China's factory activity shrinks for 4th month as trade woes deepen - CNBC

Workers assemble televisions on the production line of Tianle Group Co., Ltd on July 3, 2012 in Shengzhou of Zhejiang Province, China.

Feng Li | Getty Images

Factory activity in China shrank in August for the fourth month in a row as the United States ramped up trade pressure and domestic demand remained sluggish, pointing to a further slowdown in the world's second-largest economy.

Persistent weakness in China's vast manufacturing sector could fuel expectations that Beijing needs to roll out stimulus more quickly, and more aggressively, to weather the biggest downturn in decades.

The Purchasing Managers' Index (PMI) fell to 49.5 in August, China's National Bureau of Statistics said on Saturday, versus 49.7 in July, below the 50-point mark that separates growth from contraction on a monthly basis.

A Reuters poll showed analysts expected the August PMI to stay unchanged from the previous month.

The official factory gauge showed growing trade frictions with the United States and cooling global demand continued to wreak havoc on China's exporters.

Export orders fell for the 15th straight month in August, although at a slower pace, with the sub-index picking up to 47.2 from July's 46.9.

Total new orders - from home and abroad - also continued to fall, indicating domestic demand remains soft, despite a flurry of growth-boosting measures over the past year.

"Frontloading of exports to the U.S. ahead of higher tariffs supported trade and overall activity growth, but this effect will likely fade in the next few months," said analysts at Goldman Sachs in a note.

Manufacturers in consumption-oriented industries such as the auto sector have been especially vulnerable. Carmakers such as Geely and Great Wall have slashed expectations for sales and profits.

The data showed activity at medium- and small-sized firms contracted, even as large manufacturers, many backed by the government, managed to expand in August.

Factories continued to shed jobs in August amid the uncertain business outlook. The employment sub-index dropped to 46.9, compared with 47.1 in July.

Escalations

August saw dramatic escalations in the bitter year-long Sino-U.S. trade row, with President Donald Trump announcing early in the month that he would impose new tariffs on Chinese goods from Sept. 1, and China letting its yuan currency sharply weaken days later.

After Beijing hit back with retaliatory tariffs, Trump said existing levies would also be raised in coming months. The combined moves now effectively cover all of China's exports to the United States.

Trump said late on Friday that trade teams from both sides continue to talk and will meet in September, but tariff increases on Chinese goods set to go into effect on Sunday will not be delayed.

The U.S. president had said earlier in the week that China wants to reach a deal "very badly", citing what he described as increasing economic pressure on Beijing and job losses.

But most analysts are highly doubtful of an end to the dispute any time soon, and some have recently cut growth forecasts for China in coming quarters.

The sudden deterioration in trade ties has prompted speculation over whether China needs to roll out more forceful measures to keep growth from sliding below 6% this year, the bottom end of its target range of around 6.0-6.5%.

Analysts widely expect Beijing will cut some of its major lending rates in September for the first time in four years to help stabilize growth.

But sources had told Reuters before the latest trade escalations that big benchmark rate cuts were considered a last resort, as policymakers worry that could fuel a further build-up in debt and squeeze bank's profit margins, heightening financial sector risks.

So far, Beijing has relied on a combination of fiscal stimulus and monetary easing to deal with the economic slowdown, including hundreds of billions of dollars in infrastructure spending and tax cuts for companies.

But analysts note infrastructure investment growth has remained subdued despite the earlier pump-priming measures, underlining the need for additional support.

Services growth

Growth in China's services sector activity picked up for the first time in five months in August, with the official numbers from a separate business survey rising to 53.8 from 53.7 in August.

Beijing has been relying on a strong services sector to cushion some of the economic impact from trade uncertainties and sluggish manufacturing activities.

However, despite the higher overall figure, activity in the property industry contracted, the statistics bureau said in a statement.

The services sector has been propped up by Chinese consumers' rising wages and robust spending power in recent years. However, the sector softened late last year amid a broader slowdown.

Let's block ads! (Why?)

https://www.cnbc.com/2019/08/31/chinas-factory-activity-shrinks-for-4th-month-as-trade-woes-deepen.html

2019-08-31 10:00:29Z
52780369076438

China's factory activity shrinks for 4th month as trade woes deepen - CNBC

Workers assemble televisions on the production line of Tianle Group Co., Ltd on July 3, 2012 in Shengzhou of Zhejiang Province, China.

Feng Li | Getty Images

Factory activity in China shrank in August for the fourth month in a row as the United States ramped up trade pressure and domestic demand remained sluggish, pointing to a further slowdown in the world's second-largest economy.

Persistent weakness in China's vast manufacturing sector could fuel expectations that Beijing needs to roll out stimulus more quickly, and more aggressively, to weather the biggest downturn in decades.

The Purchasing Managers' Index (PMI) fell to 49.5 in August, China's National Bureau of Statistics said on Saturday, versus 49.7 in July, below the 50-point mark that separates growth from contraction on a monthly basis.

A Reuters poll showed analysts expected the August PMI to stay unchanged from the previous month.

The official factory gauge showed growing trade frictions with the United States and cooling global demand continued to wreak havoc on China's exporters.

Export orders fell for the 15th straight month in August, although at a slower pace, with the sub-index picking up to 47.2 from July's 46.9.

Total new orders - from home and abroad - also continued to fall, indicating domestic demand remains soft, despite a flurry of growth-boosting measures over the past year.

"Frontloading of exports to the U.S. ahead of higher tariffs supported trade and overall activity growth, but this effect will likely fade in the next few months," said analysts at Goldman Sachs in a note.

Manufacturers in consumption-oriented industries such as the auto sector have been especially vulnerable. Carmakers such as Geely and Great Wall have slashed expectations for sales and profits.

The data showed activity at medium- and small-sized firms contracted, even as large manufacturers, many backed by the government, managed to expand in August.

Factories continued to shed jobs in August amid the uncertain business outlook. The employment sub-index dropped to 46.9, compared with 47.1 in July.

Escalations

August saw dramatic escalations in the bitter year-long Sino-U.S. trade row, with President Donald Trump announcing early in the month that he would impose new tariffs on Chinese goods from Sept. 1, and China letting its yuan currency sharply weaken days later.

After Beijing hit back with retaliatory tariffs, Trump said existing levies would also be raised in coming months. The combined moves now effectively cover all of China's exports to the United States.

Trump said late on Friday that trade teams from both sides continue to talk and will meet in September, but tariff increases on Chinese goods set to go into effect on Sunday will not be delayed.

The U.S. president had said earlier in the week that China wants to reach a deal "very badly", citing what he described as increasing economic pressure on Beijing and job losses.

But most analysts are highly doubtful of an end to the dispute any time soon, and some have recently cut growth forecasts for China in coming quarters.

The sudden deterioration in trade ties has prompted speculation over whether China needs to roll out more forceful measures to keep growth from sliding below 6% this year, the bottom end of its target range of around 6.0-6.5%.

Analysts widely expect Beijing will cut some of its major lending rates in September for the first time in four years to help stabilize growth.

But sources had told Reuters before the latest trade escalations that big benchmark rate cuts were considered a last resort, as policymakers worry that could fuel a further build-up in debt and squeeze bank's profit margins, heightening financial sector risks.

So far, Beijing has relied on a combination of fiscal stimulus and monetary easing to deal with the economic slowdown, including hundreds of billions of dollars in infrastructure spending and tax cuts for companies.

But analysts note infrastructure investment growth has remained subdued despite the earlier pump-priming measures, underlining the need for additional support.

Services growth

Growth in China's services sector activity picked up for the first time in five months in August, with the official numbers from a separate business survey rising to 53.8 from 53.7 in August.

Beijing has been relying on a strong services sector to cushion some of the economic impact from trade uncertainties and sluggish manufacturing activities.

However, despite the higher overall figure, activity in the property industry contracted, the statistics bureau said in a statement.

The services sector has been propped up by Chinese consumers' rising wages and robust spending power in recent years. However, the sector softened late last year amid a broader slowdown.

Let's block ads! (Why?)

https://www.cnbc.com/2019/08/31/chinas-factory-activity-shrinks-for-4th-month-as-trade-woes-deepen.html

2019-08-31 09:55:02Z
52780369419279

More to do? Trudeau thinks so, and Team Poloz likely does, too - Financial Post

In July, Carolyn Wilkins, the Bank of Canada’s senior deputy governor, said that she, Governor Stephen Poloz and their three colleagues on the Governing Council would need to see some hard evidence that trade wars were hurting the Canadian economy before they’d cut interest rates.

There wasn’t much of it then, but there is now.

You won’t see the cracks by looking at the surface. Statistics Canada on Aug. 30 reported that gross domestic product expanded 0.9 per cent in the second quarter, the biggest quarter-to-quarter increase in two years, as the economy’s engines re-engaged after stalling last winter.

The spring rebound translates into an annualized growth rate of 3.7 per cent, considerably faster than the Bank of Canada’s July forecast of 2.3 per cent, and better than the two-per-cent rate that the United States recorded over the same period. Prime Minister Justin Trudeau was excited, tweeting, “When you trust in Canadians and invest in them, this is what we can achieve together: a strong and growing economy, over 1 million new jobs, and a better future for our kids & grandkids.”

Trudeau also admitted “we know there’s more to do.” That sentiment probably is closer to what Team Poloz will be feeling ahead of its next policy announcement on Sept. 4.

Trudeau could regret trumpeting the latest GDP number, because the economy likely won’t sustain that pace. The second-quarter surge was mostly the result of an outsized increase in exports. Oil prices recovered from last year’s collapse and shipments that were literally stuck, because of unusually terrible winter weather, finally made it to their destinations.

Those were one-time effects. The trade wars are choking global demand, and Canada’s exporters probably aren’t competitive enough to drive through the headwinds. The CPB Netherlands Bureau for Economic Policy Analysis’s index of global trade volumes, a closely watched indicator, dropped 0.3 per cent in the first quarter and declined another 0.7 per cent in the second quarter.

Exports won’t crumble, because most of our trade is with the U.S., one of the stronger large economies at present. But the U.S.’s big multinational companies are exposed to the rest of the world and it looks like they are starting to fade. The U.S. Federal Reserve earlier this month reported that industrial production declined 0.2 per cent in July, while noting that factory output had dropped more by than 1.5 per cent since the end of last year. Buoyant stock prices belie the lacklustre earnings growth.

“A meaningful third quarter acceleration seems unlikely,” Brian DePratto, a Toronto-Dominion Bank economist, told his clients in a note. “This suggests an economy struggling to operate near its potential,” he added, referring to the rate at which the economy can grow without triggering inflation, which the Bank of Canada estimates is currently about 1.8 per cent.

Real-estate investment grew for the first time in six quarters, the latest evidence that the housing lobby grossly exaggerated the threat posed by tighter mortgage rules. Instead, it appears authorities may have deflated various local housing bubbles and orchestrated a soft landing. Household disposable income and corporate earnings both posted solid gains, implying that there is little reason to worry about a recession in the foreseeable future. There’s a cushion.

This suggests an economy struggling to operate near its potential

But there is reason to be concerned about what lies beyond the horizon and whether the economy is ready to confront it.

Final domestic demand, which includes consumption, government spending, residential investment and business investment, declined in the second quarter, raising questions about the underlying strength of the rebound. Apart from housing, discretionary spending was weak. The household savings rate increased to 1.7 per cent from 1.3 per cent in the first quarter and 1.4 per cent at the end of 2018, suggesting consumers could be starting to worry about the record level of debt they’ve accumulated in recent years.

A bigger worry is business investment, which evaporated in the second quarter. Spending on machinery and equipment plunged 9.3 per cent after spiking by the same amount in the first quarter.

If households are tapped out after their years-long borrowing binge, economic growth will have to come from exports and business investment. But executives have little incentive to spend with the global outlook so unsettled.

There is reason to be concerned about what lies beyond the horizon and whether the economy is ready to confront it

Earlier this year, surveys indicated that businesses were keen to spend. Their retrenchment in the second quarter could mean the trade wars have caused them to rethink. If so, it would show that Canada is no different than countries such as Australia and South Korea, where central banks have cut interest rates this summer as economic indicators turned in the wrong direction.

Does that mean the Bank of Canada is next? Almost everyone thinks so, although there is little agreement on when.

The C.D. Howe Institute’s Monetary Policy Council of academic and Bay Street experts this week said the central bank should hold the line in September, but drop the benchmark rate by half a point to 1.25 per cent by March 2020, according to the median recommendation of the panel’s nine members.

If it’s so obvious the Bank of Canada must lower interest rates, then why wait? Sophia Drossos, a former economist at the Federal Reserve who now runs her own advisory firm in New York, has argued that if central banks know they are going to have to cut, they might as well go for it and take advantage of positive surprise effects.

Inflation is at the Bank of Canada’s target of two per cent, but Poloz has made it clear over the years that he would be unconcerned if prices increased a little faster than that for a period of time. The procession of central banks cutting interest rates this summer argues in favour of Canada taking out some insurance, too. That’s what the Bank of Canada did in 2015, when it cut interest rates to cushion the fall it anticipated would follow the sharp drop in oil prices. It turned out to be the right call.

Earlier this month, Bank of Nova Scotia’s economists replaced their forecast for interest-rate increases this year with a prediction of two quarter-point cuts by early 2020. They had assumed the trade wars would quiet, but now they see no end to the uncertainty as long as Donald Trump remains U.S. president.

Jean-François Perrault, the bank’s chief economist, on Aug. 15 said the first cut would come in October, although he acknowledged that the odds of a September move were “nearly 50/50.” He made that call before the GDP numbers were released. The possibility of a September surprise is higher now.

•Email: kcarmichael@postmedia.com | CarmichaelKevin

from Business - Latest - Google News https://ift.tt/2Zzz2pF
via IFTTT
August 31, 2019 at 04:17AM

Gas prices in Vancouver appear to be 'choreographed' concludes report - Vancouver Is Awesome

Twitter CEO Jack Dorsey has been hacked - MobileSyrup

CANADA: Cooktops recalled, deemed 'potential fire hazards' for turning on by themselves - BayToday

Health Canada has issued a recall on thousands of cooktops because of a potential fire hazard.

A release from the federal agency says the heating elements on the cooktops may energize without any user input.

The recall affects about 3,000 products produced by the Tennessee-based Whirlpool Corporation under the Whirlpool, KitchenAid and JennAir brands.

Health Canada says no injuries have been reported in this country, although there has been one report of cabinet damage due to the cooktop being on for a long time.

In the U.S., where more than 20,000 of the affected units were sold, two people have reported suffering minor burns.

Anyone who owns one of the products is advised to immediately contact Whirlpool for a free replacement.

The Canadian Press

from Business - Latest - Google News https://ift.tt/30JBCH4
via IFTTT
August 30, 2019 at 09:09PM

Here comes the worst month for Canadian stocks after wild August - BNNBloomberg.ca

After enduring a bumpy ride in August, investors in Canadian stocks need to brace for more volatility in September, typically the worst month of the year for equities.

In the past 10 years, the S&P/TSX Composite Index has dropped an average 1.5 per cent in September, as the end of summer, return to school and the start of a heavy conference agenda seem to be a bad combination for equities. The only other months with negative returns over the same period were October, June and January, according to data compiled by Bloomberg.

Don’t write off September just yet though, as the month has had its share of gains. The index has risen six of the last 10 Septembers, though massive declines in 2011, 2014 and 2015 pushed the average lower.

Investors can be forgiven for wanting to see August behind them. Global trade tensions roiled markets throughout the month, leading to wild swings up and down amid the China-U.S. showdown. After all the noise however, the benchmark is set to end the month little changed, after the best weekly gain since January as energy and mining stocks rallied with commodities.

Schmoozefest

Further along the Canadian equity train ride, the next stop is ‘Hobnob Station.’

Investors will head to conferences in Toronto and New York to hear from senior executives of major Canadian companies about their growth plans and the state of their industries. There will also be plenty of time for dinners, drinks and one-on-one meetings.

In Toronto, two events stand out:

• Scotiabank Financials Summit (Sept. 4-5): Presenters include C-Suite executives of the Big Six banks, life insurers like Manulife Financial Corp., Sun Life Financial Inc., top asset managers and private equity firm Onex Corp.
• Toronto Global Forum (Sept. 4-6): Former White House communications director Anthony Scaramucci -- who has set up a political action committee in a bid to prevent Donald Trump’s re-election -- will speak along with the CEOs of various Canadian corporations and Canadian provincial and federal ministers.

For Manhattan, investors are set to gather at the Sheraton Times Square Hotel for Barclays’ annual CEO Energy-Power conference, where majors like Suncor Energy Inc. will make presentations.

There’s one major event that will have economists and market participants on edge: Bank of Canada’s rate decision day on Sept. 4. While most expect no rate change, Governor Stephen Poloz’s comments on monetary policy will be watched closely, especially after GDP expanded 3.7% in the second quarter, beating the three per cent estimate. Investors are betting on a rate cut in October, based on trading in the swaps market.

Here’s a recap of what happened this week.

Markets -- Just The Numbers

Stocks

• S&P/TSX Composite Index has rallied for four straight days, it’s longest winning streak in almost two months as U.S.-China trade tensions eased and a rally in oil and gold prices boosted stocks earlier in the week.

Bonds

• Government bonds show U.S. economic prospects are worsening, with 10-year Treasuries yielding 37 basis points more than similar-maturity Canadian government debt, the smallest premium since October 2017.

Loonie

• The Canadian dollar has strengthened by 0.2 per cent against the U.S. dollar this week.
• Goldman Sachs said investors should bet on declines in the loonie against the greenback and the yen as the Bank of Canada may soon join other central banks in a dovish shift.

Chart of the week 

Economy

Canada recorded its largest inflow of foreign direct investment in four years, another sign growing global trade tensions haven’t reduced the appetite for investing into the Canadian economy. That probably reflected Newmont Mining Corp.’s $10 billion takeover of Goldcorp Inc. earlier this year.

August employment figures are expected on Sept. 6.

TIFF

Celebrity alert! The star-studded Toronto International Film Festival -- from Sept. 5-15 -- is expected to bring the likes of three-time Academy Award winner Meryl Streep, Jennifer Lopez, “Crazy Rich Asians” star Constance Wu, Tom Hanks and Bruce Springsteen to Canada’s most populous city next week.

How big is this event? Here are some facts and figures:

• About 280,000 visitors are expected on Festival Street
• Over 330 titles will be shown at TIFF
• Almost 8,000 films were submitted
• More than 80 countries will be represented this year
• Longest film (840 minutes!): “Women Make Film: A New Road Movie Through Cinema”
• Shortest film (2 minutes): “Human Nature, Short Cuts”

#TrendingInCanada

1. Earlier this week, Toronto Raptors guard Jeremy Lin -- the first Asian American to have won an NBA championship -- announced a deal with the Beijing Ducks to play in the Chinese Basketball Association next season.

2. Shark Tank and Dragon’s Den star Kevin O’Leary confirmed that he was in a boat accident in Ontario’s Muskoka cottage country.

--With assistance from Steven Frank and Doug Alexander.

from Business - Latest - Google News https://ift.tt/2ZAecqp
via IFTTT
August 30, 2019 at 08:04PM