Three topics today caught the eye: 

China's PMIs (steady as she recovers, some sign of life in export orders);

Hong Kong's monetary data, which signal to us the dramatic recovery in Hong Kong's function as a capital-raising centre for China - capital raised is up 99.4% ytd, with the real boom starting in 3Q;

In the US, the ADP's payrolls rise of 749k suggests a slightly faster rate of rebound than August. Nevertheless, payrolls are still down 10.4mn from pre-Covid levels, and at this rate of recovery,  we won't get back there until the end of 2021.  That's the size of the problem visible. 

Today was really all about confidence indicators - interesting at a time when we're supposedly embarking on this alleged 'second wave' of coronavirus. And generally speaking, things got better as you went from East to West. 

In Asia, S Korea's BOK survey discovered expectations on the slide - particularly for non-manufacturers, who tend to service the domestic economy. In Europe, the EU's giant monthly compilation of confidence indicators continued to show improvement despite the 2nd wave worries, but there's no acceleration in that improvement, and sentiment remains very sharply worse than in pre-Covid February. 

In the US, the news is distinctly brighter, with the expectations result in the consumer confidence survey recovering no less than 20.1% mom to a level which is now 3.6% higher than the average expectations recorded in 2019.  There's now positive expectations for jobs, for income and for business. 

Today is unusual: very little data, and that which does lands comes in pretty much as was expected. So nothing today to challenge assumptions or to merit significant comment.  

But keep listening: we're at the end of the month, so Wednesday and Thursday are going to be hectic.  Not today though.  

I'm on the lookout for early signs about how the world economy is reacting to the so-called arrival of the so-called 'second wave' of coronavirus (about which I am profoundly sceptical, on statistical grounds). Today we got what may be two early straws in the wind: S Korea's Sept consumer confidence, and the Eurozone's August money data. 

S Korea's confidence got hit, but encouragingly, mainly on assessment of current conditions and employment prospects, whilst the impact on longer-term expectations was muted. 

Eurozone money growth slowed noticeably, but when you look closely, you'll find that's less to do with any significant change in household financial behaviour or situation, and more to do with the ECB choosing August as a month to withdraw a net Eu123bn in lending to the banking system.  Bad timing, as it turns out, and  you can be certain they are now putting it all back again. 

Today's economic news extended two strands of the narrative we've been following.

In Asia, Taiwan's August money growth put in a third month of spectacular outperformance of trend. It's all down to rises in reserve money, which, in turn, is an irresistible function result of the huge build-up of foreign assets on the central bank's balance sheet. We don't know the exact number for August yet, but between May and July, that build-up of foreign assets was roughly equivalent to the average yearly build-up of the last five years! 

In the US, the housing market numbers continue to soar. With 1,011k new homes sold in August, that's the busiest month since Sept 2006! What's intriguing is that even though inventories are falling, so too are median prices.  In fact, the premium put on new homes vs existing homes, which has been in decline since 2014, disappeared almost entirely in August. 

In the monthly economic calendar there comes a day when all else is quiet, and Markit looses its preliminary PMIs on the world. It's a smart timing, because in the absence of real economic news, these indexes manage to generate headlines, which I guess is good for Markit's business. But the precision of the index numbers is spurious, and when the real economic data comes in in a few weeks time, there's no statistical reason to think it will bear any interesting relationship to these PMIs.   

The decimal point twitches really don't mean anything, but the general drift of the numbers might, possibly. So, to summarize, September's indexes suggested Japan is continues to contract, as manufacturing has been continuously since May last year, and as services have since February. Barely a flicker of change.   In Europe, the post-covid expansions of July and August ground to a halt in September, reaching just about statis.  Germany's manufacturing is still growing, but services aren't; France's is back in  overall contraction again, although manufacturing is just about stable.   

The UK, meanwhile, is still in recovery, and still growing fast,  with both manufacturing and services looking similarly strong.   The US too continues to grow solidly, with both manufacturing and services firing positively. 

In fact, the UK's result was the strongest of the day at 55.7, but with utter predictability, Markit's commentary for the UK was predictably blackly glum, whilst for everyone else they were either positively upbeat, or at worst offering mitigation.  The British penchant for destructive self-criticism remains gobsmacking.     

Hong Kong is being hit by a triple whammy:  it is now in its sixth consecutive quarter of political unrest; its an global services economy at a time of global travel lockdown; and now, of course, it is a target of China's own new-found diplomatic and political aggression. 

So you'd expect Hong Kong's balance of payments to be reeling.  But the first rule in Asian economics is 'never rule out Hong Kong'.  And today its 2Q balance of payments showed it's current account surplus up HK$26.3bn yoy to $60.5bn.  You can mainly thank the $55.1bn yoy narrowing of the trade deficit - but what happens to its trade balance is pretty much out of Hong Kong's hands. 

It's the other bits of the picture that are surprising.  First, the services surplus was down only $28bn yoy to $21.4bn, which is a pretty good result considering that in 2019 travel exports made up 29% of total services exports, but in 2Q dropped 97% yoy transport exports (last year, 30% of exports) fell 41.3% yoy In fact, if you exclude travel and transport, all other services exports fell only 6.2% yoy, whilst services imports ex transport & travel fell 10.6%. Ex travel and transport, the balance of all other services showed a surplus of $11.7bn, which was up 22.4% yoy!.  

Then there's capital flows. There is, or was, some capital outflow , but nothing that amounts to capital flight. In fact, direct dis-investment amounted to only HK$18.4bn in the 12m to June, and in 2Q itself, there was a very small positive net direct investment into the place.  Then there's portfolio investment: that showed an outflow of just HK$36bn in the 12m to June. But in context that's peanuts, and net portfolio investment into HK came to $231bn in 2Q alone. 

Put it all together, add the net result is that HK's foreign reserves rose HK$15.5bn qoq in 2Q. For the world's most open economy, under siege both from within and without, that is pretty extraordinary. Never count Hong Kong out! 

Sometimes - usually on a Monday during the middle of the month - things get quiet in the economic-data world. Today's one of those days. The only economy reporting any significant data was Taiwan, which reported August's export orders up 13.6% yoy and foreign direct investment into Taiwan up 12.3% during Jan-August. 

Export demand is concentrated in Taiwan's electronics sector, but offsetting that sectoral concentration is the the fact that demand for Taiwan's electronics is growing almost everywhere. Electronics orders are up 28.2% yoy, and infocomms equipt up 26.4% yoy, and those two sectors account for 53% of orders. But look at the spread of orders:  US up 19.5% yoy, China & HK up 21%, Europe up 21.2%, and even Asean up 5.5%. The only place not building orders with Taiwan is Japan, down 9.6% yoy. 

Then there's Taiwan's FEI numbers - which showed inward FDI rising 12.3% in the first 8 months, with investment from the mainland up 54.2% and from the rest of the world up 11.6%.  Meanwhile, Taiwan's outward FDI is growing faster - up 43.2% ytd, with investment in the mainland up 49.5% and in the rest of the world up 39.5%.  

Conclusion? Despite the stresses between China and Taiwan and the rest of the world, Taiwan's commercial ties with the mainland continue to deepen unabated. 

Back after a couple of days away - fortunately relatively insignificant days as far as data is concerned. 

Today the focus is on the US, where the Uni of Michigan sentiment index rose 6.5% mom to the best since March, and topping June's immediate post-pandemic highs.  But at 78.9, it is still far below last year's average of 96, and the l/t average for the series of 85.6.  Getting better, but still glum, then. 

More shocking was the $59bn qoq deterioration in the US 2Q current account to $170.5bn, with all active components of the balance deteriorating. Maybe the previous few months data on trade in goods and services should have alerted us to deterioration on this scale, but it didn't.   But there's a silver lining: given the extraordinary blowout in the fiscal deficit (ie, govt dissaving) during the quarter, the current account soured only rather mildly. Which in turn means the private sector was saving, and saving exceptionally hard, during the pandemic. Firepower for the recovery. 

We're regularly told that we've not yet really felt the full impact of the pandemic, and that pretty soon now, we're going to realize that it's going to leave behind a tide of unemployment which will kill the rebound in the short term, and scar the economy for years to come. And I have to say that on the face of it, that's plausible - it could happen.

My hope that it won't has two supports: first, the lockdown wasn't a 'recession', it was (merely) a medical/social emergency; second, the downside of the flight from the urban economy is unavoidably visible to reporters and analysts, whilst the positive impact on smaller towns and villages is not.  If economies are being restructured (and they are), as rise in frictional unemployment is inevitable. But that's not the tsunami we are told to fear. 

And so on to the UK's labour market data for July.  Here's the spoiler alert: although July's headline unemployment rose, the report contained the first coherent and plausible evidence that UK labour markets are beginning to recover.  Crucially, employment is rising, particularly full-time employment by companies; inactivity is falling; vacancies are rising; and early data for August from PAYE data also confirms that employment is continuing to rise.