Thursday August 22 2019
US Factory Activity Contracts for 1st Time in a Decade
Markit Economics | Joana Ferreira |

The IHS Markit US Manufacturing PMI dropped to 49.9 in August 2019 from 50.4 in the previous month and below market expectations of 50.5, a preliminary estimate showed. The latest reading pointed to the first month of contraction in the manufacturing sector since September 2009.

The decline in the headline PMI mainly reflected a much weaker contribution from new orders, which offset a stabilization in employment and fractionally faster output growth.

New business received by manufacturing companies fell for the second time in the past four months during August. Although only marginal, the latest downturn in order books was the sharpest for exactly 10 years. Latest data also signalled the fastest reduction in export sales since August 2009.

Survey respondents indicated that a drop in sales often cited a soft patch across the automotive sector, alongside a headwind to manufacturing exports from weaker global economic conditions.

Meanwhile, manufacturing companies continued to trim their inventory levels in August, which was mainly linked to concerns about the demand outlook. Pre-production inventories fell for the fourth month running, while stocks of finished goods decreased to the greatest extent since June 2014.

Thursday August 22 2019
US Jobless Claims Fall More than Expected
DOL | Agna Gabriel |

The number of Americans filling for unemployment benefits decreased by 12 thousand to 209 thousand in the week ended August 17th 2019 from the previous week's revised level of 221 thousand and beating market expectations of 216 thousand.

The 4-week moving average was 214,500, an increase of 500 from the previous week's revised average. The previous week's average was revised up by 250 from 213,750 to 214,000. 

According to unadjusted data, the largest decreases were seen in California (-5,946), Florida (-1,095) and Texas (-1,044) while the biggest rises were reported in Rhode Island (+146), Alaska (+89) and Nevada (+68).

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending August 10, unchanged from the previous week's unrevised rate. 

The advance number for seasonally adjusted insured unemployment during the week ending August 10 was 1,674,000, a decrease of 54,000 from the previous week's revised level. The previous week's level was revised up 2,000 from 1,726,000 to 1,728,000. The 4-week moving average was 1,697,000, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 500 from 1,697,250 to 1,697,750.

Thursday August 22 2019
ECB Officials Consider Stimulus Package
ECB | Joana Ferreira |

ECB policymakers noted that the economic growth was likely to be weaker than initially thought this year and a package of stimulus measures would be more effective in combating the slowdown than a sequence of selective actions, minutes of the July meeting showed.

Excerpts from Account of the monetary policy meeting of the Governing Council of the European Central Bank, held in Frankfurt am Main on Wednesday and Thursday, 24-25 July 2019:

Members shared the assessment that information available since the early June Governing Council meeting indicated that, while further employment gains and increasing wages continued to underpin the resilience of the economy, softening global growth dynamics and weak international trade were still weighing on the euro area outlook. The prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets, continued to dampen economic sentiment, notably in the manufacturing sector. It was noted that, while recent data were broadly in line with the baseline scenario and the forces underlying the baseline – such as solid wage growth and rising cost pressures – were still seen as intact, the uncertainty around the projected duration of the economic slowdown remained high, also affecting the medium-term inflation outlook. In this environment, inflationary pressures had remained muted and indicators of inflation expectations had declined.

Members expressed broad agreement with the monetary policy proposals made by Mr Lane in his introduction: first, to adjust the forward guidance on the key ECB interest rates by reintroducing an easing bias; and, second, to initiate preparatory work, including on ways to strengthen the Governing Council’s forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases. It was seen as important for the Governing Council to demonstrate its determination and capacity to act and to be prepared to ease the policy stance further by adjusting all of its instruments, as appropriate, to achieve its inflation aim. Looking ahead, more information would be available at the Governing Council’s monetary policy meeting in September, when new projections, incorporating the effects of the measures taken at the Governing Council’s June meeting, would be presented.

Members also broadly supported the proposal made by Mr Lane to task the relevant Eurosystem Committees with examining options for future policy measures. Some nuances were expressed about the design and the individual elements of a possible policy package, which was presented as a list of options. In particular, it was argued that the term premium on long-term euro area bonds had already been compressed for quite some time and that the risk of an unwarranted tightening of financial conditions was higher at the short end than at the long end of the yield curve. However, the view was expressed that the various options should be seen as a package, i.e. a combination of instruments with significant complementarities and synergies, since experience had shown that a policy package – such as the combination of rate cuts and asset purchases – was more effective than a sequence of selective actions. The point was made that the choice of instruments and the design of a possible package should reflect the relative effectiveness of different instruments in addressing future contingencies.

Thursday August 22 2019
Bank Indonesia Cuts Rates in Shock Move
Bank Indonesia | Joana Ferreira |

Bank Indonesia reduced its 7-day reverse repo rate unexpectedly by 25bps to 5.50 percent during its August meeting, the second straight cut in two months, in an attempt to support growth amid low inflation expectations. Last month's rate cut was the first time since September 2017 amid growing concerns about global growth due to continued trade tensions and a number of geopolitical risks. The overnight deposit and lending facilities were also trimmed by the same amount to 4.75 percent and 6.25 percent, respectively.

Excerpts from the Bank Indonesia press release:

This policy is consistent with low inflation forecasts that are below the midpoint of the target, continues to attract investment returns on domestic financial assets so as to support external stability, as well as pre-emptive measuresto push forward economic growth momentum from the impact of the global economic slowdown. The monetary operations strategy will continue to be directed at ensuring adequate liquidity and improving money market efficiency so as to strengthen the transmission of accommodative monetary policy. Macroprudential policies remain accommodative to encourage bank lending and expand financing for the economy, including environmentally friendly financing. Payment system policies and financial market deepening are also continuously strengthened to support economic growth. Going forward, Bank Indonesia will continue to accommodate an accommodative policy mix in line with low inflation forecasts, maintained external stability, and the need to continue to drive economic growth momentum.

Continued tensions in trade relations and a number of geopolitical risks further depress trade volume and world economic growth.The US economy is slowing down due to falling exports and non-residential investment. Economic growth in Europe, Japan, China and India was also lower due to the decline in external sector performance and domestic demand. The weakening of the global economy continues to depress commodity prices, including oil prices. To respond to the impact of slowing economic growth, various countries implemented fiscal stimulus and eased monetary policy, including the US central bank which in July 2019 had lowered its policy rates. The uncertainty of global financial markets also continued and led to a shift in the placement of global funds to assets considered safe such as US and Japanese government bonds and gold commodities.

Inflation remains under control at a low and stable level. CPI inflation in July 2019 was recorded at 0.31% (mtm), down from the previous month inflation of 0.55% (mtm). On annual basis, inflation in July 2019 was recorded at 3.32% (yoy), a slight increase compared to inflation in the previous month of 3.28% (yoy). Controlled inflation is driven by maintained core inflation supported by good expectations in line with Bank Indonesia's policy consistency in maintaining price stability, managed aggregate demand, and the effect of minimal global prices. Administered prices groupre-noted deflation was affected by the continuing impact of the policy of lowering the upper limit of air freight rates, as well as the correction of intercity transport rates and railroad fares after the Eid holiday. Meanwhile, volatile food inflation slowed, although the price development of some horticultural commodities still needs attention. Bank Indonesia remains consistent in maintaining price stability and strengthening policy coordination with the Government, both at the central and regional levels, to ensure inflation remains low and stable amidst the challenges of weather disturbances due to drought which is expected to have an impact on food supply. 2019 inflation is predicted to be below the midpoint of the target range of 3.5 ± 1% and maintained within the target range of 3.0 ± 1% by 2020.

Wednesday August 21 2019
Fed Policymakers Saw July Cut as Mid-Cycle Adjustment
Federal Reserve | Joana Ferreira |

Fed officials viewed their interest-rate cut as an adjustment that would help counter the effects on the outlook of weak global growth and trade policy uncertainty while promoting a faster return of inflation to the central bank's target, minutes of the July meeting showed. Policymakers also noted that further policy action would be guided by incoming information and its implications for the economic outlook and that any appearance of following a preset course should be avoided.

Excerpts from the minutes of the Federal Open Market Committee, July 30-31, 2019:

In their discussion of monetary policy decisions at this meeting, those participants who favored a reduction in the target range for the federal funds rate pointed to three broad categories of reasons for supporting that action.

-First, while the overall outlook remained favorable, there had been signs of deceleration in economic activity in recent quarters, particularly in business fixed investment and manufacturing. A pronounced slowing in economic growth in overseas economies—perhaps related in part to developments in, and uncertainties surrounding, international trade—appeared to be an important factor in this deceleration.
-Second, a policy easing at this meeting would be a prudent step from a risk-management perspective. Despite some encouraging signs over the intermeeting period, many of the risks and uncertainties surrounding the economic outlook that had been a source of concern in June had remained elevated, particularly those associated with the global economic outlook and international trade.
-Third, there were concerns about the outlook for inflation. A number of participants observed that overall inflation had continued to run below the Committee's 2 percent objective, as had inflation for items other than food and energy. Several of these participants commented that the fact that wage pressures had remained only moderate despite the low unemployment rate could be a sign that the longer-run normal level of the unemployment rate is appreciably lower than often assumed.

A couple of participants indicated that they would have preferred a 50 basis point cut in the federal funds rate at this meeting rather than a 25 basis point reduction.

Several participants favored maintaining the same target range at this meeting, judging that the real economy continued to be in a good place, bolstered by confident consumers, a strong job market, and a low rate of unemployment. These participants acknowledged that there were lingering risks and uncertainties about the global economy in general, and about international trade in particular, but they viewed those risks as having diminished over the intermeeting period. In addition, they viewed the news on inflation over the intermeeting period as consistent with their forecasts that inflation would move up to the Committee's 2 percent objective at an acceptable pace without an adjustment in policy at this meeting. Finally, a few participants expressed concerns that further monetary accommodation presented a risk to financial stability in certain sectors of the economy or that a reduction in the target range for the federal funds rate at this meeting could be misinterpreted as a negative signal about the state of the economy.

In their discussion of the outlook for monetary policy beyond this meeting, participants generally favored an approach in which policy would be guided by incoming information and its implications for the economic outlook and that avoided any appearance of following a preset course. Most participants viewed a proposed quarter-point policy easing at this meeting as part of a recalibration of the stance of policy, or mid-cycle adjustment, in response to the evolution of the economic outlook over recent months. A number of participants suggested that the nature of many of the risks they judged to be weighing on the economy, and the absence of clarity regarding when those risks might be resolved, highlighted the need for policymakers to remain flexible and focused on the implications of incoming data for the outlook.

Wednesday August 21 2019
Canada July Inflation Rate Steady at 2%
Statistics Canada | Stefanie Moya |

The annual inflation rate in Canada was at 2 percent in July 2019, unchanged from the previous month and above market expectations of 1.7 percent, as a slowdown in cost of services was offset by a rise in prices of goods, namely durable goods and food

Year-on-year, prices eased for shelter (2.3 percent from 2.5 percent in June); transportation (1.5 percent from 1.6 percent), namely air transportation (4.6 percent from percent) and travel tours (7.5 percent from percent); household operations, furnishings and equipment (0.3 percent from 1.2 percent); clothing and footwear (1.1 percent from 1.6 percent) and alcoholic beverages, tobacco and recreational cannabis (1.2 percent from 1.4 percent). On the other hand, cost advanced further for food (3.8 percent from at 3.5 percent), recreation, education and reading (2.7 percent from 2.0 percent) and health and personal care (1.5 percent from 1.1 percent).

Regarding special aggregates of the CPI, cost of services slowed to 2.4 percent in July from 2.8 percent in June, as consumers paid less for telephone services (-2.5 percent) due to an industry-wide shift in the pricing structure of cellular data plans amid intensifying competition among wireless providers. The introduction of unlimited data plans coincided with a reduction in the subsidies for wireless devices, shifting more of the cost of devices to consumers. Meanwhile, cost of goods rose 1.3 percent, after increasing 0.9 percent in the prior month, boosted by durable (1.9 percent from 1.4 percent), semi-durable (0.6 percent from 0.4 percent) and non-durable goods (1.3 percent from 0.8 percent). Additionally, cost of energy declined at a softer pace (-3.2 percent from -4.1 percent).

On a monthly basis, consumer prices went up 0.5 percent, rebounding from a 0.2 percent fall in June and compared with market forecasts of a 0.2 percent gain.

The BoC's annual core inflation, which excludes volatile items, was steady at 2 percent, below market consensus of 2.3 percent.

Wednesday August 21 2019
Spain Posts Smallest Trade Gap in 15 Months
Ministerio de Industria, Comercio y Turismo | Stefanie Moya |

The Spanish trade deficit narrowed to EUR 1.53 billion in June 2019 from EUR 2.45 billion in the corresponding month of the previous year. It is the smallest trade shortfall since March last year, as exports increased 0.9 percent and imports fell 2.6 percent.

Exports advanced 0.9 percent over a year earlier to EUR 24.94 billion in June, boosted by higher sales of equipment goods (7.8 percent); energy products (0.9 percent); non-chemicals semi-manufactures (6.4 percent); and other products (7.7 percent). On the other hand, sales declined for the automotive sector (-4.6 percent); food, beverages and tobacco (-0.6 percent); raw materials (-9.7 percent); manufactured consumption goods (-0.6 percent); and chemicals (-2.1 percent).

Among major trading partners, sales increased to the Euro Area (1.5 percent), of which Germany (3.9 percent), Portugal (7.1 percent), and Italy (1.4 percent). Meanwhile, shipments fell to the US (-11.4 percent), China (-0.8 percent) and France (-1.7 percent).

Imports dropped 2.6 percent from a year ago to EUR 26.47 billion, mainly due to lower purchases of raw materials (-10.9 percent); food, beverages and tobacco (-2.1 percent); automotive sector (-2.5 percent); and non-chemicals semi-manufactures (-0.2 percent). In contrast, purchases increased for energy products (0.6 percent); chemical products (6.7 percent); equipment goods (4.5 percent); and manufactured consumption goods (4.4 percent).

Among major trading partners, purchases decreased from the Euro Area (-7.1 percent), in particular Germany (-10.3 percent), France (-10.5 percent) and Portugal (-15.5 percent). Also imports rose from the US (24.1 percent) and China (4.7 percent).

Considering the first six months of the year, the country's trade shortfall widened to EUR 14.71 billion from EUR 14.59 billion in the same period of 2018, as imports rose 1.6 percent to EUR 162.12 billion and exports increased 1.7 EUR 147.41 billion.

Wednesday August 21 2019
South Africa Inflation Rate Hits 6-Month Low of 4%
Statistics South Africa | Luisa Carvalho |

The annual inflation rate in South Africa fell to 4.0 percent in July 2019 from 4.5 percent in June, well below market expectations of 4.4 percent and the mid-point of the Reserve Bank's target range of 3-6%. This is the lowest inflation rate since January, amid a decrease in fuels cost.

Year-on-year, inflation softened primarily for transport (3.0 percent vs 5.5 percent in June), as fuel cost declined (-0.5 percent vs 7.4 percent) reflecting lower international oil prices; and food & non-alcoholic beverages (3.4 percent vs 3.7 percent), of which processed food (5.1 percent vs 5.4 percent). Also, prices slowed for alcoholic beverages & tobacco (6 percent vs 6.1 percent); household contents and services (3.0 percent vs 3.1 percent) and restaurants & hotels (2.8 percent vs 3.5 percent). Meantime, inflation was steady for clothing & footwear (at 1.9 percent); education (at 6.7 percent) and recreation & culture (at 0.9 percent).

In contrast, cost rose faster for housing & utilities (5.1 percent vs 4.9 percent), namely electricity and other fuels (10.4 percent) and water and other sevices (7.1 percent) amid an increase in municipal tariffs with effect from July; miscellaneous goods & services (5.6 percent vs 5.4 percent) and health (5.4 percent vs 5.3 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, dropped to 4.2 percent in July from 4.3 percent in the prior month and slightly below market estimates of 4.3 percent.

On a monthly basis, consumer prices went up 0.4 percent, the same pace as in the previous month and below market expectations of 0.7 percent.

Tuesday August 20 2019
Hong Kong Inflation Rate Steady at Near 3-Year High
Census and Statistics Department | Stefanie Moya |

The annual inflation rate in Hong Kong was at 3.3 percent in July 2019, unchanged from the previous month. It remained the highest inflation since August of 2016, mostly driven by cost of food and transport.

Year-on-year, prices went up further for food (5.9 percent from 5.6 percent in June), boosted by food, excluding meals bought away from home (12.8 percent from 12.1 percent) and those bought away from home (2.2 percent from 2.1 percent); transport (1.9 percent from 1.7 percent); miscellaneous goods (2.7 percent from 2.1 percent); and alcoholic drinks and tobacco (2.4 percent from 1.8 percent). Additionally, cost fell less for  durable goods (-1.2 percent from -1.5 percent); and clothing and footwear (-2.0 percent from -3.1 percent). Meanwhile, prices eased for housing (4.0 percent from 4.1 percent); and miscellaneous services (1.4 percent from 2.1 percent). Also, cost of electricity, gas and water dropped at a faster pace (-5.9 percent from -5.1 percent).  

Underlying consumer inflation, which excludes the effects of one-off government relief measures such as tax cuts for lower income individuals; extra allowance for the elderly, child & disabled people; students' grants was steady at 3.9 percent in July.

“Looking ahead, overall price pressures should remain largely contained in the near term amid the earlier easing in fresh-letting residential rentals, modest global inflation and subdued local economic conditions. Yet, the inflation rate in the next few months will hinge on the supply situation and thus prices of fresh pork. The Government will continue to monitor the inflation situation closely, particularly the impact on the lower-income people.”, a government spokesman said.

Tuesday August 20 2019
Swiss Trade Surplus Narrows in July
Swiss Customs Administration | Chusnul Ch Manan |

The Swiss trade surplus narrowed to CHF 2.7 billion in July 2019 from a revised CHF 3.2 billion in the previous month, as exports fell more than imports.

Exports decreased 3.9 percent from a month earlier to CHF 19.6 billion in July, due to lower sales of chemical and pharmaceutical products (-11.3 percent), jewellery (-3.9 percent), and precision instruments (-0.9 percent). Conversely, sales rose for machinery and electronics (5.9 percent); food, beverages and tobacco (3.2 percent); metals (3.1 percent); watchmaking (0.1 percent).
Among major trade partners, exports declined to France (-2.2 percent), the UK (-24.9 percent), Spain (-6.3 percent), the Netherlands (-16.7 percent), Belgium (-16.3 percent), Austria (-8.9 percent), the US (-13.9 percent), China (-2 percent), and the Middle East (-1.6 percent). Meanwhile, there were increases in exports to Germany (3.9 percent), Italy (8.5 percent), Japan (4.3 percent), Hong Kong (8.1 percent), and Singapore (0.3 percent).

Imports dropped at a softer 1.7 percent to CHF 16.9 billion, mainly due to lower purchases of chemical and pharmaceutical products (-8.3 percent), vehicles (-3.9 percent), metals (-2.8 percent), and textiles, clothing, footwear (-0.9 percent). On the other hand, imports rose for: machinery and electronics (0.3 percent); jewellery (13.4 percent); food, beverages and tobacco (0.8 percent); and energy products (4.6 percent).

Among major trade partners, imports were down from France (-16.8 percent), Belgium (-3.9 percent), Austria (-19.4 percent), Ireland (-33.9 percent), and the US (-1.7 percent), but rose from Germany (0.4 percent), Italy (3.4 percent), Spain (30.4 percent), the Netherlands (2.3 percent), the UK (6.9 percent), the UAE (45.3 percent), China (1.7 percent), and Japan (10.7 percent).
Considering the first seven months of the year, the trade surplus widened sharply to CHF 14.9 billion from CHF 9.6 billion in the same period of 2018.

Monday August 19 2019
Russia Jobless Rate Rises from Record Low
Federal State Statistics Service | Rafael Gonzalez |

Russian unemployment rate rose to 4.5 percent in July of 2019 from an all-time low of 4.4 percent in the previous month and in line with market expectations.

The number of unemployed increased by 30 thousand to 3.364 million in July 2019 from 3.334 in the previous month. Compared with the previous year, unemployment fell by 239 thousand from 3.603 million.
Meantime, registered unemployment came in at 0.727 million, slightly lower than June’s 0.746 million but above last year's 0.690 million.
Real wages in Russia rose 3.5 percent year-on-year in July of 2019, following an upwardly revised 2.9 percent gain in the previous month and beating market forecasts of a 2.3 percent increase. It was the biggest gain in real wages since November 2018. Average nominal wages surged 8.2 percent to RUB 45,900 while annual inflation was at 4.6 percent.

Monday August 19 2019
Chile Q2 GDP Growth Beats Forecasts
Banco Central de Chile | Stefanie Moya |

The economy of Chile grew 1.9 percent year-on-year in the second quarter of 2019, following a 1.6 percent expansion in the previous period and beating market expectations of 1.8 percent. Growth was mainly boosted by the services sector namely personal services, real estate and business while the mining sector recovered after shrinking in the first quarter.

On the expenditure side, fixed investment grew at a faster pace (4.8 percent from 3.2 percent in Q1) boosted by construction (6.4 percent from 2.8 percent) while machinery and equipment slowed (2.0 percent from 3.9 percent). Meanwhile, growth moderated for household consumption (2.3 percent from 3.2 percent) and government spending (2.2 percent from 3.2 percent. Also, decline was observed for both exports (-3.2 percent from -2.0 percent) and imports (-3.5 percent from 1.4 percent).

On the production side, the mining activity grew 0.2 percent recovering from a 4.2 percent contraction in Q1 as copper production grew 0.6 percent (-3.3 percent in Q1). Additionally, output rebounded in fishing (5.5 percent from -3.2 percent); and utilities (0.7 percent from -0.6 percent). Also, faster growth was recorded in real estate (3.5 percent from 3.2 percent); construction (4.2 percent from 3.0 percent); and restaurants & hotels (2.4 percent from 1.4 percent) while business services advanced at the same pace (3.2 percent). Meanwhile, output contracted in manufacturing (-1.1 percent from 1.1 percent), mainly due to food (-3.6 percent from 0.2 percent), cellulose & paper (-2.7 percent from 0.9 percent), and textiles, clothing, leather and footwear (-10.4 percent from -9.0 percent). In addition, growth slowed in internal trade (1.5 percent from 2.4 percent); transport (3.7 percent from 4.2 percent); communication and information (2.1 percent from 2.9 percent); financial services (4.7 percent from 5.9 percent); and personal services (3.1 percent from 3.7 percent).   

On a seasonally adjusted quarterly basis, the economy advanced 0.8 percent, after stalling in the prior quarter.

Monday August 19 2019
Eurozone July Inflation Rate Revised Down to Near 3-Year Low
Eurostat | Agna Gabriel |

The annual inflation rate in Euro Area decreased to 1 percent in July of 2019 from 1.3 percent in the previous month and below preliminary estimates of 1.1 percent. It was the lowest inflation since November of 2016, as cost went up at a softer pace for energy and services.

Prices slowed for energy (0.5 percent from 1.7 percent in June) and services (1.2 percent from 1.6 percent). On the other hand, cost rose faster for food, alcohol & tobacco (1.9 percent from 1.6 percent), of which processed food, alcohol & tobacco (2 percent from 1.9 percent) and unprocessed food (1.7 percent from 0.7 percent); and non-energy industrial goods (0.4 percent from 0.3 percent). 

Among Eurozone's largest economies, the highest annual rate was recorded in France (1.3 percent), followed by Germany (1.1 percent), Spain (0.6 percent) and Italy (0.3 percent).

The annual core inflation, which excludes volatile prices of energy, food, alcohol & tobacco and at which the ECB looks in its policy decisions, was confirmed at 0.9 percent, down from 1.1 percent in the prior month and in line with market consensus.

On a monthly basis, consumer prices dropped 0.5 percent, after a 0.2 percent gain in June and compared with flash estimates of a 0.4 percent decrease. 

Monday August 19 2019
Hong Kong Jobless Rate at 16-Month High of 2.9%
Census and Statistics Department | Agna Gabriel |

The seasonally adjusted unemployment rate in Hong Kong increased to 2.9 percent in the three months to July of 2019 from 2.8 percent in the previous period. It was the highest jobless rate since the three months to March period of 2018. The underemployment rate was unchanged at 1.0 percent, the same as in the previous period.

On a non-seasonally adjusted basis, the number of unemployed persons went up by 4,200 to 118,500 in May-July 2019 when compared with the prior period, while the number of underemployed dropped by 500 to 40,700 persons. The unemployment situation in most sectors remained largely stable. Yet, as the consumption market stayed soft, the unemployment rate of the retail, accommodation and food services sectors taken together went up from the preceding three-month period. Also, the import and export trade sector has been facing increasing pressure amid shrinking trade flows, with the unemployment rate generally on the rise since early this year.

Meantime, the number of employed decreased by 3,300 to 3,867 thousand and the labour force participation rate was steady at 60.7 percent.

Looking ahead, "The economy is expected to stay weak in the coming months, the local labour market will unavoidably be subject to greater pressure. The Government will monitor the labour market situation closely." the Secretary for Labour and Welfare, Dr Law Chi-kwong, said.

Monday August 19 2019
Thailand Q2 GDP Growth Weakest in Near 5 Years
Nesdb, Thailand l Chusnul Ch Manan |

Thailand's GDP grew by 2.3 percent year-on-year in the second quarter of 2019, following a 2.8 percent expansion in the previous period and below market consensus of 2.4 percent. It was the weakest GDP growth rate since the third quarter 2014 mostly due to decline in exports and as private consumption, government spending, and investment rose at a softer pace.

On the expenditure side, private consumption increased 4.4 percent, compared to a 4.9 percent expansion in the prior quarter, mainly due to a rise spending in non-durable goods and semi-durable goods, linked to the government's welfare card program for low income earners. By contrast, durable spending fell, namely purchasing vehicles and net services.

Gross fixed capital formation advanced 2.0 percent, softer than 3.2 percent in Q1. Private investment grew 2.2 percent, easing from a 4.4 percent rise in Q1, mainly due to a 2.5 percent expansion of investment on machinery (from 5.1 percent in Q1) and spending on private construction which grew 0.9 percent, easing from 1.8 percent in Q1. Meanwhile, public investment expanded 1.4 percent (vs -0.1 percent Q1), largely due to an increase in construction (5.8 percent vs 4.1 percent).

Also, government spending went up 1.1 percent, decelerating sharply from 3.4 percent in Q1, driven by an increase of 1.0 percent in compensation of employees, lower than 1.7 percent previously along with a 5.0 percent rise of social transfers in kind, the same pace as in Q1. However, purchases from enterprises and abroad dropped 1.1 percent. The net external demand contributed negatively to GDP growth, as exports of goods and services slipped 6.1 percent (the same pace as in Q1) while imports of goods and services fell at a softer 2.7 percent (vs -0.1 percent in Q1).

On the production side, the non-agricultural sector expanded 2.6 percent, slowing from a 2.9 percent expansion in the previous three-month period. Output grew at a softer pace for: wholesale & retail trade (5.9 percent vs 6.8 percent in Q1); transportation & storage (2.5 percent vs 3.5 percent), accommodation & food service activities (3.7 percent vs 4.9 percent); health & social work (3.1 percent vs 3.5 percent), arts, entertainment & recreation (10.4 percent vs 11.6 percent), real estate, renting & business activities (3.1 percent vs 4.7 percent); finance & insurance activities (1.8 percent vs 2.0 percent); public administration & defence (0.4 percent vs 0.9 percent); water supply, sewerage, waste management & remediation activities (2.0 percent vs 4.9 percent), and other service activities (2.3 percent vs 2.5 percent). 

Conversely, manufacturing fell (-0.2 percent vs 0.6 percent in Q1), amid decreases in export-oriented industries such as computer, rubber and plastic product. Also, agriculture shrank 1.1 percent, reversing a 1.7 percent growth in the March quarter, as drought dented output of major crops, namely paddy, pineapple, sugarcane together with a deceleration in production of fruits and maize yields. Meantime, yields of vegetables and rubbers rose similar to production of livestock, namely chicken, hen's egg and swine.

On the other hand, faster growth was seen in electricity, gas & water supply (7.3 percent vs 5.4 percent); information & communication (9.3 percent vs 6.5 percent); construction (3.4 percent vs 3.0 percent). Gains were also registered in and education (1.6 percent vs 1.2 percent in Q1); professional, scientific & technical activities (2.3 percent vs 1.3 percent). In addition, output of mining and quarrying rebounded (6.8 percent vs -0.8 percent). 

In the first half of the year, the economy advanced 2.6 percent compared with the same period of 2018. For 2019, the NESDB revised its economic forecast to 2.7-3.2 percent from 3.3-3.8 percent in May, with exports seen contracting 1.2 percent (from 2.2 percent growth).

Monday August 19 2019
Thailand Quarterly GDP Growth Weakest in 3 Quarters
NESDB l Rida Husna |

Thailand's economy expanded 0.6 percent quarter-on-quarter in the three months to June 2019, slowing from a 1 percent growth in the previous period and missing market expectations of a 0.7 percent advance. This marked the lowest quarterly growth rate since a 0.2 percent contraction in the September quarter 2018, as private consumption growth was nearly steady, while there was a decline in both government spending and gross fixed capital formation.

On the expenditure side, private consumption rose by 0.9 percent in the second quarter, little-changed from a 1 percent increase in the prior quarter. At the same time, government spending  declined by 1.3 percent, the first quarterly decrease in three quarters, following a 1.7 percent growth in Q1. Also, gross fixed capital formation dropped 0.7 percent, the first quarterly fall in two years, after a 0.7 percent gain in Q1. Meanwhile, net external demand contributed positively to growth, as exports of goods and services rose 1.5 percent (from -4.1 percent in Q1), while imports contracted further -1.0 percent (from -2.3 percent in Q1).

On the production side, growth in the agriculture sector eased sharply (4.4 percent vs 11.9 percent in Q1), while non-agriculture rebounded (0.3 percent vs -0.2 percent). Within non-agriculture, there was an upturn  in both industrial sub-sector (0.4 percent vs -1.7 percent in Q1) and mining and quarrying (7.2 percent vs -2 percent), and a faster rise in electricity, gas, steam and airconditioning supply (2.1 percent vs 0.8 percent), while both manufacturing (-0.5 percent vs -1.7 percent) and water supply, sewerage, waste management and remediation activities (-0.1 percent vs -2.5 percent) decining less. At the same time, the service sector grew at a softer pace (0.2 percent vs 0.8 percent), mainly led by construction (0.4 percent vs 1.4 percent); health and social work (0.5 percent vs 1 percent); arts, entertainment and recreation (0.9 percent vs 1 percent), while output fell for transport & storage (-0.1 percent vs 0.1 percent); accommodation & food services (-0.6 percent vs 1.6 percent); real estate (-0.7 percent vs 1 percent); public administration and defence (-0.4 percent vs 1.4 percent), and education (-0.5 percent vs 1.8 percent).

Meantime, amid weakening global demand and ongoing trade conflict between US and China, the government revised down 2019 GDP growth forecast to a range of 2.7 to 3.2 percent from an earlier projections of 3.3 to 3.8 percent. It also saw 2019 exports to contract 1.2 percent, instead of 2.2 percent growth previously estimated.

Monday August 19 2019
Japan Trade Deficit Widens in July
Ministry of Finance, Japan | Chusnul Ch Manan |

Japan's trade deficit widened to JPY 249.6 billion in July 2019 from JPY 227.4 billion in the same month a year earlier and larger than market expectations of a JPY 200 billion gap.

Exports dropped 1.6 percent from a year earlier to JPY 6.64 trillion in July, compared to market consensus of a 2.2 percent decline and June's 6.6 percent fall. It was the eighth straight month of decrease in shipments, amid weakening global demand and the US-China trade dispute. Declines were observed in machinery (-7.3 percent) led by semiconductor machinery (-13.5 percent), pump and centrifuges (-10.9 percent), metalworking machinery (-10.1 percent) and parts of computer (-11.1 percent); electrical machinery (-7.3 percent) due to semiconductors (-7.7 percent), electrical apparatus (-9.1 percent) and measuring (-7 percent), and electrical power machinery (-2.3 percent); manufactured goods (-5.1 percent) such as iron & steel products (-4.2 percent), nonferrous metals (-10.7 percent) and manufactures of metals (-6.4 percent); and chemicals (-0.1 percent) on the back of plastic materials (-2.7 percent) and organic chemicals (-2.2 percent). Conversely, transport equipment exports rose 7.7 percent, mainly due to motor vehicles (9.2 percent).
Among main trade partners, exports decreased to China (-9.3 percent), South Korea (-6.9 percent), Taiwan (-8.2 percent), Singapore (-22.3 percent), Thailand (-7.7 percent), and Australia (-15.3 percent). By contrast, exports were up to the US (8.4 percent), the EU (2.2 percent), and the Middle East (17.6 percent).
Imports declined 1.2 percent to JPY 6.89 trillion in July, compared to market expectations of a 2.7 percent drop and the previous month's 5.2 percent fall. Purchases of mineral fuels slumped 9.1 percent, mainly due to petroleum (-10 percent), petroleum products (-27.1 percent) and LNG (-6 percent). Also, imports of chemicals fell 6.6 percent on the back of medical products (-7.6 percent) and organic chemicals (-6.2 percent). In addition, arrivals of manufactured goods dropped 0.7 percent, in particular nonferrous metals (-15.3 percent) and iron & steel products (-6.8 percent). In contrast, imports grew for machinery (2.7 percent), transport equipment (2.1 percent), foodstuff (4.5 percent) and raw materials (1.3 percent).
Imports fell from South Korea (-8.6 percent), Taiwan (-5.3 percent), the EU (-4.3 percent), and the Middle East (-11.7 percent), of which the United Arab Emirates (-5.3 percent) and Saudi Arabia (-16.6 percent). Conversely, imports rose from China (2.8 percent), Thailand (6.6 percent), Vietnam (17.8 percent), the US (3.5 percent) and Australia (6.2 percent).

Friday August 16 2019
Week Ahead
Joana Ferreira |

Meeting minutes from the Fed, ECB, RBA and RBI will be keenly watched next week, alongside flash PMI surveys for the US, Eurozone, Japan and Australia. Other important releases include US existing and new home sales; UK CBI factory orders; Eurozone flash consumer confidence; Japan inflation and trade balance; and Indonesia interest rate decision. Investors will also react to the Jackson Hole symposium and G7 summit.

In the US, investors will be waiting for the FOMC minutes due Wednesday for further clarification on the next monetary policy steps. The Federal Reserve slashed interest rates for the first time since 2008 during its July meeting as inflation remains subdued amid heightened concerns about the economic outlook and ongoing trade tensions with China. Other notable publications are flash Markit PMIs, and existing and new home sales.

Investors will also react to the Jackson Hole symposium and G7 summit next week.

Elsewhere in America, upcoming data include Canada inflation and retail trade; Mexico final second-quarter GDP figures; and Brazil business confidence. Chile and Peru are set to publish the first estimate of second-quarter GDP growth.

In the UK, the CBI is set to publish gauges for factory orders and distributive trades while the ONS will release updated data for July's public finances. Elsewhere in Europe, the ECB will publish the account of July's policy meeting, amid rising expectations that policymakers are set to announce new stimulus measures as soon as September. Regarding the economic calendar, flash Markit PMI numbers for the Eurozone, Germany and France are forecast to point to another month of contraction in the manufacturing sector. Traders will also keep an eye on the Eurozone flash consumer confidence and final inflation; Germany producer prices; Norway second-quarter GDP growth and unemployment data; Turkey consumer confidence and retail sales; and Switzerland industrial activity and trade balance.

Italy's Prime Minister Giuseppe Conte will address the Senate on the government's crisis and might face a vote of no confidence on August 20th.

Japan's Jibun Bank will be releasing flash PMI data, providing an update on manufacturing and services activity during August. The country's trade balance and inflation will also be keenly watched, with forecasts pointing to a further decline in Japanese exports while the core consumer inflation is seen steady at two-year lows. Meanwhile, all eyes are on Bank Indonesia's policy meeting as well as minutes from latest central bank meetings in Australia and India. Other highlights for the Asia-Pacific region include: Australia CommBank PMIs; New Zealand foreign trade; Thailand second-quarter GDP growth and trade balance; Taiwan export orders and industrial output; and Hong Kong and Singapore inflation rates.

Friday August 16 2019
US Consumer Sentiment Drops to 7-Month Low
University of Michigan | Joana Ferreira |

The University of Michigan's consumer sentiment for the US fell to 92.1 in August 2019 from 98.4 in the previous month and well below market consensus of 97.2, a preliminary estimate showed. That was the lowest reading since January.

The consumer expectations sub-index declined to 82.3 in August from the previous month's 90.5; while the gauge for current economic conditions decreased to 107.4 from 110.7.

Inflation expectations for the year ahead picked up to 2.7 percent in August from 2.6 percent in July; and the 5-year outlook advanced to 2.6 percent from 2.5 percent.

"Consumer sentiment declined in early August to its lowest level since the start of the year. The early August losses spanned all Index components. Although the Expectations Index recorded more than twice the decline in August as the Current Conditions Index (-8.2 versus -3.3), the Current Conditions Index fell to its lowest level since late 2016. Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects. Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August, barely below the recent peak of 37%. Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases. The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession. Consumers concluded, following the Fed’s lead, that they may need to reduce spending in anticipation of a potential recession. Falling interest rates have long been associated with the start of recessions—see the featured chart. Perhaps the most important remaining pillar of strength for consumer spending is favorable job and income prospects, although the August survey indicated some concerns about the future pace of income and job gains. It is likely that consumers will reduce their pace of spending while keeping the economy out of recession at least through mid 2020." Surveys of Consumers chief economist, Richard Curtin, said.

Friday August 16 2019
US Housing Starts Fall for 3rd Straight Month
US Census Bureau | Joana Ferreira |

US housing starts dropped 4.0 percent from a month earlier to a seasonally adjusted annual rate of 1,191 thousand units in July 2019, compared to market expectations of 1,257 thousand and following a revised 1.8 percent fall in June. That was the third consecutive month of decline in homebuilding, likely disrupted by Tropical Storm Barry.

Starts for the volatile multi-family housing segment tumbled 16.2 percent to a rate of 315 thousand units in July; while single-family homebuilding, which accounts for the largest share of the housing market, rose 1.3 percent to a rate of 876 thousand units, the highest level in six months. Declines in housing starts were recorded in the South (-4.3 percent to 600 thousand), Northeast (-13.8 percent to 94 thousand) and Midwest (-6.2 percent to 181 thousand), while an increase was seen in the West (1.3 percent to 316 thousand).

Building permits surged 8.4 percent to a rate of 1,336 thousand units in July, while markets had expected a 3.1 percent advance. That was the largest gain in permits since June 2017, boosted by a 21.8 percent jump in the volatile multi-family housing segment. In addition, single-family authorizations rose 1.8 percent to 838 thousand, the highest level in eight months. Across regions, permits were higher in the South (10.7 percent to 685 thousand) and West (13.7 percent to 365 thousand), but declined in the Northeast (-3.3 percent to 117 thousand) and Midwest (-1.2 percent to 169 thousand).

Year-on-year, housing starts increased 0.6 percent while building permits advanced 1.5 percent.