In a light day for data, the most interesting results are from the NY Fed's August survey of expectations.  This is usually watched for inflation expectations, and these are continuing to rise, with 12m expectations up a further 11bps to 3%, which we last saw in May and before than in Dec 2018; the 3 yr expectation also rose 25bps to 2.98%, which is the highest since Dec 2018. These are both now above the average this survey has had since 2013.  In fact, despite covid, inflation expectations have been generally rising since the low-point of Nov 2019 - even though headline CPI dropped like a stone as coronavirus hit. The Fed may have relaxed its tolerance for inflation, at least partly on the grounds that it needed to head-off any fall in inflation expectations. Well, there's no back-up for that position coming from the NY Fed's own survey. 

Other  expectations are dimming.  Labour market earnings are expected to rise only 2%, and h'hold incomes are expected to grow only 2.2% - that's down 1.6SDs from the average.  H'hold spending is expected to rise just under 3% - that's 0.9SDs below average. Part of the problem expected credit conditions dropped very sharply in August - in fact, you've got to go back to 2013 to find a more pronounced negative conviction about credit conditions.  

The results for the property market aren't quite the bull-run you'd expect either. Yes, the expected rise in prices is accelerating to 2.82%, but that's still below the level expected pre-covid. But the survey finds that the expectation of moving home in the next 12 months is the lowest since the survey started, and is still falling. And the sharpest fall is for those aged under 40 - ie, usually the most active demographic. 

Overall, this survey doesn't really conform to the usual descriptions we hear about the current state of the US economy, and its likely near-term trajectory. People seem more worried about inflation, more worried about employment and income, and less likely to spend big, or move. Overall, you have to say, these are more 'hunker-down' results than straightforward recovery.  

China's money and financing numbers for August take centre stage today, with an unusual contrast between quite subdued banking activity and soaring government bond issuance.  The 1.35tr in new bank lending is actually smaller than the 1.38tr raised in government bonds, which is,  I think, a monthly record for government issuance. It means the govt's bond debt stock is up 15.3% yoy at a time when nominal GDP is running at 3.5% on a 12m basis.  It means that in August,  government deficit-financed spending was a bigger stimulus to China's economy than the banks could manage.  

The problem, as always, is that China's government does not raise enough in taxes to finance its responsibilities and ambitions: in the 12m to June, China's total govt revs came to just 17.8% of GDP, and the fiscal deficit reached 5.3%. So its' not entirely surprising that govt bond issuance is soaring.  After all, if the banking system isn't going to provide the extra oomph, the government will have to. 

Another quiet day, but also one in which we got more opportunity to track the modest supply-squeeze showing up in US distribution channels. It came with two sets of data: the wholesale sales & inventory data for July, which cut the inventory/sales ratio back to the levels we've been used to since 4Q2018, with the ratio for durable goods falling hard and generally. 

And in addition, we got a modest inflation shock from August's PPI, not least because retailers and wholesalers responded to the supply squeeze by widening their margins. 

These strange post-pandemic dynamics won't last long, but the current modest supply squeeze can be expected to produce strong US industrial and NE Asian export numbers for a few months yet. 

A quiet day today, with no major news at all from Europe - the slackers! - and little pulse-quickening from Asia either (though Japanese machine tool orders, S Korean unemployment, and Australia home loans all beat expectations).

In the US, the focus continued to fall on the labour market, with the JOLTS job openings survey showing openings up 10.3% mom to 6.618mn.  This was the strongest since February, but still way down from the 'hot' levels of pre-Covid 2019.  Still the average openings/unemployed rate of the last 10yrs looks within grasp over the coming months. 

A question remains: if openings are so strong, why are hirings so weak - they fell 17% on the month?  A look at the soaring quits rate suggests employers are finding it increasingly difficult to find the right people to fill the  holes increasingly available.  Add skills shortage to the combined supply and demand shocks in the US economy.

Yesterday, we had trade data for August from enough of NE Asia for us to be confident about the region's export performance: we expect NE Asia's exports rose 2.3% yoy in August, with a monthly movt 0.2SDs below historic seasonal trends. Today we have import data from Germany and France for July. The Eurozone  is the last of the G3 economies to report its monthly trade numbers, but today's results give us enough to let us be confident about what happened to G3 imports in July. And remember, the relationship between G3 import demand and NE Asian export supply  is the hinge on which the globalized world has turned during the last 20-30 years.

To cut a numbers-heavy story short, Germany and France's import numbers were good enough for us to be confident that in July G3 imports fell 12% yoy in dollar terms, but that the deflection against trend was positive to the tune of 1.8SDs above trend. That follows from, and builds on,  the 2.1SD upward deflection in June, and tells us unambiguously that the recovery is being maintained. Which is what we have also seen in NE Asia's August export numbers. 

This does not mean everything is plain sailing: in trade terms the trend is not your friend - the ever-growing thicket of non-tariff barriers continues to see to that.  Still,   if we're tracking data with the aim of seeing whether we are returning to something like economic normality, the trade news of the last two days is unambiguously cheering.  

It's all about NE Asia's exports today, with China & Taiwan reporting August results, and Japan reporting on the first 20 days of August. 

What emerges is twofold. First, NE Asia's exports as a whole probably rose around 2.3% yoy in August, largely building on the post-pandemic strength seen in July.  This is the second yoy rise in a row - and to find something similar, you've got to go back to Oct-Nov 2018!

Second, China's commercial hegemony over NE Asia's exports continues to grow: almost exactly two-thirds of NE Asia's total exports in August came from China - that's up 4.4pps yoy.  And there's a further 8.8% coming from Taiwan (up 0.5pp yoy).  Meanwhile, Japan and S Korea are on the wane, now accounting for only 24.6% between them!       Neither political trade pressures or the impact of the pandemic has slowed China's continuing rise.

The US labour market surveys for August took centre stage: whilst the 1.37mn rise in non-farm payrolls was roughly as expected, the household survey data was tremendously strong: employment rose 3.76mn, the unemployment rate fell 1.8pps to 8.4%, labour participation rose 0.3pps to 61.7%, unemployment fell 2.79mn.  

Not just that, for those at work average weekly hours ticked up, and are now running longer than this time last year; and hourly wages rose 0.4% mom, with the sharpest rises in manufacturing and leisure/hospitality. 

These numbers describe an economy showing a conspicuously broad and robust recovery from the coronavirus shutdown - and its a sharp contrast with what we're seeing in Europe. 

The focus today is on service turnover data in 2Q for the Eurozone: it fell 15.5% qoq and fell 18.8% yoy.  These are truly dreadful numbers, even if they no longer actually shock us.  The available data allows us to work out which Eurozone member suffered most (Spain) and which least (Germany).  It also allows us to see how the Eurozone compared with the UK (the Eurozone did slightly less badly), and with the US (the hit to the Eurozone service industries was approximately double that to the US).

Over in the US, whilst the weekly jobless numbers were encouraging, there's a twist in the numbers: the number of people actually claiming benefits jumped 2.2mn on the week, almost certainly in response to the extension of the Pandemic Unemployment Assistance scheme deployed retroactively to August 1st. If you give it, they will come. 

A quiet day after the avalanche of data seen during the last two days. 

In Asia, what stood out was the 14.2% yoy rise in S Korean lending to business, and the 7% qoq fall in Australia's 2Q GDP.

In Europe, the main event was the 0.9% mom fall in Germany's July retail sales. The Covid-bounce was back in May, when sales rose 13.2% mom; since then it's been down 1.9% in June and now down 0.9% in July. 

In the US, the 248k rise in payrolls in August tracked by ADP was slightly, but not desperately, disappointing. Meanwhile, July's factory dynamics showed orders up 6.4% mom, shipments up 4.6%, but inventories down 0.5% - or down 0.8% if you are talking about finished goods.  Moral, the inventory-shortage in the US is not fixed, and will continue to drive industrial dynamics for the next few months.

First, let's recognize the US's ISM manufacturing index for August for the comprehensive strength it reported.  It underlined the message that this recovery in an economy running short of inventory is producing joint supply and demand shocks. Even though production surged, so also did work backlogs, whilst customer inventories shrank even more.  Essentially, manufacturing supply can't keep up with the inventory-accelerated mini-cycle, and one result is also the worst inflation in prices paid since November 2018.

The bulk of today's report, however, is on Japan's massive MOF quarterly survey of private sector balance sheets and p&ls. This is detailed enough to allow us to do a nearly-full Dupont analysis of corporate Japan.  What corporate Japan could and couldn't do when faced with a 17.7% yoy collapse in demand is probably very similar to what most companies have been doing.