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18th June 2019 Today’s Round-Up of Economic News

“Inflation expectations for the eurozone have plunged to a record low. Investors and traders are worried its economy is slipping into “Japanification”, an inescapable period of stagnant growth and ultra-low interest rates.

“The decline in a closely-watched inflation gauge – the five-year forward rate – has accelerated as global growth stutters, tumbling to an all-time low of just above 1.10pc yesterday.

“The drop indicates investors believe the European Central Bank (ECB) might be incapable of stopping the region sliding into deflation if the world economy suffers a downturn…

“Interest rate swaps indicate investors are starting to brace for the ECB to cut rates deeper into negative territory. However, Bank of America Merrill Lynch has warned further cuts risk the eurozone reaching the so-called “reversal rate” – the point at which ultraloose monetary policy “reverses and becomes contractionary for lending”.

“”The ECB does not have many bullets left when it comes to cuts and it certainly has fewer than other central banks,” it said.”

https://www.telegraph.co.uk/business/2019/06/18/fears-eurozone-turning-japanese-inflation-gauge-dives/


“At a time of rising U.S.-China trade tensions and a marked slowdown in the European economy, the last thing that the world economy now needs is a deepening in the U.K.’s Brexit crisis.

“Yet, it is difficult to see how the U.K. economic and political situation will not worsen meaningfully as the world’s fifth-largest economy approaches its Oct. 31 Brexit deadline.”

https://thehill.com/opinion/finance/448886-the-uk-economy-is-sailing-toward-dire-straits


“We are faced with a pile of s***,” an activist investor said during the nine-hour event, while another shouted: “If even Pope Benedict XVI can resign, why not [Deutsche Bank chairman] Paul Achleitner?”

“It is no surprise that investors are angry (tempers were described as “boiling over” in the Frankfurt concert hall where the annual meeting was held).

“Once a symbol of German economic might, Deutsche’s downfall has been dramatic…”

https://www.telegraph.co.uk/business/2019/06/17/has-deutsche-bank-left-years-late-turnaround/


“Lesetja Kganyago, then the top official at South Africa’s Treasury, was taking a break at Sugarloaf Mountain in Rio de Janeiro between two G-20 meetings in November 2008 when he got the bad news.

Barely three years after his country had managed to get its highest-ever investment-grade ratings from two of the three main credit-rating companies, the global financial crisis was threatening to reverse that progress.”

https://www.bloomberg.com/news/articles/2019-06-18/south-africa-finds-a-credit-rating-once-lost-is-hard-to-regain


“Zimbabwe’s year-on-year inflation reached 97,85% in May, latest statistics from the Zimbabwe Statistical Agency (Zimstat) revealed on Monday.

“The annual inflation rate jumped steeply from 75,86% the previous month, showing how the country’s economic meltdown continues to escalate.”

https://www.businesslive.co.za/bd/world/africa/2019-06-17-zimbabwe-on-the-brink-as-inflation-nears-100/


“Brazil’s central bank will leave its benchmark interest rate on hold this week, according to a Reuters poll of economists, but increasingly weak economic growth and inflationary pressures suggest it may not be long before it eases policy.”

https://uk.reuters.com/article/us-brazil-economy-rate-decision/brazil-to-hold-rates-at-record-low-as-pressure-to-cut-builds-reuters-poll-idUKKCN1TI1WS


“Macri has seen his popularity ratings plunge during a crisis where he has struggled to tame one of the world’s highest inflation rates and poverty has reached about one-third of the population.

“Argentines are also frustrated with high utility costs and the blackout could trigger more protests against Macri’s government just as he seeks re-election in October.”

https://www.aljazeera.com/news/2019/06/hunt-massive-south-america-power-outage-begins-190617074752455.html


“According to data released by the Ecuadorian Central Bank on June 17, Ecuador’s economy is expected to contract by 0.2 percent in 2019, which would place it into recession, El Comercio reported.

“The Ecuadorian economy continues to face significant headwinds — mainly in the form of its over-reliance on oil exports, slow growth in non-oil exports, and the country’s use of the U.S. dollar…”

https://worldview.stratfor.com/situation-report/ecuador-economy-expected-enter-recession-2019


“A lift in the number of Australians behind on their mortgages is a sign of a slowdown in the economy and the problems caused by slow wages growth, the Reserve Bank of Australia has admitted.

“The head of the bank’s financial stability department, Jonathan Kearns, used an address to a property summit in Canberra on Tuesday to release data showing the number of people in arrears on their home loans had now reached the level recorded during the global financial crisis.”

https://www.smh.com.au/politics/federal/mortgage-arrears-rate-at-highest-rate-since-gfc-says-reserve-bank-20190618-p51yqe.html


“The U.S. government reported that China’s holdings of Treasuries fell to a two-year low, a slump that’s coincided with an escalation in tensions between the world’s two largest economies…

“The issue is a sensitive one, as China watchers discuss the potential tools of retaliation the country has in the continuing trade war with Washington.”

https://finance.yahoo.com/news/china-cuts-treasury-holdings-two-203032077.html


“…a recession is nearing. It’s closer than it has ever been in the past 10 years and Trump is under extreme pressure to get the FED to lower rates and close a deal with the Chinese, before his approval ratings dwindle and his re-election hopes look slim…

” in 2010, U.S. corporations owed $6T and now they owe $10T, while total profits have risen from $1.7T to $2.2T. Thus, in 9 years, businesses borrowed $4T and generated $0.5T. That’s horrible. The reason the markets are up this much, despite this crazy statistic, is because (1) there is no viable alternative for your cash when interest rates are so meaningless, and (2) because CEOs spent (get ready for it) $5.7T on share buybacks and only $2.2T on capital expenditures since 2010.”

https://www.kitco.com/commentaries/2019-06-17/Sirens-Going-Off-We-re-Out-Of-Time.html


“Fears over economic growth are spreading, and investors are pricing in the Federal Reserve cutting interest rates three times this year, beginning next month. And yet, various measures of market volatility are surprisingly subdued…

“It is not just a vague sense of unease that is increasing.

“The global version of Citi’s Economic Surprise index — which reflects how data comes in, compared with expectations — is locked in its longest run in negative territory on record. In other words, economic data has been disappointing for an unnervingly long stretch.”

https://www.ozy.com/fast-forward/are-global-markets-somehow-broken/95013


“If there were no trade conflict between the U.S. and China, would it be necessary to invent one?

“In other words, would it be possible to explain what is going on in markets without making reference to the deteriorating U.S.-China trade relations? I am beginning to suspect that it would.

“Bond markets may be behaving as though they are bracing for something terrible to happen because traders are, indeed, scared that something terrible is going to happen.”

https://www.bloomberg.com/opinion/articles/2019-06-18/markets-are-behaving-like-a-recession-is-a-sure-thing-jx1a6jeq


“The global slowdown will extend into next year as mounting trade war uncertainty forces businesses to rein in spending and Chinese consumers turn cautious, Fitch Ratings has warned.”

https://www.telegraph.co.uk/business/2019/06/17/fitch-sounds-latest-warning-outlook-global-economy/


“The latest report from The World Bank crushingly delivers its weakest global growth forecast in three years and the worst predicted global trade growth since the 2008 financial crisis.”

https://www.hellenicshippingnews.com/baltic-exchange-growth-prospects-are-less-than-rosy-with-trade-tensions-a-seemingly-key-feature/


“Ten years after the subprime mortgage crisis sparked the 2008 financial crash, global real estate markets are showing signs of a slowdown.”

https://www.ft.com/content/22765d40-8c57-11e9-a1c1-51bf8f989972


Read the previous ‘Economy’ thread here and visit my Patreon page here.

17th June 2019 Today’s Round-Up of Economic News

“Beyond the US, the fragility of growth in debt-ridden China and some other emerging markets remains a concern, as do economic, policy, financial, and political risks in Europe. Worse, across the advanced economies, the policy toolbox for responding to a crisis remains limited. The monetary and fiscal interventions and private-sector backstops used after the 2008 financial crisis simply cannot be deployed to the same effect today…

“While trade wars and potential oil spikes constitute a supply-side risk, they also threaten aggregate demand and thus consumption growth, because tariffs and higher fuel prices reduce disposable income. With so much uncertainty, companies will likely opt to reduce capital spending and investment.

“Under these conditions, a severe enough shock could usher in a global recession, even if central banks respond rapidly. After all, in 2007-2009, the Fed and other central banks reacted aggressively to the shocks that triggered the global financial crisis, but they did not avert the “Great Recession”.

https://www.theguardian.com/business/2019/jun/14/the-risk-of-a-2020-recession-and-crisis-is-growing


“British companies look set to cut their investment by the most in 10 years in 2019 as the Brexit crisis drags on, weighing on future economic growth prospects, a survey showed on Monday.

“Business investment – key for productivity and pay growth – was forecast to fall by 1.3% this year…”

https://www.euronews.com/2019/06/17/uk-firms-to-cut-investment-by-most-in-10-years-as-brexit-drags-on-bcc


“Deutsche Bank has drawn up plans for a radical restructuring which will involve the creation of a “bad bank” to hold tens of billions of euros of toxic assets and a round of severe cuts to its investment banking operations, according to reports.

“The bad bank would house or sell assets valued at up to €50bn (£45bn) comprising mainly of long-term trades that have been a major drag on the struggling bank’s balance sheet, the Financial Times reported, citing four people briefed on the plan.”

https://www.theguardian.com/business/2019/jun/17/deutsche-bank-plans-radical-overhaul-with-50bn-hived-off-to-bad-bank-reports


“The recent European elections were a great victory for Matteo Salvini, the leader of the League, one of the two partners in the governing coalition.

“No doubt emboldened by this result, he has called for tax cuts that would, if implemented, surely cause Italy to break the EU’s borrowing limits.”

https://www.telegraph.co.uk/business/2019/06/16/matter-time-italys-black-wednesday-moment/


“Bleak’ market signs for global economy, warns ECB hopeful.

“A leading contender to head the European Central Bank has warned of “bleak” indications about the health of the global economy and said a breakdown in co-operation was paralysing officials’ ability to fight the next crisis.”

https://www.ft.com/content/dabc5d46-8e9b-11e9-a1c1-51bf8f989972


“Just as India’s banks emerge from under a pile of bad loans to large energy, steel and other industrial companies, they are facing a new reckoning from the accelerating crisis in the country’s shadow banking sector…

“Among the most vulnerable is Yes Bank Ltd., which has seen its shares plunge 65 percent in the past year amid wider worries about its lending policies.”

https://www.japantimes.co.jp/news/2019/06/17/business/financial-markets/shadow-banking-crisis-raises-risk-renewed-indian-bad-loan-reckoning/#.XQdGRbxKjIU


“Chinese leaders argue their citizens can outlast Americans in a trade war because they can endure hardship better. But, as China’s economic slowdown deepens, there’s a growing sense of restlessness.

“Not only does the next rung of the ladder look increasingly out of reach for many Chinese, they’re starting to question whether government decrees can fix the situation.”

https://www.bloomberg.com/opinion/articles/2019-06-16/china-can-t-revive-rust-belt-by-keeping-skilled-workers-home


“The swine fever epidemic has been described by scientists as the biggest animal disease outbreak we’ve ever had on the planet. Given that scale it seems a bit of an understatement to talk about the butterfly effect.

“That’s the idea that a small event somewhere can have implications that ripple far and wide – i.e. a butterfly’s wings cause a tiny atmospheric disturbance which snowballs to result in a hurricane on the other side of the world.”

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12240010


“Singapore’s non-oil domestic exports (NODX) fell by 15.9 per cent in May, data from trade agency Enterprise Singapore showed on Monday (Jun 17)…

“Electronic exports plunged 31.4 per cent in May year-on-year, on the back of the 16.3 per cent contraction in the previous month. Integrated circuits (ICs), disk media products and parts of ICs contracted by 39.8 per cent, 42.4 per cent and 54.2 per cent respectively, contributing the most to the decline in electronic NODX.”

https://www.channelnewsasia.com/news/singapore/singapore-s-exports-down-15-9-in-may-11632900


“Argentina’s grid “collapsed” around 7 a.m. (1100 GMT), leaving the entire country without power, Argentina’s Energy Secretariat said.

“The outage also cut electricity to much of neighboring Uruguay and swaths of Paraguay…

“The blackout comes amid a deepening economic crisis in Argentina that has plunged nearly a third of the country into poverty, pushed interest rates skyward and sent the peso tumbling against the dollar, prompting mass protests throughout the country.”

https://www.metro.us/news/the-big-stories/argentine-president-promises-investigation-following-massive-blackout


“The head of Brazil’s powerful state development bank quit on Sunday, a day after far-right President Jair Bolsonaro threatened to sack him, fueling a political crisis engulfing the government…

“Levy’s sudden departure follows a tumultuous week for a troubled government less than six months into its term, in which Bolsonaro fired his third minister, retired general Carlos Alberto dos Santos Cruz, who had clashed with Bolsonaro’s sons, and then sacked the head of Brazil’s postal service.”

https://www.france24.com/en/20190616-brazil-development-bank-chief-quits-fueling-political-crisis-0


“Thousands of Venezuelans have rushed to Peru’s northern border on Friday in hopes of entering the Andean country before the introduction of tough immigration requirements at midnight.

“Venezuela’s economic collapse under President Nicolas Maduro has unleashed the biggest migratory crisis in recent Latin American history, forcing countries like Peru – a developing nation of 32 million people –

“…to grapple with an unprecedented surge in immigration.”

https://www.aljazeera.com/news/2019/06/venezuelans-rush-enter-peru-rules-imposed-190615065449364.html


“A record seven million people – more than half of the country’s population – in South Sudan are facing severe hunger, according to a report by its government and three United Nations agencies.

“A lack of rain, ongoing economic crisis and years of civil war are being blamed for the worsening situation.”

https://www.aljazeera.com/programmes/insidestory/2019/06/south-sudan-brink-famine-190615203407217.html


““I think it’s unlikely the Fed is going to actually make a cut in the near term unless we get worse data,” he said. “But here’s a quick data point for you: usually, the market does very well — up double digits — after the first rate cut, but the last two times, it hasn’t.

“But those were also the only times the Fed actually cut and then we went into recession afterwards. So, in 2001, 2007, the Fed tried to save the market, but they did so too late. So that’s what we want to be looking at.””

https://www.cnbc.com/2019/06/16/if-a-recession-hits-even-fed-rate-cuts-wont-be-enough-ned-davis.html


“A decade of ultra-low interest rates ought to have delivered a humdinger of a recovery but it has failed to do so. Central banks keep looking for inflationary pressure that simply isn’t there.

“As was the case in the late 1970s, there is a sense of fragility… At times like this policy errors can be extremely costly, which is why Donald Trump’s stance on Iran is fraught with economic as well as geopolitical risk.”

https://www.theguardian.com/business/2019/jun/16/is-global-economy-in-for-new-oil-shock-trump-iran


Read the previous ‘Economic’ thread here and visit my Patreon page here.

14th June 2019 Today’s Round-Up of Economic News

“Chinese Ministry of Commerce spokesman Gao Feng told a Beijing press conference on Thursday that “there will be no winner in the trade war, which could cause a recession in the United States and global economies.”

“The ministry did not disclose US investment growth in China for the month of May alone, but the plunge seems to have coincided with the collapse of trade talks between Beijing and Washington.”

https://www.scmp.com/economy/china-economy/article/3014407/trade-war-could-cause-global-recession-beijing-official-warns


“China’s industrial economy continued to sag in May, data released on Friday showed, as the trade war with the United States continued to hang heavy on the world’s second largest economy.

“A new batch of data from the National Bureau of Statistics showed further deterioration on April’s numbers, and pointed to an ongoing slump across key manufacturing and production sectors, many of which are reliant on strong exports.”

https://www.scmp.com/economy/china-economy/article/3014521/china-economy-slump-goes-may-industrial-growth-lowest-17


“The US-China trade war, industrial strife and political deadlock all threaten to overwhelm the World Trade Organization, putting the future of the institution and the system of free trade in mortal danger, Liam Fox has warned…

“He criticised the G20 for failing to address the “scale [and] urgency of the challenges facing the global trading system” and warned “the WTO could be facing an existential crisis”.”

https://www.telegraph.co.uk/business/2019/06/14/liam-fox-warns-wto-crisis-businesses-told-brace-no-deal-brexit/


“Competitive currency devaluation does not benefit any country and could cause chaos to global financial order, former China central bank governor Zhou Xiaochuan said on Friday.

“Zhou did not specifically mention the Chinese yuan in his remarks to a financial forum in Shanghai on Friday. But global investors are closely watching the weakening currency as the U.S.-China trade war escalates.”

https://www.euronews.com/2019/06/14/competitive-currency-devaluation-could-prompt-global-financial-chaos-ex-pboc-chief


“Attacks targeting two oil tankers in the strait of Hormuz on Thursday followed strikes against four ships a month ago.

“The US has blamed Iran for the action and the oil price has risen as a consequence. Here we examine the potential impact on the global economy.”

https://www.theguardian.com/business/2019/jun/13/what-impact-could-oil-tanker-attacks-have-on-global-economy-gulf-oman


“A reading of the economy from Morgan Stanley is signaling “June gloom.” Morgan Stanley’s Business Conditions Index, which captures turning points in the economy, fell by 32 points in June, to a level of 13 from a level of 45 in May.

“This drop is the largest one-month decline on record and the lowest level since December 2008 during the financial crisis, according to the firm.”

https://www.cnbc.com/2019/06/13/a-morgan-stanley-reading-on-the-economy-collapses-by-the-most-ever.html


“According to a new survey from Bankrate of about 3,000 Americans, 23% of people who were adults when the recession started in December 2007 say they are now financially worse off than they were before the recession hit.

“That’s just under 50 million Americans. Another 25% say they are doing the “same.” In all, just over half believe their “overall finances” are better than before.”

https://finance.yahoo.com/news/quarter-of-adults-during-great-recession-are-worse-now-than-before-study-115254611.html


“Industrial output in the euro zone dropped in April, hit particularly by falling car production, adding to concerns of a prolonged slowdown in the region that may in turn apply pressure on the central bank.

“Monthly output dropped 0.5 per cent, compared with March, the regional statistics office said on Thursday.”

https://www.irishtimes.com/business/economy/industrial-production-in-euro-zone-drops-1.3924486


“According to the Financial Times, cross-border data shows capital entering the U.K. has fallen by 30% since the Brexit referendum, while investment into the E.U.’s other 27 countries in the three years since the referendum has surged 43% up to the first quarter of 2019.”

https://seekingalpha.com/article/4270146-brexit-looms-large-autos-lead-u-k-s-gdp-slowdown


“German Federal Ministry of Economy and Energy said the economy will “remain subdued for the time being”…

“The ministry also noted “the first signs of the economic slowdown are evident in the labor market: employment continues to grow, but the lower momentum is solidifying. Unemployment increased in May, not just because of special factors.””

https://www.actionforex.com/live-comments/207255-german-government-subdued-economy-with-first-signs-of-labor-market-slowdown/


“The European Union’s push to bring Italy into line with the bloc’s fiscal rules intensified on Thursday as top officials called for new measures to address budget shortfalls and raised concerns for the euro zone’s stability from Rome’s high debt.”

https://uk.reuters.com/article/us-eurozone-italy-debt/eu-sees-fall-of-italy-debt-crucial-to-euro-zone-stability-idUKKCN1TE126


“If too many investors make a withdrawal the fund is forced to sell assets quickly, potentially at a big discount – encouraging more investors to make redemptions before the fund loses more money.

“This can be a problem beyond the individual fund, its investors and the businesses reliant on its finance.

“It could spread through the real economy, harming businesses, savers and growth in a systemic way that did not exist at the time of the financial crisis.”

https://www.telegraph.co.uk/business/2019/06/13/run-investment-funds-could-trigger-economic-earthquake-bank/


Read the previous ‘Economic’ thread here and visit my Patreon page here.

13th June 2019 Today’s Round-Up of Economic News

“Global trade flows are flat or falling in all major regions as the world economy flirts with recession for the first time since 2008/09…

“Freight volumes handled through major ports such as Long Beach and Singapore as well as air cargo handled through hubs such as Hong Kong, Memphis, London and Frankfurt are either flat or down compared with 2018…

“Forward-looking freight indicators suggest the slowdown is likely to continue for the rest of the year and could turn into an outright recession.

“Global manufacturers report new export orders have been falling for nine months and are now declining at the fastest rate since 2015/16, according to the JPMorgan global purchasing managers’ index…

“At the moment, however, the global economy appears to be on the leading edge of a recession, and it seems more likely than not the downturn will deepen in the next six months unless action is taken to turn it around.”

https://www.reuters.com/article/us-global-economy-kemp/column-global-economy-on-leading-edge-of-recession-kemp-idUSKCN1TD29J


“World oil markets have undergone a U-turn, switching from supply-side risks like OPEC’s production cuts or U.S. sanctions against producers Iran and Venezuela, analysts said, to concerns of slowing consumption amid fears of a global recession.”

https://uk.reuters.com/article/uk-global-oil-demand-graphic/oil-demand-growth-grinding-to-lowest-in-years-as-global-economy-stalls-idUKKCN1TD2VU


“The world car market is about to take its biggest hit since the financial crisis of 2008, according to a report from Germany’s Center for Automotive Research (CAR), with sales diving more than 4 million in 2019.”

https://www.forbes.com/sites/neilwinton/2019/06/12/world-car-sales-will-fall-more-than-4-million-in-2019-report/#63b610aa2263


“Data released over the next few months will show that the current US economic expansion is the longest on record. But while the US continues to outperform other advanced economies, this success has yet to dispel many Americans’ persistent sense of economic insecurity and frustration; nor does it alleviate concerns about the lack of policy space to respond to the next economic downturn or financial shock.”

https://www.theguardian.com/business/2019/jun/12/the-unusual-us-economic-recovery-is-now-its-longest


“A closely watched measure of U.S. inflation trailed forecasts in May, reinforcing the case among investors for the Federal Reserve to cut interest rates. The core consumer price index, which removes energy and food costs, rose 2% from a year earlier, according to a Labor Department report Wednesday.

“Economists surveyed by Bloomberg had predicted a 2.1% increase. Monthly core price-rises, as well as a wider measure of annual inflation, also came in below estimates.”

https://www.bloomberg.com/news/articles/2019-06-12/u-s-core-inflation-cools-bolstering-case-for-fed-rate-cut


“Euro-area inflation expectations slid to a record low, adding pressure on the European Central Bank to step up policy support for the region’s economy.

Five-year forward five-year inflation swaps, a gauge of investor estimates of price increases in coming years, dropped Wednesday to 1.1830%, well below the ECB’s target of close to, but below 2%.

“That suggests the central bank may have to take further steps to revive inflation, such as restarting bond buying, or potentially even cutting interest rates deeper into negative territory.”

https://www.bloomberg.com/news/articles/2019-06-12/europe-inflation-expectations-at-record-low-worsens-ecb-headache


“Turkish society is divided as never before, an AK Parti win in Istanbul may trigger social turmoil in Turkey, which the state may be unable to control.

“The soccer games, particularly those of Besiktas SK and Fenerbahce SK are conducive in initiating such mass mobilization as the fans of those soccer clubs are known to be anti-government.”

https://nationalinterest.org/feature/are-erdogans-election-troubles-precursor-turkish-civil-war-62392


“After months of denial, the [Indian] government also admitted that unemployment is higher than it has been for four decades.

“Now, Arvind Subramanian, a well-regarded economist who was till last year one of Modi’s most senior advisers, has argued in a Harvard working paper that India’s official figures overestimate growth by several percentage points…

“The government had better understand that this is a crisis of credibility. Its own senior officials don’t believe its numbers. Shortly, nobody else will either.”

https://www.financialexpress.com/economy/indian-growth-narrative-economy-in-crisis-after-reduced-gdp-estimate/1606112/


“With both sides showing no sign of making concessions, a peaceful outcome appears elusive.

“How this will unfold shall be closely followed by Beijing and the local and international communities.

“Meanwhile, questions have been raised as to whether the controversial bill has taken a toll on the city’s business environment, after a property developer abandoned a multibillion-dollar deal, citing “social contradiction and economic instability”.”

https://www.scmp.com/comment/opinion/article/3014266/city-crisis-needs-be-defused-chaos-and-economic-woe-loom


Read the previous ‘Economic’ thread here and visit my Patreon page here.

12th June 2019 Today’s Round-Up of Economic News

“China’s car sales declined for a 12th consecutive month, a historic slump that’s left manufacturers reeling as trade tensions and economic worries weigh on consumer sentiment.

“Retail sales of sedans, sport utility vehicles, minivans and multipurpose vehicles fell 12.5% to 1.61 million units in May, the China Passenger Car Association (CPCA) said Tuesday. That followed a 16.6% decline in April and a 12% drop in March.

“The unprecedented slide has hit local brands particularly hard, though sales of market leader Volkswagen AG have also waned this year. While China this month unveiled a stimulus plan to help spur car demand, the policies don’t include any new spending from the central government and were met with doubts that they are enough to revive sales.”

https://www.caixinglobal.com/2019-06-12/chinas-car-slump-extends-to-a-year-without-signs-of-reprieve-101425676.html


“After a decade-long real estate boom, home prices in many Chinese cities are unnaturally high. In Beijing and Shanghai, buying a home costs about what the average family would earn in 23 years if it spent none of its income.

“And in 2016, Chinese residents began splurging on borrowing, most of it in the form of mortgages—as well as untold sums of high-interest personal loans—to buy increasingly pricy homes.

“With somewhere around $6.8 trillion in personal debt, with most wrapped up in real estate, the risks of a sharp drop in prices setting off a financial crisis akin to that of the US or Spain in 2008 are rising.”

https://qz.com/1615596/chinas-debt-disease-is-infecting-its-housing-market/


“China’s factory inflation slowed in May as faltering manufacturing hit demand, reinforcing worries about cooling growth in the world’s second-largest economy, while a surge in food prices could add to consumer grievances about living costs.”

https://uk.reuters.com/article/us-china-economy-inflation/chinas-factory-inflation-slows-as-manufacturing-stumbles-food-prices-soar-idUKKCN1TD08M


“Japan is fumbling what looks like its last chance to avoid an unnecessary and economically damaging sales-tax hike.

“The country’s ruling Liberal Democratic Party published its policy priorities for a July election to the upper house of Japan’s legislature on Friday, including a fresh commitment to increase the tax to 10% from 8% in October.”

https://www.wsj.com/articles/japan-edges-closer-to-a-major-economic-own-goal-11560243496


“South Korea’s exposure to a stressed global manufacturing supply chain has knocked its currency – Asia’s most risk sensitive – to over two-year lows as investors use it as a proxy to bet on the economic costs of a protracted U.S.-China trade war.”

https://uk.reuters.com/article/us-southkorea-markets-won/south-koreas-won-is-asias-whipping-boy-in-u-s-china-trade-war-idUKKCN1TD0MB


“Passenger vehicles sales in India recorded the worst monthly slump in 18 years in May, as a prolonged slowdown gripped the automobile industry amidst a credit crunch.

“Automotive demand in India has been cooling since July as the country faced a credit crunch and distress in rural markets.”

https://asia.nikkei.com/Business/Business-trends/India-car-sales-post-worst-slump-in-18-years-in-May-amid-weak-economic-growth


“Pakistan is flirting with a textbook emerging-market crisis. An unsustainable investment boom has ended. The central bank has raised interest rates to squeeze a current account gap.

“Growth has collapsed to a nine-year low; youth unemployment is in double digits; and inflation is getting there. Government revenues are stalling.”

https://economictimes.indiatimes.com/news/economy/indicators/another-textbook-crisis-may-be-brewing-in-asia/articleshow/69752147.cms


“An article in Foreign Policy authored by the Muslim Brotherhood’s former minister of investment Yehia Hamed has said that the chronic mismanagement of public finances by the current administration in Egypt has meant that in the last five years external debt has risen fivefold and public debt has more than doubled.

“The government currently allocates 38 percent of its entire budget merely to pay off the interest on its outstanding debt. Add loans and instalments, and more than 58 percent is eaten up,” writes Hamed.”

https://www.middleeastmonitor.com/20190611-egypt-nearly-bankrupt-due-to-mishandling-of-public-funds/


“European businesses are increasingly anticipating a recession in the near future as bad debt losses showed a marked increase in 2018.

“Companies reported 2.31% in bad debt losses in 2018 as a share of total revenues, an increase from 1.69% in 2017, according to a report from Swedish debt purchaser Intrum.”

https://www.cnbc.com/2019/06/11/european-companies-recession-rising-bad-debt-losses-report-says.html


“European industry is in trouble and there’s a risk it will infect other parts of the economy, deepening the slowdown that’s already left the region fragile.”

https://www.bloomberg.com/news/articles/2019-06-12/europe-fears-manufacturing-meltdown-will-infect-rest-of-economy


“Tensions are running high after the European Commission warned last week it was ready to take disciplinary action against Italy for consistently breaching the EU’s debt rules and flouting warnings to cut its deficit and reduce its public debt…

“The commission in a June 5 report highlighted the fact that Italy is not expected to meet its debt reduction targets in 2019 or 2020.”

https://www.aljazeera.com/ajimpact/italy-collision-eu-debt-currency-plan-190611100921805.html


“There is a dirty little secret in economics today. The United States has benefited – and continues to benefit – from the global slump.

“The US economy is humming along, even while protesters in the United Kingdom hurl milkshakes at Brexiteers, French President Emmanuel Macron confronts nihilist yellow-vested marchers, and Chinese tech firms such as Huawei fear being frozen out of foreign markets.”

https://www.channelnewsasia.com/news/commentary/us-economy-benefits-from-global-slump-inflation-tariffs-11614432


“The risks to the global economy are not limited to China and western Europe. The Argentine, Turkish, and Venezuelan economies are all in the grips of accelerating currency crises. The new Brazilian government is showing increasing signs of being unable or unwilling to address the country’s serious public finance problem. Also casting a dark cloud over the global economy are the rising geopolitical risks from countries like Iran and North Korea.

“Seemingly oblivious to the lessons from the collapse of Lehman Brothers during the 2008 financial crisis, Trump appears to think that the US economy is insulated from the rest of the world economy and is immune from a global financial market meltdown.”

https://www.omfif.org/analysis/commentary/2019/june/trump-tariffs-threaten-world-economy/


“After overcoming significant political and economic headwinds during the past decade, the US economy now appears to have undergone its longest sustained expansion in history.

“Yet, behind the data showing historically low unemployment and long-awaited wage growth lie vulnerabilities that cannot be ignored.”

https://www.project-syndicate.org/commentary/us-longest-recovery-weakness-by-mohamed-a-el-erian-2019-06


“The U.S. stock market has been surprisingly resilient in recent months despite signs that the U.S. economy is slowing.

“Behind the lofty broad market averages, however, disagreements are intensifying about the value of individual stocks, an indication that the overall outlook is increasingly uncertain.”

https://www.bloomberg.com/opinion/articles/2019-06-11/mood-swings-divulge-stress-in-a-stoic-stock-market


“The steady drumbeat of warnings over the surge in risky corporate borrowing is growing louder and louder.

“Time and again, regulators in the U.S. and Europe have pointed to the hazards of businesses taking on too much debt. At issue is the $1.3 trillion leveraged lending market, composed of high-yield loans from firms with some of the weakest finances.”

https://www.bloomberg.com/news/articles/2019-06-11/regulators-alarmed-by-risky-loans-but-don-t-know-who-holds-them


“The shale boom, along with slowing energy demand growth in much of the industrialized world, has changed the global oil and gas business.

“Rising productivity in areas such as the Permian and Appalachian basins has been a deflationary force rippling out across the industry, forcing producers everywhere from Canada’s oil sands to Brazil’s deepwater fields to cut costs.”

https://www.bloomberg.com/opinion/articles/2019-06-11/oil-producers-have-tax-cuts-in-their-futures


“A top financial regulator is opening a public effort to highlight the risk that climate change poses to the nation’s financial markets, [arguing] that the financial risks from climate change were comparable to those posed by the mortgage meltdown that triggered the 2008 financial crisis.”

https://www.nytimes.com/2019/06/11/climate/climate-financial-market-risk.html


Read the previous ‘Economic’ thread here and visit my Patreon page here.

11th June 2019 Today’s Round-Up of Economic News

“Trade tensions have re-emerged at a critical moment in the global cycle. Global growth is currently tracking at a subpar rate of 3.2%Y in 1H19 (vs a peak of 4%Y in 1Q18). One expects global growth to stagnate for 2H2019. With trade tensions already having an impact on corporate confidence, the risks to this outlook are skewed to the downside and recession risks are rising.

“Against this backdrop, the meeting between the US and China at the G20 summit assumes a heightened level of importance. The outcome is highly uncertain, but the window for resolving trade tensions and avoiding damage to the global cycle is narrowing.”

https://economictimes.indiatimes.com/news/economy/indicators/global-recession-here-are-clues-it-could-be-closer-than-you-think/articleshow/69731367.cms


“The Bank of England will probably need to raise interest rates sooner than financial markets expect, policymaker Michael Saunders said on Monday, adding his voice to an unexpectedly hawkish message from the central bank’s chief economist on Saturday.”

[Hopefully this is just bluster to bolster the £, as an interest rate rise is the absolute last thing the UK economy needs right now].

https://uk.reuters.com/article/uk-britain-boe-saunders/boes-saunders-says-uk-rates-may-need-to-rise-before-markets-expect-idUKKCN1TB25W


“European banks have transferred 21.4 billion euros ($24.2 billion) in revenues to the European Central Bank (ECB) in the five years since negative interest rates were introduced…

“The negative rates were intended to discourage banks from parking cash with the ECB rather than lending it out or investing it.”

https://www.cnbc.com/2019/06/10/european-banks-have-paid-over-20-billion-euros-to-the-ecb-since-negative-interest-rates.html


“The next time a recession harkens, the Fed might consider being more democratic — not just lend money cheaply to banks but rather give it away to ordinary working folks.

“As the Fed would have to account for that money on its balance sheet, that would require the Treasury to place on deposit securities of equal value.”

https://www.marketwatch.com/story/the-next-time-the-economy-tanks-the-fed-should-give-people-not-banks-free-money-2019-06-10


“The Reserve Bank of Australia is approaching the limits of interest rate cuts, so financial market attention is turning to the possibility of it resorting to an unconventional stimulus known as quantitative easing.

“Undoubtedly, this would be an extraordinary step for the RBA. It probably wouldn’t do so lightly, unless the economy was in trouble.”

https://www.afr.com/news/economy/monetary-policy/rba-has-extreme-stimulus-measures-on-standby-20190611-p51wf9


“Pakistan Prime Minister Imran Khan on Monday asked all citizens to declare their assets by June 30 through the Asset Declaration Scheme.

““I am appealing to all of you to take part in the Asset Declaration Scheme that we have brought, because if we don’t pay taxes, we will not be able to raise our country up,” Khan said in a televised address, Dawn reported.

“The prime minister’s remarks come at a time of economic crisis in Pakistan…”

https://scroll.in/latest/926540/pakistan-economic-crisis-imran-khan-asks-all-citizens-to-declare-their-assets-by-june-30


“The “fastest growing major economy” tag India boasted of till recently may have been based on spurious numbers.

“The country’s GDP growth between the financial years 2012 and 2017 was overestimated by around 2.5 percentage points, according to Arvind Subramanian, former chief economic advisor (CEA) to prime minister Narendra Modi.”

https://qz.com/india/1640510/india-gdp-growth-overestimated-says-ex-cea-arvind-subramanian/


“[India’s] top automakers — Maruti Suzuki, Honda Cars, Mahindra, Hyundai, and Nissan among others have applied brakes on their production for some days in order to clear the piling inventory. “There has been demand by the dealers across brands in the country to reduce the production as the sales are not happening,” an industry source told DH.

“Even as many of the auto majors officially declined any plans to curb production, yet a regulatory filing by the country’s largest automaker — Maruti Suzuki — revealed a drop of 18.9% in its production during the month of May.”

https://www.deccanherald.com/business/business-news/carmakers-hit-brakes-as-unsold-inventory-at-rs-35k-cr-739427.html


“Japan is producing fewer babies than in the 19th century, according to figures that confirm the extreme demographic crisis threatening the country’s economy, industries and welfare system.

“According to the health, labour and welfare ministry, the population fell to 124.22 million last year, a drop of 444,000 people. Barely 918,000 babies were born, 28,000 fewer than in 2017, and the smallest number since records began in 1899.”

https://www.thetimes.co.uk/article/falling-population-leaves-japan-fearing-economic-crisis-cx59tcf2r


“It’s all part of the game and China has seemingly decided that its currency falling to 7.00 per dollar isn’t a critical threshold that would see capital outflows just yet.

“The way I see it is that local authorities have played their cards well with this regard by helping to “ease” and “comfort” markets as we approach the key level.”

https://www.forexlive.com/news/!/yuans-march-to-700-per-dollar-wont-go-unnoticed-in-washington-20190610


“China’s imports of crude oil stumbled in May, and while the loss of Iranian cargoes offers a convenient explanation, there are other reasons to be cautious over the strength of demand in the world’s biggest oil importer.”

https://in.reuters.com/article/column-russell-crude-china/column-chinas-oil-import-slump-is-more-than-just-the-loss-of-iranian-crude-russell-idINL4N23I1KA


“Oil prices stabilized on Tuesday on expectations that producer group OPEC and its allies will keep withholding supply to prevent prices from tumbling amid a broad economic slowdown which has started eating away at fuel demand growth.”

https://www.cnbc.com/2019/06/11/oil-market-opec-supply-cuts-economic-slowdown-in-focus.html


“U.S. frackers haven’t turned a profit in 10 years, and investors have not only been putting pressure on them to show them a return on their investments, but have largely shut off the flow of new investment capital until they do. Last year oil companies raised about $22 billion from both equity and debt financing, less than half what they raised in 2017 and less than a third of what they raised just five years ago.

“More than 170 small fracking companies weren’t able to survive and declared bankruptcy last year. Another eight small fracking companies have cratered so far this year. And if oil prices continue to slide — crude oil hit $66 a barrel less than two months ago but now trades at $54 a barrel — lack of investors’ funds will be the least of their worries. Survival will be their top priority. Those companies going bankrupt last year left investors holding the bag on nearly $100 billion, and new investors aren’t interested in repeating the experience.”

https://www.thenewamerican.com/tech/energy/item/32559-as-oil-and-gas-prices-drop-frackers-declare-bankruptcy


Read the previous ‘Economy’ thread here and visit my Patreon page here.