The downgrade of US government debt by a credit rating agency has been a big driver of this week’s financial market gyrations. The decision by the Bank of England to lift policy rates by 25bps (with hints of more to follow) coupled with firmer-than-expected private sector payrolls data (from ADP) also served as a reminder that central banks may not yet have completed their tightening cycles. In our charts this week we look at the latest views on central bank policy that emerged from August’s Blue Chip Financial Forecasts survey (chart 1). That those views remain consistent with the idea that tightening cycles are near completion is, in part, a reflection of tighter financial market conditions, which we offer some perspectives on in our next exhibit (chart 2). It is also, however, a function of inflation, and for many central banks, service sector inflation which we focus on next (in chart 3). The decline in global economic policy uncertainty that’s unfolded in recent months is the takeaway from our next exhibit (chart 4). We then contrast this with the recent weakness of demand and of pricing power in the world’s traded goods sector (in chart 5). Lastly, (in chart 6) we look at the escalation in global rice prices in recent weeks given the threats this is posing for economic, political and social stability in many emerging market economies.
USA| Aug 03 2023U.S. ISM Services PMI Declines in July
- Service-sector total retraces a piece of June’s increase.
- Business activity & employment readings weaken.
- Prices index moves higher.
by:Tom Moeller
|in:Economy in Brief
USA| Aug 03 2023Factory Orders Jump in June on Surge in Nondefense Aircraft
- Durable goods orders jumped in June, led by nondefense aircraft; nondurable goods orders were little changed.
- Total shipments rose for the second consecutive month.
- Durable goods inventories rose modestly while nondurable goods inventories fell.
by:Sandy Batten
|in:Economy in Brief
USA| Aug 03 2023U.S. Productivity Rebounds Strongly in Q2
- Compensation surges, more than doubling Q1 rise.
- Unit labor cost increase is strongest in three quarters.
- Strength in factory compensation accompanies productivity rebound.
by:Tom Moeller
|in:Economy in Brief
- Latest week’s increase in initial claims still yields decline in 4-week moving average.
- Continuing claims rose, but prior week revised down slightly.
- Insured unemployment rate holds steady at just 1.1%.
Global| Aug 03 2023Globally Total PMIs Slow But Continue to Signal Growth
The total or composite S&P PMIs for July saw worsening as the global PMI is worsening, emerging markets are worsening, developed markets are worsening and are the weakest of all. This follows a similar performance in June when all three groups showed deterioration although May showed improvement for all three groups.
Sequentially, over 3 months, all three of these groups are worsening, over 6 months they're all improving, and over 12 months the overall and developed markets are worsening while emerging markets are improving.
The queue percentile standings show the global PMI with a 42.9 percentile standing, marking it below its 50th percentile and therefore below its median. The HSBC emerging market index has a 67.3 percentile standing, nudging it up into the top one-third in terms of historic standings. Developed markets have a 24.5 percentile standing, sending them to the bottom quartile of their range. This matrix of data portrays overall poor results for the global economy.
USA| Aug 02 2023ADP Employment Strength Diminishes in July
- Two-month change is strongest since last July.
- Service sector hiring remains strong; goods increase weakens.
- Pay increase decelerates.
by:Tom Moeller
|in:Economy in Brief
USA| Aug 02 2023U.S. Mortgage Applications Fall Again as Interest Rates Rise
- Purchase & refinancing applications decline.
- Effective interest rates edge higher.
- Average loan size eases.
by:Tom Moeller
|in:Economy in Brief
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