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Sat, 27th May 2017

Anirudh Sethi Report

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Archives of “Economy” Category

China economists temper growth expectations after Q1

With China’s gross domestic product widely pegged to maintain growth of 6.8 per cent in the first quarter of 2017, some official economists and state-backed think tanks are already predicting growth will slow markedly in the second quarter.

Zhang Baoliang, a researcher at the economic forecasting department of the State Information Center, was cited by the state-run Securities Times on Monday as predicting growth could slow in Q2 in the face of low external demand, a rising tide of “de-globalisation” and protectionism, uncertain policy outlook from the US, persistent economic imbalances in China and likely reduction in domestic sales of automobiles and housing.

The paper cited Mr Zhang and a number of other economists as predicting growth of 6.8 per cent in the first quarter.

More bluntly, Peking University’s Economic Policy Research Group has forecast GDP growth gradually slowing to 6.5 per cent over the next three quarters, bringing the annual rate to around 6.6 per cent.

At present a median estimate from economists compiled by Bloomberg predicts GDP growth for the first quarter will come in at 6.8 per cent year on year, with 16 of the 36 economists surveyed forecasting exactly that rate.

Global economy – what’s coming up this week?

How is this for a quick summary of what the major global economic events are coming up this week? What have I missed that you are watching for (in the comments please)?

TUESDAY:
  • 0830GMT 11 April  – U.K. inflation, expected 2.3% y/y (prior also 2.3%)
  • 0900GMT 11 April – Eurozone industrial production (Eurostat data), expected +0.1% on the month (1.9% y/y), prior 0.9% (0.6%)
WEDNESDAY:
  • 0130GMT 12 April – China CPI and PPI, March
  • CPI expected 1.0% y/y, prior 0.8%
  • PPI expected 7.5%, prior 7.8% (highest since 2008)
THURSDAY:
  • Some time on 13 April Asian day China March trade balance … expect the impact of the lunar new year holiday to start top fade from the data with this release
FRIDAY:
  • 1230GMT 14 April – US retail sales & CPI for March
  • Retail sales headline -0.1% m/m, prior +0.1%
  • Core CPI headline 0.2% m/m (2.3% y/y) with prior of 0.2% (2.2%) (Core is excl food and energy)

US inflation expectations hit lowest point of 2017 as ‘Trump trade’ falters

US inflation expectations slid to their lowest level of the year on Thursday, in a further sign that the so-called Trump trade is on pause.

Benchmark 10-year breakeven rates, a market measure of inflation expectations, fell to 1.95 per cent, their lowest level since the end of December. Other indicators have also dipped lower, including 5-year breakeven rates.

All 4 China PMIs … signalling a brewing storm?

Official and non-official PMIs are diverging in China. Admittedly they are different surveys (the private survey is more heavily weighted towards small firms)

Official PMIs:
Manufacturing PMI (March): 51.8
  • Highest since April of 2012
  • expected 51.7, prior was 51.6  
Service PMI (March): 55.1
  • prior was 54.2
The private (Caixin) PMIs:
Caixin Manufacturing PMI (March): 51.2
  • prior 51.7
Caixin Services 52.2 (prior 52.6) & Composite 52.1 (52.6)
Fed rate hike …
Fed signalling (still early stages admittedly) a ‘tapering’ (or wind-down, or normalisation or whatever you’d like to call it)…
Add this to the tiny steps taken at the Bank of Japan (eg) …
and at least some early signalling from the ECB … 
Not to mention the protectionist threat from the US, and the early frustrations with getting anything done by the new US administration
Dunno … but if the AUD is any guide to how the market is assessing all this stuff … The Australian dollar has tipped over and is lower again today. AUD is the world’s favourite ‘China proxy’, so maybe it is signalling a slowdown ahead on China.

March 2017 US ADP employment report 263k vs 187k exp

Details from the March 2017 US ADP employment data report 5 April 2017

  • Prior 298k. Revised to 245k
  • Small businesses 118k vs 104k prior
  • Medium businesses 100k vs 122k prior
  • Large businesses 45k vs 72k prior
  • Goods producing 82k vs 106k prior
  • Service producing 181k vs 193k prior
  • Construction 49k vs 66k prior
  • Manufacturing 30k vs 32k prior
  • Trade, transport 34k vs 9k prior
  • Professional & Business 57k vs 66k prior

  • Financial activities 25k vs 4k prior
  • Leisure and hospitality 55k vs 40k prior

Another big beat from this indicator and the dollar has responded by breaking 111.00 to a high of 111.19.

I’ll grab the details when the ADP site comes back up.

Brazil Reports 14.6% Jump In February Oil Output, Exports Almost Double

Brazilian oil output in February was 14.6 percent higher year-over-year, according to the latest data released by ANP, the South American country’s petroleum regulator.

February production touched 2.676 million barrels per day, an ANP statement said, adding that natural gas output also rose 9.2 percent compared to the same month last year.

Figures released earlier in March from the nation’s Trade Ministry said that oil exports had jumped 94 percent year-over-year in February at 45.7 million barrels – a figure that topped the January 2017 record by 12 percent.

he surge in oil exports was a function of higher production from the offshore areas in Brazilian waters, where huge oil finds were made in the pre-salt and sub-salt layers in the past few years.

 

Japan’s real GDP likely up 2% in February: JCER

Japanese real gross domestic product rose 2% on the month in February, the Japan Center for Economic Research estimated Tuesday.

The second straight month of growth was driven by a 6.4% jump in exports as automobiles and other products scored sharp gains.

 Consumer spending inched up 0.2%, buoyed by strong sales of new cars.

Housing investment climbed 2.7%. But capital spending fell 1.1%, partly on sluggish investment in machinery.