Economic Facts – 2nd September 2019


Global Developments: Heightened global tensions, currency wars, and the course of de-dollarization have been pushing central banks to boost their gold purchases. The trend is likely to continue in the coming years, experts say.

Global Developments: We expect the global economy to grow by 2.6% this year and next. This soft performance reflects a weak secular backdrop and rising cyclical headwinds.

  • Risks to this outlook are heavily skewed to the downside. We’re most concerned about open economies with limited policy flexibility. That puts the spotlight firmly on the euro area, which we expect to grow by just 1.0% next year.
  • The secular backdrop continues to point to higher inflation, but cyclical developments point in the opposite direction. We expect global inflation to fall to 2.7% in 2019 from 2.9% this year. That’s despite an acceleration to 2.5% in the US.
  • Central banks have abandoned their plans for policy normalization. We expect the Fed to cut rates by another 75 basis points (b.p.) and the ECB to couple modest rate cuts with additional bond purchases. Policy effectiveness will be key.

Global Developments: This chart shows the changes in speculative bets.

Global Developments: China significantly raised the stakes in the trade war – basically warning that it’s willing to “weaponize” its currency by allowing the yuan to trade above the “magic line” of 7 yuan to the dollar.





The United States: Consumers are less enthusiastic about purchasing a vehicle.

The United States: The Federal government will be limited in its ability to stimulate the economy in the next recession because the fiscal policy is already extraordinarily loose. Given the current economic expansion, the level of government stimulus is unprecedented.

The United States: According to reports, the government has instructed its state-owned enterprises (SOEs) to completely suspend purchases of U.S. agricultural products. No more soybeans, no more cotton, no more hides and skins, grains, pork or dairy products.

The United States: Sharpening trade fears deepened the U.S. yield curve inversion to levels we haven’t seen since 2007. The three-month Treasury bond yielded 28 basis points more than the 10-year note on Monday, the most extreme spread since before the financial crisis.

The United States: The good spot in that is that the wages are still growing very healthy and hence there is a hope that consumer spending may not be affected despite the swirl of bad news about the world economy.

The United States: The University of Michigan index of expectation show a drop-in level to 82.3, which is a new 2019 lows. The index of current conditions is the lowest since 2016. The consumer which has been a strong point of US economy is starting to wither away.




Eurozone: Untangles a world embroiled in trade wars. Sign up here.

Eurozone: Sentiment among euro-area businesses and consumers unexpectedly rose in August, respite from an almost non-stop string of disappointing numbers and recession concerns.

Eurozone: The annual inflation rate in the Euro Area came in at 1 percent in August 2019, unchanged from the previous month and in line with market consensus, a preliminary estimate showed. It remained the lowest inflation rate since November 2016, as cost of energy is expected to fall while prices of food, alcohol & tobacco and services are seen rising further. Inflation Rate in the Euro Area averaged 1.99 percent from 1991 until 2019, reaching an all-time high of 5 percent in July of 1991 and a record low of -0.60 percent in July of 2009.


Eurozone: There is downside risk to Germany’s employment growth, manufacturing and services PMI data in July–August points to weakening domestic activity, while available survey-based indicators show that sentiment among businesses and consumers continued sliding. Against this backdrop, pressures have been mounting for the government to relax its fiscal rules, with a fiscal stimulus package reportedly already in the works in the event of a recession.

Eurozone: Will slower economic growth put pressure on bank lending? In general, the banks looked rather resilient. Having said that, ECB keep putting pressure on banks to accelerate their post-crisis adjustment, so that they can take shelter from the next crisis.




UK: The figures will worry policymakers since they suggest the economy has not bounced back from the 0.2 per cent contraction in the second quarter and point to further weakness ahead of the Brexit deadline of October 31.

UK: Europe is unlikely to make material compromises, especially on the Irish border. The Johnson government is adamant it won’t agree to anything that includes the unpopular backstop, while the EU has stressed – repeatedly – that the backstop is mandatory for any deal. Neither side is likely to blink on this, so there’s almost no scope for a breakthrough before October.



Japan: The blue line represents the OECD leading indicator while the red line shows the reference data. This shows that overall leading indicators are pointing towards below-trend growth, which is confirmed by the leading number released by the Cabinet Office in Japan.

Japan: The low PMI number above is clearly hurting industrial production: Overall, Japanese growth is heading modestly lower. Leading indicators are trending lower, the Markit Economics PMI has been below 50 for several months and the Nikkei is softer.

Japan: Bank of Japan watchers are flagging a growing chance of additional stimulus as soon as next month’s policy meeting, with the yen’s recent advance threatening to sap inflation momentum.





China: After trending lower for the last few years, it has started to move higher. However, it’s still below the reference rate, implying below-trend growth. But at least things are moving in the right direction.

China: China’s Unemployment Rate dropped to 3.61 % in Jun 2019, from the previously reported number of 3.67 % in Mar 2019. China’s Unemployment Rate is updated quarterly, available from Dec 1999 to Jun 2019, with an average rate of 4.08 %. The data reached an all-time high of 4.30 % in Dec 2009 and a record low of 3.00 % in Jun 2000. The data is reported by reported by Ministry of Human Resources and Social Security.

China: Here’s enough weakness in the leading indicators to argue for a modest slowdown in Chinese activity. The leading indicator is still showing below trend activity, the manufacturing sector is in a mild contraction and the stock market has sold-off over the last 4-5 months.

China: China’s share of global exports edged up during the past year. Admittedly, exports have slowed, and there is no question that US tariffs have had a negative impact on US demand for the targeted goods.

China: There is no good news in these tariff announcements. The only minor consolation comes in their timing. By putting off the next two rounds until the import surges have already arrived to stock this year’s back-to-school and winter holiday shopping seasons, President Trump may be coming around, albeit belatedly, to the economic evidence on the costs of his trade war. Thus far, it is American consumers and companies—and not China—who are bearing the burden of his tariffs.

China: Trump’s trade actions in 2018 increased the tariff coverage to more than 50 percent of US imports from China by September 23 of that year.[4] New tariffs in 2018 alone resulted in a coverage of trade protection unmatched over the last 40 years (figure 4).

China: Here is how Beijing wins against Vietnam, as US importers try to shift supply chains out of China.

China: How sensitive are Asian currencies to movements in the renminbi.






Australia: The blue line is the leading indicator, which has ticked above its reference rate this year. This indicates above-trend growth.

Australia: Outlook is confirmed by the Markit Manufacturing PMI: The data here is mostly positive. The OECD leading index is moving higher and the Markit PMI is showing a modestly growing manufacturing sector. The only negative is the stock market, which has sold-off.

Australia: Over the past three years productivity has grown on average each year by just 0.6% and with underlying inflation growing at 1.6% that gets up to 2.2% which is around the level of current wages growth.

Australia: The slowdown in construction work, which unfortunately shows no sign of abating. The latest construction work figures, released on Wednesday by the Bureau of Statistics, show that the volume of both private and public construction has now fallen for four straight quarters.

Australia: since the start of 2014, the annual growth of Australian real household disposable income has always been lower than the OECD average.

That’s five and a half years of underperformance:

Australia: While the OECD uses a broader measure of underemployment than does the ABS (including marginally attached workers – those outside the labour force but who would be willing to work if something became available), the rise and fall of the two measures are largely comparable.

Australia: Nationally, new home sales are down almost 13%, according to the latest Housing Industry Association (HIA) figures, despite an uptick in the most recent quarter.



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