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Turkey’s Albayrak Reins Capital Control as Policy Option

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Treasury and Finance Minister Berat Albayrak of Turkey had excluded controls on capital movement as an option to the policy and urges to strengthen confidence amid conference call held yesterday.

The finance minister further stated that the main priorities were the restriction in inflation and contracting the current-account deficit. The remarks of Albayrak hinted for the economy chief’s thoughts of a dispute against the United States with regards the American pastor detention that displeased financial markets. The lira weakened a quarter of its value within a few weeks as the United States sanctioned the government staffs of President Recep Tayyip Erdogan, however, it was able to cut down some losses as the central bank and banking regulators caused higher value in betting the currency.

The Turkish lira was able to grow and currently trades strongly by 3.1 percent at 5.7660 per dollar at 4:46 pm in Istanbul. As Albayrak talked about inflation and mentioned that the central bank itself could not control the price hikes in its target level with the absence of fiscal policy. The economic growth is temporarily steady at 7.4 percent growth in the medium term recorded last year.

Business Confidence in UK Decline due to Brexit Uncertainty

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The survey issued on Monday showed the lowest decline of business leaders’ confidence towards the UK economy due to the risky effects of the Brexit agreement. Britain is expected to the leave the European Union in less than eight months, however, the government has not yet settled its exit with Brussels and proceeded to plan for the possible failure to come up with an official agreement. 

The Institute for Directors (IoD) employers group polled 750 executive leaders and found out that the major trading concern is the uncertainty within the European Union. When asked about the leader's optimism about the expanding economy for next year, the majority of them were pessimistic which resulted the confidence level to reach -16 percent versus -11 percent in June and lower than the positive 3 percent rating in April.

According to the IoD, there was 44 percent of the participants mentioned the uncertainty towards EU’s trading condition which they believe will have an unfavorable impact on their companies. The poll was made on July 11-26 which indicates that respondents had a positive outlook on their own businesses, with a net optimistic forecast of 37 percent but further showed a decline from 46 percent in June.

Business Confidence in UK Decline due to Brexit Uncertainty

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The survey issued on Monday showed the lowest decline of business leaders’ confidence towards the UK economy due to the risky effects of the Brexit agreement. Britain is expected to the leave the European Union in less than eight months, however, the government has not yet settled its exit with Brussels and proceeded to plan for the possible failure to come up with an official agreement. 

The Institute for Directors (IoD) employers group polled 750 executive leaders and found out that the major trading concern is the uncertainty within the European Union. When asked about the leader's optimism about the expanding economy for next year, the majority of them were pessimistic which resulted the confidence level to reach -16 percent versus -11 percent in June and lower than the positive 3 percent rating in April.

According to the IoD, there was 44 percent of the participants mentioned the uncertainty towards EU’s trading condition which they believe will have an unfavorable impact on their companies. The poll was made on July 11-26 which indicates that respondents had a positive outlook on their own businesses, with a net optimistic forecast of 37 percent but further showed a decline from 46 percent in June.

Japan’s Easing of Stimulus Program is Likely Even Before The Target Rate

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The economic growth of Japan is getting better which is expected to reduce its huge stimulus program even before reaching the 2 percent target rate as stated by a former Bank of Japan board member, Koji Ishida. 

Considering that Ishida was a commercial bank executive back then, he added that the action of the central bank was “long overdue”, affecting the returns of regional banks because of ultra-low rates. 

A very low inflation rate induced the BOJ to keep an ultra-easy policy in the past years in spite of the possible consequences of such policies, as well as its banking system. 

In achieving the mandate of the central bank by law, the inflation target is necessary in order to stabilize “sound economic development”, as described by Ishida during Reuters’ interview on Tuesday since exiting the central bank two years ago. 

Yet, the BOJ would not keep the present policy rates until the inflation target of 2 percent has been reached. Moreover, he said that the central bank will have a “flexible” monetary policy regardless of achieving the target rate. 

With looming concerns on very low policy rates, the BOJ allowed loosening their bond yields to be more agile in meeting the zero percent target. However, it may take some time before considering the rates for long-term not to overwhelm the market speculation but instead, they are aiming for a short-term exit from the loose monetary policy, he said. 

The central may not rush in curbing the yield curve as of the moment, but it is also apparent that it is possible when the market becomes steady, he added.

Japan’s Manufacturing Activity Grew Due To Domestic Demand in August

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Japan’s manufacturing activity grew at a bit faster rate in August as the domestic demand increased according to a preliminary survey on Thursday. Although the export orders dropped adding to the problem with the trade protectionism. 

The flash Markit/Nikkei Purchasing Managers Index (PMI) on manufacturing sector increase to 52.5 on a seasonally adjusted in August compared to the 52.3 figure in July. Figures remained above the 50 mark which puts it apart from contraction for the 24th straight month. 

The flash data prolonged the growth cycle of Japan’s manufacturing sector for two years, which has been the longest period since the global financial crisis, as described by an economist at IHS Markit. 

Adding to that, he said that the expansion was supported by the strengthening domestic market with the most recent data that came out. 

Data shows that export orders increased to 52.6 from 50.9 last month, giving emphasis on the steadfast growth of the domestic market. However, the new export orders declined to 49.3 from a final 50.0 in July, showing a decline in two months. 

Real wages grew in June, which was the quickest rate over 21  years, signaling consumer spending to further rise. 

The economy progressed at a better rate in the second quarter, boosting a strong household and business spending and further strengthening the domestic demand. Yet, concerns on trade disputes add risk in the manufacturing sectors as it may affect the export demands.

France Advised Turkey to Use Economic Policy Tools

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French Finance Minister Bruno Le Maire told Turkish counterpart Berat Albayrak at a meeting on Monday that Turkey should make use of their tools available for economic policy in order to establish a sustainable growth.

Turkish lira had declined by almost 40 percent this year due to concerns on monetary policy as well as the issue of the Christian pastor Andrew Brunson. Moreover, Le Maire mentioned that everyone, including Europe, France, and Turkey itself, that the situation in Turkey will become stable. France further stated that Turkey is committed to structural reforms.

NZIER Revised Downward its Growth Outlook

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The New Zealand Institute of Economic Research (NZIER) decided to reduce its economic growth outlook due to combined events of slackening population growth, the decline in business confidence and global trade war. However, the demand for residential and nonresidential construction continued to be strong and capacity constraints limit the highest extent of construction activity. 

Moreover, the prospect of economists and the Reserve Bank indicates that the official cash rate will remain steady until 2020. Generally, the monetary policy normalization introduced by the United States reflects for the rate increase which is required to allocate among emerging markets.

Mexico’s Central Bank Lower Growth Forecast Amid NAFTA Talks

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The central bank of Mexico adjusted lower their forecast for this year and the next, based on the report released on Wednesday. Although, the NAFTA trade talks could allay the uncertainty of the economy. 

The gross domestic product is anticipated to rise between 2.0 and 2.6 percent in 2018 compared to the previous inflation report of 2.0 to 3.0 percent, which may denote a problem in the future. 

Growth forecast for 2019 is around 1.8 and 2.8 percent much lower than the range of 2.2 and 3.2 percent. The fourth quarter inflation is presumed to be at 4.2 percent this year, higher than the former 3.8 percent.

Other than that, the central bank raised its inflation estimates for 2018 and the next close to the 3.0 percent target in the first half of 2020. 

 For 2019, the central bank increased the inflation estimate to 3.3 percent for the fourth quarter next year than the 3.1 percent previously. 

The board said that monetary policy will be adjusted and will continue to do so if the situation demands a more “firm” approach to reach the inflation target.

China’s Services PMI Rose in August From an 11-month Low

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The services sector in China gained momentum in August following a decline in the previous month, according to the official report on Friday. Somehow this supports the economic slowdown of the US amid the stiff tariffs of Chinese goods. 

The official Purchasing Managers’ Index (PMI) of the non-manufacturing sector grew to 54.2 after an 11-month low of 54.0 in the previous month, whereas higher than 50 mark divides growth from contraction. 

More than half of the Asian economy relies on the services sector, supported by higher spending power from increasing wages of Chinese people. 

The composite PMI, including the manufacturing and services activity, rose to 53.8 this month from 53.6 in the previous one. 

Although, it is unforeseen for the manufacturing sector in the Chinese sector in China to rise from a two-months decline while the PMI increased to 51.3 from 51.2 in July.

British Manufacturing Weaken as Export Orders Decline

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UK manufacturers had a lackluster month after a couple of years while exports had an unusual downfall in August, and these serve as a warning for the potential economic decline as the Brexit issues also affects British factories, according to a survey.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) is down to its lowest level since July 2016 at 52.8 due to Brexit vote, while  Reuters poll of economists showed a median estimate of 53.8. 

Moreover, the pound appears to be sluggish against its rivals dollar and euro after the published data, as experts also mentioned that the possible exit of the  European Union in March 2019 without a finalized deal would likely reflect on the sentiment.

Factory orders became unsteady in more than two years, which was greatly affected by the initial decrease in export orders since April 2016. The uncertainty in the British exit approximately in seven months supported the business confidence to reach a 22-month low.

Germany’s Growth Outlook Raises to 1.9 pc, says Ifo

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On Thursday, the Ifo economic institute announced its increased on 2018 economic growth outlook for Germany to 1.9 percent versus 1.8 percent in the previous, indicating a better-than-expected growth during the first half of the year.

Ifo economist Timo Wollmershauser stated that there is an ongoing strong upswing in the German economy, which will be mainly driven by personal consumption for the current year and in 2019. He added that this will be supported by the employment expansion and stable income growth.

The Ifo expects that the GDP growth rates will reach 1.9 percent next year and 1.7 percent in 2020.

Japanese Manufacturers’ Confidence Dropped in September as Trade Tension Continues

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Japanese manufacturers’ confidence dropped this month, following a seven-month high in August. The survey shows the possibility of worsening trade war between China and the US that puts exporters hesitant. 

The monthly survey of BOJ Tankan also indicates bouncing up in September from a two-year low in August driven by retail spending from summer bonuses and high heat.  

Unlike three months earlier, m manufacturers’ sentiment remained unchanged and the service-sector sentiment to slightly behind, signifying the BOJ Tankan on 1st of October to be positively holding steadily the business confidence. 

The government also shows the economy to be growing at the fastest pace since 2016, overshadowing capital expenditures of the economy amid the trade tensions and natural disasters, based on the reports by Tankan on Monday. 

Although, the business morale is anticipated to recover in the next three months but not the service-sector which is slightly declining. 

Reuters survey also shows exporters of cars and metal products or machinery raised concerns on the effect of the trade war tensions as they react on putting tariffs, influencing shipments and capital expenditure.

Manufacturers’ index remained the same with the figures three months ago but this is expected to recover in December. 

Meanwhile, the service sector index grew to 33 from 25 last month, driven by retailers. In comparison, it dropped by 2 points from June data of 35 points. This is once again presumed to go down in December. 

Figures slid down for the second consecutive quarter primarily due to higher costs as an after-effect of US trade protectionism that affect negatively Japan, being an export-reliant nation. 

On the other hand, the revised government data showed a boost in capital spending, resulting in a growth of 3.0 percent annually in the second quarter. This has exceeded economists’ forecast of 2.6 percent gain and the fastest growth so far since the first three months of 2016.

Germany’s Higher Growth Forecast by 2 Percent in 2018

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The German economy is expected to rise around 2 percent this year, more or less 0.1 percent, according to the German Economy Minister Peter Altmaier on Monday. 

It is possible to reach as much as 3 percent but companies’ efforts are not sufficient to attain higher growth as there is a lack of skilled workers to raise their output. 

Around the beginning of the month, the Ifo economic institute adjusted higher their rate forecast of German GDP to 1.9 percent from 1.8 percent this year which is indicative of good performance in the first six months of the year.

Japan’s Manufacturing Grew Steadily in September, Exports Close to 2-years Low

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The manufacturing activity of Japan grew steadily in September based on the revised survey on Monday despite the export orders, as well as production, dropped to an almost two-year low in the background of global trade protectionism. 

The final Markit/Nikkei survey showed a decline to a seasonally adjusted figure of 52.5 from a flash reading of 52.9 but remained the same from last month. 

The 50th figure separates the expansion from contraction for 25 succeeding months but failed to meet the future output of 22-month low amid global trade war. 

However, an economist at IHS Markit, Joe Hayes, said that the average PMI reading was “weaker” than the first two quarters this year indicating lesser drive. 

Although, corporate confidence continues to be positive with output levels expected to higher in 12 months, however, the degree of confidence slid to a 22-month low. Some panel members have raised concern over this. 

The sub-index forecast was adjusted higher to 56.8 from the preliminary of 55.9, which is the lowest sentiment since November 2016. 

As for the exports orders index, it was revised lower to 49.8 from a flash reading of 50.9 for two succeeding monthly declines. 

Yet, analysts are concerned with the worsening trade war between the US and China that could affect economic growth in both large nations.

RBA’s Interest Rates Remain Low in a Tight Credit Conditions

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The central bank of Australia has been going steady for the 26 consecutive months on Tuesday, suggesting an extended period of low rates in the background of tight credit conditions and adding over it is the tepid inflation and wages growth. 

Not surprisingly, the Reserve Bank of Australia (RBA) board meeting closed with the same low rate of 1.50 percent. 

Governor Philip Lowe said that credit rates were tighter but the mortgage rates continued on low numbers amid a strong competition for borrowers of higher credit quality. Rising prices are controlled by regulatory restrictions on lending with a stricter survey of bank behaviors. 

The credit of home-owners remain strong but the demand of investors has become slower with changes in housing market activity, he added.  

Lowe remained optimistic on economic worth of A$1.8 trillion and has reiterated the next rate hike would go north instead of south. 

Low inflation has been a major setback for the central bank, undermining the 2  to 3 percent target rate over two years now while the wage growth continues to be moving slow approaching a record low of 2.1 percent. Yet, Low says low-interest rates will be favorable to the Australian economy, although it is expected to be in a gradual manner.

German Services Grew to an 8-month High Inverse to Weak Manufacturing Sector

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German services growth reached an 8-month high in September based on the survey on Wednesday which seems to be softening the effects of slower manufacturing growth because of its stronger domestic demand. 

The IHS Markit’s final composite Purchasing Managers’ Index (PMI), reflecting the performance of manufacturing and services sectors that represent two-thirds of the economy, dropped to 55.0 from 55.6 in August. 

The outcome is still a bit lower than the preliminary estimate in the previous month but it still above the 50 demarcation, separating growth from contraction. 

The business activity for the services sector improved to 55.9 in September from 55.0 a month earlier with the employment rate reaching its highest in almost 11 years while services firms continue to be optimistic about future businesses. 

In the span of two years, the service sector at a quicker pace compared to the manufacturing sectors which supports a significant shift in the driver of growth in the biggest area of euro, according to IHS Markit economist, Phil Smith. 

Growth rate almost expanded by 0.5 percent in the third quarter, he added.

German services were driven by a positive record of employment and increasing real wages, higher job security, and cheaper borrowing costs, boosting domestic demand.

US Services Sector ISM survey Depicted Growth but Weaker Pace in IHS Markit

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The US services sector grew to a 21-year high in September, supporting employment of most companies and signals strengthening of the economy by the end of the third quarter. 

The optimistic reports on Wednesday keep the course of the interest rates to rise in December. Last week, the US central bank increase their rates for the third time in 2018. Fed Chairman Jerome Powell described on Tuesday that the economy has been “remarkably” well. 

Growth will likely be above the trend if the strength on the survey continues, according to the US Economist at Capital Economics in London, Andrew Hunter. This will likely keep the Fed interest rates to move steadily in short-term. 

The ISM non-manufacturing activity index rose by 3.1 points to 61.6 in the previous month since August 1997. A reading higher than 50 line, implies expansion representing over two-thirds of the US activity. 

Meanwhile, the ISM new orders sub-index for the services sector climbed by 1.2 points from 61.6 last month. The factory employment based on the survey grew to 2.4 in September from 56.7 in August. This implies the September's nonfarm payrolls could work on the upside which is scheduled to be released on Friday. 

However, in comparison to the IHS Markit numbers, it shows growth to have a weaker acceleration for this month. Although the ISM survey exhibited positive growth on business conditions last month, there are still concerns on capacity, logistics, adding to the uncertainty brought by the global trade. 

Companies encounter issues in the background of a robust economy and tightening labor market conditions. There are increased reports of a hard time in searching for qualified workers to meet the demand, leading to delays in delivering goods and services 

There have been reports on the difficulty in the search of qualified workers to meet the demand, resulting in delays in delivery good and services. On a global issue, American just imposed tariffs to China, which in turn, raised costs on some raw materials.

China’s Service Sector Picks Up Demand In September, Employment Declines

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China’s service sector rose at the quickest pace in July quarter due to pick-up in demand according to the Reuter survey on Monday despite weaker sentiment because of lesser jobs over two years expansions amid higher cost pressure affecting profit margins. 

The Caixin/Markit services purchasing managers’ index (PMI) grew to 53.1 in September from 51.5 the month earlier but still above the 50 mark, separating contraction from growth. 

Faster progress implies its forward direction amid escalating trade row in the US. 

Moreover, the official measurement of the non-manufacturing sector in the previous months published on the last day of September also shows continuous growth that was boosted by construction with government’s fiscal easing gaining demand. 

The positive survey was driven by higher new business orders while the sub-index increased at the fastest rate in three months resulting to 52.4 from 51.7 in August. 

China is relying more on services, especially high value-added services in finance and technology to lessen its dependence on heavy industry and investment, as to what they have been doing in the past years. At the same time, policymakers tried to kick up the pace of project approvals resulting to better infrastructure investment growth. 

The progress of services sector would lessen the impact of US tariffs on China’s manufacturing sector. Yet, factory activity slowed in September after 15 months of expansion in the background of declining export orders in over two years based on a separate Caixin survey last week. 

The services sector, constituting more than half of the economy in the first 6 months of the year, rose by 7.6 percent than a year earlier, exceeding the overall GDP growth of 6.8 percent. 

The published rate of Caixin’s composite manufacturing and services PMI on Monday slightly grew to 52.1 in September from 52.0 the month earlier. 

Nonetheless, despite positive growth in the services sector eased worries on Chinese policymakers, a sudden drop in employment in the sector seems to come out as an emerging stress.

Eurozone Investor Morale Dropped in October Due to Italy Fiscal Concerns

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Investor’s confidence in the eurozone dropped more than the forecast in October based on the survey on Monday, amid worries on Italy’s fiscal policies and stricter car compliance, especially emission rules giving a big impact.

The Sentix index for the eurozone dropped to 11.4 from 12 points in September while the Reuters forecast suggests a drop to 11.7. Meanwhile, the sub-index measuring expectation grew slightly to -8.3 from -8.8 as it drops down to 33 from 35, reaching its lowest since April 2017.

The automobile sector in Germany, as well as the future fiscal policy of the Italian government,  had a big impact on the slight decline of the index, according to the managing director of Sentix, Manfred Huebner.

Italy was also part of the concern by investors as the European Commission intends to bring the planned deficit lower, with the EU rules in mind.

Another index measuring investor morales in Germany showed an increase in spite of increasing pressure in the large automotive sector to remunerate for older diesel cars. Stability concern on Chancellor Angela Merkel’s government with the coalition to their allies and center-left social democrats also has had an influence on this besides contentious argument over immigration and spy-related scandal.

Nevertheless, the German economic data remains steadfast despite the worrisome discussion on the car industry and repute of the governing coalition stability, Huebner added.

The economy may have been “cooling down” but a recession is still not on the table.

China’s Exports Slowed down in September

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China’s export rose at a slower rate in September dropped down at a slower rate in September, influenced by a quick decline in orders as the trade war escalates with the United States affecting the Chinese shipments, based on the survey by Reuters. 

Imports exceeded recent highs, which is not a good indicator for Chinese policymakers who are relying on economic growth with weaker external demand. 

If the economy further slowed down, economists see that this could drive more stimulus measure that would boost small and medium-sized firms as the main source of employment. 

Export growth of China slowed to 8.9 percent in September from 9.8 percent gain in August., based on the median estimate of 32 economists in the Reuters poll. 

Imports are also anticipated to slow down to 15 percent from 19.9 percent gain in August. 

Forecast on exports tells a further slowdown in September amid rising trade protectionism. Although, the economist at Nomura noted that one less working day has added pressure to go down. 

On the other hand, if the China-US trade tension continues for medium-to-long-term, this would have an impact and “hit beyond the scales” in trading reports. 

China’s overall trade surplus is presumed to drop to $19.4 billion in September from $27.89 billion in the previous month. 

The recent forecast of the International Monetary Fund reduced its global economic forecast for 2018 and the next as repercussion on Sino-US trade war. Moreover, China’s economic growth forecast declined to 6.2 for this year and 6.4 for the following year.  

On Sunday, China announced their fourth cut this year to boost the economy, amounting to how much they have put aside as reserves to further strengthen the policy easing to hit back from the trade war with the US.

Germany’s Outlook for 2018 and 2019 Boosted by Domestic Demand

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A strong domestic demand will push the increase of German growth by 1.8 percent for 2018 and the year after, according to the economy ministry on Thursday. Other than that, the net trade will not have an impact on the biggest economy in Europe. 

The economic growth outlook of Germany is dimmed by the protectionist tendencies and international trade war. Other than that, Berlin also aims to impose quickly the EU-US tariffs which were agreed on earlier this year and sims to settle the transatlantic trade conflict. 

The revised forecast from the government based on the report by Reuters on Wednesday, suggests the rising global trade dispute as the major contributing risk factor in the future.

China’s GDP YoY Growth Weakened in Q3

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The economic growth of China rose at a slower rate of 6.5 percent in the third than a year ago, which is the weakest growth since the global financial crisis based on the data published on Friday. 

It shows a moderate cooling of the country amid the efforts of the government for some years in facing the debt risks that starts to affect growth and ongoing trade war with the US that put exports at risk. 

Survey of analysts by Reuters anticipate growth of the GDP by 6.6 percent in July, indicating a  slight weakening compared to the 6.7 percent growth in the previous quarter. 

The result of the GDP reading shows the weakest quarterly growth of year-on-year since the first quarter of 2009 in the background of the global financial crisis. 

The latest economic data also expressed the decline in domestic demand amid softer factory activity of infrastructures and consumer spending after years of a clampdown on riskier lending added to debt causing the borrowing rates to go higher. 

According to the National Bureau of Statistics, the GDP growth rose to 1.6 percent on a quarterly basis in comparison to the 1.8 percent rise in the April quarter. Meanwhile, analysts anticipated growth of 1.6 percent on a quarterly basis.

Germany’s Outlook Turns Positive After a Weak Third Quarter Data

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The German economy drops in the third quarter as they struggle due to declining in the car manufacturing sector amid continuous growth factors. Yet, the economy is presumed to recover in the last three months of the year, according to the Bundesbank on Monday. 

The implementation of new motor vehicle emissions certification has somehow affected the German auto companies in getting regulatory clearance while large dealership discounts decrease in order to clear out stocks prior to the implementation of the new rules. 

The largest economy in Europe accounted for the five-year growth of the euro bloc and this recent decline may have caused worries on ending the growth cycle before the countries can recover from debt crises years ago. 

Bundesbank’s regular monthly economic report says that the German economy drive is still “fundamentally intact”. 

The business climate grew which is apparent in the third quarter on the reports of Ifo institute. Hence, an economic expansion can be expected in the present quarter. 

Yet, the retail sales and construction are likely to slow down as the reports on the third quarter scheduled to be published in the middle of November anticipated to slow down from recent highs. Such figures will have an impact on growth after a large drop in industrial production. 

Although sectors other than automobile manufacturing are doing well and lag on industrial orders get bigger, Bundesbank also mentioned. 

Growth forecast of Germany slid by 1.8 percent from 2.3 percent for this year and weakened the outlook for 2019 to 1.8 percent from 2.1 percent in the background of the trade war, employment shortages and struggles in the auto sector.

Japan’s Manufacturing PMI Grew Due to Rise in New Export Orders in October

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Japan’s manufacturing activity grew in October at the quickest rate in about half a year as new exports orders recovered, according to the preliminary survey on Wednesday. It shows how careful most companies from a trade war. 

The Flash Markit/Nikkei Manufacturing Purchasing Managers’ Index (PMI) increased to 53.1 seasonally adjusted in October from the final output of 52.5 in September. It still over the 50 mark, separating contraction from expansion for more than two years and reached the highest number since April. 

Export sales grew for the first time since May despite various problems because of a global trade war, according to Joe Hayes, an economist at IHS Markit. 

Next month output is significant to confirm if the recovery is just for a short period of time and weakening due to recent natural disasters. 

The preliminary new export orders index increased to 51.7 from a final 49.8 in September. 

The confidence of Japanese manufacturers increased in October from September but will continue to be flat in the next three months based on the Reuters Tankan survey last week. 

There are still risks involved with how trade deal between the United States and China will affect the global economy as they retaliate tariffs with each other in the past months and the planned bilateral trade talk is on hold.

Eurozone Inflation Outlook Remains the Same Despite Economic Growth Risks

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The outlook of eurozone rates is presumed to continue increasing by 1.7 percent annually until 2020 despite risks of weak inflation and economic growth, according to a survey from the ECB on Friday. 

The ECB announced their stimulus program of easing up to 2.6 trillion euro ($2.96 trillion) at the end of the year and increase rates after summer next year as they try to keep the inflation in spite of growth uncertainty. 

The recent survey of Professional Forecasters supports the outlook on Friday, keeping their rates unchanged for headline inflation in the next two hikes to be at 1.7 percent and 1.9 percent in long-term. 

However, the forecast for ECB is to reduce their estimates for core inflation and cut down more volatile energy and food prices and economic growth in 2018 and the next. 

The target inflation rate of the eurozone’s central bank aims to be close to two percent but less than this number in medium-term. 

The survey shows that the ECB growth of core prices will still increase by 10 basis and slow more than 1.2 percent this year and 1.5 percent the next.

Japan’s Retail Sales Growth Slowed Down After a Third Quarter GDP Drop

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The retail sales in Japan grew in September for the 11th succeeding month, although the pace slowed down from the past month. It indicates the private consumption not strong enough to avoid slower economic growth. 

The sudden decline in exports for the month of September based on the trade ministry data reflects moderate economic growth in the July quarter after expansion three months earlier. 

Analysts see the third quarter sluggish growth to be transitory because of natural disasters that affected business and consumer activity in the past few months. 

The central bank will monitor incoming reports including factory output and jobless reports during the board meeting this week to update the growth forecast. Data for the gross domestic product for the month of September is scheduled to be released on November 14. 

Weakened growth puts into question the capacity of the central bank to reach the annual inflation target of 2 percent. 

Gross Domestic Product for the third quarter dropped to 0.1 percent after a solid growth, which in turn prompts the central bank to curb down slightly inflation prospects for the current fiscal year but it is less likely to drop in the future. 

Gains in September were driven by increasing gasoline price and strong sales of machine tools, food, and beverage purchases and clothing, while automobile sales decline, as well as, online retailers dropped. 

The retail sales decreased by 0.2 percent on a seasonally-adjusted basis in September compared to the previous month increase of 0.9. 

Meanwhile, the annual core consumer inflation grew to 1.0 percent in September, which was the quickest in seven months boosted predominantly by higher oil prices to prepare in sustaining price growth.

RBNZ Forecast Keeps Policy Rates Unchanged In Short-term

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The central bank of New Zealand is presumed to keep the interest rates unchanged this week for the next term as policymakers wait for an increase in inflation and higher growth numbers and determine its sustainability. 

Meanwhile, economists will see scrutinize the monetary policy on Thursday if the trend changes from being dovish since August, as it decided to sustain the interest rates at a record low until 2020 since the current progress did not meet expectations. 

The official cash rate (OCR) of the Reserve Bank of New Zealand will be maintained since November 2016 to be at 1.75 percent based on the Survey from Reuters of 16 economists on the final policy review for the year. 

However, two economists anticipate a rate hike in the July quarter of 2019 and four of them assumed an increase in the last quarter while the rest of the months expected not to change in 2019. 

The latest announcement from the RBNZ Governor Adrian Orr for the month of September was not too negative at the August meeting but said that an accommodating monetary policy is necessary to raise inflation. 

RBNZ is taking solace from the unexpected solid growth for the second quarter and continued on the next three months, close to the midpoint target of 2.0 percent according to analysts while some consider this to be misleading.

German Industrial Orders Boosted by Local demand

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The German industrial order grew surprisingly in September boosted by higher demand from domestic and other eurozone clients based on the reports on Tuesday. This also shows that Germany closed the quarter in solid growth. 

Contracts that are made locally rose by 0.3 percent after an increase and revised higher by 2.5 percent last month, according to the Fed Statistics Office. 

The figure came out stronger than anticipated as analysts forecast of a drop by 0.6 percent.

China’s Exports Rushed Ahead Higher US Tariffs Next Year

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Exports came out better-than-expected in Octobers as companies hasten shipment to the United States with higher tariffs by next year, which their top trading partner. 

On the other hand, imports slowed down compared to forecasts while Beijing implements counter-measures to higher tariffs of US next year.  

The positive readings from China give positive news to boost global demand which has raised concerns to some and the slowest growth of the country since the global financial crisis in the third quarter. 

A month has passed since US tariffs on Chinese goods implemented starting September 24, reflecting an important escalation in the of escalating trade war. 

However, analysts see the risk of sharp decline in the US demand for Chinese goods in early 2019 while everybody’s attentions are focused on the president of US and China and hopefully come to an agreement on their meeting this month. 

Exports in China grew to 15.6 percent last month than a year ago. Customs data shown on Thursday, boosted from 14.5 percent in September, exceeding forecast of analysts by just 11 percent. Nevertheless, Oxford Economics showed a solid growth as it rose astonishingly by 9.9 percent. However, analysts say that export reading will just be transitory given slower export orders for some months.

BoF Report Shows 0.4 Percent Growth but less than the INSEE Forecast

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The economy of France is anticipated to rise by 0.4 percent in the fourth quarter, according to the Bank of France on Monday, where the figures show a steady growth.

In the previous month, the INSEE national statistics office anticipate growth  0.4 percent of the French economy in the September quarter, lower than the forecast of 0.5 percent growth.

Economists deem that the second largest economy needs to increase by 0.8 percent in the last quarter after achieving the 1.7 percent rate forecast by the government of Macron for the whole year.


Moreover, the industrial production demonstrated a sluggish growth in October based on the business climate survey on Monday. The primary reason is the automobile business amid updates in the new industry that affects car production.

Japan’s Economic Growth Declined in Q3 Amid Trade Tensions

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The Japanese economy dropped more than the expected figure in the third quarter because of natural and lesser imports which can be due to the escalating trade protectionism on offshore demand.  

The decline in number indicates the increasing sign of weakness in the global market as we can see China and Europe losing its ground. Germany is anticipated to be released later in the day which also showed a decline in the previous quarter. 

The government continues to see that the economy can recover moderately because of typhoons and earthquakes affecting production, as well as consumption. As an economist at Tokai Tokyo Research Center said, “The decline in exports cannot be attributed entirely to the natural disasters”. However, few analysts see that this can’t be because of just a single factor amid the decline in exports and sluggish Chinese demand and effects on increasing global trade friction. 

The contraction of 1.2 percent in the July quarter for an annual basis, higher than the median estimate decline of 1.0 percent. Previously, it showed a solid growth of 3.0 percent, according to the reports on Wednesday. 

Fall in exports was primarily due to the 1.8 percent, which was the largest drop over three years. The capital expenditure declined by 0.2 percent after its growth of 3.1 percent in April. This has been the first decline in two years based on the reports. 

Analysts warn that recovery may be weaker than anticipated and could hamper growth next year when problems on trade conflict worsen.

Japan Exports Recover in October Boosted by US Automobile Imports

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Japan exports recovered in a year to October due to high demand in U.S.-bound car shipments after a sudden drop despite the sluggish global demand and unsettled trade war between the US and China, dimming the outlook for export-reliant Japan.

On Monday, the data from the Ministry of Finance showed an increase in exports by 8.2 percent in 12 months to October, less than the 9.0 percent gain forecast from the survey of Reuters. 

The export grew after a revision of 1.3 percent annual drop in September due to natural disasters disrupting the international airport, the factory output, goods, and inbound tourism. Data on Gross Domestic Product declined lower than expected in the third quarter, stricken by natural disasters and slower exports. 

While the economy is expected to return to growth this quarter as temporary effects from natural disasters fade, Japanese policymakers remain wary about the overall economic impact of global trade friction and slowing external demand. 

Although, the momentum is diminishing amid sluggish shipments to Asia because of China’s slowdown, according to the senior economist at SMBC Nikko Securities, Koya Miyamae. “The U.S.-China trade war has not yet had much impact on Japan’s exports, but it warrants attention given that it could cause full-blown effects from next year onwards,” he added. 

Exports to China increased to 9.0 percent in the year to October driven by automobiles and plastic raw materials after a drop the month before. Meanwhile, shipments to Asia accounted about more than half of Japan total exports grew by 7.3 percent. 

Exports to the US rose by 11.6 percent in the year to October driven by shipments of cars, estimated to 154,085 and grew by 3.0 percent year-on-year and rose for the first time in five months. 

The US raised its concern on unfair trade with Japan and China, shipping millions of cars to North America while blocking imports of U.S. autos and farm products.  

Trade talks between US and Japan are scheduled in September to protect Japanese auto manufacturers from further tariffs on exports with the US representing about two-thirds of $69 billion annual trade surplus.

Probable Further Decline of Unemployment Rate, says RBA

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The Australian unemployment has a chance for a further decline from the current year low of 6.5 without raising the pressure to increase wages, according to the head of the nation’s central bank on Tuesday. 

The Reserve Bank of Australia’s Governor Philip Lowe mentioned that despite the jobless rate ranges between the two largest states of New South Wales and Victoria with 4.4 and 4.6 percent, there is not enough momentum to raise the annual wage growth. 

The unemployment rate was recorded to be 5.0 percent with annual wage growth of 2.3 percent. There is a chance to reach the 4.5 percent unemployment without augmenting the wage growth “too much”, he added.

Slow Korean Export Growth May Affect International Trades

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Exports from South Korea to China has decreased, as well as the shipments of semiconductor that added concerns to the progress of global trade amid the economic conflict between the US and Beijing. 

The preliminary trade data from the period of November 1 to 20 has shown a decline of 4.3 percent in exports to China, which has been the first decline outside the holiday since late 2016. It follows a decline for seven consecutive months higher than the 20 percent in the early readings. 

Moreover, the growth of chip exports has also declined to 3.5 percent in comparison to the gains estimated to be at 35 percent for every month from January to September of 2018. This implies a faster decline in the global tech sector where Korea has been the main supplier. 

The preliminary data did not exactly match the final output to this year with 2017 which may raise a slight concern. In general, exports were recorded to grow by 5.7 percent for the first 20 days of November than last year. 

In case the whole-moth figure did not turn our positively, this reflects the status of China’s economy in a poor performance since November that is “worrisome”, according to an economist at Meritz Securities Co. in Seoul, Stephen Lee.