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UK PMI manufacturing finalized at 55.2, recovery gathered pace

    By
    ActionForex
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    UK PMI Manufacturing was finalized at 55.2 in August, up from July’s 53.3. That’s also the highest level in 30 months. Markit noted output and new orders rose at solid and accelerated rates. Input price inflation was also at 20-month high.

    Rob Dobson, Director at IHS Markit:

    “The recovery of the UK manufacturing sector gathered pace in August. Output expanded at the fastest rate in over six years as new work intakes rose to the greatest extent since November 2017, led by an upturn in domestic demand and signs of recovering exports. Business optimism also remained encouragingly robust and close to July’s recent peak.

    “However, companies report that the current bounce is mainly driven by the restarting of manufacturers’ operations and reopening of clients as COVID-19 restrictions continue to be relaxed. Backlogs of work fell at an increased rate, hinting at spare capacity, and the labour market remains worryingly weak, with job losses registered for the seventh straight month. The downturn in employment may have further to run as the government’s furlough scheme is phased out unless demand rises sharply.

    “Given the fragility of demand and uncertain outlook, both in terms of COVID-19 and Brexit, policymakers may struggle to prevent a ‘surge-then-slump’ scenario from developing.”

    Full release in PDF.

    Eurozone PMI manufacturing finalized at 51.7, next few months’ data all-important

      By
      ActionForex
      -

      Eurozone PMI Manufacturing was finalized at 51.7 in August, slightly down from July’s 51.8. Markit noted marked gains in output and new orders. Also, confidence was highest for over two years but job losses continued at strong rate. Among the member states, Italy hit 26-month high at 53.1. Germany hit 22-month high at 52.2. But Spain, France and Greece are in contraction.

      Chris Williamson, Chief Business Economist at IHS Markit said:

      “Eurozone factory output rose strongly again in August, providing further encouraging evidence that production will rebound sharply in the third quarter after the collapse seen at the height of the COVID- 19 pandemic in the second quarter. Business expectations for output in a year’s time also rose to the highest for over two years as prospects continued to brighten from the unprecedented gloom seen earlier in 2020.

      “Caution is warranted in assessing the likely production trend… Worryingly, order book growth cooled slightly in August, and there are indications that firms are bracing for a near-term weakening of demand… Of note, a key theme of the latest survey is one of firms taking a cautious approach to costs and spending, notably in respect to investment and hiring… “In short, manufacturing is currently being buoyed by a wave of pent up demand, but capacity is being scaled back. The next few months’ data will be all-important in assessing the sustainability of the upturn.”

      Full release here.

      RBA kept cash rate at 0.25%, expand and extend term funding facility

        By
        ActionForex
        -

        RBA left cash rate unchanged at 0.25% as widely expected. The target for 3-year AGS was also kept at 0.25%. On the other hand, it decided to increase the size of the Term Funding Facility to around AUD 200B. Also, the access to facility will also be extended. It also pledged to maintain “highly accommodative settings as long as is required”. It “will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.”

        On the economy, RBA reiterated that the downside is “not as severe as earlier expected”. But recovery is “both uneven and bumpy” with outbreak in Victoria having a “major effect” of the state’s economy. Unemployment and underemployment “remain high” and it’s “likely to be some months” before a meaningful recovery in labor market takes place. Wages and price prices pressures also “remain subdued” and “likely to continue for some time”.

        RBA also acknowledged that “US dollar has depreciated against most currencies over recent months. Given this and higher commodity prices, the Australian dollar has appreciated, to be around its highest level in nearly two years.”

        Full statement here.

        Australia AiG manufacturing dropped to 49.3, Victoria in contraction too

          By
          ActionForex
          -

          Australia AiG Performance of Manufacturing Index dropped to 49.3 in August, down from July’s 53.5, back in contraction. The details are mixed as production dropped -3.0 to 53.4. Employment dropped -3.2 to 50.2. New orders dropped -6.1 to 46.6. Exports rose 10.8 to 52.2. Average wages rose 2.0 to 50.

          There was large divergence between larger manufacturing states. Victoria’s PMI dropped by -9.3pts and back into contraction at 44.0. New South Wales PMI also dropped -5.2 pts to 51.0. But South Australia PMI Rose 3.3 pts to 65.3. Queensland PMI also rose 9.7 to 47.1.

          Full release here.

          Also released from Australia, building permits jumped 12.0% mom in July versus expectation of -0.5% mom. Current account surplus widened to AUD 17.7B in Q2 versus expectation of AUD 13.0B. From New Zealand, building permits dropped -4.5% mom in July.

          China Caixin PMI manufacturing rose to 53.1, post-epidemic recovery continued

            By
            ActionForex
            -

            China Caixin PMI Manufacturing rose to 53.1 in August, up fro m52.8, above expectation of 51.3. Markit noted the sharpest increases in output and new orders since the start of 0211. New export work rises for the first time in 2020 to date. Employment also moves closer to stabilization.

            Wang Zhe, Senior Economist at Caixin Insight Group said: “Overall, the post-epidemic economic recovery in the manufacturing sector continued. Supply and demand expanded with the pickup in overseas demand. Backlogs of work continued to increase. Both quantity of purchases and stocks of purchased items also grew. Companies’ future output expectations remained strong, reflecting a positive outlook for the manufacturing sector for the year ahead.

            “Employment remained an important focus. An expansion of employment relies on long-term improvement in the economy. Macroeconomic policy supports are essential, especially when there are still many uncertainties in domestic and overseas economies. Relevant policies should not be significantly tightened.”

            Full release here.

            Japan PMI manufacturing finalized at 47.2, moved closer to stabilization

              By
              ActionForex
              -

              PMI Manufacturing was finalized at 47.2 in August, up from July’s 45.2. Markit noted slowest falls in output and new orders since early 2020. Export sales also decline at weakest rate for seven months. There is modest drop in employment.

              Annabel Fiddes, Economics Associate Director at IHS Markit, said: “The latest PMI data show that Japan’s manufacturing sector moved closer to stabilisation in August, as firms signalled weaker drops in output and orders… It is hoped that as economies around the world reopen and business operations normalise, this will feed through to firmer customer demand and a recovery of Japanese manufacturing activity in the months ahead.”

              Full release here.

              Japan capital spending dropped -11.3% in Q2, unemployment rate ticked up to 2.9% in Jul

                By
                ActionForex
                -

                Japan’s capital spending dropped -11.3% in Q2, much worse than expectation of -4.0%. That’s also the worst decline since Q1 2010, as coronavirus pandemic hit manufacturing and services investments.

                In July, unemployment rate ticked up to 2.9%, from 2.8%, better than expectation of 3.1%. Job-to-applicants ratio slipped for the seven consecutive month, from 1.11 to 1.08, lowest since April 2014.

                Fed Clarida: Symmetric inflation outcomes requires asymmetric monetary policy reaction function

                  By
                  ActionForex
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                  Fed Vice Chair Richard Clarida explained that if monetary policy “seeks only to return inflation to 2 percent”, the policy will tend to generate inflation that averages less than 2%. That would in turn “tend to put persistent downward pressure on inflation expectations”.

                  To “achieve symmetric outcomes for inflation requires an asymmetric monetary policy reactions reaction function in a low r* world with binding ELB constraints in economic downturns,” he added. Hence, FOMC will no longer refers to 2% inflation goal as “symmetric”, but “averages 2% over time”.

                  He also said said forward guidance and large-scale asset purchases “have been and continue to be effective” with federal funds rate at effective lower bound. He reiterated that “we do not see negative rates as an attractive policy option”. Yield caps and targets were “not warranted” in the current environment.

                  Full speech here.

                  ECB Schnabel: No reason to adjust monetary policy with baseline scenario intact

                    By
                    ActionForex
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                    In an interview with Reuters, ECB  Executive Board Member Isabel Schnabel, said Eurozone’s Q2 GDP contraction of -12.1% qoq was “very large” but “close to our projection of -13%”. Incoming data also “by and large” support the baseline of June projections. She believed that the economic is close to the baseline with a “strong rebound” in Q3, and there will be a “protracted recovery”.

                    Despite recent resurgence of infections, “it looks unlikely that we are going to see a full lockdown again”, she added. And this is “precisely what we assumed in our baseline scenario”. As long as the baseline scenario remains intact, “there is no reason to adjust the monetary policy stance”.

                    Full interview here.

                    Oil prices lifted by AbuDhabi supply cuts, but WTI still struggling around 43

                      By
                      ActionForex
                      -

                      Oil prices rise mildly today as lifted by Abu Dhabi’s supply cuts. The National Oil Company told its customers today that October supplies will be reduced by -30%, deeper than than -5% cut in September. That was directed by UAE government to meet the commitment on recent OPEC+ agreement.

                      WTI crude oil is back above 43 for the moment. But it’s still struggling to find follow through buying to take out 43.38 resistance decisively. Such level is also close to 55 week EMA (now at 43.87). Sustained break of this EMA would carry larger bullish implications for 65.38 resistance next. Nevertheless, rejection by this EMA would at least bring a correction to 38.58 support.

                      New Zealand ANZ business confidence dropped to -41.8, activity dropped to -17.5

                        By
                        ActionForex
                        -

                        New Zealand ANZ Business Confidence dropped to -41.8 in August, down from July’s -31.8, but was revised slightly up from Aug preliminary reading of -42.4. Confidence is particularly weak in agriculture at -80.6, with services at -43.3, retail at -33.3, manufacturing at -37.3, and construction at -16.1.

                        Own activity outlook also dropped back to -17.5, down form July’s -8.9, worse than preliminary reading of -17.0. Retail was worst at -27.5, followed by agriculture at -22.6, manufacturing at -19.4, services at -13.9 and construction at -12.1.

                        ANZ added, “The recent re-emergence of COVID-19 is disheartening, and has taken a real toll on businesses, particularly in Auckland. However, it appears that firms are looking through it to some extent, in that intentions and expectations saw relatively modest falls compared to the first half of the month.”

                        Full release here.

                        China PMI manufacturing edged down to 51.0 in Aug

                          By
                          ActionForex
                          -

                          The official Chinese PMI Manufacturing edged down to 51.0 in August, from 51.1, slightly below expectation of 51.1. PMI Non-Manufacturing, on the other hand, rose to 55.2, up from 54.2, above expectation of 54.0.

                          Zhao Qinghe a senior statistician with the NBS noted, “demand continues to recover, and the supply-demand cycle is gradually improving” with new order index rising for the 4th month to 52.0. trade also improved with new export orders rising 0.7 to 49.1.

                          However, “some companies in Chongqing and Sichuan reported an impact from the heavy rains and floods, resulting in a prolonged procurement cycle for raw materials, reduced orders and a pullback in factory production.”

                          Japan industrial production rose record 8.0% mom, still way off pre-pandemic level

                            By
                            ActionForex
                            -

                            According data from Japan’s Ministry of Economy, Trade and Industry, industrial production grew 8.0% mom in July, well above expectation of 5.0% mom. That’s also the quickest jump on record since 1978. Manufacturers are expect output to grow further by 4.0% mom in August, and further by 1.9% in September. However, METI expects output to remain below pre-pandemic level for some time. Over the year, production was down -16.1% yoy.

                            On the other hand, retail sales dropped -2.8% yoy in July, much worse than expectation of -1.7% yoy. Housing starts dropped -11.4%, better than expectation of -13.7% yoy. Consumer confidence edged down to 29.3, down from 29.5, missed expectation of 29.4.

                            As Prime Minister Shinzo Abe is stepping down, it’s reported that the ruling LDP will vote on September 14 to select a new leader.

                            Canada GDP grew 6.5% mom in Jun, highest on record since 1961

                              By
                              ActionForex
                              -

                              Canada GDP grew 6.5% mom in June, above expectation of 5.2% mom. That’s the largest monthly increase since the series started in 1961. Still, economic activity remained about -9% below February’s pre-pandemic level. Both goods-producing (+7.5%) and services-producing (+6.1%) industries were up as 19 of 20 industrial sectors posted increases in June.

                              Full release here.

                              US PCE price index rose to 1.0%, core PCE accelerated to 1.3%

                                By
                                ActionForex
                                -

                                US personal income rose 0.4%, or USD 70.5B in July, much better than expectation of -0.2% decline. Spending rose 1.9% or USD 267.6B, also above expectation of 1.5% mom. Headline PCE price index rose to 1.0% yoy, up from 0.8% yoy, but missed expectation of 1.2% yoy. On the other hand, Core PCE price index accelerated to 1.3% yoy, up from 1.1% yoy, beat expectation of 1.3% yoy.

                                Also released, goods trade deficit rose 11.7% mom to USD 79.3B

                                Eurozone economic sentiment rose to 87.7, recovered 60% of losses in Mar and Apr

                                  By
                                  ActionForex
                                  -

                                  Eurozone Economic Sentiment Indicator rose to 87.7 in August, up form 82.4, above expectation of 84.9. EU ESI rose 5 pts to 86.9. The ESIs in both regions have so far recovered around 60% of the combined losses of March and April.

                                  As for Eurozone, industrial confidence rose from -16.2 to -12.7. Services confidence rose from -26.2 to -17.2. Consumer confidence rose slightly from -15.0 to -14.7. Retail trade confidence rose from -15.1 to -10.5. Construction confidence, however, dropped from -11.4 to -11.8. Employment Expectations also rose from 86.7 to 89.6.

                                  Full release here.

                                  Swiss KOF rose to 110.2, upswing phase of V-shaped recession

                                    By
                                    ActionForex
                                    -

                                    Swiss KOF Economic Barometer rose to 110.2 in August, up from 86.0, well above expectation of 90.0. It’s the third straight month of rise, and it’s now well above long-term average. KOF also said, “the Swiss economy is in the upswing phase of what appears for the time being a V-​shaped recession.”

                                    The indicator groups for manufacturing, the hospitality sector and foreign demand are primarily responsible for the current increase. To a lesser extent, the indicators relating to financial and insurance services as well as other services contributed to the improvement. The construction sector, on the other hand, recorded a slight deterioration.

                                    Full release here.

                                    France GDP -13.8% in Q2, low point reached in April

                                      By
                                      ActionForex
                                      -

                                      According to first estimate, French GDP dropped -13.8% qoq in Q2. It’s -19% down lower than GDP back in Q2 2019. INSEE said, “the gradual ending of restrictions led to a gradual recovery of economic activity in May and June, after the low point reached in April.”

                                      Looking at some details, household consumption expenditures dropped (–11.0% after –5.8%), as did total gross fixed capital formation in a more pronounced manner (GFCF: –17.8% after –10.3%). General government expenditure also stepped back (–8.0% after –3.5%). Overall, final domestic demand excluding inventory changes fell sharply: it contributed to –12.0 points to GDP growth.

                                      Exports fell this quarter (–25.5% after –6.1%) more strongly than imports (–17.3% after –5.5%). All in all, the foreign trade balance contributed negatively to GDP growth: –2.3 points, after –0.1 points the previous quarter. Conversely, changes in inventories contributed positively to GDP growth (+0.6 points).

                                       

                                      Full release here.

                                      German Gfk consumer climate dropped to -1.8, coronavirus creates uncertainty again

                                        By
                                        ActionForex
                                        -

                                        German Gfk consumer climate for September dropped -1.8, down from -0.2, missed expectation of 2.0. Economic expectations improved to 11.7, up from 10.6. However, income expectations dropped sharply to 12.8, down form 18.6.

                                        Rolf Bürkl, consumer expert at GfK, “an increase in the number of infections and the fear that coronavirus-related restrictions will be further tightened are creating uncertainty and consequently dampening the mood… Whether or not this is just a temporary slowdown will depend primarily on what infection rates look like in future and the necessary measures to be put in place by policy makers.”

                                        Full release here.

                                        Abe steps down as Japanes PM on health issue

                                          By
                                          ActionForex
                                          -

                                          Japanese Prime Minister Shinzo Abe confirmed in an announcement that the is resigning due to worsening health. He said in a news conference, “I am not confident of responding to the trust of the people while I am dealing with my illness and treatment and my health is not good,”

                                          “I cannot be prime minister if I cannot make the best decisions for the people. I have decided to step down from my post.” He added that he won’t comment on his potential successors.

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