always this easy. For some time the horse and carriage ruled the road, especially here in Boston. When automobiles first arrived, they came in the promise of a horseless carriage. One had to compete with the horse and the horse drawn carriage so a motorized carriage was the centralized promise. 

The first promise was delivered in the 1700s. The year was 1769. The 1st steam-powered auto, able to carry humans is built by Nicolas-Joseph Cugnot. It was basically a “mechanical land-vehicle” - the vehicle was huge, and only went 2 miles an hour. Still, it sold reasonably well. In 1771 an incident occurred where the driver of one of Cugnot's land-vehicles lost control and ran into a wall. This mishap is often credited as being the world's first automobile accident. 

The market slowly moved away from steam and into combustion. 

In 1808, François Isaac de Rivaz designed the first car powered by an internal combustion engine fueled by hydrogen. 

In 1870 Siegfried Marcus built the gas combustion engine;

In 1885 Karl Benz opens shop;

In 1899 FIAT is formed in Italy;

In 1899 The Detroit Automobile Co. was founded, I believe Henry Ford’s first commercial automobile company;

Electric vehicles on the other hand were largely neglected but they had a legitimate presence. EV’s are not from last century, but as far back as the 1800s. In the 1830s Scottish inventor Robert Anderson invented the first carriage powered by non-rechargeable primary cells - so this would be the first electric carriage. Electric vehicles were produced commercially in the United States until the Model T, powered on gasoline, came to dominate. Gasoline won out for a number of reasons, including it being readily available and capable of fueling longer ranges. 

In the United States it wasn't until the 1960s and 70s that consumers began requesting EV’s in some capacity.  This was largely after the oil crisis in the 1973 oil crisis (October 1973 – March 1974); 

I guess we can claim that between 1975 and 1990 we were back in the throw of big oil and the mentioning of EV’s was just novelty.  

However, in 1990 California passed a Zero Emission Vehicle (ZEV) Mandate. The program was landmark and proved to be highly influential. 

Since 2010, more than 500,000 zero-emission vehicles and plug-in hybrids have been registered in California. I imagine a great deal more since that is a figure from a decade ago. 

The ZEV mandate likely nudged GM to produce their EV, entitled the EV1, it was produced from 1996 - 1999 and sold through their Saturn subsidiary. At 100% electric and the range was about 100 miles. 

What is clear is that electricity - or alternative fuels from non-fossil sources - could have been used to power autos - instead of gasoline - over 100 hundred years ago. Perhaps electric autos lacked the technology and power to fuel transportation initially, but they certainly fell behind by attrition, negligence and devotion to the oil barons. 

In the US from 1920 - 1970 the market and powers that be turned their backs on the idea of EV’s in the marketplace. 

This has caused other movements in the energy world: wind, hydro, nuclear and also clean powered vehicles for all types of transportation. Clearly, apart from batteries, Eventually we will see 100% clean fuel, or at least renewable fuels, and this will allow airplane and container ships to travel around the world without the associate pollutants - to some regard. 

It is estimated in London that emissions permits will be on of the most traded securities in the next ten years. However, it is still hard to add up the market share for forecasting at my office.

We have a lot of questions about the free market mechanics behind permits and trading and well as how it all adds up. 

The move away from carbon comes after a minimum fifty year run for carbon producers who effectively had a monopoly from gasoline. Where are we now in the US with the major automobile manufacturers rolling back sedans and coupes to center on heavy trucks and SUVs? How will those be efficient powered to be effective in the market place when a bigger emphasis is being put on size and that regards added weight? 

From a family office investment perspective, we kicked the tires on a deal in 2018 - it was a roll up consisting of numerous dealerships - and from what we could see, the sales, services and supply chain could easily support the mass introduction of EV, so long as EV charging times continue to develop, and maintenance expands.  

EV’s will eclipse the internal combustion engine—one day. Before this happens, in order for it to happen we need a tighter framework of regulation and better incentives for innovation - much like what I see in London and Europe. 

Numbers & Markets:

Despite the intense fever and furor for electric vehicles, they are quite rare. 

At this moment EV’s account for a minuscule percentage of annual auto sales. 

Market leaders at this moment are Tesla in the US and BYD in China. A decent product, Tesla has attracted intense emotional response, fandom and devotion; at the same time foes and enemies. However, because of Tesla electric vehicles have entered the consumer market place indefinity. 

BYD Auto, short for Build Your Dreams, was established in 2003 and markets the brand in China. It specializes in electric vehicles and has a joint venture with Daimler. 

As far as market share, Norway leads (46% in 2018), followed by Iceland (17%) and Sweden (8%).

Estimated 2018 EV sales:

China (1M+) 

Europe (385K) 

United States (361K) 

These three regions accounted for 90% of all sales in 2018. 

Peak passenger vehicle oil demand is forecasted for 2028; commercial vehicle peak oil demand peaks in 2035. By 2040 over 50% of all passenger vehicle sales will be electric vehicles, with the commercial fleet and e-buses following - Bloomberg NEF.

Note: Facts and figures came from Bloomberg NEF, EIA & Zermatt Research.

While the spike in repo and other short-term rates can be attributed to a confluence of events that resulted in a large swing in the US Treasury’s cash balances, the extent of the move suggests either that reserves may be closer to their “terminal level” than previously thought, and/or that intermediation is currently constrained. The stress could persist in the near term without Fed intervention, but is not a “systemic risk” issue in our view.

Our projections for reserve balances and recent price action suggest that reserve injection on the order of $100-$150bn may be necessary over the next few weeks to keep the policy rate within the target range. While we expect a pick-up in reserve balances in late October/early November, this pick-up is likely to prove temporary. Therefore, rather than engage in temporary OMOs over long periods, the Fed may choose to expand its balance sheet by an amount offsetting non-reserve liability growth as early as October, when it announces its next round of Treasury reinvestment purchases.

- Goldman Sachs Research

Uncertainty over Saudi oil – ICE Brent prices settled yesterday with a gain of around 15%, the largest one-day price increase in at least two decades, after Saudi Arabia reported a supply loss of nearly 5.7MMbbls/d. Saudi Aramco is still reported to be assessing the damage on the plants; however, a quick restoration of full capacity can probably be ruled out. The latest market reports suggest that the company may restore some of the capacity quickly (within a matter of days) but a significant part of the impacted capacity could take weeks or even months to repair and restore completely. Saudi Arabia said that it will use existing inventories to fill the supply gap; however, as we discussed earlier, inventories have already been depleted this year due to output cuts and the supply gap could be overwhelming if the current output disruptions are prolonged.

- ING Economics 

I am writing this post after a return from London, where you have a great many of smokers and smoking culture. There is also a lot of vaping and vape shops. The EU is in favor of a broader distribution of vaping devices but they take a common sense approach to regulation. Nicotine, for instance, and nicotine amounts per milligram are regulated. A question we must ask ourselves in America is: "is vaping better than combustible cigarettes and should it be regulated". Off the cuff the answer seems obvious. However, from a medical standpoint:

"E-cigarettes heat nicotine (extracted from tobacco), flavorings and other chemicals to create a water vapor that you inhale. Regular tobacco cigarettes contain 7,000 chemicals, many of which are toxic. While we don’t know exactly what chemicals are in e-cigarettes, Blaha says “there’s almost no doubt that they expose you to fewer toxic chemicals than traditional cigarettes. - Johns Hopkins”

On this, vaping is bad for you. Smoking cigs is bad for you. Vaping is a healthier option but it still bad for you.  Also, vaping is still addictive. Let us look at cigars and cigarettes. Cigars are not terribly bad for you in moderation, but if you smoke them daily and if you inhale them, they are seriously bad for you.

Switching from cigarette smoking to cigar smoking can be particularly harmful because you might inhale cigar smoke the way you inhaled cigarette smoke. The more cigars you smoke and the deeper you inhale, the greater the risks. Although the health effects of occasional cigar smoking aren't as clear, the only safe level of cigar smoking is none at all. Instead of trying to choose between cigarette smoking and cigar smoking, try to quit tobacco entirely. There is no safe form of tobacco. J. Taylor Hays, M.D.

What can I say about this US? Well, the United States typically believes that the state level market dictates issues that then merit federal intervention. They are very hands off. In the world we live in today there is a loophole which allows for bad actors and greedy players to flood the market with their quasi-safe or not-safe-at-all product and it goes straight into the population where they are treated like guinea pigs in a consumer product experiment. At an extreme example is Heroin, OxyContin and Fentanyl. As for marijuana and THC, the absolute lack of regulation has put many buyers at the risk of the ethics of the manufacturers. Essentially, drug dealers who are squeezing out products and adding in extenders, or "cutting the drug" with whatever they deem appropriate, almost never attached to a scientific process.

The filled cartridges are not by definition a health risk. However, Mr. Downs, along with executives from legal THC companies and health officials, say that the illicit operations are using a tactic common to other illegal drug operations: cutting their product with other substances, including some that can be dangerous. - NYT

The US needs to set standards for nicotine, CBD, THC and other marketable smokeable vape cartridges and oils. Additionally, whatever base liquid is used for nicotine (as we all know what is the base for CBD/ THC)  we need strict regulations so as not to have a continued public health crisis. - Chad


Links & Sources:

1) Global Tobacco Laws:
https://www.globaltobaccocontrol.org/e-cigarette/country-laws/view

2) Johns Hopkins 5 Vaping Facts You Need To Know:
https://www.hopkinsmedicine.org/health/wellness-and-prevention/5-truths-you-need-to-know-about-vaping

3) The Walter White of Vape Cartridges:
https://www.nytimes.com/2019/09/15/health/vaping-thc-wisconsin.html?action=click&module=MoreInSection&pgtype=Article&region=Footer&contentCollection=Health





+ Disclosure:
I am an investor in companies that manufacturer smoking devices and import Cuban tobacco.

What happened? Early Saturday saw the use of drones to attack crude oil processing plants in Saudi Arabia, with the 7MMbbls/d Abqaiq plant hit, whilst the 1.45MMbbls/d Khurais oilfield was also hit. The Saudi energy ministry has said as a result of the attacks, 5.7MMbbls/d of crude oil output has been affected, along with 2bcf/d of natural gas production. The Iranian-backed Houthis in Yemen have claimed responsibility for the attack, and follows the attacks we saw on Saudi oil infrastructure earlier this summer. However, this time around it has been significantly more disruptive, with 58% of Saudi oil output affected. Fortunately, reports suggest that there were no casualties with this latest incident.

What now for the oil market? Clearly these latest developments are bullish for the oil market. In recent months, market participants have failed to price in a risk premium around Middle East tensions, despite a number of incidents over the summer. Instead, the market has been focused on trade developments and the broader macro environment. However now with almost 20% of OPEC production taken offline over the weekend, this is likely to change. How bullish will really depend on how long the outage lasts. There have been reports that production could return to normal in a matter of days, which if the case means the upside would reflect more of a risk premium, rather than a significant tightening in the market. However, we believe any indication or confirmation from the Saudis of a prolonged outage, would see Brent trading back above US$70/bbl in the near term. It is not just the flat price that is poised to move higher, nearby time spreads are also likely to move deeper into backwardation, reflecting the tightening in the prompt physical market. OPEC+ production cuts in recent months have already been supportive for spreads, and this latest development will likely only give them a further boost higher.  However looking beyond the supply lost from this incident, the attack does highlight the vulnerability of the Saudi oil infrastructure. Whilst many have been worried about disruptions to oil flows through the Strait of Hormuz, this latest incident does suggest that such attacks can prove even more disruptive. Furthermore, is the uncertainty of how the Saudis will respond to the attack, but what is certain is that the market needs to price in a risk premium for the simmering tension in the region. Finally, the exit of John Bolton as the National Security Advisor to President Trump suggested that we could see the US relax its stance with Iran when it comes to sanctions. However, this latest incident means that it is an unlikely scenario now. Following the attack, US Secretary of State Mike Pompeo was not shy to put the blame on Iran.

Can the market manage with this lost supply? The Saudis have said that they will use inventories to meet exports. If we see a disruption of only several days, then the market should be able to absorb these losses fairly easily. However, if outages start to run into weeks, this would leave the market increasingly tight. Looking at the Joint Organisations Data Initiative data, Saudi crude oil inventories have been in steady decline since 2015, and this is no surprise with ongoing production cuts. At the end of June, crude oil inventories stood at almost 188MMbbls - down from around 205MMbbls at the end of 2018. This is equivalent to around 26 days of crude oil exports. Current levels are likely to be even lower, with the continued deep production cuts that we see from Saudi Arabia. The US Department of Energy has also said that it would act if needed, by turning to its strategic petroleum reserves, which stand at 645MMbbls. The International Energy Agency also said that is was following current developments closely, but for now believes that there are adequate commercial stocks to absorb production losses.  Finally, a prolonged outage could mean that OPEC+ relaxes production cuts. However whilst this may help, it would not be enough to make up for the full Saudi shortfall. There are only a handful of OPEC+ members that can bring a meaningful amount of output onto the market. Between Russia, UAE, Kuwait and Iraq, we could see them bring in the region of 800-900Mbbls/d of production online, which is significantly less than the outage in Saudi. The issue for the market is that more than 70% of OPEC spare capacity sits in Saudi Arabia. Link to PDF of article from ING Economics

Friday the 13th Consumer News

USA: Retail Sales Rise Further in August; Import Prices Decline in August. Headline retail sales increased by more than expected in August. Core retail sales increased by 0.3%, in line with consensus expectations, but revisions to prior months were somewhat negative. Import prices declined in August, in line with consensus expectations, and non-petroleum import prices were flat for the second consecutive month. Today’s import price data had a modest downward impact on our August core PCE estimates, and we lowered our month-over month and year-over-year forecasts by 0.01pp to +0.14% and 0.02pp to +1.70%, respectively. Today’s retail sales report suggested upside risk to our GDP tracking estimates, which we will finalize after the mid-morning data. 

Research from GS

In my opinion one would have to be blinded by greed to even consider such. HKEX already owns LME (metals exchange), no point in merging LSEG, no point at all. So you really think it would be in safe hands? That said, there is a silver lining - the market isn’t keen to the idea. Let’s keep it that way. 

- Chad Hagan, London (September 12, 2019)

—

Serious doubts about Hong Kong’s £32 billion offer for the London Stock Exchange grew on Thursday just one day after the daring bid emerged.  Investors say the deal could fail over price, regulatory and political concerns even in the unlikely event that the LSE’s management backed the offer.

The first opportunity investors in Hong Kong Exchanges and Clearing (HKEX) had to react to the deal saw the shares fall more than 3%, taking $1 billion off the value of the company.  With growing talk in the City that HKEX is in effect controlled by the Chinese, the LSE is widely expected to formally reject the deal.  LSE shares fell again today, off 16p at 7190p, far below the 8361p at which the offer was valued yesterday. That suggests shareholders think it highly unlikely the bid will succeed.

Full story at the Evening Standard 

Full story at the Evening Standard

“Italian industrial production fell by 0.7% mom in July, compared with expectations of a smaller decline. The weakness was driven by investment goods. Growth in industrial production in June was also revised down.”

- Goldman Sachs Research

OVERVIEW
The economy likely continued to contract in the second quarter. Private consumption should have been tepid, as suggested by declining retail sales throughout the period, amid still-high inflation and a rising unemployment rate—which reached an over-decade high in May. Moreover, the industrial sector was subdued, as evidenced by falling industrial output in April–June. More positively, the current account deficit narrowed markedly year-on-year, although this was largely due to weak domestic demand. Turning to the third quarter, signs are scarcely more encouraging. In July, the manufacturing PMI was deep in contractionary territory, while vehicle sales plummeted as government tax incentives expired. That said, the Central Bank’s rate cut in July should be providing some impetus to activity, while tourist arrivals were up 17% year-on-year in the same month, supported by the weak lira.

REAL SECTOR
Industrial output declines further in June Turkish industrial production fell 3.9% year-on-year in June, down from May’s 1.3% fall. The drop in production was driven by faltering manufacturing output, while the electricity, gas and steam, and mining and quarrying sectors rose. Sequential data was also downbeat; industrial output fell 3.7% over the prior month in June on a seasonally- and calendar-adjusted basis, contrasting May’s 1.2% increase (previously reported: +1.3% quarter-on-quarter seasonally adjusted).

OUTLOOK
Sentiment among Turkish consumers improved slightly in August after dropping to a near-record low in July, with the consumer confidence index rising to 58.3 in August from 56.5. As a result, the index inched closer to the neutral 100-point mark, but remained deeply entrenched in pessimistic territory. August’s uptick was due to consumers’ less pessimistic assessment of the economic outlook and their financial situation. Moreover, households held Industrial Production | variation in % Note: Year-on-year and annual average variation of industrial production index in %. Source: Turkish Statistical Institute (TurkStat) and FocusEconomics calculations. -12 -6 0 6 12 18 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Year-on-year Annual average % Purchasing Managers’ Index Note: Istanbul Chamber of Industry (ICI) Purchasing Managers’ Index (PMI). A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction. Source: IHS Markit and ICI. 40 45 50 55 60 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Consumer Confidence Index Note: Consumer Confidence Index. Values above 100 indicate an optimistic outlook while values below 100 indicate a pessimistic outlook. Source: Turkish Statistical Institute (TurkStat). 40 60 80 100 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 FOCUSECONOMICS Turkey FocusEconomics Consensus Forecast | 90 September 2019 less negative expectations for the labor market in August and their probability of saving improved. FocusEconomics Consensus Forecast panelists see private consumption declining 3.4% in 2019, which is down 0.1 percentage points from last month’s forecast, before expanding 2.5% in 2020.