UK Farage: Johnson is just reheating May’s Brexit agreement

    Brexit Party Nigel Farage criticized that UK Prime Minister Boris Johnson is not opting for no-deal Brexit, but just reheating the old Withdrawal Agreement.

    He said, “of course if Boris Johnson says we’re leaving, we’re going to have a clean break… then we, the Brexit Party, would put country before party and tell Mr Johnson that we want to help you in any way we can.”

    “But I’m afraid that’s not what the prime minister wants to do and that was made very clear by his statement outside Downing Street last night. He is intent on reheating Mrs May’s Withdrawal Agreement.”

    UK PMI construction dropped to 45.0, sector braced for a protracted slowdown

      UK PMI Construction PMI dropped to 45.0 in August, down from 45.3 and missed expectation of 46.7. It’s the fourth consecutive month of sub-50 contractionary reading. Additionally, new orders fell as fastest pace for over 10 years since March 2009. Construction output dropped for the fourth month in a row. And business optimism sank to its lowest level since December 2008.

      Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey:

      “Domestic political uncertainty continued to hold back the UK construction sector in August, with survey respondents indicating that delays to spending decisions had contributed to the sharpest fall new work for over 10 years.

      “Construction companies noted that rising risk aversion and tighter budget setting by clients in response to Brexit uncertainty had held back activity, particularly in the commercial sub-sector. Commercial construction activity fell at a steep and accelerated pace during August, which more than offset the softer rates of decline in house building and civil engineering work.

      “Concerns about softening demand for new projects resulted in a fall in business optimism across the construction sector to its weakest since December 2008. This provides an early signal that UK construction companies are braced for a protracted slowdown as a lack of new work to replace completed contracts begins to bite over the next 12 months.”

      Full release here.

      UK Hammond: We will have the numbers

        Former UK Chancellor of Exchequer Philip Hammond said there should be enough rebel Conservative and opposition MPs to block no-deal Brexit in the vote today. The told BBC Radio that “I think we will have the numbers. I think there will be enough people to get this over the line.” “Many colleagues have been incensed by some of the actions over the last week or so,” he said. “I think there’s a group of Conservatives who feel very strongly that now is a time where we have to put the national interest ahead of any threats to us personally or to our careers.”

        Labour’s top legal policy chief Shami Chakrabarti also said “we’ve got to get a locked-in guarantee that Britain would not crash out of the EU in an election campaign period.” “We’ve also got to try as best as possible to ensure that it wouldn’t be possible for the sitting squatting prime minister in this period to set a general election and then change the date. The priority this morning is preventing this no-deal crash out.”

        UK lawmakers to block no-deal Brexit, Johnson might call elections

          A group of UK lawmakers are expected to put forward a vote on Tuesday to seize control of the parliamentary business. The target was to pass legislation to force a three month delay to October 31 Brexit date. If such case is pushed through, Prime Minister Boris Johnson is expected seek a vote to hold a general election the next day, on October 14.

          Without giving any details on his plan, Johnson said outside his office that “I want everybody to know there are no circumstances in which I will ask Brussels to delay: we are leaving on 31st October, no ifs or buts.” And, “we will not accept any attempt to go back on our promises,” he added. “I don’t want an election. You don’t want an election. Let’s get on with the people’s agenda.”

          Separately, Brexit Minister Stephen Barclay said in an interview yesterday that EU should be open to “creative and flexible” solutions to the Irish border backstop. He also reiterated that “we will leave the EU on October 31, whether with or without a deal.”

          RBA stands pat, Aussie pares losses as there is no further dovish turn

            RBA left cash rate unchanged at 1.00% as widely expected. Australian Dollar pares back some of earlier loss as the central bank doesn’t turn more dovish in the accompanying statement, even though easing bias is maintained. Instead, RBA just noted that “it is reasonable to expect that an extended period of low interest rates will be required”. And the board will continue to “monitor developments, including in the labour market, and ease monetary policy further if needed”.

            RBA expected growth to “strengthen gradually to be around trend over the next couple of years”. Main domestic uncertainty continues to be consumption outlook. However, wages growth remains “subdued” with “little upward pressure”. And the Australian economy can “sustain lower rates of unemployment and underemployment”. Inflation pressures also remain “subdued”. On the positive side, there are “further signs of a turnaround” in housing markets, especially in Sydney and Melbourne. Such stabilization is expected to support spending.

            RBA statement here.

            Released earlier, Australia retail sales dropped -0.1% mom in July, below expectation of 0.2% mom. Current account surplus widened to AUD 5.9B in Q2, above expectation of AUD 1.5B.

            China launched WTO complaint against US tariffs

              China’s Commerce Ministry said that it has launched a complaint at the WTO against the US over tariffs. No details were released regarding the case, but MOFCOM just said the tariffs affected USD 300B of Chinese exports. It also said the latest tariff actions violated the consensus reached by presidents of both countries at G20 in Osaka.

              Under WTO rules, the US will have 60 days to try to settle the dispute. Afterwards, China could WTO to adjudicate. If US is found to have broken rules, China would get approvals for trade sanctions. But even so, the process could take several years.

              UK PMI manufacturing dropped to 47.4, 7-year low

                UK PMI Manufacturing dropped to 47.4 in August, down from 48.0 and missed expectation of 49.5. That’s also the lowest level in more than 7 years. Markit also noted that new orders contracted as fastest pace in over seven years too. Business confidence dropped to series-record low.

                Rob Dobson, Director at IHS Markit, which compiles the survey:

                “High levels of economic and political uncertainty alongside ongoing global trade tensions stifled the performance of UK manufacturers in August. Business conditions deteriorated to the greatest extent in seven years, as companies scaled back production in response to the steepest drop in new order intakes since mid- 2012. Based on its historical relationship against official ONS data, the latest PMI Output Index is consistent with a quarterly pace of contraction close to 2%. The outlook also weakened as the multiple headwinds buffeting the sector saw business optimism slump to a series-record low.

                “Demand from domestic and export markets both weakened in August, with new export business suffering the sharpest fall in seven years. The global economic slowdown was the main factor weighing on new work received from Europe, the USA and Asia. There was also a further impact from some EU-based clients routing supply chains away from the UK due to Brexit.

                “The further downturn in export orders occurred despite a weakening in the sterling exchange at the start of the month. This was felt on the costs front though, with 80% of companies providing a reason for higher purchase prices making at least some reference to the exchange rate. The current high degree of market uncertainty, both at home and abroad, and currency volatility will need to reduce significantly if UK manufacturing is to make any positive strides towards recovery in the coming months.”

                Full release here.

                Eurozone PMI manufacturing finalized at 47.0, Germany in steepest decline, Franc bucks the trend

                  Eurozone PMI Manufacturing was finalized at 47.0 in August, unrevised. That was slightly higher than July’s final reading of 46.5. Markit noted that production and new orders continued to fall as confidence hits lowest since November 2012. Also, employment declined for the fourth month running during August.

                  Among the states, improvement were generally seen but readings stayed dismal. Germany was revised slightly lower to 43.5, well below 50. Australia was at 48.6. Italy was at 48.7. Spain was at 48.8. Ireland even fell to 76-month low at 48.6. France (51.1), the Netherlands (51.6) and Greece (54.9) were the brighter spots.

                  Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                  “Eurozone producers are suffering as the summer slump in factory production persisted into August. Although up on July, August’s manufacturing PMI was the second-lowest since early 2013, and a marked deterioration in optimism about the year ahead suggests companies are expecting worse to come.

                  “The deteriorating manufacturing conditions mean the goods-producing sector is likely to act as an increased drag on eurozone economic growth in the third quarter. At current levels, the survey is consistent with goods production declining at a quarterly rate of 1%.

                  “Prices are falling as companies offer discounts in the face of disappointingly weak demand, and payroll numbers are being culled at one of the steepest rates seen over the past six years as companies increasingly seek to cut costs in the uncertain trading environment.

                  “Trade wars and tariffs remain the biggest concerns among producers, and the escalation of global trade war tensions in August encouraged further risk aversion.

                  “Germany is suffering the steepest decline, in part reflecting slumping global demand for autos and business machinery. While France bucked a wider downturn trend, even here growth was only very modest.”

                  Full release here.

                  China Caixin PMI Manufacturing rose to 50.4, but overall demand didn’t improve

                    China Caixin PMI Manufacturing rose to 50.4 in August, up from 49.9 and beat expectation of 49.8. Caixin note marginal expansion of output. New orders were broadly stable despite further decline in export sales. However, output charges fell at quickest rate since December 2015.

                    Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

                    “The Caixin China General Manufacturing PMI stood at 50.4 in August, up from 49.9 in the previous month, showing an improvement in the manufacturing sector.

                    “The subindex for new orders stayed in expansionary territory, but it inched down, suggesting flat demand for manufactured products. The gauge for new export orders remained in contractionary territory and fell to the lowest level this year in August, reflecting declining foreign demand amid an intensifying trade dispute between China and the U.S. The output subindex stayed in positive territory and rose further, pointing to increased production activity.

                    “The employment subindex jumped to a level only marginally lower than the 50-point mark that divides expansion from contraction, showing a relative improvement in labor market conditions.

                    “The subindex for stocks of purchased items fell further into negative territory, reflecting manufacturers’ growing reluctance to replenish inventories. The subindex for suppliers’ delivery times dropped further into decline, indicating that they have delayed deliveries even longer. The measure for stocks of finished goods rebounded into positive territory, suggesting growing inventories amid the improved production environment. However, it remains to be seen whether production will continue to improve.

                    “Although it remained in positive territory, the gauge for future output dropped, reflecting subdued confidence among manufacturers. We don’t expect they will soon become more willing to invest. Both the measures for input costs and output charges dropped, implying that industrial prices were on a downward trend.

                    “China’s manufacturing sector showed a recovery in August, mainly due to improved production activity. However, overall demand didn’t improve, and foreign demand declined notably, leading product inventories to grow. There was no sign of an improvement in companies’ willingness to replenish inventories of inputs or in their confidence. Industrial prices trended down. China’s economy showed signs of a short-term recovery, but downward pressure remains a long-term problem. Amid unstable Sino-American relations, China needs to step up countercyclical policies.”

                    Full release here.

                    Japan PMI manufacturing finalized at 49.3, difficult to envisage any near-term improvements

                      Japan PMI Manufacturing was finalized at 49.3 in August, revised down from 49.5, slightly down from July’s 49.3. Markit noted sluggish demand conditions persisted in August. Output continued to decline while business confidence was subdued. Also, firmed reduced output charges to stimulate sales.

                      Commenting on the latest survey results, Joe Hayes, Economist at IHS Markit, said:

                      “Japanese goods producers continued to signal difficult conditions during August, reflecting the broader regional tone within the APAC manufacturing economy. The headline index was among the lowest seen across the past three years.

                      The sector was plagued by production cutbacks and flagging demand, which have been the trends so far in 2019. Softer growth across Asia, particularly in China, was reported to have dented export opportunities.

                      “Meanwhile, the escalation of tensions with Korea merely adds extra downside risk to an already fragile environment. August data showed a ninth straight month-on-month fall in export sales, while the domestic market was similarly weak. As such, firms were wary towards the manufacturing sector outlook, cautious of the role the consumption tax hike will play, in addition to the drop-off of Olympic Games-related demand ahead of Tokyo 2020.

                      “With external and domestic headwinds aplenty, it is difficult to envisage any near-term improvements in Japan’s manufacturing sector.”

                      Also from Japan, capital spending rose 1.9% in Q2, above expectation of 1.9%.

                      Australia AiG PMI rose to 53.1, manufacturing conditions improved

                        Australia AiG Performance of Manufacturing Index rose to 53.1 in August, up from 51.3. AiG noted that “manufacturing conditions improved in August, with increasing levels of production and rising exports”. And “overseas demand for Australian manufactured products remains strong, particularly for consumable manufacturing products.”

                        Also from Australia, TD securities inflation rose 0.0% mom in August. Company operating profits rose 4.5% qoq in Q2, much higher than expectation of 1.7% qoq.

                        New Zealand Treasury: Continued Business Pessimism Increased Downside Risk

                          In the Monthly Economic Indicators report, New Zealand Treasury warned that “continued weakness in business confidence to weigh on domestic economic growth”, “renewed US-China trade tensions lead to significant market volatility”. Also, “global slowdown in manufacturing continues, but shows little sign of spilling over into services”.

                          The report noted that “manufacturing sector indicated contractionary sentiment for the first time since August 2012” while ANZ Business Confidence fell further. And, “continued general business pessimism has increased the downside risk for our near-term GDP growth forecasts, but there are tentative signs that the downward trend in confidence may have stabilised.”

                          Full report here.

                          Released from New Zealand, terms of trade index rose 1.6% qoq in Q2, up from 1.0% qoq and beat expectation of 1.0% qoq.

                          China tells US to stop being a school bully as new tariffs kicked in

                            New 15% tariffs on more than USD 125B in Chinese imports took effect over the weekend, while the levies on the rest of USD 300B are still on track for December 15. China also started retaliation on the USD 75B in American goods. At the same time, US President Donald Trump indicated on Sunday that talks are still planned for September. He noted, “we are talking to China, the meetings in September, that hasn’t changed.”

                            On the other hand, Chinese state media repeated its hard line messages. The official Xinhua news agency warned “the United States should learn how to behave like a responsible global power and stop acting as a ‘school bully’.” The People’s Daily also emphasized “China’s booming economy has made China a fertile ground for investment that foreign companies cannot ignore.”

                            ECB Holzmann expressed criticism toward further monetary easing

                              New Austrian National Bank Governor and ECB Governing Council member Robert Holzmann set out his hawkish line over the weekend. He told broadcaster ORF that He’d “probably express more criticism toward proposals for future deepening of the monetary footprint.” He noted that “Cheap money has its charms but also its limits, especially when it lasts for a long time.”

                              Holzmann also said the “probability of further effects” of monetary stimulus was “very slightly”. On the other hand, the short- or long-term risks associated “have risen to a great extent because low rates per se carry the risk of misallocation of resources and misallocation of price discovery.

                              He added: “You see this in real estate prices, in gold prices and in erratic stock prices. The long-term effects could be very negative for Europe and the world.”

                              Trump: We don’t have a tariff problem, we have a Fed problem

                                US President Donald Trump complains Fed again today. He pointed to “Euro is dropping against the Dollar ‘like crazy'”. (Our comment: No, it’s just a small decline). And, that give Eurozone a “big export and manufacturing advantage”. At the same time “Fed does NOTHING!”.

                                Trump repeated his usual comment that “if the Fed would cut, we would have one of the biggest Stock Market increases in a long time.” He went further that “we don’t have a Tariff problem”, “we have a Fed problem”.

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                                US personal income rose 0.1%, spending rose 0.6%

                                  In July, US personal income rose 0.1%, below expectation of 0.3%. Spending grew 0.6%, above expectation of 0.5%. The increase in personal income in July primarily reflected increases in compensation of employees and government social benefits to persons that were partially offset by a decrease in personal interest income. Headline PCE inflation rose to 1.4% yoy, matched expectations. Core PCE inflation was unchanged at 1.6% yoy, matched expectations.

                                  Full release here.

                                   

                                  Canada GDP grew 0.2% in June, 0.9% in Q2

                                    Canada GDP grew 0.2% mom in June, above expectation of 0.1% mom. That’s also the fourth consecutive month of expansion. Growth in 17 of 20 industrial sectors more than compensated for a decline in manufacturing. Goods-producing industries declined 0.2% as a result of lower manufacturing, largely offsetting the growth in May. Services-producing industries were up 0.3%.

                                    For Q2, GDP grew 0.9% qoq, after just 0.1% growth in each of the previous two quarters. This growth was led by a 3.2% rise in export volumes, while final domestic demand edged down (-0.2%). Expressed at an annualized rate, real GDP advanced 3.7% in Q2.

                                    Eurozone CPI unchanged at 1.0% yoy, unemployment rate unchanged at 7.5%

                                      Eurozone CPI was unchanged at 1.0% yoy in August, matched expectations. Core CPI was also unchanged at 0.9% yoy, missed expectation of 1.0% yoy. Looking at the components, food, alcohol & tobacco is expected to have the highest annual rate in August (2.1%, compared with 1.9% in July), followed by services (1.3%, compared with 1.2% in July), non-energy industrial goods (0.4%, stable compared with July) and energy (-0.6%, compared with 0.5% in July).

                                      Eurozone unemployment rate was unchanged at 7.5% in July, matched expectations. It’s also the lowest rate recorded since July 2008. EU 28 unemployment was unchanged at 6.3%, also the lowest since 2000. Among the Member States, the lowest unemployment rates in July 2019 were recorded in Czechia (2.1%) and Germany (3.0%). The highest unemployment rates were observed in Greece (17.2% in May 2019) and Spain (13.9%).

                                      Swiss KOF unchanged at 97, More favorable signals from foreign demand

                                        Swiss KOF Economic Barometer was unchanged at 97.0 in August, above expectation of 95.2. KOF noted that “somewhat more favourable signals than before are coming from indicators of foreign demand and domestically from consumer prospects and manufacturing. The remaining indicator bundles (accommodation and food service activities, financial, insurance and other services as well as construction), however, tend to point to stagnation or slight deterioration in economic sentiment.”

                                        Full release here.

                                        Australia building approvals dropped -9.7%, activity taking another leg down

                                          Released from Australia, building approvals dropped -9.7% mom in July, much worse than expectation of 0.0% mom. The decline tool approvals to lowest level in more than six years, and down -28% on a year ago. Also, total approvals are now tracking materially below ‘underlying demand’ for the first time since 2013. The data highlighted risk that building activity is taking another leg down. Also released, private sector credit rose 0.2% mom in July, matched expectations.

                                          Separately, RBA said in its corporate plan that “movements in asset values and leverage may be more important for economic developments than in the past given the already high levels of debt on household balance sheets.” And, “especially in the context of weak growth in household income, high debt levels could complicate future monetary policy decisions by making the economy less resilient to shocks,” it added.