Tue, 21st November 2017

Anirudh Sethi Report


Archives of “Economy” Category

Eurozone June industrial production mm SA -0.6% vs -0.3% exp

Eurozone June industrial production report 14 Aug

  • 1.2% prev revised down from 1.3%
  • yy 2.6% vs 2.8% exp vs 3.9% prev revised down from 4.0%

Soggy report but euro pairs unfazed with EURUSD holding 1.1800, EURGBPO testing 0.9100 and EURJPY underpinned around 129.50

Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities.




Japan’s economy grows annualized 4.0% in April-June quarter

Japan’s economy grew at an annualized rate of 4.0 percent in the April-June quarter, the government said Monday.

The expansion in inflation-adjusted gross domestic product corresponds to a 1.0 percent increase from the previous quarter.

  Private consumption, a key component of the country’s GDP, was up 0.9 percent.

GDP is the total value of goods and services produced at home.

Japan GDP for Q2 – advance

GDP (seasonally adjusted) for Q2, preliminary, up 1.0% q/q … its just the prelim, but a good beat if confirmed
  • expected 0.6%, prior 0.4%, revised higher from 0.3%
  • So that’s a 6th consecutive quarter of expansion in GDP, the first time in more than 10 years
GDP Annualized (seasonally adjusted) for Q2, preliminary, 4.0% y/y. Ditto, huge beat.
  • expected 2.5%, prior 1.5, revised much higher from 1.0%
  • best result (fastest growth) since the first quarter of 2015
GDP Nominal (seasonally adjusted) for Q2, preliminary 1.1% q/q
  • expected 0.7%, prior -0.3%
GDP Deflator y/y for Q2, preliminary, -0.4% … BOJ won’t like this
  • expected -0.5%, prior -0.8%
GDP Consumer Spending y/y for Q2, preliminary 0.9% q/q
  • expected 0.5%, prior was 0.4% revised from  0.3%
  • The jump in this is the fastest since the January to March quarter of 2014
GDP Business Spending y/y for Q2, preliminary 2.4% q/q
  • expected 1.2%, prior was 0.9%, revised from  0.6%
  • The jump in this is the fastest since the January to March quarter of 2014 also

China trade balance for July: CNY 321.2 bn (expected CNY293.55 bn)

Trade balance data from China for July, this the ‘yuan terms’ (USD terms should be coming soon)

China trade balance for July: CNy 321.2 bn. A beat for the surplus

  • expected CNY293.55bn, prior was CNY 294.30bn

Exports y/y: +11.2%. A miss on exports

  • expected +14.8%, prior was +17.3%

Imports y/y:  +14.7%. And a miss on imports

  • expected +22.6%, prior was +23.1%
For the January to July period:
  • Trade surplus of 1.6tln yuan
  • Exports +14.4% y/y in yuan
  • Imports +24% in yuan

China Forex reserves end-July USD 3.081trln vs 3.057trln prev

China FX reserves end-July data now out 7 Aug

  • gold reserves $75.084bln vs $73.585bln end-June
  • gold reserves 59.24 mln fine troy oz as prev

First time reserves have climbed 6 months in a row since June 2014 suggesting less PBOC intervention having burned through $320bln to take total reserves below $3trln.

FX regulator SAFE says:

  • reserves in July boosted by appreciation of non-USD currencies
  • cross border flows remain stable
  • reserves expected to remain stable in future

Fed to shed $2tn in assets ‘over long period’

The U.S. Federal Reserve has swung into policy normalization mode — a shift that is bound to have ripple effects worldwide.

Alan Blinder

 Q: What is your assessment of the U.S. economy? Do you have any projections for growth or inflation?

A: I’d say the current economic situation in the U.S. is quite good. Growth looks to be coming in over the next couple of quarters in the 2%-plus range, rather than the 2%-minus range. We’re in the unusual position that the Federal Reserve is fretting that inflation is creeping down, not creeping up. I’m not very upset that inflation is 1.5% instead of 2%. It just doesn’t matter that much — a half a percentage point on the inflation rate.

To me, that is really swamped by the fact that we’ve got the unemployment rate down below 4.5%, with no signs of an inflationary breakout that stops that.

It looks like we might be able to push the unemployment rate even lower. Or maybe the right way is not to say “push it” — it’s doing it by itself.

Q: When will the Fed start normalizing its balance sheet? I think the market expects a decision at the September meeting. Do you agree?

A: I very much agree with that. The Fed started talking about balance sheet adjustment earlier than I thought they would. That caught me by surprise.

They will announce it at the September meeting and … they’ll announce a start date, which might be Oct. 1.

Already $90 bn inflow to Emerging Market Fund this Year

Investors ploughed more cash into emerging market funds in the week since the asset class’ stock benchmark touched its highest level since 2014.

Emerging market equity funds counted $2.2bn of inflows in the week to August 2, while EM bond funds recorded $1.9bn of fresh capital commitments, according to flows tracked by EPFR. The additions lift inflows since the year began to nearly $90bn for the two fund categories.

Enthusiasm for emerging markets has been bolstered by low interest rates across the globe and a renewed drop in the US dollar. The MSCI emerging market stock index has climbed more than 23 per cent this year.

In the developed world, investors showed a continued preference for European stock funds over their US counterparts. European equity funds notched their fourth consecutive week of inflows, although additions decelerated from a week prior. US stock funds suffered their seventh straight week of redemptions, with outflows since mid-June topping $22bn.

From 8-month highs to record lows… why does any one put any faith in the useless ‘soft’ surveys?


Main points:

  • India’s Nikkei Markit services PMI contracted to 45.9 (the lowest reading since September 2013). Combined with the manufacturing PMI reported on Tuesday, the July composite PMI fell to 46.0, the lowest reading since March 2009.
  • Among subcomponents, the new business index fell the most to 45.2 (from 53.3 in June), reflecting disruptions caused by the GST.
  • As the press release from Markit Economics mentioned, “Most of the contraction was attributed to the implementation of the goods & services tax and the confusion it caused”.
  • The employment index for services fell to 48.9 (from 51.8 in June).
  • That said, the index for business expectations rose to a 11-month high to 62.3, suggesting optimism from services providers about the future once they have more clarity about the new tax system.
  • The output price index rose to 54.6 (from 51.0 in June), while the input price index moderated to 51.7.
  • Overall, PMI data for July suggest a significant drag on new business activity post the GST implementation. That said, optimism expressed by both manufacturers and services providers about the future is encouraging and suggest a potential improvement in activity once businesses adjust to the new tax system.

Trump could actually have something to celebrate: The initial Atlanta Fed GDPNow forecast for Q3 is 4.0%

Tracking estimate from the Atlanta Fed forecasts a pickup

If Trump actually got a quarter of 4% growth, the tweetstorm would be epic.

The initial forecast for Q3 from the Atlanta Fed is +4.0% in the popular GDPNow model.

“The GDPNow model projects inventory investment will contribute 1.13 percentage points to real GDP growth in the third quarter; inventory investment subtracted 0.02 percentage points from growth in the second quarter.”

For Q2, the final Atlanta Fed estimate was 2.8% compared to the 2.6% reading. At the start of the quarter they had forecast 4.3%. Trump went on to tout how great growth was:

“We have a GDP, on Friday – it got very little mention, although I guess in the business areas it did. But it got, I think, very little mention. 2.6 is a number that nobody thought they’d see for a long period of time. Remember, I was saying we will hit three at some point in the not-too-distant future, and everybody smiled and they laughed and they thought we’d be at one. And 2.6 is an unbelievable number, announced on Friday.”

The Q3 consensus is still fuzzy, but it’s around 2.3%.

Eurozone July final services PMI 55.4 vs 55.4 exp

Final reading of Eurozone services PMI coming in at 55.4, as expected.

  • Prior was 55.4
  • Composite 55.7 vs 55.8 exp

Mixed bag for the European services PMIs. Spain and Germany missed, while Italy beat and French figures were pretty much in line.