• Fink 🧠
  • Posts
  • China recovery stabilising, Aussie unemployment beat

China recovery stabilising, Aussie unemployment beat

07:06BST

Fears of a China slowdown seem unfounded for now.

The data was reasonably encouraging, with growth in both industrial output & retail sales.

  • Industrial output rose 8.3% in June from a year earlier, beating the median estimate of 7.9%

  • Retail sales expanded 12.1% in June; median forecast was 10.8%

  • Fixed-asset investment climbed 12.6% in the first half from a year ago

  • The jobless rate was unchanged at 5% at the end of June

  • GDP rose 1.3% in the second quarter from the previous three months

@CommSec

This is one key metric to watch. 👇

If incomes don't increase, it's pretty hard to boost consumption...

Becky Liu, head of China macro strategy at Standard Chartered Plc in Hong Kong, said the economy needs more support and there could be more RRR cuts to come.

“China’s growth is decent, but it’s not good enough, and the economy will likely moderate further from here,” she said. “The market underestimated the central bank’s determination to ease monetary policy and support growth -- the RRR cut is an obvious signal that China has entered an easing cycle. RRR is never one off, and I expect the PBOC to reduce RRR again by year-end.”

Australia are now above pre-pandemic employment levels, with an unemployment rate of 4.9%, way ahead of the RBA's forecasts 👇

RBA's forecasts on unemployment will be upgraded in August, on today's outcome it's around 8 months ahead of expectations. Labour demand will be negatively impacted by lockdowns, but equally labour supply will too - will be very interested in the Bank's population forecasts 👇

@IFM_Economist

The RBA's pessimistic forecasts have been repeatedly surpassed and revised 👇

Callam Pickering

But the unemployment rate doesn't show the full picture...

Especially with another lockdown expected in Victoria

Underemployment is the usual symptom as ANZ note here:

Along with hours worked, underemployment is a good indicator to look at when gauging the effects of a lockdown. Victoria's underemployment rate jumped 2.3ppt to 10.1% in June, a seven-month high, while it fell 0.2ppt in the rest of Australia to 7.1%, an eight-year low.

@cfbirch (ANZ)

The guys at forexflow noted a big AUD option expiry today (nearly 4bn at 0.7500/10).

Oil continues to fall as the OPEC+ deal is renegotiated.

 Of course Iraq is gonna be a pain here.

For reference, Iraq produced ~150 kbpd fewer barrels in April 2020 (UAE’s preferred baseline) than October 2018 (current baseline), though produced higher volumes in mid-2019 when it was shirking its #OPEC+ cut commitments. #oott #eft https://t.co/uA5vNF2VzD pic.twitter.com/DXuMj50t2t— Rory Johnston (@Rory_Johnston) July 14, 2021 

GS see the potential for $80/barrel pretty soon 👇

 Goldman on OPEC+: IF a deal is announced where output increases by 500kbd AND UAE increase share by 130kbd, “this would represent $2 to $4/bbl upside risk to our $80/bbl summer and $75/bbl 2022 Brent price forecasts” #OOTT— Joumanna Bercetche 🇱🇧 (@CNBCJou) July 15, 2021 

Kazakhstan may jump on the bandwagon too, as they were pushing for higher baselines alongside UAE & Iraq earlier in the July talks.

Data:

  • US Initial/Continued Jobless Claims

  • NY Fed Manufacturing, Ind Prod and Import/Export Prices

  • Fed's Powell, Evans, ECB's Elderson, BoE's Saunders

  • OPEC MOMR

  • Biden & Merkel Meeting 👇