Tue 19 Dec 2017


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  • Today at the stock market

    bull/bearGlobal stock markets edged lower on Tuesday, while U.S. Treasury yields rose, as Republican legislation with steep cuts to corporate taxes cleared the House of Representatives and headed towards a final vote in the Senate.

    • The S&P 500 lost 8.69 points, or 0.32%, to 2,681.47.
    • The Dow Jones Industrial Average fell 37.45 points, or 0.15%, to 24,754.75.
    • The Nasdaq Composite dropped 30.91 points, or 0.44%, to 6,963.85.

    U.S. stocks hit successive highs ahead of the tax overhaul bill, but modest selling has crept into the market as most traders see the positive impact of the bill as already priced in.

    “I really think it might be: buy the rumor, sell the news,” said Jim Paulsen, chief investment strategist with the Leuthold Group in Minneapolis. “Wall Street has had long enough to vet this thing.”

    The pan-European FTSEurofirst 300 index lost 0.51 percent and MSCI’s gauge of stocks across the globe shed 0.30%.

    The U.S. House of Representatives approved the tax bill by a vote of 227-203. A Senate decision could come Tuesday night on what would be the biggest U.S. tax overhaul in more than 30 years. However, the U.S. Senate parliamentarian has ruled against three provision of the Republican tax bill, forcing the House of Representatives to hold a second vote on the legislation, Senator Bernie Sanders said.

    President Donald Trump is expected to sign the bill into law by the end of the week if it is passed by the Senate.

    The plan includes slashing the corporate tax rate to 21% from 35%, which analysts say would likely increase profits, buybacks and dividend payouts.

    A slump in technology stocks, led by Apple Inc, also helped drag markets down in afternoon trading. Apple shares fell more than 1% after broker Instinet downgraded the stock to “neutral” from “buy” on doubts about iPhone X sales. Business InsiderReuters

    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) 2,681.47 -0.33% 2,238.83 +19.77%
    DJIA INDU 24,754.75 -0.16% 19,762.60 +25.26%
    NASDAQ IXIC 6,963.85 -0.45% 5,383.12 +29.36%

    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 3.147 -0.88% 2.105 +49.53%
    Valuation Rate USD/AUD 0.77142 -0.02% 0.72663 +6.16%
    AUD-denominated Index AUD 4.081 -0.86% 2.895 +40.97%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1,079.78 -0.49% $792.45 +36.25%
    Alphabet C GOOG $1,070.68 -0.60% $771.82 +38.72%
    Apple AAPL $174.54 -1.07% $115.82 +50.69%
    Amazon AMZN $1,187.38 -0.27% $749.87 +58.34%
    Ebay EBAY $37.80 -1.00% $29.69 +27.31%
    Facebook FB $179.51 -0.73% $115.05 +56.02%
    PayPal PYPL $74.50 -1.09% $39.47 +88.75%
    Twitter TWTR $25.08 +1.62% $16.30 +53.86%
    Visa V $112.14 -1.25% $78.02 +43.73%
    VMware VMW $128.14 -0.59% $78.73 +62.75%

    FX: USD/AUD

    USD

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

    U.S. Treasury yields rose with the benchmark yield hitting a seven-week high as the tax bill pushed forward.

    Before the House tax bill vote, bonds were selling in reaction to data that showed U.S. domestic home construction rose to a 13-month peak in November, with single-family home construction hitting a 10-year high.

    Now, bond investors could be pulling back on expectations of economic growth, said Jack Ablin, chief investment officer with BMO Private Bank in Chicago. “Some may be concerned the boost on the fiscal side can be offset by monetary tightening,” Ablin said.

    Benchmark 10-year U.S. Treasury notes were last down 20/32 in price to yield 2.4644%, from 2.392% late Monday.

    The 30-year bond was down 1-17/32 in price to yield 2.206 percent, from 2.744 percent.

    The USD, which slipped on tax plan doubts on Monday, began to flatten on the unexpectedly strong housing data.

    In late trading, the USD rose 0.3% to JPY 112.92. It was little changed against the Swiss CHF, but higher versus Britain’s GBP as well as the AUD, CAD and NZD.

    Bloomberg Dollar Spot Index (DXY), which fell 0.26%, was weaker against the EUR, which was up 0.5% to USD 1.1840.

    Gold, which dipped as U.S. Treasury yields rose, is on track to post its narrowest trading range of any quarter in a decade in the last three months of the year.

    Spot gold added 0.1% to USD 1,262.07 an ounce. U.S. gold futures fell 0.02% to USD 1,265.20.Reuters

    AUD

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

    Oil and Gas Futures

    Oil edged up towards $64/barrel on Tuesday, supported by the Forties pipeline outage in the North Sea, OPEC-led supply cuts and expectations that U.S. crude inventories fell for a fifth week.

    Rising output in the United States put a lid on gains, however. Shale production will rise to a record in January, according to a government forecast published on Monday, as higher prices encourage companies to pump more.

    The unplanned shutdown of Forties since last week has supported Brent in particular, as Forties is the largest of the North Sea crude grades underpinning the benchmark. Brent reached $65.83 on 12 Dec 2017, its highest since mid-2015.

    “This should ensure buying pressures remain at the fore of the Brent structure until the turn of the year at the very least,” said Stephen Brennock of oil broker PVM.

    Ineos, operator of the Forties pipeline, said on Tuesday it was moving forward with a preferred repair option and the timeframe for the fix remained two to four weeks starting from 11 Dec 2017, the date of the shutdown.

    A deal by the Organization of the Petroleum Exporting Countries and non-member producers including Russia to cut supplies in an attempt to get rid of a supply glut that has built up since 2014 has also boosted prices.

    OPEC and its allies have extended the agreement until the end of 2018 and Russia’s Rosneft said on Monday it could be maintained beyond 2018.

    As a result of the cuts, oil inventories are falling globally and the latest weekly supply reports are expected to show a further reduction in U.S. crude inventories.

    Still, rising U.S. production is countering OPEC’s cuts and other supply losses.

    U.S. shale output in Jan 2018 is forecast to increase by 94,000 barrels per day to 6.41 million bpd, according to the EIA’s monthly drilling productivity report.

    “The U.S. shale oil report issued late yesterday is on the bearish side as it confirms an acceleration in U.S. production,” said Olivier Jakob, analyst at Petromatrix.

    That forecast follows an EIA prediction last week that total oil production, including non-shale, will grow by 780,000 bpd to a record 10.02 million bpd in 2018.Reuters

    Futures prices

    Oil rose slightly, aided by an ongoing North Sea pipeline outage, supply cuts and expectations that U.S. crude inventories had fallen for a 5th week.
    Brent crude was up 42 cents or 0.66% to $63.83/barrel. U.S. crude rose 47 cents or 0.8% to $57.69.
    Reuters

    Prices are as at 15:48 ET

    • NYMEX West Texas Intermediate (WTI): $57.46/barrel +0.52% (14:29) Chart
    • ICE (London) Brent North Sea Crude: $63.77/barrel +0.57% Chart
    • NYMEX Natural gas futures: $2.71/MMBTU -1.17% Chart

    flag_australia AU: Consumer Price Index. Sep 2017

    Press Release Extract [au_cpi]

    The Consumer Price Index (CPI) rose 0.6 per cent in the September quarter 2017, the latest Australian Bureau of Statistics (ABS) figures reveal. This follows a rise of 0.2 per cent in the June quarter 2017.

    The most significant price rises this quarter are electricity (+8.9%), tobacco (+4.1%), international holiday travel and accommodation (+4.1%) and new dwelling purchase by owner-occupiers (+0.8%). These rises are partially offset by falls in vegetables (-10.9%), automotive fuel (-2.3%) and telecommunication equipment and services (-1.5%).

    The CPI rose 1.8 per cent through the year to September quarter 2017 having increased to 1.9 per cent in the June quarter 2017.

    Chief Economist for the ABS, Bruce Hockman, said “Utilities prices rose strongly in the September quarter 2017. The most significant rises relate to electricity and gas prices, with increases in wholesale prices being passed on to consumers. Increases in wholesale prices have been observed across the National Electricity Market (NEM), with the most significant rises this quarter in electricity being observed in Adelaide; Sydney; Canberra and Perth.”

    Australian Bureau of Statistics, “6401.0 Consumer Price Index, Australia, September 2017 (Additional Information)“, 19 Dec 2017 More

    flag_australia AU: Household Expenditure Survey. 2015-16

    Press Release Extract [au_hhspending]

    Australian households are spending more per week on living and learning according to new detailed spending data from the Household Expenditure Survey, released today by the Australian Bureau of Statistics (ABS).

    “In the six years since the last survey, the biggest increases in spending on goods and services by households have been in education (up by 44 per cent), household services and operation, including child care services (up by 30 per cent), energy and health care (both up by 26 per cent),” ABS Chief Economist, Bruce Hockman said.

    “We’re seeing increased spending for families with children in many areas. The hike in education spending mainly came from spending on school fees, which rose by almost half from 2009-10 to 2015-16. Child care spending also rose considerably, almost doubling over that six year period.”

    In 2015-16, child care spending was highest for couple families whose youngest child was under five years. These households spent an average of $114 per week on child care. Child care spending decreased to an average of $21 per week in households where the youngest child had reached school age (5-14 years), but average spending on school fees for these households was $152 per week.

    Where you live makes a big difference to household spending. Sydney households reported the highest average spending on child care in 2015-16, at $30 per week, more than $12 higher than the national average.

    When it comes to energy, households in some cities were spending a lot more in 2015-16 to keep the lights on than in 2009-10. Perth and Adelaide saw the largest percentage increases in average electricity spending, at 37 per cent and 30 per cent respectively. Hobart and Canberra were the only capital cities where spending on electricity remained stable over the six years.

    Darwin households spent the most in dollar terms on electricity, averaging $47 per week in 2015-16, but Canberra spent the most on gas, at $21 per week on average.

    Average weekly spending on health care has increased by 26 per cent, from $66 in 2009-10 to $82 in 2015-16.

    Households where the reference person was aged 55-64 years were paying more for health care in 2015-16. Average weekly spending by these households was up by $24 over the six year period, from $78 in 2009-10 to $102 in 2015-16. Most of this increase was in health insurance payments, which rose on average from $35 to $51 per week over the same period.

    Australian Bureau of Statistics, “6530.0 Household Expenditure Survey, Australia: Summary of Results, 2015-16“, 19 Dec 2017 More

    flag_australia AU: RBA Monetary Policy Meeting Minutes

    Press Release Extract [au_rba]

    International Economic Conditions

    Members commenced their discussion of the global economy by noting that growth in global industrial production was likely to have increased further in October. The pick-up had been broadly based geographically. Survey measures suggested that conditions in the manufacturing sectors of Australia’s largest trading partners had continued to improve; conditions in the services sectors of the major advanced economies had remained favourable. The strength of industrial production in the high-income economies of east Asia had been associated with very strong growth in exports of electronics, specifically of semiconductors. The strength of demand in electronics-related industries had supported business investment and GDP growth in the region, particularly in South Korea.

    GDP growth in the major advanced economies had been above potential, supported by accommodative monetary policies. Members noted that recent growth outcomes for the euro area had been stronger than expected. Growth in business investment had picked up in the major advanced economies over the prior year and further solid growth was anticipated over coming quarters. Consumption growth had remained above average, supported by robust growth in employment.

    Conditions in labour markets in a number of major advanced economies had continued to tighten. Employment-to-population ratios had increased and unemployment rates had declined to low levels in Japan, Germany and the United States, among other advanced economies. Members noted that this implied there was limited spare capacity in these economies, based on conventional measures of full employment. However, wage growth had picked up only slightly. While observing that there were typically lags between labour markets tightening and wage pressures emerging, members noted that the wage data might suggest these economies had more spare capacity than implied by conventional measures. More generally, members noted that the nature of work was evolving, driven partly by technological change, and that not everyone was benefiting equally from the recent strength in labour demand. Low wage outcomes had contributed to core inflation in the major advanced economies remaining low, even though producer price inflation had been noticeably higher.

    In China, GDP growth had been stronger than expected over the first three quarters of 2017, but more recently growth looked to have eased. This was particularly true of residential construction activity in cities where the authorities had implemented policies to address buoyant housing market conditions. The output of some sectors producing inputs for the construction sector, such as glass and steel products, had fallen in preceding months. Production shutdowns designed to deal with environmental concerns had also affected crude steel production. In combination, these factors had led to some levelling off of Chinese bulk commodity imports, including from Australia. Despite this, spot prices for iron ore had increased over the previous month and Chinese producer price inflation had remained elevated, partly reflecting stronger commodity prices. Although consumer price inflation in China had edged higher, it remained below the authorities’ objective of 3 per cent in 2017.

    Domestic Economic Conditions

    Members commenced their discussion of the domestic economy by noting that the wage price index continued to suggest that wage growth had been stable at a low rate. The outcome for the September quarter had been slightly lower than expected, despite the 3.3 per cent increase in award and minimum wages in the quarter, as previously determined by the Fair Work Commission. (The award system directly covers around one-quarter of the workforce.) Wage growth in the health and education sectors remained above the national average and a number of sectors had seen an increase in year-ended wage growth compared with a year prior. This had occurred at the same time as spare capacity appeared to have declined and more firms had been reporting difficulty finding suitable labour. The forecast was still for wage growth to increase gradually over the next year or so.

    Labour market conditions had remained positive and had been stronger than expected over the previous year. Employment had increased a little in October and growth over the previous year had been well above average. Full-time employment had risen sharply and was growing at around its fastest pace in a decade. The participation rate was notably higher than a year earlier, particularly for women and older workers, who had been staying in the labour force for longer. The unemployment rate had edged lower to be 5.4 per cent in October, which was its lowest level since 2013, and unemployment rates had been on a downward trend in most states. Forward-looking indicators of labour demand suggested employment growth would be somewhat above average over the next few quarters.

    Members noted that the September quarter national accounts would be released the day after the meeting and that recent data suggested GDP growth over the year to the September quarter was likely to have picked up to around the economy’s potential growth rate.

    Information on components of household consumption indicated that growth in aggregate household consumption had moderated in the September quarter; growth in retail sales volumes and motor vehicle sales to households had been subdued. The growth in the value of retail sales in October was consistent with reports from the Bank’s liaison suggesting that moderate growth in consumption had continued into the December quarter.

    Dwelling investment was expected to have fallen marginally in the September quarter. Dwelling investment had fallen over the preceding year in Queensland and Western Australia, but had remained at a high level in New South Wales and Victoria. Residential building approvals had picked up in preceding months, but remained below the levels of a few years earlier. Together with data on the pipeline of work yet to be done, this suggested that dwelling investment would remain at a high level for the following year or so, but that it was not likely to add materially to GDP growth.

    Conditions had eased in the established housing market, most noticeably in Sydney, where housing prices had declined in prior months and auction clearance rates had fallen. Housing price growth had also eased in Melbourne, but remained relatively strong, supported by high population growth. Housing prices in Perth and Brisbane had been little changed in preceding months.

    Members observed that business conditions in the non-mining sector had been above average for most industries over the preceding year or so and that non-mining profits had been increasing. Non-mining business investment looked to have risen further in the September quarter and the prospects for continued growth were positive: investment intentions had been revised higher, particularly for the business services sector; survey measures of capacity utilisation had remained well above average; and private non-residential building approvals had remained strong. Mining investment looked to have been little changed in the September quarter, although declines were still anticipated over the next few quarters.

    Growth in public investment had picked up over the preceding few years, driven by infrastructure investment. Further growth was expected over the following couple of years, based on projections in state and federal budgets. Members considered macroeconomic modelling of a scenario under which public investment was higher than forecast for the following three years. The demand effects of this scenario included the direct contribution to GDP growth of higher public investment, as well as the multiplier effects through higher profits earned by private sector firms and the higher incomes earned by workers on these projects. Members noted the possibility of ‘crowding out’ of other forms of demand, but did not consider this a major risk given that the economy was currently operating with a degree of spare capacity and inflation was low. Indeed, a sustained pick-up in spending on public infrastructure could even ‘crowd in’ additional investment by the private sector firms undertaking those projects on the public sector’s behalf. Members also noted that the higher level of infrastructure investment could boost productivity in the economy.

    Financial Markets

    Members noted that conditions in financial markets generally had been little changed over the previous month, with volatility having remained at a low level throughout 2017. Financial conditions generally remained very accommodative, despite the gradual withdrawal of monetary stimulus in some economies over 2017. However, there had been a noticeable tightening in financial market conditions in China over the year, including in response to regulatory measures.

    Market pricing suggested that market participants expected the US Federal Open Market Committee (FOMC) to increase the federal funds rate at its December meeting, consistent with the median of FOMC members’ projections. However, market pricing continued to suggest a more modest increase in the federal funds rate over 2018 than implied by the median FOMC projection. Members noted that previously announced changes to the composition of the FOMC had not affected market analysts’ expectations regarding the stance of US monetary policy. Regulations – particularly on smaller financial institutions – were under review, although members noted that core reforms relevant to capital, liquidity, stress testing and resolution planning were likely to be preserved.

    Members observed that the yield on long-term US government bonds had been little changed over preceding months, whereas the yield on shorter-term US government bonds had increased. This in part reflected expectations for an increase in the federal funds rate and the US Treasury shifting its issuance towards securities at shorter maturities. Long-term government bond yields in other major financial markets had also generally remained little changed at low levels.

    Members noted that while yields on Australian 10-year government bonds had been little changed, their spread to US Treasury bond yields had declined to a low level over preceding months.

    Financing conditions remained favourable for corporations across major markets. Although spreads of high-yield corporate bonds to government bonds had increased a little in November, they remained at very low levels. Also, equity valuations remained high, having risen over 2017, although there had been small declines in some markets over November.

    There had been little change in most major exchange rates over November. The US dollar had appreciated a little since early September on a trade-weighted basis, reflecting increased prospects for both future increases in the federal funds rate and US fiscal stimulus. Members noted that while the Australian dollar had depreciated by around 5 per cent in trade-weighted terms over this period, it had moved within a relatively narrow range over the previous two and a half years and was a little higher than the level of early 2016.

    In China, a broad range of policy actions had contributed to a tightening in financial market conditions since late 2016 and a reduction in leverage within the financial system. Recent regulatory announcements had been directed towards managing risks in the shadow banking sector. Members noted that Chinese equity valuations had risen strongly over 2017, but had fallen somewhat in November after the authorities had signalled their concern that some stocks were overvalued.

    In Australia, housing credit growth had eased a little over the second half of 2017, as growth in lending to owner-occupiers had slowed somewhat and growth in lending to investors had stabilised at a lower level than in the first half of the year. The easing in housing credit growth had been accounted for by the major banks, which had been more affected by the need to restrain interest-only lending to comply with the supervisory measures announced earlier in the year. Growth in housing lending by non-authorised deposit-taking institutions (non-ADIs) had picked up, although these institutions’ share of overall housing lending remained small. Members noted that these lenders charged higher interest rates on average than ADIs, which is likely to reflect both the borrower risk profile and higher funding costs of non-ADIs.

    Issuance of residential mortgage-backed securities, which are an important source of funding for non-ADIs, had been strong in 2017 and pricing of these securities had declined a little. Major banks’ funding costs had declined a little over 2017 and long-term debt funding had grown relatively strongly in the second half of the year.

    Members observed that the Australian equity market (on an accumulation basis) had risen in line with global markets over the previous couple of years and that volatility had remained low over the prior year. Australian share prices had been little changed over the preceding month, although banks’ share prices had declined, partly in response to lower-than-expected profit increases.

    Financial market prices continued to imply that the cash rate was expected to remain unchanged over the following year or so.

    Members concluded their review of developments in financial markets with a detailed discussion of Australian businesses’ access to finance. They noted that external finance had become available on increasingly favourable terms for large businesses over recent years, with foreign banks having added to competition for large business lending. Nevertheless, business borrowing had grown only moderately, reflecting subdued mergers and acquisitions activity, with investment having been funded largely from internal sources of funds. In contrast, many small businesses continued to find it challenging to obtain finance, particularly in their start-up or expansion phases. Members noted that this was likely to reflect the riskier nature of such lending, but also the less competitive market for small business lending. Participants on the Bank’s Small Business Finance Advisory Panel, convened annually, had confirmed the challenges of accessing bank lending. Members observed that equity funding was often more appropriate for the risk profile of start-up businesses, but that there are relatively few avenues for such financing in Australia compared with some other markets. Members were encouraged by the potential for innovations to improve access to finance for small businesses and the willingness of regulators to facilitate these developments, including in the areas of comprehensive credit reporting, open banking and alternative funding platforms.

    Considerations for Monetary Policy

    In considering the stance of monetary policy, members noted that conditions in the global economy had improved over 2017 and that the outlook had also been upgraded. This improvement had been supported by expansionary financial conditions, notwithstanding some withdrawal of monetary stimulus in a number of economies. In the major advanced economies, labour market conditions had continued to tighten, but wage growth and core inflation had remained low. Members recognised that this combination of strength in economic activity and low inflation was a central issue in the global economy. It was possible that this combination could continue for a while yet, but it was also possible that inflation could pick up by more than expected as spare capacity diminished.

    Although the global growth outlook had improved, commodity prices and Australia’s terms of trade were expected to decline in the period ahead, but to remain at relatively high levels. The Australian dollar had continued to fluctuate within its range of the preceding two and a half years. An appreciating exchange rate would be expected to result in a slower pick-up in domestic economic activity and inflation than currently forecast.

    Members noted that the low level of interest rates had been supporting the Australian economy. Recent data suggested that GDP growth had been around its trend rate over the year to the September quarter. Output growth was still expected to pick up gradually over the forecast period. Business conditions were positive and capacity utilisation had remained high. The outlook for non-mining business investment had improved further and the pick-up in public infrastructure investment was also supporting overall growth. However, growth in consumption was expected to have slowed in the September quarter and the outlook for household consumption continued to be a significant risk, given that household incomes were growing slowly and debt levels were high.

    Growth in employment, particularly full-time employment, had increased and the unemployment rate had fallen to a four-year low. Although wage growth had been a little lower than expected in the September quarter, it appeared to have stabilised at a low rate. Leading indicators of labour demand had been broadly consistent with continuing strength in the labour market. In these circumstances, spare capacity in the labour market was expected to be absorbed gradually and wage growth was expected to pick up over time.

    Housing market conditions had generally eased, especially in Sydney. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. To address the medium-term risks associated with high and rising household indebtedness, the Australian Prudential Regulation Authority had introduced a number of supervisory measures earlier in the year and credit standards had been tightened to lower the risk profile of borrowers. Growth in household credit had slowed somewhat, but members agreed that household balance sheets still warranted careful monitoring.

    Over the prior year or so, the unemployment rate had fallen and inflation had moved closer to target. Members noted that this had occurred at the same time as risks in household balance sheets had lessened. Recent data had increased confidence that there would be further progress on these fronts over the following year. How far and when stronger conditions in the economy and labour market might feed through into higher wage growth and inflation remained important considerations shaping the outlook. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

    The Decision

    The Board decided to leave the cash rate unchanged at 1.5 per cent.

    Reserve Bank of Australia, “Minutes of Monetary Policy Committee Meeting“, 19 Dec 2017 More

    flag_europe EU: Labour Cost Index. Q3/2017

    Press Release Extract [eu_labourcost]

    Hourly labour costs rose by 1.6% in the euro area (EA19) and by 2.1% in the EU28 in the third quarter of 2017, compared with the same quarter of the previous year. In the second quarter of 2017, hourly labour costs increased by 1.8% and 2.3% respectively. These figures are published by Eurostat, the statistical office of the European Union.

    eu_labourcosts_20171219

    The two main components of labour costs are wages & salaries and non-wage costs. In the euro area, wages & salaries per hour worked grew by 1.6% and the non-wage component by 1.5%, in the third quarter of 2017 compared with the same quarter of the previous year. In the second quarter of 2017, the annual changes were +2.1% and +0.8% respectively. In the EU28, hourly wages & salaries rose by 2.1% and the non-wage component by 2.3% in the third quarter of 2017. In the second quarter of 2017, annual changes were +2.5% and +1.8% respectively.

    Breakdown by economic activity

    In the third quarter of 2017 compared with the same quarter of the previous year, hourly labour costs in the euro area rose by 1.5% in industry, by 2.1% in both construction and services, and by 0.8% in the (mainly) non-business economy. In the EU28, labour costs per hour grew by 2.0% in industry, by 2.5% in construction, by 2.6% in services and by 1.6% in the (mainly) non-business economy.

    Member States

    eu_labourcosts_states_20171219

    In the third quarter of 2017, the highest annual increases in hourly labour costs for the whole economy were registered in Romania (+16.5%), Hungary (+12.6%) and Bulgaria (+10.7%). A decrease was recorded in Finland (-3.0%) and Portugal (-1.1%)

    Eurostat, “Third quarter of 2017: Annual growth in labour costs at 1.6% in euro area, At 2.1% in EU28“, 19 Dec 2017 More

    flag_europe EU: Production in Construction. Oct 2017

    Press Release Extract [eu_construction]

    In October 2017 compared with September 2017, seasonally adjusted production in the construction sector decreased by 0.4% in the euro area (EA19) and by 0.7% in the EU28, according to first estimates from Eurostat, the statistical office of the European Union. In September 2017, production in construction grew by 0.1% in the euro area, while it fell by 0.2% in the EU28.

    eu_constr_20171219

    In October 2017 compared with October 2016, production in construction increased by 2.0% in both zones.

    Monthly comparison by construction sector and by Member State

    The decrease of 0.4% in production in construction in the euro area in October 2017, compared with September 2017, is due to building construction falling by 0.5% and civil engineering by 0.3%.

    In the EU28, the decrease of 0.7% is due to building construction falling by 0.8% and civil engineering by 0.1%.

    Among Member States for which data are available, the largest decreases in production in construction were recorded in Sweden (-2.1%), the United Kingdom (-1.6%), Germany and Romania (both -1.3%), and the highest increases in Slovenia (+8.5%), Hungary (+5.9%) and Slovakia (+5.7%)

    Annual comparison by construction sector and by Member State

    The increase of 2.0% in production in construction in the euro area in October 2017, compared with October 2016, is due to building construction rising by 2.2% and civil engineering by 1.4%.

    In the EU28, the increase of 2.0% is due to civil engineering rising by 2.9% and building construction by 1.8%.

    Among Member States for which data are available, the highest increases in production in construction were recorded in Hungary (+38.1%), Slovenia (+29.5%) and Poland (+18.0%), and the largest decreases in Romania (-14.3%) and Spain (-1.2%).

    Eurostat, “October 2017 compared with September 2017: Production in construction down by 0.4% in euro area, Down by 0.7% in EU28“, 19 Dec 2017 More

    flag_usa US: International Transactions. Q3/2017

    Press Release Extract [us_internationaltxns]

    The U.S. current-account deficit decreased to $100.6 billion (preliminary) in the third quarter of 2017 from $124.4 billion (revised) in the second quarter of 2017, according to statistics released by the Bureau of Economic Analysis (BEA). The deficit decreased to 2.1 percent of current-dollar gross domestic product (GDP) from 2.6 percent in the second quarter.

    us_int_txn_20171219

    The $23.8 billion decrease in the current-account deficit reflected decreases in the deficits on secondary income and goods and increases in the surpluses on primary income and services.

    The remainder of this release highlights changes from the second quarter to the third quarter in major aggregates of the U.S. international transactions accounts, selected component contributions to those changes, and updates to previously published statistics for the second quarter.

    CURRENT ACCOUNT TRANSACTIONS

    Exports of goods and services and income receipts

    Exports of goods and services and income receipts increased $23.4 billion in the third quarter to $858.7 billion.

    • Primary income receipts increased $9.4 billion to $234.5 billion, mostly reflecting increases in portfolio investment income and in direct investment income.>/li>
    • Secondary income receipts increased $6.9 billion to $41.1 billion, mostly reflecting an increase in U.S. government transfers, primarily fines and penalties.>/li>
    • Goods exports increased $5.2 billion to $388.1 billion, mostly reflecting an increase in capital goods except automotive, primarily civilian aircraft, engines, and parts and telecommunications equipment.>/li>

    Imports of goods and services and income payments

    Imports of goods and services and income payments decreased $0.4 billion to $959.2 billion.

    • Secondary income payments decreased $3.0 billion to $64.3 billion, mostly reflecting a decrease in private transfers, primarily fines and penalties.
    • Primary income payments increased $2.8 billion to $177.5 billion, reflecting increases in portfolio investment income and in other investment income.

    CAPITAL ACCOUNT

    Capital transfer receipts were $24.9 billion in the third quarter. The transactions reflected receipts from foreign insurance companies for losses resulting from hurricanes Harvey, Irma, and Maria.

    FINANCIAL ACCOUNT

    Net U.S. borrowing measured by financial-account transactions was $105.6 billion in the third quarter of 2017, a decrease from net borrowing of $114.4 billion in the second quarter.

    Financial assets

    Net U.S. acquisition of financial assets excluding financial derivatives decreased $7.0 billion in the third quarter to $337.9 billion.

    • Net U.S. acquisition of direct investment assets decreased $13.9 billion to $76.7 billion, reflecting a decrease in net acquisition of equity assets.
    • Net U.S. acquisition of portfolio investment assets decreased $10.9 billion to $175.6 billion, reflecting a decrease in net U.S. purchases of equity and investment fund shares.
    • Net U.S. acquisition of other investment assets increased $18.0 billion to $85.6 billion, partly offsetting the decreases in net acquisition of direct investment assets and in net acquisition of portfolio investment assets. The increase in net acquisition of other investment assets reflected an increase in net acquisition of currency and deposits.

    Liabilities

    Net U.S. incurrence of liabilities excluding financial derivatives decreased $6.5 billion to $462.1 billion.

    • Net U.S. incurrence of portfolio investment liabilities decreased $7.2 billion to $284.0 billion, reflecting a decrease in net foreign purchases of U.S. debt securities.
    • Net U.S. incurrence of other investment liabilities decreased $4.0 billion to $82.3 billion, reflecting largely offsetting changes in transactions in deposit and loan liabilities. In deposits, transactions shifted to net foreign withdrawal of deposits in the United States in the third quarter from net foreign placement in the second quarter. In loans, transactions shifted to net U.S. incurrence from net U.S. repayment.
    • Net U.S. incurrence of direct investment liabilities increased $4.7 billion to $95.8 billion, partly offsetting the decreases in net incurrence of portfolio investment liabilities and in net incurrence of other investment liabilities. The increase in net incurrence of direct investment liabilities reflected an increase in net incurrence of equity liabilities.

    Financial derivatives

    Transactions in financial derivatives other than reserves reflected third-quarter net lending of $18.6 billion, an increase of $9.3 billion from the second quarter.

    Bureau of Economic Analysis, “US International Transactions. Q3/2017“, 19 Dec 2017 (08:30) More

    flag_usa US: New Residential Construction. Nov 2017

    Press Release Extract [us_newres]

    Building Permits

    Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,298,000. This is 1.4 percent (±1.7 percent) below the revised October rate of 1,316,000, but is 3.4 percent (±2.3 percent) above the November 2016 rate of 1,255,000. Single-family authorizations in November were at a rate of 862,000; this is 1.4 percent (±1.6 percent) above the revised October figure of 850,000. Authorizations of units in buildings with five units or more were at a rate of 395,000 in November.

    Housing Starts

    Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,297,000. This is 3.3 percent (±9.1 percent) above the revised October estimate of 1,256,000 and is 12.9 percent (±11.7 percent) above the November 2016 rate of 1,149,000. Single-family housing starts in November were at a rate of 930,000; this is 5.3 percent (±10.2 percent) above the revised October figure of 883,000. The November rate for units in buildings with five units or more was 359,000.

    Housing Completions

    Privately-owned housing completions in November were at a seasonally adjusted annual rate of 1,116,000. This is 6.1 percent (±10.4 percent) below the revised October estimate of 1,189,000 and is 7.2 percent (±12.5 percent) below the November 2016 rate of 1,203,000. Single-family housing completions in November were at a rate of 752,000; this is 4.6 percent (±12.0 percent) below the revised October rate of 788,000. The November rate for units in buildings with five units or more was 353,000.

    US Census Bureau, “New Residential Construction. Nov 2017“, 19 Dec 2017 More

    flag_usa US: House Approves Tax Bill

    taxbill

    flag_japan Japan update

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    flag_china China update

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