By loading the video, you agree to YouTube’s privacy policy.
Learn more
ECB press conference live stream
Fed Daly: Last rate cut an appropriate recalibration of policy for headwinds, not impending downturn
In a Quora.com post, San Francisco Fed Mary Daly said the US is not headed towards a recessions right not. She saw “solid domestic momentum that points to a continued economic expansion:. Also, “the labor market is strong, consumer confidence is high, and consumer spending is healthy.”
But “considerable headwinds”, including global slowdown and trade uncertainties, contributed to fear that a “downturn is right around the corner”. Hence, she’s closely look at whether “fear of recession becomes a self-fulfilling prophecy”.
Daly added that recent rate cut was “appropriate recalibration” of policy in response to the headwinds. And, her support was “not because I see an impending downturn on the horizon.”
Trump: China trade deal could happen sooner than you think
Trump indicated that US and China are “having some very good conversations” on trade. And China want to make deal “very badly” and “it could happen sooner than you think.” He added that’s “because they’re losing their jobs, because their supply chain is going to hell and companies are moving out of China and they’re moving to lots of other places, including the United States.” Additionally, China is “starting to buy our agricultural product again… starting to go with the beef and all of the different things, pork, very big on pork.”
The comments came just a day after Trump’s harsh criticism on China at the United Nations General Assembly. He said “not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale”. And, “as far as America is concerned, those days are over.”
Swiss consumer climate surged to 8 in Q2, highest since 2010
Swiss SECO Consumer Climate rose sharply from -7 to 8 in Q3. That’s the highest level since July 2010, and well above long-term average of -5. Expectations of general economic growth rose to record 48. Employment expectations rose to 29, just slightly below pre-crisis level. Expected financial situation also rose to 3, back above long-term average for the first time in over six years.
Fed’s Collins methodical, forward-looking approach to rate cuts
Boston Fed President Susan Collins suggested that it may become “appropriate to begin easing policy later this year,” highlighting the importance of a “methodical, forward-looking approach” to gradually reduce rates.
Collins anticipated further inflation deceleration would might necessitate further slowdown in economic activity. However, she noted the “considerable uncertainty” surrounding the magnitude and timing of this slowdown. The path ahead, as Collins notes, is expected to be “bumpy,” as suggested by hotter-than-expected employment and price increase readings.
In this context, it will be important to focus on seeking “sustained, broadening signs” of progress towards its dual mandate goals, acknowledging that such progress may unfold unevenly. Collins cautions against setting overly stringent expectations for the data, indicating that “expecting all data to speak uniformly is too high a bar.”
Bundesbank highlights modest improvement in German economy with ongoing risks
Bundesbank, in its latest monthly report, suggested some improvement in the German economy though underlying weaknesses remain. The report notes, “Germany’s economic situation has brightened somewhat, but it remains weak at its core,” signaling uncertainty about the sustainability of economic growth into the second quarter.
Despite these challenges, there has been a noticeable rise in optimism among consumers, businesses, and investors, potentially setting the stage for a stronger economic recovery than previously anticipated. The Bundesbank highlights, “If this improvement continues, the economy could also pick up more significantly than was expected a month ago.”
However, the report also points out several areas of concern. Industry continues to struggle, and the construction sector might see a downturn following a temporary boost from a mild winter. Furthermore, high interest rates are suppressing investment activities, and while export demand shows weakness, consumer spending remains restrained despite favorable conditions in the labor market, such as rising wages and slowing inflation.
Bundesbank Weidmann: I do not rule out higher inflation rates
Bundesbank President Jens Weidmann told the Welt am Sonntag newspaper, “I do not rule out higher inflation rates.” He added, “In any case, I will insist on keeping a close eye on the risk of an excessively high inflation rate and not only on the risk of an excessively low inflation rate.”
He also said that the emergency asset purchase program, known as PEPP, must end when the Covid-19 crisis is over. “The first P stands for pandemic and not for permanent. It’s a question of credibility,” he added.
On the plan of stimulus exit, “the sequence would then be: first we end the PEPP, then the APP is scaled back, and then we can raise interest rates,” he said.
Japan’s industrial production rises 1.8% mom in Dec, a bounce in seesawing pattern
Japan’s industrial production rose 1.8% mom in December, rebounding from prior month’s -0.9% mom contraction, but missed expectation of 2.4% mom.
Manufacturers have tempered expectations for the coming months, predicting a -6.2% mom drop in production in January, followed by a modest 2.2% mom increase in February. The Ministry of Economy, Trade and Industry maintains its assessment of “seesawing” on production.
As an METI official indicated, the recent Noto Peninsula earthquake’s impact on manufacturing appears minimal for January. However, production forecasts are clouded by the suspension of operations at Daihatsu due to issues with collision-safety test irregularities.
“Although we believe that the production sentiment of companies is gradually getting out of the bearish phase, for the time being, we need to pay attention to the impact of the suspension of auto manufacturers’ operation,” the official said.
In separate release, retail sales grew 2.1% yoy in December, well below expectation of 5.0% yoy.
EU said no Eurozone country at serious risk of breaching fiscal rules
In the regular annual assessment of national budgets by European Commission, none of the 19 Eurozone state was found at “serious” risk of breaching EU fiscal rules. Though,
Commission Vice President Valdis Dombrovskis warned that “among the budgetary plans found at risk of non-compliance, the ones that concern us most are those with debt levels that are high and not reduced fast enough.” He explicitly pointed to Italy, France, Belgium and Spain.
And, he urged “all members states that are at risk of non-compliance with the (rules) to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant”. Though, for now, no immediate action is requested.
UK urges EU to match its compromises on Brexit
UK Prime Minister Boris Johnson said he made a “very generous, fair and reasonable offer” to the EU on Brexit. And “what we’d like to hear from you now is what your thoughts are.” And, he also told EU, “if you have issues with any of the proposals that we’ve come up with, then let’s get into the detail and discuss them.”
Johnson’s spokesman also noted, “We are ready to talk to the EU at pace to secure a deal so that we can move on and build a new partnership between the UK and the EU, but if this is to be possible, the EU must match the compromises that the UK has made”. And, “the PM still believes there is an opportunity to get a deal done, but the EU must understand, in order to achieve that, the backstop has to be removed.”
UK PMI construction dropped to 58.7, widespread supply shortages and constrained capacity
UK PMI Construction dropped to 58.7 in July, down sharply from June’s 24-year high of 66.3. House building remained best-performing category. Supply shortages led to another rapid rise in input prices.
Tim Moore, Economics Director at IHS Markit:
“July data marked the first real slowdown in the construction recovery since the lockdown at the start of this year. It was unsurprising that UK construction companies were unable to maintain output growth at the 24-year high seen in June, especially with widespread supply shortages and constrained capacity to take on additional orders…
“Long lead times for materials and shrinking sub-contractor availability were cited as factors holding back work on site… Another rapid increase in purchasing costs was linked to global supply and demand imbalances, but many firms also noted that local issues had amplified inflationary pressures. These included a severe lack of haulage availability, continued reports of Brexit trade frictions, and greater shortages of contractors due to exceptionally strong demand.”
ECB consumer survey reveals 1-yr inflation expectations drop to 3.1%, a two-year low
ECB’s Consumer Expectations Survey for February indicated continuing decline in consumers’ median inflation perceptions over the past 12 months, marking a fifth consecutive month of decrease, settling at 5.5% down from 6.0% in January.
Furthermore, median expectations for inflation over the next 12 months have dipped to 3.1% from 3.3%. This level is the lowest recorded since the onset of Russia’s conflict with Ukraine in February 2022.
Expectations for inflation three years ahead remained stable at 2.5%.
UK retailers urge Chancellor Javid to fix broken business rates system
Over 50 retailers in UK sent a joint letter to Chancellor of the Exchequer Sajid Javid, urged him to fix the “broken” business rates system. The letter was coordinated by the British Retail Consortium.
The letter urged four fixes, including a freeze in the business rates multiplier; fixing transitional relief, which currently forces many retailers to pay more than they should; introducing an ‘Improvement Relief’ for ratepayers; ensuring that the Valuation Office Agency is fully resourced to do its job.
Helen Dickinson, Chief Executive of the BRC said:”These four fixes would be an important step to reform the broken business rates system which holds back investment, threatens jobs and harms our high streets. The new Government has an opportunity to unlock the full potential of retail in the UK, and the Prime Minister’s economic package provides a means to do so.
WH Kudlow: Still planning for Chinese trade team to come in September
White House economic adviser Larry Kudlow said yesterday that there was “quite constructive” telephone conversations at deputy level between US and China and trade. The deputies have agreed to set up another conference call and were working through some of the key issues.
Kudow added “we are still planning for the Chinese team to come over here in September.”
On the economy, Kudlow dismissed the concerns of a downturn. Instead, he said “we don’t anticipate anything but a solid strong economy.”
ECB press conference live stream
By loading the video, you agree to YouTube’s privacy policy.
Learn more
US initial jobless claims dropped to 210k, below expectations
US initial jobless claims dropped -10k to 210k in the week ending October 5, below expectation of 217k. Four-week moving average of initial claims rose 1k to 213.75k. Continuing claims rose 29k to 1.684m in the week ending September 28. Four-week moving average of continuing claims rose 2.5k to 1.665m.
UK wage growth accelerated to fastest since 2008
UK unemployment rate was unchanged at 4.1% in the three months to October, matched expectation. However, wage growth was rather impressive. Average weekly earnings including bonus rose 3.3% 3moy, above expectation of 3.0% 3moy. Average weekly earnings excluding bonus also rose 3.3% 3moy, above expectation of 3.2% 3moy. Wage growth was indeed fastest since 2008. Also claimant count rose 21.9k in November, above expectation of 13.2k.
Fed Barkin: Recent pick up in inflation just a natural rebound
Richmond Fed President Tom Barkin said in a speech, while inflation has run below the 2% target it is “not that far-off target”. “With rounding, you could even call it on target.” The new framework allows “only a moderate” overshoot in inflation. “That moderation limits the risk of de-anchoring while sending a positive signal on inflation.”
He added that recent pick up in inflation is “just a natural rebound from a deflationary second quarter.”. While it’s possible that inflation could escalate in the near future, “I have to say I’m less worried about that possibility.” And, should inflation emerge, the Fed has the tools and the will to address it.”
ECB de Guindos said UK election results eliminate uncertainty in the short term
ECB Vice President Luis de Guindos hailed that “the results of the elections in Great Britain are positive because they eliminate uncertainty in the short term”. And, “we know perfectly well that on the 31st January the United Kingdom will leave the union – this is good in terms of uncertainty, but also hails a new period, one which will not be easy.” “It will not be easy because commerce rules will have to be renegotiated.”
Separately, Governing Council member Francois Villeroy de Galhau said “The economic situation in the euro zone is beginning to stabilise … and as the situation stabilizes so does monetary policy”. He added, “we are applying the measures decided in September and aren’t adding any more… For how long depends on the economic situation and its improvement.” Another Governing Council member Bostjan Vasle said “domestic factors represent the main drive of economic activity while the growth of foreign demand will be weak”.
Fed’s Collins believes rates may have peaked in current cycle
Boston Fed President Susan Collins highlighted that recent rise in long-term yields implies some tightening of financial conditions. “If it persists, it likely reduces the need for further monetary-policy tightening in the near term,” she noted in a speech yesterday.
Such market dynamics further bolstered Collins’ perspective on the current tightening cycle led. “This reinforces my view that we are very near, and perhaps at, the peak federal funds rates for this tightening cycle,” she stated, indicating that the cycle could be nearing its zenith.
However, Collins maintained a flexible stance on the future course of action, and clarified, “I would not take further tightening off the table yet.”
Weighed in on yesterday’s CPI data, which revealed that September’s headline inflation held steady at 3.7% and core inflation eased to 4.1%. Collins said, “Today’s CPI release is a reminder that restoring price stability will take time.”