• Business

When expectations do not meet reality: a weekly overview of the world

Japan is trying to queue a replacement for the prime minister, a lull after the Jackson Hall conference and final European data on the indices.

Everything that is expected to happen this week in the world, including the question: What will happen to inflation?

Tags

• Wall Street

Walla!

Business

Monday, 31 August 2020, 23:31

• Share on Facebook

• Share on WhatsApp

• Share on general

• Share on general

• Share on Twitter

• Share on Email

0 comments

• Honeysuckle Cohen Experis Information Security

• Towards the start of the school year: Netanyahu and Galant visited ...

• Elections abstained: Knesset approves law rejecting approval ...

• Hundreds of artists protested in front of the Prime Minister's residence in Jerusalem: "We want ...

• Video - The climate crisis is an investor scam

• 18,000 people demonstrate in Berlin against corona restrictions: ...

• Research: The use of social robots for studies leads to a leap ...

• Gamzo: I will not change my mind about the ban on flights to Uman, ...

• By Gantz: The Biological Institute will begin a vaccine trial ...

• Gamzo: Need restrictions for the holidays, there may be aggravation ...

• Bennett's Rebuke Speech: What Did You Do?

  Nothing, dead people -...

In the video: Trump visits Louisiana after Hurricane Laura hits the country (Photo: Reuters)

The process of replacing Japanese Prime Minister Shinzo Abe is expected to be extremely quick, but there are still some difficulties on the way to finding a replacement.

The political system in the United States will enter into a certain lull after the recent conferences of the two parties, but reaching an agreement on an additional aid package due to the Corona plague seems difficult to achieve.

This week's macro data in the United States will shed light on market expectations for recovery and the reality on the ground, with the Purchasing Managers' Index and the ISM Institute's Index released this week in addition to the monthly employment report released on Friday.

In Europe, we will receive final data for August from the Markit Purchasing Managers' Index, retail sales data, and the Consumer Price Index, when the inflation figure is expected to show that the European Central Bank has a difficult task in achieving the inflation target.

In China we will receive the CAIXIN Purchasing Managers Index in addition to the official Purchasing Managers Index released today.

As far as central banks are concerned it is a quiet week except for an interest rate decision by the Australian central bank on Tuesday and everyone will have time to digest Powell's speech at Jackson Hall.

(Promoted Content)

The next wave of masks is already here: more comfortable, beautiful and protective

Advertising article

To the full article

Fast replacement.

Shinzo Abe (Photo: Reuters)

Economic events log

• Third:

  China - CAIXIN Institute's Purchasing Managers' Index for August.

  Eurozone - Consumer Price Index for August.

  Germany - Unemployment data for August.

  United States - ISM Production Purchasing Managers Index for August.

• Wednesday:

  Germany - Retail sales for July.

  United States - Factory Order Data for July.

• Thursday:

  China - CAIXIN Institute Purchasing Managers' Index, August.

  Eurozone - Retail sales for July.

  United States-ISM Services Purchasing Managers Index August.

• Friday:

  United States - August Employment Report.

Monetary Policy after the Jackson Hall Conference

Speech by US Federal Reserve Chairman Jerome Powell last week went slightly further than market expectations, when he defined a different approach regarding the inflation target, also regarding the definition of an employment market that is in a state of full employment.

The speech caused the 10-year bond yield to rise to a two-month high, in addition to the fact that consumers' inflation expectations will also rise in the future.

Despite all the shifts, immediate problems still exist regarding the Fed's monetary policy in achieving its goals.

Powell's speech also prepared the ground for the Fed's interest rate decision in September, with a change in wording on future inflation expectations expected, as well as a change in the bank's acquisition plan.

Powell stressed in his speech that the U.S. economy needs additional fiscal support, but proposals for such a plan are stuck in negotiations between the two political camps.

Powell's speech at Jackson Hall raised expectations that at the bank's meeting in September there would be a change in Fed policy.

Going far.

Powell (Photo: Bill O'Leary, Gettyimages)

Economic recovery in the United States and the labor market

Most recently released monthly data like durable product orders indicate a solid economic recovery, but real-time data like small business closures indicate some weakness.

A further weekly drop in unemployment claims will add to the optimism, but the figures at the absolute level of one million new claims are still very high in historical terms.

The current business sentiment and expectations for the future will be reflected in the publication on Tuesday and Thursday of the ISM Institute's Purchasing Managers' Purchasing Managers Index.

It may be difficult to grasp the gap between the picture that emerges from the Purchasing Managers' Index versus the monthly employment report.

Small businesses are responsible for a quarter of job creation in the United States and therefore seeing the future will determine the pace of labor market recovery.

The ISM Institute's Purchasing Managers' indices are expected to remain above 50, but employment data are still a concern for the future.

China: An In-Depth Examination of Economic Rise

The official data of the Purchasing Managers' Indices were released today in China.

Both were very close to the figures in the previous month, with the production figure at 51 compared to 51.1 July and the services figure at 55.2 compared to 54.2 July.

Attention is now shifting to the CAIXIN Institute's Purchasing Managers' Index, which focuses on the private sector, with production figures set for Tuesday and services on Thursday.

Data from the Purchasing Managers' Index should always be treated with caution, as they are sentiment indicators that indicate a monthly change compared to the previous situation but not absolute levels of economic activity.

The monthly trade data expected to be released next Monday will shed light on whether exports continued to recover in August with the Chinese domestic economy still a cause for concern.

Recent data showed a 4.8 percent increase in the output of industrial companies compared to last year but retail sales data in China showed a 1.1 percent decline.

Efforts by policymakers to boost the economy continue as the government announces that it will expedite the transfer of emergency funds to the districts below it.

The figure for industrial companies' profits rose by 19.6 percent compared to last year, but the rate of increase may now begin to moderate.

The economic support of policymakers will be directed towards encouraging the local economy in China.

Sharp decline in GDP.

Moody (Photo: Reuters)

India: Policies and difficulty with the spread of the corona virus.

GDP data for the second quarter are expected to be released, in India with the expectation that after the downturn of the economy during the quarter there will be a sharp decline to 18% percent compared to last year.

Recently published monthly macro data, such as car sales data, indicate that the fall in output and consumption is bottoming out, but there are concerns about corporate profitability and future investment levels.

The willingness of the Indian central bank to support the economy may be limited because of its current inflation mandate.

The consumer price index rose to a level slightly below 7% in July, mainly in light of rising food prices and minutes from the Bank's recent meeting on a combination of high inflation alongside an economic recession in light of the corona.

These concerns may dissuade bank decision-makers from further lowering interest rates until inflation returns to the bank target of 4% plus or minus 2% per party which may not happen by the end of 2020. Therefore, further interest rate cuts are expected in the near future but the bank will continue to On an expansionary monetary policy given the unconventional situation it faces and although this policy is contrary to its purpose of lowering inflation towards the target.

A sharp decline in GDP for the second quarter will not lead the bank to further interest rate cuts in light of fears of a state of stagnation.

Eurozone: Retail Sales

The Eurozone's retail sales data for July will shed light on the recovery of consumption on the continent, but will not capture the negative effect as a result of an increase in infection rates in many countries on the continent.

Inflation figures released on Tuesday are of greater importance in the long run as expectations are for a larger decline compared to last year.

The European Central Bank like the Fed in the United States is facing important questions regarding its inflation policy.

The minutes of the last bank meeting published last week were seen by the market as hawks, and the bank's chief economist Philip Lane, in his speech at the Jackson Hall conference, hinted that the bank may shift its attention from market stability to price stability.

In his speech the Chief Economist detailed two steps to this process: 1. Dealing with the immediate market caused by the inflation figure.

2. Re-calibration of the policy in order to meet the Bank's long - term inflation targets.

The conclusion is that the European Central Bank may look at further expansionary policies in the long run while continuing to take short-term measures.

Inflation data in the eurozone for August will continue to put pressure on the Bank's future policy.

• Share on Facebook

• Share on WhatsApp

• Share on general

• Share on general

• Share on Twitter

• Share on Email

0 comments