Independent Strategy

Macro Category

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).

Factory orders missed once again with a terrible 2.2% m/m decline in volumes.  That has dropped the y/y rate to -8.7%, which represents a 117 month low and the 10th consecutive negative y/y reading.  In index terms we’re now down 11.3% from the December 2017 peak.

June ISM non-manufacturing index recorded a further decline and while the Final Markit Services PMI was revised up a little, the overall story remains brittle.  The ISM non-manufacturing report showed declines in the rate of activity, output and new orders with only export orders showing stability.

Another weak ADP private sector jobs report with just 102.2k jobs created in June.  That marks an improvement following the very weak May release but still drags the 3m average down to 132.7k, the lowest since July 2012.  The ADP breakdown bears out the problems of the construction sector, with a second consecutive month of declines while small businesses also showed another contraction in jobs.

Money supply continues to tick up again, but overall there is not much to suggest we’re in any marked re-acceleration phase, which is equally evident in the persistently weak money multipliers.  Credit data surprised on the downside thanks to some moderation in consumer demand for money.  Non-financial side looks stronger.

US

27th June, 2019 » US Final Q1 GDP

The final reading of US first quarter growth, at first glance, paints a positive picture.  The quarterly pace of expansion came in at 3.1% ann. with y/y growth hitting 3.2%, the highest since Q1 2015.  But the structure shows clear evidence of the cross currents at work with an upward revision to the inventories build and a relatively better gain from net exports offsetting a moderation of domestic consumption growth.

Another weak durable good orders report, with the outcome surprising to the downside of expectations, pushing the y/y rate deeper into negative territory.  Ex-ing out the more volatile components improves the picture somewhat but the overall story is still unimpressive.

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