UK September retail sales boomed again, with the headline print rising a further +1.5% m/m (Consensus Est +0.4%) taking y/y growth to +4.7%, the highest since April 2019. Core retail sales (Ex-fuel) performed even more strongly, jumping +1.6% (mkt +0.5%) on the month and 6.4% yoy.
Chart pack and analysis attached.
The resurgence of Coronavirus in the developed economies, specifically Europe and to a lesser extent (so far) the US is leading to a clear divergence in economic activity According to the latest global mobility and economic activity data (running through to 16 October), DMs continue to show a deceleration in activity.
Another strong credit number, Chinese total social financing (TSF) rising CNY3.48trn in September (mkt 3.15trn) while new yuan loans grew CNY1.9trn (est. 1.7trn). That leaves overall credit growth steady at +13% yoy. But that understates this impact. Indeed, on a 12m rolling basis credit issuance is up 37.8% or 30.4% excluding shadow banking. This is piling on more leverage to an over-leveraged economy, TSF stock now above 280% of GDP and growing fast, amplified by the GDP hit from Covid.
Global mobility and economic activity data, published by Google, is pointing to some loss in the momentum of recovery. Although the mobility indices continue to register small improvements (despite the resurgence of the virus in many places), economic activity is not following through from that.
China’s September reserve numbers showed a modest decline to US$3.143trn from US$3.165trn in August. And nearly all of this can be accounted for by FX valuation adjustments. Given the large trade and current account surplus China is currently running though this still implies ongoing outflows of capital, with our rough calculations pointing to an annualised outflow of US$200bn.
Chart pack and analysis attached.
To refresh, these indices measure the level of activity as measured against the pre-pandemic level using the Google Mobility Indexes, adjusted by Independent Strategy. Activity is a smoothed average of the economic and mobility measures, which provides a guide to the current recovery trend. The data runs through to the end of September.
September non-farm payrolls number came in under expectations at +661k (mkt +850k). But the private payrolls number bettered at +877k vs. 850k mkt, while manufacturing payrolls also beat (+66k vs. +35k est) with a loss of 216k on the government side explaining the headline miss. There was a sizable upward revision to the jobs gained in August too.
