New Month Kicks Off with Further Evidence of Accelerating Turkish Inflation, a Whole Lot of PMI Surveys, and North American Holidays

September 3, 2018

U.S. and Canadian Markets are closed for Labor Day holidays.

Turkish CPI inflation accelerated two percentage points to 17.9% in August, its highest level since the end of 2003. PPI inflation catapulted to 32.3% from 17.4% the month before. In response, officials at Turkey’s central bank have promised to tighten monetary policy soon.

Bank of Japan Governor Kuroda defended the prolonged quantitative monetary stimulus and said there will not be an interest rate hike for an extended time.

Share prices in the Pacific Rim fell 0.9% in India, Taiwan, and Indonesia, 0.8% in New Zealand and Hong Kong, and 0.7% in Japan and China. In Europe, stocks have risen 0.9% in the U.K., 0.2% in Switzerland and Italy, and 0.1% in France but fallen 0.9% in Greece, 0.3% in Germany and 0.2% in Spain. Trade tensions remain a depressant.

The dollar shows gains of 0.7% against the Mexican peso and sterling, 0.2% relative to the loonie, and 0.1% vis-a-vis the yen and Swiss franc, but the U.S. currency is also down 0.5% against the Australian dollar and 0.1% versus the yuan and euro.

The ten-year British gilt yield slid 3 basis points, while the German bund and Japanese JGB yields edged a basis point higher.

Gold is steady, and oil has moved 0.2% firmer.

Euroland’s August manufacturing purchasing managers index replicated the flash estimate of 54.6. That’s down a half-point from July and the weakest in 21 months. Business optimism was at its second softest level since November 2015. Factor PMI readings within the euro area ranged from a 2-month high of 59.1 in The Netherlands to a 24-month low of 50.1 in Italy. In between those extremes, Ireland scored a 7-month high of 57.5, Austria slid to a 20-month low of 56.9, Germany posted a 2-month high of 55.9, Greece and France recorded 3-month highs of 53.9 and 53.5, and Spain’s 53.0 reading was at a 2-month high. PMI scores above 50.0 imply improved manufacturing conditions.

In other manufacturing PMI reports released today,

  • Britain’s purchasing managers index fell 1.2 points to a 25-month low of 52.8, which is weaker than had been anticipated.
  • Japan’s PMI rose 0.2 points to 52.5, a 2-month high, but optimism slipped.
  • China’s 50.6 was at a 14-month low.
  • India’s 51.7 was a 3-month low.
  • The Russian PMI (48.9) was below 50.0 for a fourth straight month.
  • The Swiss PMI (64.8) showed the fastest improvement of conditions since February.
  • Sweden’s 52.5 reading was the lowest in two years.
  • Turkey’s PMI slid to a 3-month low of 46.4.
  • Malaysia crossed above 50 to a 7-month high of 51.2.
  • Indonesia scored a 49-month high of 51.9.
  • Two different manufacturing PMIs were compiled for Australia. That by the CBA (53.2) was at a 2-month high, and the AIG’s estimate of 56.7 represented a 3-month high.
  • Norway’s 60.5 PMI score was the highest since July 2017.
  • The Czech PMI dropped 0.5 to a one-year low of 54.9.
  • Poland’s PMI of 51.4 was at a 22-month low.
  • Taiwan’s PMI also was at a 22-month low (53.0).
  • South Korea’s PMI stayed barely under 50 at 49.9, which is an 8-month low.
  • The Filipino PMI rebounded 1.0 to 51.9, a 2-month high.

Among other released economic data this Monday,

Greek 2Q GDP growth slowed sharply to a quarter-on-quarter 0.2% pace from 0.8% in the first quarter, causing on-year growth to drop under 2% to 1.8%.

South Korea recorded a $6.9 billion trade surplus in August, lifting the year-to-date surplus to $49.21 billion, which was still well below the year-earlier level of $61.8 billion.

August CPI and PPI inflation in Thailand amounted to just 1.6% and 1.8%, respectively.

Indonesian CPI inflation of 3.2% overall and 2.9% core was virtually the same in August as in July.

The Austrian jobless rate ticked up 0.1 percentage point to 7.0% in August.

New Zealand export price growth last quarter surpassed import price inflation, lifting that economy’s terms of trade by 0.6% on quarter and 2.4% versus the year-earlier month.

Australian corporate profits rose 2.0% on quarter and 10.3% on year in the second quarter of this year. Australian retail sales, meanwhile, remained unchanged on month in July, resulting in a 3.2% 12-month increase versus on-year increases of 3.1% in June and 2.8% in May.

Japanese motor vehicle sales reverted to an on-year decline, albeit of just 0.2% in August.

Last but not least, a wholly unexpected 12.8% quarterly leap in Japanese business investment in 2Q suggests that GDP growth last quarter is likely to get revised upward. This was the best quarterly performance in investment in 11 years.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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