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UK PMI construction rose to 52.3, but optimism sank

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    ActionForex.com
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    UK PMI construction rose from 49.2 to 52.3 in September, above expectation of 48.1. S&P Global said total industry activity rose for the first time three months. Output growth was linked to work on delayed projects. Business optimism was the lowest since July 2020 as new orders stalled.

    Tim Moore, Economics Director at S&P Global Market Intelligence, said: “Forward-looking survey indicators took another turn for the worse in September, with new business volumes stalling and output growth expectations for the year ahead now the lowest since July 2020. This reflected deepening concerns across the construction sector that rising interest rates, the energy crisis and UK recession risks are all set to dampen client demand in the coming months.”

    Full release here.

    IMF lowers 2019 global growth forecast to 3.3%, but expects pick up in H2

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      ActionForex.com
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      In the World Economic Outlook report, IMF revised down global growth forecasts as weakness in the second half of 2018 is expected to persist into the first half of 2019. IMF expects slowdown in 70% of world economy. Global growth would dropped from 3.6% in 2018 to 3.3% in 2019, revised down by -0.2%. There were negative revisions for several major economies including the euro area, Latin America, the United States, the United Kingdom, Canada, and Australia.

      Nevertheless, IMF still expects growth to pickup again in second half of the year. There will be support from “significant monetary policy accommodation by major economies”. Fed, ECB, BoJ and BoE have “all shifted to a more accommodative stance”. Meanwhile, China has ramped up its fiscal and monetary stimulus. Outlook for US-China trade tensions has also “improved as the prospect of a trade agreement take shape”. “Global recession is not in the baseline projections,

      However, IMF maintained “there are many downside risks”, including trade tensions that could “could flare up again and play out in other areas (such as the auto industry), with large disruptions to global supply chains.: Growth in Eurozone and China “may surprise on the downside”. Brexit risks remain “heightened”.

      Here is a summary of the growth forecasts (comparing with January forecasts):

      • World in 2019 at 3.3% (down -0.2%)
      • World in 2020 at 3.6% (unchanged).
      • US in 2019 at 2.3% (down -0.2%)
      • US in 2020 at 1.9% (up 0.1%)
      • Eurozone in 2019 at 1.3% (down -0.3%)
      • Eurozone in 2020 at 1.5% (down -0.2%).
      • Japan in 2019 at 1.0% (down -0.1%).
      • Japan in 2020 at 0.5% (unchanged).
      • China in 2019 at 6.3% (up 0.1%).
      • China in 2020 at 6.1% (down -0.1%).

      Full report here.

      France GDP grew 0.9% qoq in Q2, slightly above expectations

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        ActionForex.com
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        France GDP grew 0.9% qoq in Q2, slightly above expectation of 0.8% qoq. GDP still stood -3.3% below the level of Q4 2019, before the pandemic.

        Final internal demand (excluding inventory changes) made a positive contribution to GDP growth this quarter (+0.9 points after +0.1 points in the previous quarter). Gross fixed capital formation (GFCF) accelerated (+1.1% after +0.4%), as households’ consumption expenditure (+0.9% after +0.2%).

        In Q2 2021, imports (+1.9%) increased more than exports (+1.5%). Overall, foreign trade made a slightly negative contribution to GDP growth this quarter: –0.1 points, after –0.5 points in the previous quarter. Lastly, the contribution of inventory changes to the growth of the GDP was slightly positive this quarter (+0.2 points after +0.4 points in Q1 2021).

        Full release here.

        EU von der Leyen: Well prepared for a no-deal Brexit scenario

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          European Commission president Ursula von der Leyen said there were “genuine progress” in post-Brexit negotiations with the UK. She emphasized that “the next days are going to be decisive,” on whether a deal could be clinched.

          “With very little time ahead of us, we will do all in our power to reach an agreement. We are ready to be creative. But we are not ready to put into question the integrity of our single market,” she added.

          “We need to establish robust mechanisms, ensuring that competition is – and remains – free and fair over time. In the discussions about state aid, we still have serious issues, for instance when it comes to enforcement,” said von der Leyen.

          She also reiterated, “the European Union is well prepared for a no-deal-scenario, but of course we prefer to have an agreement.”

          Italy may submit revised budget next Wed

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            ActionForex.com
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            After repeated rumors, Italy still haven’t submitted the revised Draft Budget Plan to European Commission up till now. It’s reported again today that the coalition government will have the budget ready by next Wednesday.

            Another rumor comes up on Economy Minister Giovanni Tria’s resignation, on budget row with the cabinet. It’s reported that Five Star movement has requested Tria to step down, for ceding too much ground to EU. However, it seems that the League wants Tria to stay.

            Five-Star leader, Italian Deputy Prime Minister Luigi Di Maio denied the rumor today and said “Tria is doing a great job and a winning team must not be changed”.

            ECB Draghi emphasized predictability in monetary policy adjustments

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              ECB President Mario Draghi emphasized in a conference in Frankfurt yesterday that any monetary policy adjustments must be “predictable” and carried out “at a measured pace”. For now, he said ECB “still need to see further evidence that inflation dynamics are moving in the right direction”. Therefore, “monetary policy will remain patient, persistent and prudent.” Draghi also added that “sharp repricing” in the financial markets must be carefully monitored.

              Regarding the steel and aluminum tariffs of the US, Draghi expected the initial impact to be small. However, he warned that “there are potential second-round effects that could have much more serious consequences.” And, risks include “retaliation across other goods and an escalation of trade tensions, and the potential for negative confidence effects which would weigh on business investment in particular.”

               

              Germany Ifo Business Climate ticked down to 88.5, trade deteriorates further

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                ActionForex.com
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                Germany Ifo Business Climate dropped slightly from 88.7 to 88.5 in August, above expectation of 86.7. Current Assessment index ticked down from 97.7 to 97.5. Expectations Index also edged down from 80.4 to 80.3.

                By sector, manufacturing was unchanged at -6.9. Services rose from 1.0 to 1.3. Trade dropped further from -21.6 to -25.8. Constructions improved from -16.2 to -14.5.

                Ifo said, “uncertainty among the companies remains high, and the German economy as a whole is expected to shrink in the third quarter.”

                For trade, Ifo said that “many enterprises are facing a dilemma: high inflation is dragging down their business, but they can hardly avoid raising prices due to increased costs.”

                Full release here.

                UK payrolled employees rose 74k in Oct, unemployment rate at 3.6% in Sep

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                  ActionForex.com
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                  In October, UK payrolled employees rose 0.2% mom or 74k. Comparing with October 2021, payrolled employees rose 2.7% yoy or 772k. Median monthly pay rose 6.0% yoy. Claimant counts rose 3.3k, versus expectation of -12.6k.

                  In the three months to September, comparing to the previous three month period, unemployment was down -0.2% to 3.6%. Employment rate was unchanged at 75.5%. Economic inactivity rate rose 0.2% to 21.6%. Average earnings excluding bonus rose 5.7% yoy. Average earnings including bonus rose 6.0% yoy.

                  Full release here.

                  US initial jobless claims dropped to 411k, above expectation

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                    ActionForex.com
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                    US initial jobless claims dropped -7k to 411k in the week ending June 18, above expectation of 380k. Four-week moving average of initial claims rose 1.5k to 398k.

                    Continuing claims dropped -144k to 3390k in the week ending June 12, lowest since March 21, 2020. Four-week moving average of continuing claims dropped -55k to 3553k.

                    Full release here.

                    RBA Minutes: Further rate cut is more likely than not

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                      ActionForex.com
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                      Australian Dollar falls broadly today on dovish RBA minutes as well as miss in house price data. RBA cut cash rate by -25bps to 1.25% at the June 4 meeting. The minutes noted that “members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.”

                      Policymakers acknowledged that inflation has been below 2-3% target range for three years and even deteriorated to 1.5% in Q1. Unemployment rate had not declined any further in the last six months despite ongoing job growth. It has eve edged up in the most recent two months. Thus, “a lower level of interest rates would support growth in the economy, thereby reducing unemployment and contributing to inflation rising to a level consistent with the target.”

                      Also, lower interests could support the economy through lower exchange rate, reduced borrowing rates for businesses, and lower interest payments for households. And give the extent of spare capacity in the economy and the subdued inflationary pressures, there was “a low likelihood of a decline in interest rates resulting in an unexpectedly strong pick-up in inflation.”

                      Instead, lowest interest rates would ” stimulate activity and thereby improve the resilience of the Australian economy to any future adverse shocks.”

                      Full minutes here.

                      Johnson and Corbyn couldn’t agree on timetable for Brexit bill

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                        ActionForex.com
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                        UK Prime Minister Boris Johnson met opposition Labour leader Jeremy Corbyn today. But they failed to agree on a timetable to press ahead with the Brexit Withdrawal Agreement Bill.

                        Labour spokesperson said “Jeremy Corbyn reiterated Labour’s offer to the prime minister to agree a reasonable timetable to debate, scrutinise and amend the withdrawal agreement bill, and restated that Labour will support a general election when the threat of a no-deal crash-out is off the table.”

                        Afterwards in the PMQs, Johnson accused Labour of seeking to scupper Brexit. Corbyn called for “the necessary time to improve on this worse-than-terrible treaty”.

                        RBNZ: GDP to be lowered by 37 by level 4 coronavirus measures

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                          ActionForex.com
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                          RBNZ released a paper outlining the economic impacts of coronavirus containment measures. At alert level 4 with lockdown of non-essential activity, GDP would be reduced by -37% during the period. that’s slightly lower than treasury’s estimate of -40%. At alert level 3 with restrictions on trading activity, GDP will only be -19% lower during the period.

                          The paper also noted that the “ongoing impacts” are not included in the analysis. And, “even with significant support from fiscal and monetary policy, these would add to the overall economic costs.” Though, ” estimates of the direct impacts may be overstated because the decline in global economic activity and international travel would have reduced economic activity in New Zealand even without any containment measures.”

                          Full paper here.

                          UK PM May maintains her pledge to deliver Brexit ahead of no-confidence vote

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                            ActionForex.com
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                            In the UK, eyes are now first on no-confidence vote on Prime Minister Theresa May at 1900GMT. After yesterday’s humiliating 432 to 202 defeat of her Brexit deal, May told the parliament today that “What the government wants to do is first of all to ensure that we deliver on the result of the referendum”.

                            She added that “We want to do it in a way that ensures we respect the votes of those who voted to leave in that referendum. That means ending free movement, it means getting a fairer deal for farmers and fishermen, it means opening up new opportunities to trade with the rest of the world.”

                            Opposition Labour leader Jeremy Corbyn urged a new election. He said “if a government cannot get its legislation through parliament, it must got to the country for a new mandate”. And, “there can be no doubt that this is indeed a zombie government.”

                            Conservative backbencher Dominic Grieve, proposed two new bills that would enable preparations for a second referendum. He expected the government to disregard it as it controls the time and schedule for debates. But he added “if Parliament seizes control, then I imagine time will be found for it,” and “it’s a marker, so once it’s down it can be used.”

                            German news paper Handelsblatt reported that Germany, the Netherlands and some other EU countries are trying to explore some concessions regarding the issue of Irish border backstop. But we’ll tend not to pay too much attention to rumors, until they’re confirmed.

                            EU de Montchalin: Any tariffs on UK is economically rational position not revenge

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                              ActionForex.com
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                              EU is expected to approve today the negotiation mandate on future relationship with UK after the Brexit transition period. It’s widely believed that EU will guard against any distortions of trade and unfair competitive advantages as the basis of tariffs and quota free trade agreement.

                              France’s Europe Minister Amelie de Montchalin said that “we can have an agreement with zero tariffs and zero quotas if we can be sure … we will have common norms …regulatory proximity on the basis of EU rules.” And, “If we cannot maintain this regulatory proximity, then we must … apply tariffs or quotas,” she said. “It’s not a position of revenge, it’s an economically rational position.”

                              The time frame to complete a deal by year end is seen as extremely challenging by EU officials. German Europe Minister Michael Roth warned “this is an extremely ambitious timetable.” “The time pressure is immense, the interests are huge, it’s a very complicated treaty, so it will be very hard work.”

                              UK, on the other hand, is expected to publish its own negotiation guidelines on Thursday. It’s believed that the economic and political independence will remain the primary bottomline in the talks.

                              Fed Kashkari: Trade war uncertainty scaring people a little bit

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                                ActionForex.com
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                                Minneapolis Fed President Neel Kashkari urged fed policy makers “should all be paying attention” to the escalation in trade tension between Trump and China. For now, “it’s too soon for any of us to judge” and “none of us knows how to weigh the probability of these different outcomes.” And, “how that washes out in overall inflation I think is hard to judge.”

                                He said the impact to the economy is unknown for the moment as “this could be a lot of chest pounding”. Or, “it could lead to a trade war.” The end results, even something in the middle as usual during negotiations, could prompt business and investors to “pull back” and that could impact economic growth. Also, “the impact on Main Street is going to be seen over the long term.”

                                Kashkari also noted that “uncertainty I think is scaring people a little bit.”

                                BoC Macklem: We’re getting closer on rates, but not there yet

                                  By
                                  ActionForex.com
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                                  BoC Governor Tiff Macklem told a parliamentary committee yesterday that the central bank is “still far from its goal” of ensuring “low, stable, predictable” inflation.

                                  “Inflation has come down in recent months, but we have yet to see a generalized decline in price pressures,” Macklem said. “This tightening phase will draw to a close. We are getting closer, but we are not there yet.”

                                  “We anticipate that (inflation) will stay quite high for the rest of this year. It will start to decline next year,” he noted.

                                  Swiss GDP grew 0.6% in Q1, driven by strong domestic demand

                                    By
                                    ActionForex.com
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                                    Swiss GDP grew 0.6% qoq in Q1, accelerated from prior 0.3% qoq and beat expectation of 0.4% qoq. SECO noted that “Growth was driven primarily by increasing domestic demand. Foreign trade also provided positive impetus. Value added grew in most sectors.”

                                    On the positive side, private consumption grew slightly above average for the first time in six quarters, at 0.4%. The increase in consumption expenditures were also broad-based, in almost all segments. Additionally, most service sectors development positively in Q1. Manufacturing saw dynamic growth at 1.5%. Production stepped up in the pharmaceutical industry as well as in watchmaking and precision instruments.

                                    Full release here.

                                    Ireland Coveney: Johnson deliberately set UK on collision course with EU

                                      By
                                      ActionForex.com
                                      -

                                      UK Prime Minister Boris Johnson’s spokesman said Johnson spoke with French President Emmnauel Macron on Thursday night. Discussions moved on to Brexit that Johnson “will be setting out the same message which he delivered in the House of Commons”. That is, “the withdrawal agreement has been rejected three times by the House of Commons, it’s not going to pass, so that means reopening the withdrawal agreement and securing the abolition of the backstop.”

                                      Referring to Johnson’s statements in House, Ireland’s Foreign Minister, Simon Coveney, said they are “very unhelpful” tot he Brexit process. Coveney said Johnson “seems to have made a deliberate decision to set Britain on a collision course with the European Union and with Ireland in relation to the Brexit negotiations.” And, “the approach that the British prime minister seems to now be taking is not going to be the basis of an agreement, and that’s worrying for everybody.”

                                      Frenchs State Minister for European affairs Amelie de Montchalin said Macron will hold discussion with Johnson in the coming week and “What is still to negotiate is the future relationship… We have to create a working relationship and not get into games, gestures and provocations.”

                                      Bullard: Fed should tack in a more hawkish direction

                                        By
                                        ActionForex.com
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                                        St. Louis Fed President James Bullard said Fed should “tack in a more hawkish direction” over the next few meetings. He warned, “if inflation happens to go away we are in great shape for that. If inflation doesn’t go away as quickly as many are currently anticipating it is going to be up to (Fed) to keep inflation under control.”

                                        He added that if Fed increase the pace of tapering to USD 30B per month, that would open the door for a rate hike at the end of Q1. He has penciled in two hikes for next year and agreed with markets’ assessment. Also, he’s open to the idea of raising interest rate before tapering completes.

                                        US jobless claims rose to 214k, Philly Fed business outlook dropped to 9.4

                                          By
                                          ActionForex.com
                                          -

                                          US initial jobless claims rose 8k to 214k in the week ended December 15, below expectation of 219k. Four-week moving average of initial claims dropped -2.75k to 222k.

                                          Continuing claims rose 27k to 1.688M in the week ended December 8. Four-week moving average of continuing claims rose 6.75k to 1.6725M.

                                          Also released Philly Fed business outlook dropped sharply to 9.4 in December, down from 12.9 and missed expectation of 15.6. That’s also the lowest level since August 2016.

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