Global
macroeconomic backdrop deteriorates * Service sector expectations have weakened
* New Italian government reduces risk of another budget clash
Eurozone:
Uncertainties are weighing on growth – ING
The
eurozone economy is slowing down and with Brexit and the trade war tensions
weighing on confidence, a further deceleration looks likely. If a hard Brexit
were to materialise and Europe was targeted in the evolving trade war, it would
be hard to avoid a technical recession and the ECB would have to act on its
words
Ministers
likely to clash over euro zone budget next week – Reuters
EU
finance ministers are likely to clash next week over how to finance a future
budget for the 19 countries sharing the euro, as time runs out to reach a deal
for an issue that EU leaders set as a priority in June.
Emerging
Europe Watch – Resilience to a global slowdown? – ABN AMRO
Growth
for the CEE-3 is strong, not so for Russia and Turkey. CEE-3 is vulnerable to a
reversal of FDI-flows, Turkey for shifts in portfolio flows. The direct impact
of the US-China trade war for the region is low but indirect effects via
eurozone imports can be substantial. CEE-3 has little room for monetary
stimulus; Russia and Turkey will continue easing. Czech Republic and Russia
still have ample room for fiscal support
Giugliano:
Italy’s New Coalition Is Already Looking Shaky – BB
Five
Star and the Democrats want tax cuts and extra spending, but the two parties
are bound to clash on other policies.
Election
may lead us to the Brexit end game (but not necessarily) – Danske
Bank
Euro
zone business growth remained lacklustre in August: PMI – Reuters
Euro
zone's slowing growth confirmed, hit by weak trade – Reuters
GERMANY
Editorial:
Germany’s Obsession With Fiscal Prudence Needs to Go – BB
Additional
spending will help an economy on the verge of recession, and give a boost to
the European Union too.
Bershidsky:
In Eastern Germany, the Glass Is Half Full – BB
The
centrist parties can build on their narrow wins, and the governing coalition
will likely survive
Bershidsky:
Why Germany Is Ignoring Its Own Russian Spy Scandal – BB
The
murder of a Chechen rebel in Berlin looks like a Russian operation, but the
Merkel government is not making a public fuss about that.
Germany
- Loosening the brake
– Danske
Bank
A
closer look at the timing, size and scope of fiscal easing in Germany.
EUROPEAN CENTRAL BANK
Daniel
Gros: The ECB’s Deflation Obsession – Project
Syndicate
It
is hard to understand why the European Central Bank is currently so anxious to
find new ways to make its policy stance even more expansionary. Its
hyper-vigilance about falling prices is misplaced, and its ability to increase
the rate of inflation is dubious.
Understanding
low wage growth in the euro area and European countries – ECB
Cyclical
drivers, as captured by a standard Phillips curve, seem to explain much of the
weakness in wage growth during this period, but not all of it. Going beyond the
drivers included in standard Phillips curves, other factors are also found to
have played a role, such as compositional effects, the possible non-linear
reaction of wage growth to cyclical improvements, and structural and
institutional factors.
ECB
back to easing again, but inflation still not in its grip: Reuters poll – Reuters
The
ECB will cut its deposit rate next week and announce a restart of its asset
purchase program, but over 80% of economists polled by Reuters were skeptical
about the bank's ability to influence inflation over the medium term.
Mario
Draghi and the ECB confront a slowing euro zone – The
Economist
As
the risk of recession in Europe rises, the ECB must act
Gavyn
Davies: Mario Draghi prepared to pass on the baton at the ECB – FT
The
governor leaves behind a battery of monetary weapons that are now misfiring
Draghi
faces up to super-charged market expectations – FT
Eyes
on ECB president to deliver ‘Buzz Lightyear’ moment at policy meeting
How
much ECB QE is needed? Go big, or go home! – Pictet
We
estimate that a new QE2 programme worth at least EUR600bn would be needed for
the ECB to close a 0.50% inflation gap.
ECB meeting preview presentation – Danske Bank
ECB
Research - Enough talking, now is the time for action – Danske
Bank
We
expect the long-awaited ECB meeting to set the scene for months and potentially quarters to come. The question is not if the ECB will announce
new initiatives but how much it will deliver.
ECB
Watch: Do good things really come in small packages? – Nordea
The
ECB is set to announce an easing package next week but given the contradictory
comments from ECB members and the large number of variables, the meeting is
bound to include surprises. We would not bet on a stronger EUR yet.
ECB
corporate QE and the loan supply to bank-dependent firms – ECB
CSPP
increased the net issuance of debt securities, triggering a shift in bank loan supply
in favour of firms that do not have access to bond-based financing.
The
Phillips Curve at the ECB – ECB
Lagarde
confirms policy continuity – ABN
AMRO
Lagarde
supports stimulus, signals framework review
UNITED STATES
Jobs:
workers finally feeling it – ING
Payrolls
growth is slowing but wages are picking up, which underlines the difficult
decision facing the Federal Reserve. The risks from a deteriorating
international backdrop and a manufacturing recession mean we still look for
September and December rate cuts
US
labour market report: More evidence of slowing growth – Nordea
Nonfarm
payrolls increased by 130k in August, lower than expected. Furthermore, the two
last months were revised down by 20k . The unemployment rate was stable at 3.7
% while wages increased 0.4% on the month and 3.2% y/y.
Manufacturing
a recession
– ING
The
headwinds facing the US economy are building, as trade tensions intensify and
evidence of global economic weakness spreads. Given this backdrop, we have cut
our 2020 GDP growth forecast to 1.3% and have pencilled in an additional Fed
interest rate cut
OTHER
Gloom
deepens for global economy – FT
Weak
US jobs and German factory data push central bankers towards launching stimulus
Nordea
Economic Outlook
– Nordea
Time
of fear: policy choices and Nordic divergence come to the fore
China:
The strategy is working – ING
We
believe that China has changed its strategy when it comes to the trade war, and
that could lead to further market volatility. In terms of economic growth, it
seems the strategy of boosting infrastructure projects is also working.
Trade
war: A turn for the worse – ING
Although
later than initially thought, we still expect a deal between the US and China *
A deal before year end is likely to not be in the cards anymore * President
Trump will need to compromise given the economy is slowing * We expect a deal
at the start of the second quarter of 2020 * Trump is likely to refrain from a
trade war with the EU
Understanding
what works for active labour market policies – voxeu
Governments
around the world spend a large portion of their budgets on active labour market
policies aimed at improving access to new jobs and higher wages. This column
presents the first systematic review of 102 experimental interventions
comprising a total of 652 estimated impacts. It finds that programmes are more
likely to yield positive results when GDP growth is higher and unemployment
lower, and that programmes aimed at building human capital show significant
positive impact.
CENTRAL BANKS
El-Erian:
Fed and ECB Bend to Markets Ahead of Economy – BB
Central
bankers are determined to loosen monetary policy despite questions about
effectiveness and risks.
Rick
Rieder: The monetary policy endgame – BlackRock
The
economic policy state-of-play today, and where it may lead to should economic
growth falter, productivity not materialize, and populism continue to thrive.
Elga
Bartsch: Why central banks are running out of ammo – BlackRock
How
conventional and unconventional monetary policy space is limited and rapidly
being used up even before central banks respond to the next downturn, let alone
a full-blown recession.
FINNISH
Syyskuun talouskatsaus: Epävarmuus varjostaa yhä talouden näkymiä – Suomen
Pankki
Suomen
vientimarkkinoiden kasvu on hidastumassa varsinkin euroalueella, ja epävarmuus
maailmantaloudessa jatkuu. Myös asuntorakentaminen on hiljenemässä, eikä tue
investointien kasvua entiseen tapaan. Työllisyyden kasvu ja palkankorotukset
ovat tukeneet ostovoiman kasvua, mutta kuluttajien luottamus Suomen talouteen
vajoaa. Indikaattorimallien mukaan Suomen talouskasvu onkin pysähtymässä
kolmannella vuosineljänneksellä. Työllisyyden kasvu hyytyi jo kesän aikana.
Suomen Pankin maine pehmenee – Peter
Nyberg
Täältä tullaan, taantuma ja taantumus! – Henri
Alakylä