Wed 6 Sep 2017


watch Nightly Business Report. watch Bloomberg Tech. watch PBS NewsHour.

In Portfolioticker today

Today at the stock market

bull/bearU.S. shares rose on Wednesday and the USD gained against the safe-haven Japanese JPY as upbeat news out of Washington helped mitigate investors’ concerns about North Korea’s nuclear weapons tests and a major hurricane barreling towards Puerto Rico and Florida.

U.S. President Donald Trump and congressional leaders agreed to pass an extension of the debt limit until 15 Dec 2017. The news also lifted the yield on benchmark 10-year Treasury notes after it had fallen to a near 10-month low at 2.054%. Trump and legislators also plan to pass a government funding bill and disaster aid for Hurricane Harvey victims, Democratic leaders said.

  • The S&P 500 rose 8.99 points, or 0.37%, to 2,466.84
  • The Dow Jones Industrial Average rose 74.53 points, or 0.34%, to 21,827.84
  • The Nasdaq Composite rose 19.90 points, or 0.31%, to 6,395.47.

The Federal Reserve’s Beige Book survey showed that economic activity expanded at a modest to moderate pace in July and August, helping stocks extend their gains.

As measured against a basket of major currencies, the DXY index turned positive after having fallen on a Fed Beige Book survey that was weaker than expected and after Fed Vice Chairman Stanley Fischer said he would resign in Oct 2017, many months before his term was due to end. “This means a sea change in the composition of the Fed, especially as it’s not clear if Fed Chair (Janet) Yellen is going to get renominated. The composition of the Fed is going to look entirely different than it did just a couple of years ago,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

In Europe, a meeting on Thursday of European Central Bank (ECB) policymakers is expected to yield clues as to when they will begin to scale back monetary stimulus. “A lot will depend on how (ECB President Mario) Draghi addresses the euro,” said Commerzbank currency strategist Esther Reichelt, in Frankfurt. “The question is whether he’ll address it strongly enough for the market to react.”

Tensions remained high over North Korea’s nuclear tests. Russian President Vladimir Putin said on Wednesday that resolving the crisis is impossible with sanctions and pressure alone.

In the Caribbean, dangerous Category 5 Hurricane Irma slammed across islands with pounding winds and raging surf en route to a possible landfall in Florida this weekend.

Oil prices rose as strong global refining margins and the reopening of U.S. Gulf Coast refineries provided a more bullish outlook after sharp drops due to Storm Harvey.Reuters

Market indices

Market indices
^ Market indices today (mouseover for 12 month view) Chart: Google Finance

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,465.54 +0.31% 2,238.83 +10.12%
DJIA INDU 21,807.64 +0.24% 19,762.60 +10.34%
NASDAQ IXIC 6,393.31 +0.27% 5,383.12 +18.76%

read_this Portfolio Indices

USD and AUD denominated indices over the past 52 weeks (Chart: Bunting)
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting

Index values

Index Currency Today Change 31 Dec 16 YTD
USD-denominated Index USD 2.857 +0.02% 2.105 +35.75%
Valuation Rate USD/AUD 0.80422 -0.06% 0.72663 +10.67%
AUD-denominated Index AUD 3.556 +0.07% 2.895 +22.84%

Portfolio stock prices

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $942.02 +0.06% $792.45 +18.87%
Alphabet C GOOG $927.81 -0.07% $771.82 +20.21%
Apple AAPL $161.91 -0.10% $115.82 +39.79%
Amazon AMZN $967.80 +0.26% $749.87 +29.06%
Ebay EBAY $36.76 +1.86% $29.69 +23.81%
Facebook FB $172.09 +0.80% $115.05 +49.57%
PayPal PYPL $61.24 -0.05% $39.47 +55.15%
Twitter TWTR $16.83 +1.08% $16.30 +3.25%
Visa V $103.18 +0.17% $78.02 +32.24%
VMware VMW $107.29 +0.20% $78.73 +36.27%

FX: USD/AUD

USD

DXY movements
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg

The Bloomberg Dollar Spot Index (DXY) decreased 0.1%.
The EUR was unchanged at USD 1.1914.
Britain’s GBP advanced 0.1% to USD 1.304.
Japan’s JPY fell 0.5% to 109.32 per USD.
Canada’s CAD surged 1.2% to CAD 1.225 per USD, the strongest in more than 2 years.
Bloomberg

AUD

AUD movements
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com

Oil and Gas Futures

Futures prices

Prices are as at 16:47 ET

  • NYMEX West Texas Intermediate (WTI): $49.15/barrel +1.01% Chart
  • ICE (London) Brent North Sea Crude: $54.16/barrel +1.48% Chart
  • NYMEX Natural gas futures: $3.01/MMBTU +1.18% Chart

flag_australia AU: Australian National Accounts: National Income, Expenditure and Product. Jun 2017

newyorker_20170906

Press Comment: Peter Martin

Australian consumers defied weak wage growth to spend more in the three months to Jun 2017, propelling economic growth to a respectable 0.8% in the quarter and propelling annual economic growth to an above-budget 1.9%.

Declaring “better days ahead”, Treasurer Scott Morrison said the government would close off its books for 2016-17 with a smaller deficit than the $37.6 billion forecast in May. The latest financial statements show the budget around $6.3 billion ahead.The Age

Press Release Extract [ser_abs]

GDP Summary:

  • The Australian economy grew by 0.8% in seasonally adjusted chain volume terms in the June quarter.
  • Household final consumption expenditure increased 0.7% and government final consumption expenditure increased 1.2%.
  • Exports of goods and services rose 2.7% for the quarter.
  • Compensation of employees increased 0.7%.
  • The terms of trade fell 6.0% in the quarter.

Data from the Australian Bureau of Statistics (ABS) shows the Australian economy grew by 0.8 per cent in seasonally adjusted chain volume terms during the June quarter.

Domestic spending increased 1.0 per cent for the quarter, driven by a 0.7 per cent growth in household consumption, with expenditure on food, clothing and household furnishings increasing. Dwelling construction grew a moderate 0.2 per cent with growth being observed in New South Wales and Queensland.

Growth was also observed in industries providing services to business. Professional, Scientific and Technical Services, Financial and Insurance Services, and Information, Media and Telecommunications all recorded above trend growth. The Manufacturing industry grew 1.8 per cent.

Falling prices for key export commodities impacted the terms of trade in the June quarter, declining 6.0 per cent. This has impacted GDP in current prices, which fell 0.1 per cent as lower coal and iron ore prices contributed to more subdued company profits. Gross operating surplus from businesses declined 2.6 per cent for the quarter.

GDP growth for the 2016/17 financial year was 1.9 per cent.

Chief Economist for the ABS, Bruce Hockman said: “Recent swings in coal and iron ore prices have had significant effects on the Australian economy in terms of export revenues and real incomes, though export volumes continued to grow in the June quarter. Dwelling construction remains at elevated levels, although new residential building approvals are on the decline. ”

Mr Hockman said: “Recent indicators showing increased business confidence appear to be reflected by the 3.2 per cent quarterly increase in purchases of new machinery and equipment as well as increases in the previously published June quarter employment and hours worked estimates.”

The increases in hours worked resulted in an increase in Compensation of Employees (COE) of 0.7 per cent despite the subdued wage pressures in the economy. This moderate increase in COE coupled with the strong increase in household spending saw the percentage of income which households are saving fall to 4.6 per cent.

Australian Bureau of Statistics, “5206: Australian National Accounts: National Income, Expenditure and Product“, 6 Sep 2017 More

flag_usa US: Trump Cuts Deal on Debt Ceiling

Press Report [ser_debt_ceiling]

President Donald Trump overruled congressional Republicans and his own treasury secretary Wednesday and cut a deal with Democrats to fund the government and raise the federal borrowing limit for three months, all part of an agreement to speed money to Harvey relief.

In the course of a relatively brief negotiating session at the White House, Trump largely sided with Democratic leaders as they pushed for the three-month deal. He brushed aside calls from Republican congressional leaders and Treasury Secretary Steven Mnuchin for a longer extension to the debt limit, which Republicans had been aiming for to avoid having to take another vote on the politically toxic issue before the 2018 elections.

The deal promises to speed the $7.9 billion Hurricane Harvey aid bill, which passed the House overwhelmingly Wednesday, to Trump’s desk before disaster accounts run out later this week.

The move also buys almost three months, until 15 Dec 2017, for Washington to try to solve myriad other issues, including more funding for the military, immigration and health care, and a longer-term increase in the government’s borrowing authority to avoid a first-ever default.

Trump cut the deal at the White House just hours after Ryan had slammed the idea of the 3-month extension sought by Democrats as ‘ridiculous.’AP Reuters

U.S. stocks rose on Wednesday after two top Democratic leaders said President Donald Trump would support a debt ceiling extension and government funding plan.

  • The Dow Jones industrial average traded about 72 points higher, near session highs reached earlier in the session, with Home Depot contributing the most to the gains.
  • The S&P 500 gained 0.3%, with energy and real estate among the best performers. However, shares of United Continental Holdings and Newell Brands were among the worst performers in the S&P 500. United cut its unit revenue and pre-tax margin guidance for this quarter, citing Hurricane Harvey. Newell Brands, meanwhile, issued a statement saying “nearly all” of its resin suppliers in Louisiana and Texas are shut down because of Harvey.
  • The Nasdaq composite rose 0.26% as some large-cap tech stocks, like Facebook and Netflix, regained their footing.CNBC

flag_usa US: Federal Reserve Resignations

Stanley Fischer, the vice chairman of the Federal Reserve, is resigning around 13 Oct 2017, months before his term as the Fed’s No. 2 official was due to expire in Jun 2018.Resignation Bloomberg

flag_usa US: Congress Passes A Bill to Speed Introduction of Self-Drive Cars

U.S. House lawmakers passed a wide-ranging bill to speed the introduction of self-driving vehicles championed by tech and auto companies racing to develop and deploy the technology.

“With this legislation, innovation can flourish without the heavy hand of government,” Ohio Republican Bob Latta said on the House floor ahead of the voice vote in the chamber Wednesday. Latta is chairman of the House Energy and Commerce subcommittee that developed the legislation.

The action now moves to the Senate, where Republican John Thune of South Dakota and Democrats Bill Nelson of Florida and Gary Peters of Michigan are leading work on legislation of their own. The trio serve on the Senate commerce committee, which on Wednesday announced a Sept. 13 hearing to examine autonomous commercial vehicles and how they may fit into the Senate’s self-driving vehicle legislation. The House bill only applies to passenger cars and light trucks.

The House bill would put the National Highway Traffic Safety Administration in charge of regulating self-driving car safety and preempt competing rules at the state level. Manufacturers would eventually be able to introduce as many as 100,000 self-driving cars per year that don’t comply with current safety rules that assume the presence of a human driver. It also instructs NHTSA to develop new standards for self-driving cars. Companies must draft security and privacy plans for autonomous vehicles and document their approach for ensuring self-driving car safety.

Trade groups representing companies such as Alphabet Inc.’s Waymo LLC, Ford Motor Co., General Motors Co., Lyft Inc. and others working on the technology voiced strong support for the bill. Labor unions successfully lobbied to exclude tractor-trailers, buses and other commercial vehicles from the House bill.Bloomberg

flag_usa US: International Trade in Goods and Services. Jul 2017

Press Release Extract [ser_bea]

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.7 billion in July, up $0.1 billion from $43.5 billion in June, revised. July exports were $194.4 billion, $0.6 billion less than June exports. July imports were $238.1 billion, $0.4 billion less than June imports.

The July increase in the goods and services deficit reflected a decrease in the goods deficit of less than $0.1 billion to $65.3 billion and a decrease in the services surplus of $0.2 billion to $21.6 billion.

Year-to-date, the goods and services deficit increased $27.9 billion, or 9.6 percent, from the same period in 2016. Exports increased $76.8 billion or 6.0 percent. Imports increased $104.8 billion or 6.7 percent.

The average goods and services deficit decreased $1.2 billion to $44.5 billion for the three months ending in July.

  • Average exports of goods and services increased $0.9 billion to $193.9 billion in July.
  • Average imports of goods and services decreased $0.3 billion to $238.4 billion in July.

Year-over-year, the average goods and services deficit increased $2.3 billion from the three months ending in July 2016.

  • Average exports of goods and services increased $10.1 billion from July 2016.
  • Average imports of goods and services increased $12.4 billion from July 2016.

Exports

Exports of goods decreased $0.4 billion to $128.6 billion in July. Exports of goods on a Census basis decreased $0.4 billion.

  • Consumer goods decreased $0.7 billion.
    o Cell phones and other household goods decreased $0.5 billion.
  • Automotive vehicles, parts, and engines decreased $0.6 billion.
    o Passenger cars decreased $1.0 billion.
  • Capital goods increased $0.9 billion.
    o Civilian aircraft increased $1.1 billion.

Net balance of payments adjustments decreased $0.1 billion.

Exports of services decreased $0.1 billion to $65.8 billion in July.

  • Travel (for all purposes including education) decreased $0.3 billion.
  • Other business services, which includes research and development services; professional and management services; and technical, trade-related, and other services, increased $0.2 billion.

Imports

Imports of goods decreased $0.5 billion to $193.9 billion in July. Imports of goods on a Census basis decreased $0.4 billion.

  • Automotive vehicles, parts, and engines decreased $0.8 billion.
    o Passenger cars decreased $0.8 billion.
  • Industrial supplies and materials decreased $0.7 billion.
    o Crude oil decreased $1.0 billion.
  • Capital goods increased $1.3 billion.
    o Computer accessories increased $0.6 billion.
    o Computers increased $0.6 billion.

Net balance of payments adjustments decreased less than $0.1 billion.

Imports of services increased less than $0.1 billion to $44.1 billion in July. The changes in all categories were $0.1 billion or less and nearly offsetting.

Real Goods Deficit in 2009 Dollars – Census Basis

The real goods deficit increased $0.8 billion to $61.6 billion in July.

  • Real exports of goods decreased $0.7 billion to $126.4 billion.
  • Real imports of goods increased $0.1 billion to $188.0 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis

Surpluses were recorded, in billions of dollars, with South and Central America ($3.5), Hong Kong ($2.8), Brazil ($0.8), Saudi Arabia ($0.8), and Singapore ($0.7).

Deficits were recorded, in billions of dollars, with China ($31.8), European Union ($12.1), Japan ($5.5), Mexico ($5.4), Germany ($5.3), Italy ($2.4), India ($1.9), Taiwan ($1.9), South Korea ($1.8), France ($1.3), Canada ($0.9), United Kingdom ($0.2), and OPEC ($0.1).

Goods and Services by Selected Countries and Areas: Quarterly – Balance of Payments Basis

Surpluses were recorded, in billions of dollars, with South and Central America ($18.4), Hong Kong ($7.5), Brazil ($6.4), Singapore ($5.1), United Kingdom ($4.3), OPEC ($3.1), and Saudi Arabia ($1.8).

Deficits were recorded, in billions of dollars, with China ($83.6), European Union ($23.7), Mexico ($18.5), Germany ($16.9), Japan ($13.6), Italy ($8.8), India ($7.4), Taiwan ($3.9), France ($3.6), South Korea ($1.5), and Canada ($1.0).

Bureau of Economic Analysis, “International Trade in Goods and Services. Jul 2017“, 6 Sep 2017 (08:30) More

flag_usa US: Quarterly Financial Report – Retail Trade. Q2/2017

Press Release Extract [ser_us_retail]

After-Tax Profits and Sales, Second Quarter 2017 – Seasonally Adjusted

Seasonally adjusted after-tax profits of U.S. retail corporations with assets of $50 million and over totaled $23.2 billion, up $4.3 (±0.1) billion from the $18.9 billion in the first quarter of 2017, and up $0.5 (±0.2) billion from the $22.7 billion recorded in the second quarter of 2016.

Seasonally adjusted sales for the quarter totaled $728.1 billion, up $9.6 (±3.7) billion from the $718.6 billion in the first quarter of 2017, and up $32.0 (±8.4) billion from the $696.2 billion recorded in the second quarter of 2016.

us_retail_20170906

After-Tax Profits and Sales, Second Quarter 2017 – Not Seasonally Adjusted

Second quarter 2017 after-tax profits of U.S. retail corporations with assets of $50 million and over totaled $22.8 billion, up $0.5 (±0.2) billion from the after-tax profits of $22.3 billion recorded in the second quarter of 2016, and up $4.8 (±0.1) billion from the after-tax profits of $18.0 billion recorded in the first quarter of 2017.

Sales in the second quarter of 2017 were $726.3 billion, up $32.1 (±8.4) billion from the $694.3 billion recorded in the second quarter of 2016, and up $33.3 (±3.7) billion from the $693.0 billion recorded in the first quarter of 2017.

US Census Bureau, “Quarterly Financial Report – Retail Trade. Q2/2017“, 6 Sep 2017 (10:00) More

flag_usa US: Quarterly Financial Report–Manufacturing, Mining, Wholesale Trade, and Selected Service Industries. Q2/2017

Press Release Extract [ser_us_other_ind]

After-Tax Profits and Sales, Second Quarter 2017 – Seasonally Adjusted

us_profits_20170906

Manufacturing Corporations

U.S. manufacturing corporations’ seasonally adjusted after-tax profits in the second quarter of 2017 totaled $150.0 billion, up $0.5 (±0.3) billion from the after-tax profits of $149.5 billion recorded in the first quarter of 2017, and up $19.0 (±1.2) billion from the after-tax profits of $131.0 billion recorded in the second quarter of 2016.

Seasonally adjusted sales for the quarter totaled $1,618.6 billion, down $9.3 (±5.3) billion from the $1,627.9 billion recorded in the first quarter of 2017, but up $58.4 (±16.5) billion from the $1,560.2 billion recorded in the second quarter of 2016.

Nondurable Goods Manufacturers

Nondurable goods manufacturers’ seasonally adjusted after-tax profits in the second quarter of 2017 totaled $73.9 billion, up $3.4 (±0.3) billion from the after-tax profits of $70.5 billion recorded in the first quarter of 2017, and up $10.4 (±0.5) billion from the after-tax profits of $63.4 billion recorded in the second quarter of 2016.

Seasonally adjusted sales for the quarter totaled $773.1 billion, down $6.9 (±4.0) billion from the $780.0 billion recorded in the first quarter of 2017, but up $43.7 (±6.5) billion from the $729.4 billion recorded in the second quarter of 2016.

Durable Goods Manufacturers

Durable goods manufacturers’ seasonally adjusted after-tax profits in the second quarter of 2017 totaled $76.2 billion, down $2.9 (±0.2) billion from the after-tax profits of $79.0 billion recorded in the first quarter of 2017, but up $8.6 (±0.8) billion from the after-tax profits of $67.6 billion recorded in the second quarter of 2016.

Seasonally adjusted sales for the quarter totaled $845.6 billion, not statistically different from the $848.0 billion recorded in the first quarter of 2017, but up $14.8 (±10.8) billion from the $830.8 billion recorded in the second quarter of 2016.

After-Tax Profits and Sales, Second Quarter 2017 – Not Seasonally Adjusted

Manufacturing Corporations

U.S. manufacturing corporations’ second quarter 2017 unadjusted after-tax profits totaled $155.2 billion, up $18.5 (±1.2) billion from the after-tax profits of $136.7 billion recorded in the second quarter of 2016, and up $12.4 (±0.3) billion from the after-tax profits of $142.8 billion recorded in the first quarter of 2017.

Unadjusted sales for the second quarter of 2017 totaled $1,650.0 billion, up $59.7 (±16.5) billion from the $1,590.3 billion recorded in the second quarter of 2016, and up $76.2 (±5.3) billion from the first quarter 2017 sales of $1,573.7 billion.

Nondurable Goods Manufacturers

Nondurable goods manufacturers’ second quarter 2017 unadjusted after-tax profits totaled $75.3 billion, up $10.2 (±0.5) billion from the after-tax profits of $65.1 billion recorded in the second quarter of 2016, and up $5.3 (±0.3) billion from first quarter 2017 after-tax profits of $69.9 billion.
Unadjusted sales for the second quarter of 2017 totaled $789.6 billion, up $44.7 (±6.5) billion from the $744.9 billion recorded in the second quarter of 2016, and up $31.9 (±4.0) billion from the first quarter 2017 sales of $757.7 billion.

Durable Goods Manufacturers

Durable goods manufacturers’ second quarter 2017 unadjusted after-tax profits totaled $80.0 billion, up $8.4 (±0.8) billion from the after-tax profits of $71.6 billion recorded in the second quarter of 2016, and up $7.1 (±0.2) billion from first quarter 2017 after-tax profits of $72.9 billion.
Unadjusted sales for the second quarter of 2017 totaled $860.4 billion, up $15.0 (±10.8) billion from the $845.4 billion recorded in the second quarter of 2016, and up $44.3 (±2.5) billion from first quarter 2017 sales of $816.0 billion.

US Census Bureau, “Quarterly Financial Report–Manufacturing, Mining, Wholesale Trade, and Selected Service Industries. Q2/2017“, 6 Sep 2017 More

flag_usa US: Non-Manufacturing ISM Report On Business. Aug 2017

Press Release Extract [ser_us_ism_psi]

Economic activity in the non-manufacturing sector grew in August for the 92nd consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The NMI® registered 55.3 percent, which is 1.4 percentage points higher than the July reading of 53.9 percent. This represents continued growth in the non-manufacturing sector at a faster rate.

  • The Non-Manufacturing Business Activity Index increased to 57.5 percent, 1.6 percentage points higher than the July reading of 55.9 percent, reflecting growth for the 97th consecutive month, at a faster rate in August.
  • The New Orders Index registered 57.1 percent, 2 percentage points higher than the reading of 55.1 percent in July.
  • The Employment Index increased 2.6 percentage points in August to 56.2 percent from the July reading of 53.6 percent.
  • The Prices Index increased 2.2 percentage points from the July reading of 55.7 percent to 57.9 percent, indicating prices increased in August for the third consecutive month.

According to the NMI®, 15 non-manufacturing industries reported growth. The non-manufacturing sector has rebounded from the prior month’s cooling-off period. The majority of respondents are optimistic about business conditions going forward.”

Industry Performance

The 15 non-manufacturing industries reporting growth in August — listed in order — are: Retail Trade; Information; Management of Companies & Support Services; Real Estate, Rental & Leasing; Other Services; Wholesale Trade; Utilities; Mining; Educational Services; Accommodation & Food Services; Finance & Insurance; Public Administration; Professional, Scientific & Technical Services; Construction; and Health Care & Social Assistance.

The two industries reporting contraction in August are: Agriculture, Forestry, Fishing & Hunting; and Transportation & Warehousing.

Institute for Supply Management, “Non-Manufacturing ISM Report On Business. Aug 2017“, 6 Sep 2017 (09:45) More

flag_usa US: Markit Services PMI. Aug 2017

Press Release Extract [ser_us_psi]

Key findings:

  • Sharp increase in activity
  • New business expands at strongest rate since July 2015
  • Employment rises at quickest pace for nearly two years.

us_psi_20170906

August data signalled an accelerated upturn in business activity across the US service sector. New orders also expanded at a quicker rate, with growth reaching a 25-month high. Higher activity and new business prompted firms to add to their payrolls again in August, and at the quickest rate for nearly two years. On the prices front, both input costs and output charges increased again, with rates of inflation reaching 26- and 35-month highs, respectively. Meanwhile, business confidence was the strongest since January, with firms encouraged by greater client demand.

The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 56.0 in August, up from July’s reading of 54.7. The latest survey extended the current sequence of activity growth to 18 months. Moreover, the upturn was the fastest since November 2015, with a number of panellists stating that higher activity was underpinned by a greater willingness to spend among clients and improving market conditions.

Similarly, new business received by services companies increased sharply, supported by strong client demand. Furthermore, the expansion was the strongest since July 2015 and was well above the long-run series average.

Sustained growth in new orders placed further pressure on operating capacity, as shown by the level of outstanding business rising for the fourth month running in August. The pace of backlog accumulation was moderate and broadly in line with that seen in July. To accommodate greater workloads, firms hired staff at an accelerated rate. Notably, the pace of job creation was the strongest since September 2015.

Cost burdens faced by firms in the service sector continued to rise in August, extending the current inflationary trend which spans the entire series history. Notably, the pace of input price inflation was the fastest since June 2015. Panellists linked the latest increase to higher prices for raw materials and transportation. Stronger demand conditions generally enabled companies to pass on higher input prices in the form of greater output charges. Moreover, the rate of output price inflation was the fastest seen for nearly three years.

Business confidence among service providers remained robust in August, with the degree of positive sentiment reaching a seven-month high. Panellists noted that improving market conditions and forecasts of rising new orders had underpinned confidence.

IHS Markit Final U.S. Composite PMI™

The final seasonally adjusted IHS Markit U.S. Composite PMI™ Output Index rose to 55.3 in August, up from July’s reading of 54.6.

us_composite_pmi_20170906

The latest composite figure signalled the strongest expansion of private sector output since the start of 2017. Service sector firms reported a strong upturn in business activity, the fastest since November 2015. Conversely, manufacturers indicated a weaker increase in output, with growth edging down to a 14-month low in August.

The composite index is based on original survey data from the IHS Markit U.S. Services PMI and the IHS Markit U.S. Manufacturing PMI.

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

‘The US service sector moved up a gear in August, providing a welcome boost to the economy after the sister PMI survey showed slower manufacturing growth. The two PMI surveys collectively point to the fastest rate of economic expansion since January as businesses enjoyed a summer growth spurt.’

‘The strong survey data add to the expectation that the economy was picking up further momentum before hurricane Harvey hit, the impact of which is still a big unknown. While the pre-Harvey data were pointing to third quarter GDP rising at an annualised rate of 3.5%, this could now be slightly below 3.0%.’

‘Encouragingly, August saw companies become more optimistic about the year ahead, with confidence across manufacturing and services climbing to the highest since January. Any hurricane-related impact is therefore likely to result in only a temporary lull, with stronger growth returning later in the year.’

‘With new orders growth accelerating, backlogs of work rising and job creation buoyant, the surveys clearly point to an economy that’s generally in expansion mode.’

‘For Fed-watchers, the upturn in price pressures sends an additional hawkish signal for policy. Average selling prices for goods and services rose at the steepest rate for nearly three years. Another rate hike in December is therefore looking increasingly likely.’

IHS Markit, “Markit Services PMI. Aug 2017“, 6 Sep 2017 (09:45) More

flag_usa US: Beige Book. Aug 2017

Press Release Extract [ser_us_beige]

Overall Economic Activity

Economic activity expanded at a modest to moderate pace across all twelve Federal Reserve Districts in July and August. Consumer spending increased in most Districts, with gains reported for nonauto retail sales and tourism, but mixed results for vehicle sales. Capital spending also increased in several Districts. Manufacturing activity expanded modestly on balance. That said, reports were mixed regarding auto production, and contacts in many Districts expressed concerns about a prolonged slowdown in the auto industry. Both residential and commercial construction increased slightly overall. Low inventories of homes for sale continued to weigh on residential real estate activity across the country, while commercial real estate activity increased slightly. Activity in the energy and natural resources sector was generally positive prior to shutdowns arising from Hurricane Harvey. Agricultural conditions were mixed overall, with drought conditions reported in multiple Districts. Business and consumer loan demand grew at a modest pace in most Districts, with a number of banks reporting rising competition from both other banks and non-bank lenders.

Employment and Wages

Employment growth slowed some on balance, ranging from a slight to a modest rate in most Districts. Labor markets were widely characterized as tight. There were reports of worker shortages in numerous industries, most notably in manufacturing and construction. Firms in the Atlanta, St. Louis, and Minneapolis Districts said that they had turned down business because they could not find the necessary workers. Many Districts indicated that businesses were having difficulty filling openings at all skill levels. In spite of the tight labor market, the majority of Districts reported limited wage pressures and modest to moderate wage growth. That said, there were reports from firms in the Dallas and San Francisco Districts that labor shortages were pushing up wages.

Prices

Prices rose modestly overall across the country. Input and materials costs generally increased, most notably for freight, lumber, and steel. In contrast, movements in energy and agricultural commodity prices were mixed. A number of Districts indicated that pass-through to downstream prices was limited, with increases in input prices exceeding gains in selling prices. Home prices moved up overall, as low inventories put upward pressure on prices in many regions.

A Special Note on the Impact of Hurricane Harvey

Hurricane Harvey created broad disruptions to economic activity along the Gulf Coast in the Dallas and Atlanta Districts, although it was too soon to gauge the full extent of the impact. Many firms and organizations in the affected areas closed due to flooding. A fifth of the oil and natural gas production in the Gulf of Mexico was offline, and many onshore producers in the Eagle Ford region temporarily stopped production. Harvey also affected fuel and petrochemical production, forcing fifteen refineries in the region to shut down temporarily and several others to operate at reduced capacity. Some areas experienced gasoline shortages, and supply was expected to remain tight in the Southeastern United States because of pipeline disruptions. Contacts in the Richmond District indicated that spot freight prices jumped after the storm, as freight was being redirected around the country. The Port of Charleston expected increased volumes in coming weeks as freight traffic is routed away from the Port of Houston.

US Federal Reserve, “Beige Book: Summary of Commentary on Current Economic Conditions by Federal Reserve District. Aug 2017“, 6 Sep 2017 (14:00) More

JPMorgan Global Services PMI. Aug 2017

Press Release Extract [ser_global_psi]

August saw the rate of expansion in global service sector activity accelerate to a two-year high, as companies responded to rising levels of new business and backlogs of work. This in turn contributed to further solid job creation and rising business confidence.

global_psi_20170906

global_activity_20170906

The J.P.Morgan Global Services Business Activity Index rose to 54.1 in August, up from 53.7 in July. The average reading so far in the third quarter is a tick above that for quarter two.

Global services activity and new orders have now risen in each of the past 97 months. The latest increases in both variables reflected gains across the business, consumer and financial services sectors. There were notable differences in the rates of growth, however. The strongest expansions were seen at business service providers and the weakest in the consumer services category.

By nation, output increased across the vast majority of the countries covered, the main exceptions being contractions in India and Brazil. Growth accelerated to a 21-month high in the US, three-month high in China and also picked up in Germany, Russia and Ireland. Rates of increase slowed in Japan, the UK, France, Italy, Spain and Australia.

August saw a solid increase in global service sector employment, with the rate of jobs growth matching July’s 26-month record. Staffing levels were raised in the US, the euro area, China, Japan, the UK, Russia and Australia, but cut further in both India and Brazil.

Price pressures increased during August, with rates of inflation for both input costs and output charges picking up. The rise in input prices was the steepest in seven months, whereas the increase in service charges was the sharpest since April 2014.

August saw a solid improvement in business optimism. Moreover, the degree of positive sentiment was only marginally below June’s five-month high. Confidence increased across the business, consumer and financial services sub-sectors.

Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

‘August saw global service sector output rise at the quickest pace in two years, underpinned by a similarly robust expansion in incoming new business. The momentum gained by the sector suggests that growth over the third quarter as a whole will match or exceed that seen, on average, over the opening half of the year.’

J.P.Morgan and IHS Markit in association with ISM and IFPSM, “JPMorgan Global Services PMI. Aug 2017“, 6 Sep 2017 (11:00) More

JPMorgan Global Composite PMI. Aug 2017

Press Release Extract [ser_global_composite_psi]

Global economic growth gathered momentum in August, with output rising at the quickest pace since April 2015. Rates of increase improved in the manufacturing and service sectors, reflecting ongoing expansions at consumer, intermediate and investment goods producers and across business, consumer and financial services.

global_pmi_composite_20170906

The J.P.Morgan Global All-Industry Output Index posted 53.9 in August, up from 53.6 in July and above the neutral mark of 50.0 for the fifty-ninth month in a row.

Developed nations continued to outperform (on average) relative to emerging markets. The euro area saw a further solid gain in economic output, with the pace of increase matching that registered in July. Stronger growth of manufacturing production was offset by a softer increase in service sector activity. Within the currency union, faster growth was seen in Germany and Ireland.

The upturn in the US economy gathered pace, as output growth picked up to its steepest since January. Japan also saw a mild acceleration. The UK expanded at a slightly weaker pace than in July, while growth slowed in Australia to a ten-month low.

Among the emerging nations covered, economic output rose at accelerated rates in China (six-month high) and Russia (two-month high), but fell in India and Brazil. The latter two nations both saw improved performances among manufacturers offset by contractions in service sector business activity.

Global all-industry new business rose at the quickest pace in almost three years during August. This led to increased backlogs of work – which expanded to one of the greatest extents in almost four years – and further job creation. The rate of growth in employee numbers hit a 77-month record.

Staffing levels increased in the US, the eurozone, Japan, the UK, India, Australia and Russia. Employment was unchanged in China – following reductions in each of the prior four months – and cut further in Brazil.

Global Manufacturing & Services PMI™

Price pressures strengthened slightly in August, with rates of increase in costs and output charges both accelerating. Input cost inflation reached a four-month high, whereas output prices rose to the greatest extent since May 2011. Developed nations registered steeper increases (on average) in both price measures than was generally seen among emerging markets.

Business optimism improved during the latest survey month. Confidence moved higher among service providers, but held steady in the manufacturing sector.

Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

‘The August PMI signalled a broad and accelerated expansion of global economic output. Overall growth was the quickest since April 2015, underpinned by expansions across the six main categories of manufacturing and services covered by the survey. With new order inflows strengthening, backlogs rising and jobs growth accelerating, the economy looks set to perform well in the coming months.’

J.P.Morgan and IHS Markit in association with ISM and IFPSM, “JPMorgan Global Composite PMI. Aug 2017“, 6 Sep 2017 (11:00) More

flag_japan Japan update

Currency: USD/JPY

JPY movements
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

Stockmarket: Nikkei 225

N225 movements
^ Nikkei N225 movements over the past week Chart: Google Finance

flag_china China update

Currency: USD/CNY

CNY movements
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

Stockmarket: CSI300

CSI300 movements
^ Shanghai CSI300 movements over the past week Chart: Google Finance