Weekly Economics News Wrap up

2019-2-15 17:52 | By : MEX Analyst Team

The most significant global concern this week was still the trend of China-US trade war. A new round of high-level trade negotiations between China and the United States was held in Beijing Diaoyutai State Guesthouse for two days yesterday. Before the negotiations began, US President Donald Trump considered extending the deadline on March 1 for negotiations to impose tariffs on China by 60 days, allowing the two countries to have sufficient time to reach a mutual agreement. Some analysts said that the structural contradictions between China and the United States are obviously difficult to resolve in a short period of time. Choosing to extend the time limit instead of directly raising the tariffs, reflects the intention of the two sides to reach an agreement. However, China and the United States are still stalemating on a list of major issues, including the Chinese government was accused of forcing the technology transfer and the subsidization of domestic industries. In terms of economic restructuring, it has not been able to narrow the contrasts.

The US Senate passed the Border Security and Expenditure Bill to help the government to avoid another lockout; Majority Leader McConnell said that President Trump will sign the relevant decree, but at the same time declare the state of emergency for the US to obtain funds to build the border fence.

US retail sales recorded the largest MoM decline in more than nine years. Fed Governor Lael Brainard said that the retail sales figures have increased the downside risks for the US economy. It is appropriate to stop raising the Fed rate to maintain to lower the risks. The normalization of the balance sheet should be completed by the end of 2019.

On the other hand, due to the trade war and the rapid slowdown of the Chinese economy, Japanese companies did not perform well recently. In 2018 Q3, Japanese companies made the most drastic decline in profit since the 311 earthquakes. Many companies revised their financial forecasts and emphasized the uncertainty for the improvement of financial performance. The Financial Times reported that SMBC Nikko Securities data showed that 1,014 companies in the Tokyo Stock Price Index lost 2.6% in 2018 Q3, the biggest drop since the 311 earthquakes in 2011. The net profit of Japanese companies plummeted by 26% in 2018 Q3, mainly contributed by the disappeared of positive effects from US tax cuts. In addition, Toyota, Hitachi, Suruga Bank, Nomura, and other large corporates significantly write-down their assets also affected the company's net profit. Although the Japanese electronics and machinery industry have already expected the net profit to fall, the impact of the Chinese car sales recession is greater than the expectation. The decline in the net profit of the car factory has spread from the supply chain to the electronics industry.

This week, a list important economic data from different countries was announced:

United Kingdom

Affected by the Brexit negotiations, the UK's recent economic performance is weak which is reflected by the announced data below.

  • 2018 Q4, Business investment fell by 1.4% QoQ, lower than the expectation by 0.1%.
  • 2018 Q4, Gross domestic product (GDP) growth was 0.2% QoQ, lower than the expectation by 0.1%.
  • 2018 Dec, Manufacturing production fell by 0.7% MoM, lower than the expectation.
  • 2019 Jan, RICS House Price Balance fell by 22%, meaning that most respondents are not optimistic about current inflation trends.

Germany

Germany barely avoided the recession, the real GDP in the fourth quarter of 2018 increased by 0.0%

  • 2018 Q4, German GDP grew by 0.0% QoQ after adjusting the price, seasonality and calendar factors, which was worse than the market expectation of 0.1%.

United States

The United States has recently been affected by political and economic factors both internally and externally, such as government shutdowns and trade war negotiations, which hindered the US economy. Economic data shows that the US economy is still not optimistic, US retail data is not good, and the Fed is not likely to raise the interest rate softening the inflation of USD.

  • 2018 Dec, the JOLTs Job Openings was 7.335 M, better than the expectation.
  • As of February 9, 2018, the Initial Jobless Claims is 239,000, greater than the expectation.
  • 2018 Dec, the retail sales decreased by 1.2%, lower than the expectation, which is the biggest decline since 2009.
  • 2019 Jan, the final value of the Consumer Confidence Index was 91.2 (Q1=100 in 1966), down 7.2% from 98.3 MoM and 4.7% from 95.7 in the same period last year.
  • The Producer Price Index (PPI) was reduced by 0.1% MoM. Although there is an annual increase of 2.5%, it is the lowest increase since the beginning of 2018.
  • 2018 Nov, the factory orders decreased by 0.6% to US$499.94 billion, which was the second consecutive month of contraction and less than the market expectation of a 0.2% increase.
  • 2018 Nov, the trade deficit fell by 11.5% month-on-month, exceeding expectations

China

Benefit by the market's optimism about the trade negotiations and the impact of government policies, China's stock market has performed strongly this week, but the economic data does not reflect an optimistic result.

  • The number of vacant houses in China reached 65 million, and the vacant house issues in the second and third tier cities are deteriorated.
  • 2019 Jan, China's CPI rose 1.7% YoY, lower than the expectation by 0.2%.
  • 2019 Jan, China's Producer Price Index (PPI) rose 0.1% YoY, lower than the expectation by 0.2%.