“Whether the world’s central banks are prepared to combat another slump is becoming less of a hypothetical question as the global economy shows signs of strain. The chances that the United States will enter a recession by next year have grown as manufacturing weakens and trade uncertainty drags on. In Germany, the unemployment rate has ticked higher, and industrial production is slowing. In Japan, weak factory production and waning exports heighten vulnerability…
“Central bank officials insist that they are prepared to act aggressively if another recession flares. The E.C.B. stands prepared to stimulate the eurozone, and the Fed is signaling that it could soon cut interest rates to try to get ahead of mounting risks in the United States.
“But economists across the globe say central banks can no longer be sole saviours the next time a downturn hits. That reality is colliding with political constraints in the United States and Europe, where lawmakers may prove unable — or unwilling — to quickly roll out expensive stimulus packages.
“When it comes to monetary policy, “surely there is not enough room to respond to even a run-of-the-mill recession,” said Olivier Blanchard, a former International Monetary Fund chief economist…
“While the Fed is in comparatively good shape because it has gotten rates off rock bottom — they’re at 2.25 to 2.5 percent — that leaves it just half as much room to cut borrowing costs as policymakers had back in 2007. In fact, the Fed’s chair, Jerome H. Powell, has started a yearlong review of just what its options are.
“Having low interest rates really challenges the existing tool kits of central banks,” Mr. Powell said during remarks in New York last month.
“Central banks in major economies are in their diminished positions largely because sustainable growth, inflation and interest rates have all fallen, trends that are attributable to long-running structural forces in the economy including ageing populations and weakening productivity.”
“The U.K. economy probably shrank for the first time since 2012 in the second quarter, according to Bloomberg’s latest survey of economists.
“The prediction for a 0.1% contraction marks a downgrade from June, when economists only predicted stagnation. The survey came as retail industry reported another drop in sales and said “the picture is bleak.””
“Retail sales suffer ‘worst June on record’, says lobby group. UK retail sales experienced their “worst June on record”, according to a key industry body, as uncertainty over Brexit continued to affect the economy.”
“The scene was solemn at Deutsche Bank’s offices in London, New York and Tokyo on Monday as scores of employees, belongings in hand, left their desks for the final time as the German lending giant began one of the largest rounds of layoffs since the financial crisis.
“Carrying boxes and envelopes containing personal effects and A4 forms, Deutsche workers started their work week by collecting their belongings and emptying their desks.”
“Investors consider an economic recession in Germany inevitable, according to economic research group Sentix. Its index measuring current conditions and expectations for Europe’s largest economy fell to its lowest level in almost a decade. A similar gauge for the eurozone dropped to the lowest since 2014.
“The data suggests that de-escalating tensions between the US and China at last month’s Group of 20 meeting in Japan has failed to inspire investors.”
“After the 2008 financial crisis, as the American central bank dropped interest rates to zero to spur revival, Turkish banks took advantage of free money by borrowing dollars.
“They lent greenbacks to Turkish businesses eager for an alternative to the lira’s high borrowing costs… in recent years, as the lira has fallen, companies with revenues in lira and debts in dollars have seen their burdens expand.”
“Cotton and cotton products are one of Pakistan’s main exports, accounting for $11.7bn of the country’s $24.7bn in exports last year, according to central bank data…
“For the past month, authorities have been battling a swarm of desert locusts which has been threatening the country’s main cash crop…
“Pakistan is already going through a major economic crisis, with slowing growth, a skyrocketing exchange rate and rising inflation.”
“Chinese companies are facing a reality check after years of ramping up debt… “China’s default risks are still seen as rising, due in part to slowing economic growth… How big is the problem? It’s big, with the potential to worsen…”
“The DHL Global Trade Barometer, an early indicator of global trade developments calculated using Artificial Intelligence and Big Data, suggests weakening ocean trade — which slipped 8 points to an index value of 47 — will drive the decline in overall Chinese trade…”
“Congratulations, debt slaves! Today’s G19 Fed report on [US] Consumer Credit shows that you owe the banks and other creditors yet another record high amount of money.
“Total: $4.1 Trillion
“Revolving: $1.1 Trillion
“Non-Revolving: $3.0 Trillion
“With more than 10 years having passed since the financial crisis, leading to the longest bull market in history, it’s crazy to think ‘the greatest economy anywhere in the world’ is panicking over the difference between a 25 bps or 50 bps rate cut, let alone any rate cut at all.
“For the first time ever, the universe of negative yielding debt has surpassed $13 trillion and isn’t showing any signs of slowing down.
“40% of global bonds are now yielding less than 1%, according to Bloomberg.”
“It’s yet another example of the craziness in the bond market right now. It costs less to borrow money for a period of decades than just a few months — a phenomenon known as an inverted yield curve.”
Read the previous ‘Economy’ thread here and visit my Patreon page here.
“The risk of a global downturn is now at its highest in at least four years, according to investors surveyed by Absolute Strategy Research.
“Global bond markets have rallied in recent weeks as central banks respond to signs that major economies are looking increasingly fragile.”
“The rising threat of no-deal Brexit has set Britain on course for the biggest decline in business investment since the financial crisis, the Confederation of British Industry has warned.
“Paving the way for weaker future economic growth, the CBI warned that business spending in the UK economy was set to decline by about 1.3% in 2019 compared with a year ago – the steepest drop since the last recession in 2009.”
“The sharpest slide in German factory orders since the financial crisis ignited fears that the slowdown in Europe’s biggest economy is escalating into a more serious slump. Factory orders plunged 8.6pc year-on-year in May, the biggest annual tumble in almost a decade.
“The shock setback for Germany’s ailing manufacturers stoked concerns that central banks will need to take action to arrest a deepening global downturn.”
“Deutsche Bank announced Sunday that it will pull out of its global equities sales and trading business as part of a sweeping restructuring plan to improve profitability.
“The bank will also slash 18,000 jobs for a global headcount of around 74,000 employees by 2022. The bank aims to reduce costs by 6 billion euros.”
“Turkey has fired its central bank governor as policy differences between the government and the bank deepen in the face of an economic slump, volatility in the lira currency and high inflation.
“Murat Çetinkaya, who had been serving as the governor since April 2016, was removed from the role and replaced by his deputy Murat Uysal…”
“India’s fourth largest bank has reported another big-ticket scam. On July 6, Punjab National Bank (PNB) said in a stock exchange filing that one of its debtors, Bhushan Power & Steel, has defrauded the bank of Rs3805.15 crore ($555 million).”
“China’s fuel producers are making extended curbs to their output in the third quarter after supply from mammoth new refineries stoked an already-sizeable glut, potentially dragging on crude oil demand from the world’s biggest importer of the commodity…
““For markets that are already consumed with fears about a global recession … headline numbers of oil demand growth slowing alongside talk of run cuts seem to reinforce a bearish narrative,” said Michal Meidan, a London-based analyst at Energy Aspects.”
“Corporate bond issuance in South Korea hit an all-time high in the first half of the year as companies rushed to capitalize on strong investor appetite for bonds triggered by lingering doubts about the Korean economy and underlying stocks amid U.S-China trade frictions.”
“Japan’s machinery orders fell for the first time since January and at a faster rate than expected, casting doubt on the strength of capital investment over the coming months amid a global economic slowdown.
“Core machinery orders, a leading indicator of capital expenditure, fell 7.8% in May from April… Orders slipped 3.7% from the previous year.”
“The economic expansion this week became the longest in U.S. history, surpassing the 1990s boom, which lasted exactly a decade…
“But this expansion has been weaker and its benefits distributed far more unevenly than in previous growth cycles, leaving many Americans in a vulnerable position.
“This is a “two-tier recovery,” said Matthew Mish, head of credit strategy at the investment bank UBS. About 60 percent of Americans have benefited financially, he said, while 40 percent have not.
“The 40 percent — which Mish calls the “lower tier” — have seen paltry or volatile wage growth, rising expenses for housing, health care and education, and increased levels of personal debt. They tend not to own homes or many stocks.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“Global manufacturing and construction sectors have already entered a downturn; the service sector is all that now stands between the economy and a full-blown recession.
“Global manufacturers reported new export orders fell for a 10th month running in June, with the most widespread decline for six years, according to the JPMorgan global purchasing managers survey.
“Even in the United States, which has escaped relatively mildly so far from the downturn hitting Europe and Asia, there are now clear signs growth has stalled across the manufacturing and construction industries…
“…it is not clear whether early and aggressive rate cuts will be enough to avoid a recession. Rate cuts successfully extended the economic expansion in 1995/96 and 1998 but not in 2001 and 2007.
“Policymakers’ concerns about the worsening manufacturing slowdown and its potential to spill over into the rest of the economy explain why the United States reached out to China last month to restart trade talks.
“Global growth is now too weak to absorb any more serious shocks without sliding into a much more serious downturn.”
“The UK economy has suffered its first quarterly contraction in seven years, a closely watched survey suggests, as the looming threat of a no-deal Brexit paralyses business activity.
“Growth in the UK’s dominant services sector came to a near standstill in June, confirming a gloomy outlook for a month in which the manufacturing and construction industries plunged into reverse.”
“The number of babies born in Italy hit a new record low in 2018, the population shrank and the average age crept higher, national statistics office ISTAT said on Wednesday.
“Italy’s demographic crisis, with a shrinking population and ageing workforce, is one reason for its chronically stagnant economy, economists say — and the situation is getting worse.”
“Builder loans are under the lens. This is the illiquid, opaque part of the real estate business that’s simultaneously the biggest employer in India and thrives on financing from beyond the official bailiwicks.
“In effect, therefore, builder loans could well be India’s own subprime… The contraction is a clear reflection that borrowing short and lending long can’t continue for eternity.”
“The world’s largest car market is grappling with a sharp slowdown… Now, China is making auto financing even more accessible. Given the car sector contributes around 4 per cent to nominal gross domestic product, this makes sense. But with the country’s financial system teetering, the wisdom and timing of this decision is questionable…
“Yet again, China is returning to credit to solve its problems.”
“A gauge of U.S. service industries dropped more than forecast in June to the weakest in almost two years, led by a cooling in employment that may further temper optimism about the labor market heading into Friday’s jobs report.”
“First-half job cuts were at their highest level since the first half of 2009, according to new research. Jobs outsourcing firm Challenger, Gray & Christmas has kept layoff data by month for years.
“Its researchers wrote, “So far this year, employers have announced plans to cut 330,987 jobs, a 35% increase from the 245,179 cuts announced through the first half of last year. This year marks the highest first-half total since 2009…”
“Inventories fell less than expected as U.S. refineries last week consumed less crude than the week before and processed 2% less oil than a year ago, the EIA data showed, despite being in the midst of the summer gasoline demand season.
“That suggests oil demand in the United States, the world’s biggest crude consumer, could be slowing amid signs of a weakening economy. New orders for U.S. factory goods fell for a second straight month in May, government data showed on Wednesday, adding to the economic concerns.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“Jobs losses. Factory closures. Trade war. Climate change. Britain is in a manufacturing recession, say businesses, and there is little reason to think it will escape the downturn anytime soon.
“Business activity slumped last month at the fastest pace since the eurozone crisis of 2011-13 and almost every part of the industry is struggling.”
“Britain’s construction industry “dropped like a stone” in June to record its worst monthly performance in more than 10 years…
“The IHS Markit/Cips construction purchasing managers’ index (PMI) plunged to 43.1, the lowest reading since April 2009 when the country was gripped by the global financial crisis. A PMI figure below 50 shows the sector has contracted.”
“A no-deal Brexit could be almost as bad as the 2008 financial crisis, Conservative leadership candidate Jeremy Hunt has conceded.
“The foreign secretary said the shock of a no-deal could increase the national debt by £90 billion, and agreed with William Hague it may lead to Scotland and Northern Ireland breaking away from the United Kingdom.”
“Let this sink in for a minute: Yields on two-year Italian government bonds briefly fell below 0% on Tuesday.
“That’s right – for a moment, investors decided it was just fine to pay Italy for the privilege of lending it money, even though barely a month ago the country was on the verge of a fiscal crisis so bad some wondered whether it would be need to leave the euro zone.”
“Housing, often an early indicator of cyclical turns, has weakened [in the US]. Even though not all in the sector looks bad, investors and policy makers would do well to watch this area especially carefully.
“The headline figures from the Census Bureau paint the most ominous picture. They recorded a sharp 8% drop in the sales of newly constructed privately owned homes in May, almost 4% below the level a year ago.”
“Here’s my theory. The [US] economy should have entered recession a year ago. The late-2017 tax cuts bought a little time by encouraging business investment, while the Fed’s rate hikes made homebuyers rush to beat rising mortgage rates.
“Then, the Trump trade fight sparked an import boom that created more activity and jobs. That extended the growth a little more. But those effects were temporary, and now they’re running out.”
“Cuba’s Communist government said on Tuesday it was studying the potential use of cryptocurrency as part of a series of measures to boost its economy amid a deepening crisis exacerbated by U.S. sanctions.
“Cryptocurrency, which allows financial operations to be carried out anonymously, has been used in the past to get around capital controls.”
“India’s financial system [is at] at risk. “This is a crisis waiting to happen,” said Vivek Dehejia, an economist at Carleton University in Canada.”
“Labor says the [Australian] Reserve Bank’s decision to cut interest rates for the second month in a row to a record low of 1% shows the “floundering” economy needs more stimulus, as it urges the government to back its proposal to bring forward tax cuts.”
“New car sales tumbled in June by 9.6 per cent to extend a run of softness in the vehicle market to 15 consecutive months…
“Industry players had been hopeful that an interest rate cut in early June by the Reserve Bank of Australia and sharp deals offered by car dealers in the traditional end of year discounting might trigger an upswing in June. The RBA followed up with a second cut on Tuesday amid a weak economy.”
““It’s a bit of a scary time for the global economy,” the NYU professor and head of Roubini Macro Associates told Bloomberg Television Tuesday.
““There is a risk of a global recession and financial crisis by next year.” Roubini pointed to the ongoing U.S.-China trade conflict as the likeliest trigger of the next crisis.”
“Carney said: “The more hostile and uncertain trading environment is coinciding with sharp slowdowns in global trade, manufacturing, industrial production and capital goods orders.
“As a consequence, the quality of global growth has deteriorated.
“Across the G7, the growth rate of business investment has almost halved since its peak in late 2017, leaving the global expansion more reliant on consumer spending and reducing its resilience.””
“Global manufacturing is faltering.”
“OPEC and other supply-cutting countries led by Russia on Tuesday finalized plans to prop up oil prices, which have taken sharp drops in recent months as a slowing global economy depressed the outlook for demand…
“Yet oil prices remained depressed following the announcement, signaling that concerns about a slowdown in growth have overwhelmed expectations for lower supply.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“As governments across the globe struggle to restore their growth rates, a new spectre has come to haunt many of them: Unsustainable debt…
“…the specific way in which the global financial crisis was sought to be addressed keeping in mind the interests of finance, has delivered a debt spiral, without imparting much dynamism to the world economy. There is a real possibility of another debt meltdown.”
“The U.S. broke its record for time without an economic recession Monday as it began the 121st consecutive month of gross domestic product (GDP) growth since the 2008 recession.
“The recovery, which began in July 2009, turned 10 years old Monday, marking the longest stretch of economic expansion in modern U.S. history.”
“The wealthiest fifth of Americans hold 88% of the country’s wealth, a share that has grown since before the crisis, Federal Reserve data through 2016 shows. Meanwhile, the number of people receiving federal food stamps tops 39 million, below the peak in 2013 but still up 40% from 2008 even though the country’s population has only grown about 8%…
“Now, many of the signs of mega-wealth that preceded that financial crisis  are once again on display.”
“When RV sales are doing well, the economy follows; when RV sales tank, the economy is soon to tank too…
“The RV industry has repeatedly fallen in advance of more widespread economic troubles… the next recession could be around the corner.”
“…the Fed, which signaled rate cuts could come soon due partly to uncertainty caused by the trade war, still faces a slowing global economy as well as businesses domestically putting off spending until China and the United States reach a lasting truce.”
“Private sector asks to immediately apply effective measures against the current economic deceleration that is taking place in Mexico.
““The Mexican economy is in risk of falling into a vicious circle of stagnation and even reaching recession”, warned the Center for Economic Studies of the Private Sector (Centro de Estudios Económicos del Sector Privado: Ceesp).”
“The Reserve Bank [of Australia] has cut interest rates to an historic low of 1 per cent, as it stares down the twin issues of rising unemployment and a slowing economy…
“The 0.25-percentage-point cut follows a move at last month’s meeting and is the first back-to-back cut since 2012, amid fears of a global financial meltdown flowing from European banks.”
“”The current economy [South Korea] seems worse than it was back in 2008, during the global financial crisis,” Kang said in his office in Hanam Industrial Complex in the city of Gwangju, some 270 km (167.77 miles) southwest of Seoul.
“”The worst scenario for us will be our unit only doing design work and our production being tossed to countries with cheaper labour such as China or Mexico.””
“The days of a “free lunch’’ are over for Asia’s banks, which face an intensifying threat from slowing economic growth and competition with technology firms, according to McKinsey & Co. After years of rapid expansion, banks in the region are now seeing their revenue and profit growth slow and global market share shrink, the New York-based consultancy wrote in a report.”
“Indian companies, across both private and public sectors, announced new projects worth ₹43,400 crore in the June 2019 quarter, 81% lower than what was announced in March quarter and 87% lower than the same period a year ago…
“…the data paints a grim picture of an investment-starved economy and resonates with the Reserve Bank of India’s (RBI) concerns of shrinking investment in the Indian economy.”
“India’s $42 billion shadow-banking system has been creaking since one of the country’s biggest infrastructure lenders unexpectedly halted debt repayments in 2018. Investor nerves were rattled again in June when a major mortgage lender delayed bond interest payments, indicating credit markets remain under enormous strain…
“Can investor confidence be restored or is a full-blown financial crisis brewing?”
“The battle between Boris Johnson and Jeremy Hunt to outdo each other in offering the hardest Brexit with “no deal” pledges is the “height of irresponsibility”, showing “zero understanding” of the consequences, business leaders have said.
“The trade body Make UK spoke out after manufacturers suffered the sharpest fall in activity in six and a half years, adding to signs of economic weakness.”
“Summer has arrived in London, but the smiles are likely to remain frozen in the financial community as HSBC Holdings Plc and Deutsche Bank AG join Nomura in implementing thousands of job reductions. In an atmosphere that may be the gloomiest since the financial crisis, some are jumping before they’re pushed.”
“In a speech to finance leaders on Tuesday, City minister John Glen is expected to announce government plans to boost the use of green financial products and remind financiers of the “vital role” they have to play in “securing a greener future for us all”.
“The action plan includes the official launch of a so-called Green Finance Institute…”
“Oil cartel Opec agreed to extend supply cuts by nine months today, in an attempt to maintain the price of oil in face of soaring US production and fears of a global economic slowdown…
“Opec and its allies have been cutting output since 2017 to support oil prices…”
“The world’s most powerful leaders gathered at the Group of 20 summit in Osaka, Japan last week for meetings that may help set the direction of the global economy.
“These talks occurred as global manufacturing contracted for the second consecutive month. Two months of contraction in global trade has not happened in six-and-a-half years, according to the J.P. Morgan Global Manufacturing Index.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“Factory sentiment across Asia became even more frigid in June, signaling a worsening in the region’s growth outlook as U.S.-China trade tensions continue to simmer.
“Waning global demand, particularly in the electronics sector that’s vital to much of the region, continued to weigh on Asia purchasing manager indexes, according to releases Monday. Trade friction between the world’s two biggest economies is straining the outlook despite both countries agreeing over the weekend to resume negotiations.
“June PMIs for Japan, South Korea, Malaysia, and Taiwan fell further below 50, signaling deeper contractions in factory output. South Korea’s index slumped to a four-month low of 47.5, while Taiwan’s reading of 45.5 was the weakest since November 2011, according to IHS Markit data. Both China’s official manufacturing PMI and the Caixin report signaled declining production last month.
” Recent U.S.-China developments — including a pledge by U.S. President Donald Trump, at the weekend’s Group of 20 meetings, to delay any further tariffs — have done little to convince economists that the data will show a turnaround this year. “
“Australia is about to reach its last percentage point of interest-rate ammunition, dragging the country’s economy and markets deeper into the low-yield world that’s already engulfed many of its developed-world peers.
“Yields on the nation’s 10-year government bonds hit an all-time low 1.26% last week…”
“[South African] Institutions and municipalities in financial crisis for the past five years have no recovery plans.
“The management of beleaguered state institutions and local municipalities last week reached new crisis levels after employees at a number of institutions were either not paid on time or not at all.”
“Saudi Arabia’s economic growth more than halved on a quarterly basis to 1.66% in the first quarter of this year, in line with expectations of only a modest pick up as oil production cuts weigh on the world’s top crude exporter…
“On Sunday, Saudi Energy Minister Khalid al-Falih said the cuts would most likely be extended by nine months.”
“Growth in UK manufacturing slowed between April and June, a closely-watched business survey showed on Monday, with key measures the weakest in years.
“Factories’ sales at home and abroad rose but at the slowest pace in seven years, according to the quarterly poll by the British Chambers of Commerce. The outlook is also gloomy…”
“Jeremy Hunt will announce plans for a £20 billion “war chest” for a no deal Brexit which would see dramatic tax cuts designed to turbo-charge the economy.
“The Foreign Secretary will unveil a detailed 10-point plan for leaving without a deal, with a package of financial support which he likens to that offered in the immediate aftermath of the 2008 financial crisis.”
“Signs of weakness in the manufacturing sector have been mounting left and right in recent months, adding to concerns that the decade-long expansion could be running out of steam…
“The US purchasing managers index, which gauges activity based on a survey of firms, dropped this May to its lowest level since President Donald Trump took office. Regional readings have been similarly dismal, with the Empire State manufacturing index posting its largest drop ever this month.”
“Unfortunately, there are an increasing number of signs that are warning that the expansion is soon coming to end and that a recession is not far away.
“Particularly alarming is the fact that the New York Fed’s very accurate recession probability model is warning that the current odds of a recession in the next year are the same as they were in July 2007, which is when the subprime debt crisis kicked into high gear.”
“Currency Warrior; Why Trump is Weaponising the Dollar…
“The dollar’s share of global foreign exchange reserves has slipped in the 10 years since the financial crisis, but at 62 per cent of the total it still dwarfs all rivals… the world is locked into the dollar as the default currency.”
“Global central banks may have to issue their own digital currencies sooner than expected, the general manager of the Bank for International Settlements has said, after Facebook recently unveiled plans to create its own stablecoin.”
“The world’s biggest central banks, having been on a money-printing binge for years, are about to embark on a fresh round, it seems. Yet inflation is nowhere to be seen, which appears to suggest that the money is disappearing into a giant sink hole or new kind of black hole that physicists have yet to identify…
“…the consequences of profligate money-printing will thrust themselves upon world attention probably not far down the road. They are like the unseen but massive roots of a tree that threaten to undermine and topple the house – or global economy – it is supposed to shade.”
“Corporate borrowing poses a danger to the global financial system and could trigger a crisis in the same way US sub-prime mortgages sparked the 2008 banking crash, the organisation that represents the world’s central banks has warned…
“While it was not clear whether or how a crisis might unfold, the $3tn (£2.4tn) market for low-grade corporate debt was already “overheating” and risked provoking a panic that could send market values crashing as happened 11 years ago.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.