Last day of August starts with Euro Area inflation coming in above expectations at 5.3% this morning while Chinese manufacturing was better than expected. Domestically (kind of), Bostic speaking at an event in South Africa said: "I feel policy is appropriately restrictive," "We should be cautious and patient and let the restrictive policy continue to influence the economy, lest we risk tightening too much and inflicting unnecessary economic pain." He added: "that does not mean I am for easing policy any time soon, Yesterday ADP payrolls missed expectations as did GDP with yields continuing to ease from the highs of August 21st. Ahead of PCE and jobless claims this morning yields are down a little over a bp with the 2Y at 4.87% and 10Y at 4.10%. On the upcoming PCE data, Nick Timiraos X/Tweet: "Based on inputs from the July CPI and PPI, forecasters anticipate the July core PCE price index will rise by 0.2% or 0.3% from June. That would bring the 12-month rate to 4.3% in July from 4.1% in June. The increase partly reflects base effects, as July 2022 printed at +0.08%"
XTOD: Morgan Stanley predicts a TSwift/Barbie/Beyonce hangover in consumer spending data in the fourth quarter. (+ it's only slightly smaller than their estimate of the drag coming from the expiration of the student loan moratorium, which they put at 0.8pp)
XTOD: Pyongyang said it had successfully test-fired two ballistic missiles designed to make “scorched-earth strikes” at South Korean command centers and operational airfields
XTOD: Preemptive congrats to the cartels on seizing political power over all of Mexico in a little over 20 years time.
XTOD: First poll in Argentina that shows Milei winning outright in the first round..What is more shocking, in a global-historic sense, than an Internet movement lifting up an anarcho-capitalist candidate in Argentina (population ~46M) basically out of nowhere? You go back 2 years ago and people would have laughed at you for suggesting this was possible...He's also incredibly weird right up to his hair, like dog clones named after libertarian philosophers weird, has flirted with some extremely radical views and is a thorough ideologue for a fringe political tradition.
XTOD: to industrial policy enthusiasts: "I think that what we are seeing right now in China illustrates the real limits of that kind of government planning for the economy."
XTOD: The problem is that the crackdown on residential property has resulted in a sharp fall in housing sales. And I don’t think those sales are ever coming back. That’s a problem because residential housing investment mostly accrues to households through those sales. So if housing sales have fallen, but the household’s gross savings rate has not, then household net financial balances must be increasing. Higher household net savings must be absorbed by the corporate or government sector, or else the current account surplus will widen as it lends the savings to foreigners. But it’s not clear to me that any sector can really absorb these savings...Property developers really must deleverage. That’s been partly offset by the government’s pivot to manufacturing in 2020, but there’s unlikely to be enough corporate investment & credit demand to absorb higher HH net savings. And the rest of the world probably can’t either. China’s trade surplus as a share of its GDP may be lower than in 2008, but it’s now a larger share of global GDP. So, assuming policymakers don’t want to reflate the housing market like they did in 2016, the only solution is to restore HH confidence to bring down the savings rate. But nothing the government has announced seems likely work If not, the household net financial surplus will continue to get stuck in the financial system and won’t be intermediated into new demand. Which will lead to lower incomes and eventually lower savings, sort of like what happened in Japan after 1990. Which is the great irony. China's policymakers launched the crackdown on property to reign in a housing bubble they feared could lead to a Japan-like balance sheet recession. But in doing so, they may have sowed the seeds for a different kind of economic collapse
https://twitter.com/jeannasmialek/status/1696946069408489779?s=20
https://twitter.com/WSJ/status/1697030199726977444?s=20
https://twitter.com/EricGomezAsia/status/1697026560258101269?s=20
https://twitter.com/PopulismUpdates/status/1696977555688182009?s=20
https://twitter.com/MichaelRStrain/status/1696981768664928609?s=20
https://twitter.com/adamkwolfe/status/1696919506608701637?s=20
PCE data was largely in line, perhaps the data point of note was on the Personal spending side which rose 0.8% v. 0.5% est. Jobless claims were less than expected and Chicago PMI beat. The 10Y little changed while the 2Y is up to 4.90% on the session and stocks continue their winning streak
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