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Research Update - Weekly Summary

Written and accurate as at: Aug 16, 2019 Current Stats & Facts

 The Economy


Following President Trump issuing a tariff threat earlier this month on consumer goods from China, the US this week announced that it was delaying imposing tariffs on some imports until 15 December. The delay was in part to avoid hitting US shoppers this Christmas and includes mobile phones, laptops, video game consoles, some toys, computer monitors, and certain footwear and clothing. However other items facing a 10% tariff will go ahead as planned on 1 September and demonstrates that the trade war continues with the implications for weaker global growth.

Intensifying the concerns over the ongoing trade war with the US, a range of Chinese economic data in July came in softer than market expectations. Industrial production grew by 4.8% (consensus 5.8%) in July down from 6.3% in June,  which was a 17 year low. Infrastructure investment, property investment, crude steel output and motor vehicle also recorded falls in the month.

In Germany the ZEW Indicator of Economic Sentiment plunged 19.6 points from a month earlier to -44.1 in August, the lowest reading since December 2011 and below market expectations of -28.5. The most recent escalation in the trade dispute between the US and China, the risk of competitive devaluations, and the increased likelihood of a no-deal Brexit place additional pressure on the already weak economic growth. This will most likely put a further strain on the development of German exports and industrial production.

In Australia the NAB Monthly Business Survey for July was released this week and broadly the picture from the business survey is unchanged from June. The key message was that the business sector has lost significant momentum since early 2018 and that forward looking indicators do not point to an improvement in the near term. One of the key standouts is the weakness in the retail industry, with conditions in that industry at recessionary levels – and declining further in the month. This is a worrying result, given an expectation of a boost to the industry following the post-election tax cuts. More broadly, the lift in confidence following the election appears to have been temporary. It appears that both the cut to interest rates and boost to tax rebates is yet to feed into the business sector and that the weakness in Q2 has persisted into Q3, as illustrated below

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