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Bundesbank sees risk of the German economy entering a recession

  
Analysis, Economy
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Comments by Bundesbank via its monthly report

Germany
  • Euro area economy growing at a subdued pace in Q3
  • Sees first signs of downturn in the labour market
  • German economic outlook remains unclear, hinges on exports
  • Economic activity could shrink over the summer (Q3) due to weak industrial activity
  • It is unclear if exports will regain their footing before the domestic economy becomes more severely affected
Given the way things are going, another economic contraction wouldn’t be surprising.
As mentioned over the last few weeks, the dichotomy of Germany’s economy (manufacturing and services performance) will eventually settle on one path and the likelihood of negative spillovers from the manufacturing to services sector grows with each passing day.
Thursday’s PMI data may give us a glimpse of that but lawmakers and policymakers will be certainly be hoping that the services sector will continue to bolster the economy through these tough times.

Eurozone June current account balance €18.4 billion vs €29.7 billion prior

  
Analysis, Economy

Latest data released by the ECB – 19 August 2019

  • Prior €29.7 billion; revised to €30.3 billion
Slight delay in the release by the source. The surplus shrinks below €20 billion for the first time since 2017 as we see a drop in goods, services and primary income for the month of June. That’s not encouraging but at this point in time, this is still a minor data release.
The data is a general indication of flows in/out of the euro area economy. EUR/USD holds steady at 1.1101 currently still.

UK Times reports government secret no‑deal Brexit preparations leaked

  
Analysis, Economy
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Via the Sunday Times (gated), the paper say they have the full copy of an unprecedented leak of government documents

“This is not Project Fear-this is the most realistic assessment of what the public face with no deal. These are likely, basic, reasonable scenarios-not the worst case,” a senior government source told the Sunday Times.
Britain faces shortages of fuel, food and medicine,
  • a three-month meltdown at its ports,
  • a hard border with Ireland
  • rising costs in social care in the event of a no-deal Brexit
Says the Times:
  • The documents … have emerged as the UK looks increasingly likely to crash out of the EU without a deal.
  • Compiled this month by the Cabinet Office
Apart from that, how was the weekend?
Via the Sunday Times (gated), the paper say they have the full copy of an unprecedented leak of government documents 

German Finance Minister says could deploy up to 50bn EUR of extra spending if needed

  
Analysis, Economy
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German Finance Minister Olaf Scholz spoke on Sunday,

  • Said Germany has fiscal strength
  • is thus able to counter future economic crisis “with full force”
  • could spend up to 50bn EUR extra
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Germany’s economy is showing signs of slowing, Scholz floating the idea here of dially back government promises to target balanced budgets and instead borrow to fund investment.
  • if we have a debt level in Germany in relation to economic output that is below 60 percent, then this is the strength we have to counter a crisis with full force

US President Trump says China is doing poorly, wants to make a deal

  
Analysis, Economy

I believe this is what the psychiatrists refer to as ‘projection’.

And, more:
  • US consumers may have to pay more to cover costs of tariffs
(ps there is no may about it)
More:
  • Does not think China would retaliate for an increase in tariffs
(LOL)
Still going:
  • thinks trade war with China will be fairly short
  • he understands September meeting between US and China negotiators is still on
  • Powell should be cutting rates, other countries are cutting and we should stay even
I believe this is what the psychiatrists refer to as 'projection'.
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Oh, if you are down this far …. here are some Asia rumours beginning to do the rounds:
  • China has frozen mainland assets of Hong Kong citizens
  • Yang Jiechi delivered letter to Trump – with news that China is to to fully take over Hong Kong…. in return China to sign 153 pages of previous agreement on trade deal and buys 10-30 bln $ farm products
Juicy rumours but that’s all they are. Make up your own mind. I can’t see China caving in and signing the previous agreement FWIW. And, if China want to snaffle up HK they’ll do so regardless.

Bank of Mexico delivers surprise 25 basis point rate cut

  
Analysis, Economy

Mexico lowers rates to 8.00% from 8.25%

Cuts, coming soon to a central bank near you.
Economists were roughly divided on whether they would cut or not but the majority came down on the side of holding. The central bank said it wasn’t a unanimous decision with one dissent.
They said the balance of risks to growth were still tilted downwards in an environment of marked uncertainty.

BoA / ML assess the probability of a US recession within 12 months as one in three

  
Analysis, Economy

A bit of an ICYMI, I wanted to post this yesterday but didn’t … it seemed to have slipped through the cracks!

Probably for the best given the surging equities markets overnight ;-D
Anyway, as a catch up:
  • Bank of America / Merrill Lynch revised forecast citing the worsening uncertainty around the continuing US – China trade war
  • & the resulting slowdown in the global economy, fall in business activity
  • “Our official model has the probability of a recession over the next 12 months only pegged at about 20 per cent, but our subjective call based on the slew of data and events leads us to believe it is closer to a one-in-three chance”
Specifically worried on three of the five indicators that track business performance
  • industrial production,
  • automotive sales
  • aggregated number of hours worked
A bit of an ICYMI, I wanted to post this yesterday but didn't … it seemed to have slipped through the cracks!
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