Independent Strategy

Macro Matters

A deeper look at data

Independent Strategy Blog: Macro Matters

Macro Matters is the Independent Strategy blog area.  We aim to try and offer a glimpse into our analytical process by making available some of the files and data we use to analyse macro developments and financial markets.  It also includes some supplemental weekly technical analysis, which helps us measure shifts in sentiment and bigger changes in trends, complementing the work we do on the macro side.  If you’d like to discuss anything in more detail, please reach out.

US

18th September, 2019 » , US Money Market Volatility

The spike in repo rates (Figure 1) in the US has drawn quite a bit of attention, sparking some concerns that this might be a sign of some kind of systemic risk.  But the reality is somewhat more balanced, with the rise reflecting a number of specific factors and probably a rather sluggish response from the NY Fed, which conducts the open market operations of the Federal Reserve system, rather than any deeper seated problems.

UK

18th September, 2019 » UK August Inflation Report

Another positive outcome with price pressure easing across the board, both at a consumer price level and on the producer side.  Sharp deceleration in core CPI particularly welcome, particularly when taken alongside rising wage growth which will help real incomes catch up with the losses sustained following the inflation surge that followed the Brexit referendum.

US

17th September, 2019 » US August Industrial Production

Better than expected bounce in August industrial production, although it doesn’t look so flattering in y/y terms with the growth rate (if you can call it that) slowing further to just 0.36%. And that includes a +0.68 contribution from energy.  Manufacturing in other words is contracting, registering a drop of -0.44% y/y.

US

13th September, 2019 » US August Retail Sales

Solid August retail sales report which build on the improvement we saw during July.  Overall retail sales growth has moved up to 4.1% y/y while control group growth hit 5.3% y/y.  Much of the monthly lift was due to higher auto sales, stripping that out and the recent growth rate looks more modest.  But overall this is not a sign of false confidence with an increase in big ticket expenditure a positive demand sign.

China

11th September, 2019 » China August Money & Credit

Chinese August money supply and credit data was in line with market expectations.  Money supply growth remains stable.  Even if M2 was fractionally above estimates the broad money growth rate has been basically static for the past eighteen months.  On the credit side loan growth picked up a little from last month, but overall not that different to what we saw this time last year.

UK

9th September, 2019 » UK July GDP, Production, Trade

Better monthly GDP print which kept y/y growth rate at 1.0%.  But this is still the lowest level (bar last month) since Aug 2013.  Activity expanded across all sectors m/m.  But looks more like respite than turnaround with Brexit uncertainty continuing to drag on sentiment and activity.  Surveys continue to reflect this uncertainty amid weak orders and a sharp rise in firms operating below capacity.

US

6th September, 2019 » US Aug Non-Farm Payrolls, Wages

Another soft non-farm payrolls report, with July also revised downward.  Private sector jobs growth in particular disappointed at just 96k which compares to the +246k private jobs added this time last year.  There was some positive movement on the participation rate, which jumped to 63.2%.  Hiring continues to be driven by females though.

Germany

5th September, 2019 » July Germany Factory Orders

Although there was a slight upward revision to the June numbers, there isn’t much to cheer in the German July factor orders report.  Orders fell a further 2.7% m/m.  That takes the current decline to -11.2% from its peak.

Singapore

17th July, 2019 » Singapore June Trade

While there was a bit of a base effect going on the underlying export story in Singapore remained very weak in June.  Indeed, in some sectors – electronics - we’re looking at weakness not seen since the financial crisis, even if this sector is fundamentally a shrinking one as manufacturers continue to relocate offshore.

Another positive surprise on the wages front with a strong pick up in the headline data. The rebound in weekly wage growth was partly due to a more favourable hours worked comparison though.  Hourly wage growth has been steadier.  Alongside steady inflation means real income growth has improved, continuing the recovery we’ve seen in recent months.

Stronger than expected rise in credit during June with the culprit appearing to be an increase in local government bond issuance, reflecting official efforts to support the domestic economy.  Loan growth continues to run well ahead of nominal GDP.  And with no underlying pick up in money supply growth the velocity measures also remain weak.

Slight upside surprise in June core consumer prices as headline y/y moved down amid the base effect.  The breakdown shows a further uptick in housing costs (shelter) while there has also been some upward movement in household furnishings and apparel (which was slightly less deflationary), perhaps reflecting tariff effects.

Consumer prices remained steady in June with prices actually falling m/m, which kept the y/y rate at 2.7%.  The backdrop would have been more encouraging had swine flu not taken its toll on meat prices while fresh fruit and vegetables have also soared over the past few months.

UK activity data for May somewhat better than expected, but this is largely due to volatility as industry juggled with the initial March Brexit data and resulting slide in production in April, notably the pre-planned auto sector shutdowns.  The underlying picture is still one of weakening activity

A positive surprise, particularly after the weak ADP number on Wednesday, with non-farm payrolls +224k in June, although there were mild downward revisions for the previous two months (-11k).

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