ECB’s Lagarde: Current rates will bring inflation to target by 2025 end

    ECB President Christine Lagarde, in her address to a European Parliament committee, expressed confidence in the current policy rates, emphasizing their effectiveness in steering inflation back towards the intended target.

    “Based on our latest assessment,” Lagarde mentioned, “we consider that our policy rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”

    Lagarde also highlighted the headwinds faced by the euro area’s economy. After broadly stagnating during the first half of 2023, the economy has demonstrated signs of weakening further in the third quarter. This is particularly concerning given the previously resilient services sector, which is also starting to display weakness.

    Lagarde elaborated, “The services sector, which had been resilient until recently, is now also weakening,” noting that “job creation in the services sector is moderating and overall momentum is slowing.”

    Domestic price pressures, however, continue to remain formidable. A surge in holiday and travel spending combined with substantial wage growth is holding up services inflation.

    Nevertheless, according to staff projections, “inflationary pressures are expected to moderate and that inflation is set to reach our target by the end of 2025.”

    Full remarks of ECB Lagarde here.

    Eurozone industrial production down -4.1% mom in Mar

      Eurozone industrial production contracted -4.1% mom in March, much worse than expectation of -1.2% mom. Production of capital goods fell by -15.4% mom, intermediate goods by -1.8% mom, energy by -0.9% mom and non-durable consumer goods by -0.8% mom, while production of durable consumer goods rose by 2.8% mom.

      EU industrial production declined -3.6% mom. Among Member States for which data are available, the largest monthly decreases were registered in Ireland (-26.3%), Sweden (-3.9%) and Germany (-3.1%). The highest increases were observed in Finland (+3.0%), Slovenia (+2.3%), Czechia and Slovakia (both +1.7%).

      Full Eurozone industrial production release here.

      IW: Negative scenario of coronavirus epidemic could fundamentally question the foundations of our prosperity

        German Economic Institute (IW) said in the “positive scenario”, the coronavirus lockdown would last until end of April. GDP growth of the country in 2020 would be around -5% lower than without the pandemic. Industry could lost around -10%. Loss in private service provider would be similar to the broader economy. But in individual areas such as the hospitality industry, double-digit losses can be expected. In this scenario, rapid recovery will begin in may and the crisis could be over by autumn. The V-shaped response would be that at best, the crisis will be almost as severe as the 2009 financial crisis, but broader.

        In the “negative scenario”, lockdown could last until end of June and then catch-up process is less intensive. GDP growth would be lowered by -10% compared to the normal course. Industry would be hit hard by -18% and private service by -11%. A U shape economic activity form would be seen in which the upswing would only start at the beginning of Q3. There would be further downward dynamics if companies collapse in large numbers and confidence of consumers and investors cannot be regained. Such a decline would be “unprecedented” and would “fundamentally question the foundations of our prosperity”.

        IW added: “A particular problem is the lack of, or even a total lack of, international coordination of the crisis response. There is no coordination on border closings, common solutions and strengthening foreign trade in order to increase flexibility on the supply side. Economic self-sufficiency and foreclosure are not the necessary conditions for national civil protection, but complicate adaptation and hinder recovery. As in 2008, the G20 must develop a common understanding of the crisis and define an action framework. The euro area must assume shared fiscal responsibility to prevent disintegration. To ease the burden on the ECB, corona joint bonds must therefore be examined.

        The Charlevoix G7 Summit Communique

          Finally, there is still an official G7 communique released. Here are the paragraphs on trade.

          We acknowledge that free, fair and mutually beneficial trade and investment, while creating reciprocal benefits, are key engines for growth and job creation. We recommit to the conclusions on trade of the Hamburg G20 Summit, in particular, we underline the crucial role of a rules-based international trading system and continue to fight protectionism. We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements. We commit to modernize the WTO to make it more fair as soon as possible. We strive to reduce tariff barriers, non-tariff barriers and subsidies.

          We will work together to enforce existing international rules and develop new rules where needed to foster a truly level playing field, addressing in particular non-market oriented policies and practices, and inadequate protection of intellectual property rights, such as forced technology transfer or cyber-enabled theft. We call for the start of negotiations – this year – to develop stronger international rules on market-distorting industrial subsidies and trade-distorting actions by state-owned enterprises. We also call on all members of the Global Forum on Steel Excess Capacity to fully and promptly implement its recommendations. We stress the urgent need to avoid excess capacity in other sectors such as aluminum and high technology. We call on the International Working Group on Export Credits to develop a new set of guidelines for government-supported export credits, as soon as possible in 2019.

          Full communique below, or at their website.

          The Charlevoix G7 Summit Communique

          1. We, the Leaders of the G7, have come together in Charlevoix, Quebec, Canada on June 8–9, 2018, guided by our shared values of freedom, democracy, the rule of law and respect for human rights and our commitment to promote a rules-based international order. As advanced economies and leading democracies, we share a fundamental commitment to investing in our citizens and meeting their needs and to responding to global challenges. We collectively affirm our strong determination to achieve a clean environment, clean air and clean water. We are resolved to work together in creating a healthy, prosperous, sustainable and fair future for all.

          Investing in Growth that Works for Everyone

          1. We share the responsibility of working together to stimulate sustainable economic growth that benefits everyone and, in particular, those most at risk of being left behind. We welcome the contribution of technological change and global integration to global economic recovery and increased job creation. The global economic outlook continues to improve, but too few citizens have benefited from that economic growth. While resilience against risk has improved among emerging market economies, recent market movements remind us of potential vulnerabilities. We will continue monitoring market developments and using all policy tools to support strong, sustainable, balanced and inclusive growth that generates widespread prosperity. We reaffirm our existing exchange rate commitments. We commit to promoting smart, sustainable and high-quality investments, such as in infrastructure, to boost growth and productivity and create quality jobs. Economic growth is fundamental to raising living standards. We also recognize that economic output alone is insufficient for measuring success and acknowledge the importance of monitoring other societal and economic indicators that measure prosperity and well-being. We are committed to removing the barriers that keep our citizens, including women and marginalized individuals, from participating fully in the global economy. We endorse the Charlevoix Commitment on Equality and Economic Growth, which reinforces our commitment to eradicate poverty, advance gender equality, foster income equality, ensure better access to financial resources and create decent work and quality of life for all.
          2. In order to ensure that everyone pays their fair share, we will exchange approaches and support international efforts to deliver fair, progressive, effective and efficient tax systems. We will continue to fight tax evasion and avoidance by promoting the global implementation of international standards and addressing base erosion and profit shifting. The impacts of the digitalization of the economy on the international tax system remain key outstanding issues. We welcome the OECD interim report analyzing the impact of digitalization of the economy on the international tax system. We are committed to work together to seek a consensus-based solution by 2020.
          3. We acknowledge that free, fair and mutually beneficial trade and investment, while creating reciprocal benefits, are key engines for growth and job creation. We recommit to the conclusions on trade of the Hamburg G20 Summit, in particular, we underline the crucial role of a rules-based international trading system and continue to fight protectionism. We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements. We commit to modernize the WTO to make it more fair as soon as possible. We strive to reduce tariff barriers, non-tariff barriers and subsidies.
          4. We will work together to enforce existing international rules and develop new rules where needed to foster a truly level playing field, addressing in particular non-market oriented policies and practices, and inadequate protection of intellectual property rights, such as forced technology transfer or cyber-enabled theft. We call for the start of negotiations – this year – to develop stronger international rules on market-distorting industrial subsidies and trade-distorting actions by state-owned enterprises. We also call on all members of the Global Forum on Steel Excess Capacity to fully and promptly implement its recommendations. We stress the urgent need to avoid excess capacity in other sectors such as aluminum and high technology. We call on the International Working Group on Export Credits to develop a new set of guidelines for government-supported export credits, as soon as possible in 2019.
          5. To support growth and equal participation that benefits everyone, and ensure our citizens lead healthy and productive lives, we commit to supporting strong, sustainable health systems that promote access to quality and affordable healthcare and to bringing greater attention to mental health. We support efforts to promote and protect women’s and adolescents’ health and well-being through evidence-based healthcare and health information. We recognize the World Health Organization’s vital role in health emergencies, including through the Contingency Fund for Emergencies and the World Bank’s Pandemic Emergency Financing Facility, and emphasize their need for further development and continued and sustainable financing. We recommit to support our 76 partners to strengthen their implementation of the International Health Regulations, including through their development of costed national action plans and the use of diverse sources of financing and multi-stakeholder resources. We will prioritize and coordinate our global efforts to fight against antimicrobial resistance, in a “one health” approach. We will accelerate our efforts to end tuberculosis, and its resistant forms. We reconfirm our resolve to work with partners to eradicate polio and effectively manage the post-polio transition. We affirm our support for a successful replenishment of the Global Fund in 2019.
          6. Public finance, including official development assistance and domestic resource mobilization, is necessary to work towards the achievement of the Sustainable Development Goals of the 2030 Agenda, but alone is insufficient to support the economic growth and sustainable development necessary to lift all populations from poverty. As a result, we have committed to the Charlevoix Commitment on Innovative Financing for Development to promote economic growth in developing economies and foster greater equality of opportunity within and between countries. We will continue to invest in quality infrastructure with open access. Given rising debt levels in low income countries and the importance of debt sustainability, we call for greater debt transparency not only from low income debtor countries, but also emerging sovereign lenders and private creditors. We support the ongoing work of the Paris Club, as the principal international forum for restructuring official bilateral debt, towards the broader inclusion of emerging creditors. We recognize the value in development and humanitarian assistance that promotes greater equality of opportunity, and gender equality, and prioritizes the most vulnerable, and will continue to work to develop innovative financing models to ensure that no one is left behind.

          Preparing for Jobs of the Future

          1. We are resolved to ensure that all workers have access to the skills and education necessary to adapt and prosper in the new world of work brought by innovation through emerging technologies. We will promote innovation through a culture of lifelong learning among current and future generations of workers. We will expand market-driven training and education, particularly for girls and women in the science, technology, engineering and mathematics (STEM) fields. We recognize the need to remove barriers to women’s leadership and equal opportunity to participate in all aspects of the labour market, including by eliminating violence, discrimination and harassment within and beyond the workplace. We will explore innovative new approaches to apprenticeship and vocational learning, as well as opportunities to engage employers and improve access to workplace training.
          2. We highlight the importance of working towards making social protection more effective and efficient and creating quality work environments for workers, including those in non-standard forms of work. Expanding communication and collaboration between governments and businesses, social partners, educational institutions and other relevant stakeholders will be essential for preparing workers to adapt and thrive in the new world of work. To realize the benefits of artificial intelligence (AI), we endorse the Charlevoix Common Vision for the Future of Artificial Intelligence. We recognize that a human-centric approach to AI has the potential to introduce new sources of economic growth, bring significant benefits to our societies and help address some of our most pressing challenges.

          Advancing Gender Equality and Women’s Empowerment

          1. We recognize that gender equality is fundamental for the fulfillment of human rights and is a social and economic imperative. However, gender inequality persists despite decades of international commitments to eliminate these differences. We will continue to work to remove barriers to women’s participation and decision-making in social, economic and political spheres as well as increase the opportunities for all to participate equally in all aspects of the labour market. Our path forward will promote women’s full economic participation through working to reduce the gender wage gap, supporting women business leaders and entrepreneurs and recognizing the value of unpaid care work.
          2. Equal access to quality education is vital to achieve the empowerment and equal opportunity of girls and women, especially in developing contexts and countries struggling with conflict. Through the Charlevoix Declaration on Quality Education for Girls, Adolescent Girls and Women in Developing Countries, we demonstrate our commitment to increase opportunities for at least 12 years of safe and quality education for all and to dismantle the barriers to girls’ and women’s quality education, particularly in emergencies and in conflict-affected and fragile states. We recognize that marginalized girls, such as those with a disability, face additional barriers in attaining access to education.
          3. Advancing gender equality and ending violence against girls and women benefits all and is a shared responsibility in which everyone, including men and boys, has a critical role to play. We endorse the Charlevoix Commitment to End Sexual and Gender-Based Violence, Abuse and Harassment in Digital Contexts, and are resolved to end all forms of sexual and gender-based violence. We strive for a future where individuals’ human rights are equally protected both offline and online; and where everyone has equal opportunity to participate in political, social, economic and cultural endeavors.

          Building a More Peaceful and Secure World

          1. We share a responsibility to build a more peaceful and secure world, recognizing that respect for human rights, the rule of law and equality of opportunity are necessary for lasting security and to enable economic growth that works for everyone. The global security threats we face are complex and evolving and we commit to working together to counter terrorism. We welcome the outcome of the international conference on the fight against terrorist financing, held in Paris April 25-26, 2018. Foreign terrorist fighters must be held accountable for their actions. We are committed to addressing the use of the internet for terrorist purposes, including as a tool for recruitment, training, propaganda and financing, and by working with partners such as the Global Internet Forum to Counter Terrorism. We underscore the importance of taking concrete measures to eradicate trafficking in persons, forced labour, child labour and all forms of slavery, including modern slavery.
          2. Recognizing that countries that are more equal are also more stable, more peaceful and more democratic, we are resolved to strengthen the implementation of the Women, Peace and Security (WPS) agenda. Gender-sensitive measures that include women’s participation and perspectives to prevent and eradicate terrorism are vital to effective and sustainable results, protection from sexual and gender-based violence, and preventing other human rights abuses and violations.
          3. We commit to take concerted action in responding to foreign actors who seek to undermine our democratic societies and institutions, our electoral processes, our sovereignty and our security as outlined in the Charlevoix Commitment on Defending Democracy from Foreign Threats. We recognize that such threats, particularly those originating from state actors, are not just threats to G7 nations, but to international peace and security and the rules-based international order. We call on others to join us in addressing these growing threats by increasing the resilience and security of our institutions, economies and societies, and by taking concerted action to identify and hold to account those who would do us harm.
          4. We continue to call on North Korea to completely, verifiably and irreversibly dismantle all of its weapons of mass destruction (WMD) and ballistic missiles as well as its related programs and facilities. We acknowledge recent developments, including North Korea’s announcement of a moratorium on nuclear testing and ballistic missile launches, a commitment to denuclearization made in the April 27 Panmunjom Declaration – assuming full implementation – and the apparent closure of the Punggye-ri nuclear test site on May 24; but we reiterate the importance of full denuclearization. The dismantlement of all of its WMD and ballistic missiles will lead to a more positive future for all people on the Korean Peninsula and a chance of prosperity for the people of North Korea, who have suffered for too long. However, more must be done and we call on all states to maintain strong pressure, including through the full implementation of relevant UNSCRs, to urge North Korea to change its course and take decisive and irreversible steps. In this context, we once again call upon North Korea to respect the human rights of its people and resolve the abductions issue immediately
          5. We urge Russia to cease its destabilizing behaviour to undermine democratic systems and its support of the Syrian regime. We condemn the attack using a military-grade nerve agent in Salisbury, United Kingdom. We share and agree with the United Kingdom’s assessment that it is highly likely that the Russian Federation was responsible for the attack, and that there is no plausible alternative explanation. We urge Russia to live up to its international obligations, as well as its responsibilities as a permanent member of the UN Security Council, to uphold international peace and security. Notwithstanding, we will continue to engage with Russia on addressing regional crises and global challenges, where it is in our interests. We reiterate our condemnation of the illegal annexation of Crimea and reaffirm our enduring support for Ukrainian sovereignty, independence and territorial integrity within its internationally-recognized borders. We maintain our commitment to assisting Ukraine in implementing its ambitious and necessary reform agenda. We recall that the continuation of sanctions is clearly linked to Russia’s failure to demonstrate complete implementation of its commitments in the Minsk Agreements and respect for Ukraine’s sovereignty and we fully support the efforts within the Normandy Format and of the Organization for Security and Cooperation in Europe for a solution to the conflict in Eastern Ukraine. Should its actions so require, we also stand ready to take further restrictive measures in order to increase costs on Russia. We remain committed to support Russian civil society and to engage and invest in people-to-people contact.
          6. We strongly condemn the murderous brutality of Daesh and its oppression of civilian populations under its control. As an international community, we remain committed to the eradication of Daesh and its hateful ideology. In Syria, we also condemn the repeated and morally reprehensible use of chemical weapons by the Syrian regime and by Daesh. We call on the supporters of the regime to ensure compliance with its obligation to declare and dismantle remaining chemical weapons. We deplore the fact that Syria assumed the presidency of the Conference on Disarmament in May, given its consistent and flagrant disregard of international non-proliferation norms and agreements. We reaffirm our collective commitment to the Chemical Weapons Convention and call on all states to support the upcoming Organisation for the Prohibition of Chemical Weapons (OPCW) Special Conference of States Parties and to work together to strengthen the ability of the OPCW to promote the implementation of the Convention. We call upon those who have yet to do so to join the International Partnership Against Impunity for the Use of Chemical Weapons. We call for credible, inclusive and non-sectarian governance in Syria, facilitated by free and fair elections held to the highest international standards of transparency and accountability, with all Syrians, including members of the diaspora, eligible to participate.
          7. We remain concerned about the situation in the East and South China Seas and reiterate our strong opposition to any unilateral actions that could escalate tensions and undermine regional stability and the international rules-based order. We urge all parties to pursue demilitarization of disputed features. We are committed to taking a strong stance against human rights abuse, human trafficking and corruption across the globe, especially as it impacts vulnerable populations, and we call upon the international community to take strong action against these abuses all over the world. We welcome the recent commitments made by Myanmar and we pledge to coordinate efforts to build lasting peace and support democratic transition in Myanmar, particularly in the context of the ongoing Rohingya crisis, to allow safe and unhindered humanitarian access and the safe, voluntary and dignified return of refugees and displaced people. We are deeply concerned about the lack of respect for human rights and basic democratic principles in Venezuela, as well as the spiraling economic crisis and its humanitarian repercussions. We express our concern at the continuous deterioration of the situation in Yemen and renew our call for all parties to fully comply with international humanitarian law and human rights law.
          8. Recognizing the threat Iran’s ballistic missile program poses to international peace and security, we call upon Iran to refrain from launches of ballistic missiles and all other activities which are inconsistent with UNSCR 2231 – including all annexes – and destabilizing for the region, and cease proliferation of missile technology. We are committed to permanently ensuring that Iran’s nuclear program remains peaceful, in line with its international obligations and commitments to never seek, develop or acquire a nuclear weapon. We condemn all financial support of terrorism including terrorist groups sponsored by Iran. We also call upon Iran to play a constructive role by contributing to efforts to counter terrorism and achieve political solutions, reconciliation and peace in the region.
          9. We remain concerned about the Israeli-Palestinian conflict, especially in the light of recent events. We support the resumption without delay of substantive peace talks between Israelis and Palestinians aimed at achieving a negotiated solution that ensures the peace and security for both parties. We stress the importance of addressing as soon as possible the dire and deteriorating humanitarian and security situation in the Gaza strip.
          10. Africa’s security, stability, and sustainable development are high priorities for us, and we reiterate our support for African-led initiatives, including at a regional level. We reiterate our commitment to work in partnership with the African continent, supporting the African Union Agenda 2063 in order to realize Africa’s potential. We will promote African capabilities to better prevent, respond to, and manage crisis and conflicts; and to strengthen democratic institutions. We reiterate our commitment to the stabilization, unity and democracy of Libya, which is key for the stability of the Mediterranean region and of Europe. We support the efforts of the Special Representative of the Secretary-General Salamé in pursuing an inclusive political process founded on his Action Plan and we encourage all Libyan and regional actors to uphold their constructive engagement as outlined in the June 6, 2018 statement of the President of the Security Council on Libya. We support the efforts of the Presidency Council for Libya and the Libyan Government of National Accord to consolidate State institutions.

          Working Together on Climate Change, Oceans and Clean Energy

          1. A healthy planet and sustainable economic growth are mutually beneficial, and therefore, we are pursuing global efforts towards a sustainable and resilient future that creates jobs for our citizens. We firmly support the broad participation and leadership of young people, girls and women in promoting sustainable development. We collectively affirm our strong determination to achieve a clean environment, clean air, clean water and healthy soil. We commit to ongoing action to strengthen our collective energy security and demonstrate leadership in ensuring that our energy systems continue to drive sustainable economic growth. We recognise that each country may chart its own path to achieving a low-emission future. We look forward to adopting a common set of guidelines at UNFCCC COP 24.
          2. Canada, France, Germany, Italy, Japan, the United Kingdom and the European Union reaffirm their strong commitment to implement the Paris Agreement, through ambitious climate action; in particular through reducing emissions while stimulating innovation, enhancing adaptive capacity, strengthening and financing resilience and reducing vulnerability; as well as ensuring a just transition, including increasing efforts to mobilize climate finance from a wide variety of sources. We discussed the key role of energy transitions through the development of market based clean energy technologies and the importance of carbon pricing, technology collaboration and innovation to continue advancing economic growth and protect the environment as part of sustainable, resilient and low-carbon energy systems; as well as financing adaptive capacity. We reaffirm the commitment that we have made to our citizens to reduce air and water pollution and our greenhouse gas emissions to reach a global carbon-neutral economy over the course of the second half of the century. We welcome the adoption by the UN General Assembly of a resolution titled Towards a Global Pact for the Environment and look forward to the presentation of a report by the Secretary General in the next General Assembly.
          3. Canada, France, Germany, Italy, Japan, the United Kingdom and the European Union will promote the fight against climate change through collaborative partnerships and work with all relevant partners, in particular all levels of government; local, Indigenous, remote coastal and small island communities; as well as with the private sector, international organizations and civil society to identify and assess policy gaps, needs and best practices. We recognize the contribution of the One Planet conferences to this collective effort.
          4. The United States believes sustainable economic growth and development depends on universal access to affordable and reliable energy resources. It commits to ongoing action to strengthen the world’s collective energy security, including through policies that facilitates open, diverse, transparent, liquid and secure global markets for all energy sources. The United States will continue to promote energy security and economic growth in a manner that improves the health of the world’s oceans and environment, while increasing public-private investments in energy infrastructure and technology that advances the ability of countries to produce, transport, and use all available energy sources based on each country’s national circumstances. The United States will endeavour to work closely with other countries to help them access and use fossil fuels more cleanly and efficiently and help deploy renewable and other clean energy sources, given the importance of energy access and security in their Nationally Determined Contributions. The United States believes in the key role of energy transitions through the development of market-based clean energy technologies and the importance of technology collaboration and innovation to continue advancing economic growth and protect the environment as part of sustainable, resilient, and clean energy systems. The United States reiterates its commitment to advancing sustainable economic growth, and underscores the importance of continued action to reduce air and water pollution.
          5. Recognizing that healthy oceans and seas directly support the livelihoods, food security and economic prosperity of billions of people, we met with the heads of state or government of the Argentina, Bangladesh, Haiti, Jamaica, Kenya, Marshall Islands, Norway, Rwanda (Chair of the African Union), Senegal, Seychelles, South Africa, Vietnam, and the heads of the United Nations, the IMF, the World Bank and the OECD, to discuss concrete actions to protect the health of marine environments and ensure a sustainable use of marine resources as part of a renewed agenda to increase global biodiversity protection. We endorse the Charlevoix Blueprint for Healthy Oceans, Seas and Resilient Coastal Communities, and will improve oceans knowledge, promote sustainable oceans and fisheries, support resilient coasts and coastal communities and address ocean plastic waste and marine litter. Recognizing that plastics play an important role in our economy and daily lives but that the current approach to producing, using, managing and disposing of plastics and poses a significant threat to the marine environment, to livelihoods and potentially to human health, we the Leaders of Canada, France, Germany, Italy, the United Kingdom and the European Union endorse the G7 Ocean Plastics Charter.

          Conclusion

          1. We share the responsibility of working together to stimulate sustainable economic growth that benefits everyone, in particular, those most at risk of being left behind. We would like to thank our citizens, civil society, the Gender Equality Advisory Council, the Formal G7 Engagement Groups and other partners for their meaningful input to Canada’s presidency. We welcome the offer of the President of France to host our next Summit in 2019 and his pledge to continue G7 leadership on our common agenda.

          Eurozone industrial production rose 0.2% mom in May, EU up 0.1% mom

            Eurozone industrial production rose 0.2% mom in May, below expectation of 0.3% mom. Production of capital goods grew by 1.0%, intermediate goods and durable consumer goods both by 0.5% and non-durable consumer goods by 0.3%, while production of energy fell by -1.1%.

            EU industrial production rose 0.1% mom. Among Member States for which data are available, the highest monthly increases were registered in Slovenia (+7.9%), Croatia (+4.3%), Slovakia and Finland (both +2.5%). The largest decreases were observed in Ireland (-4.9%), Lithuania (-2.8%), Romania and Belgium (both -1.2%).

            Full Eurozone industrial production release here.

            Australia retail sales rose 0.4%, growth in five of six industries

              Australia retail sales rose 0.40% mom in June, above expectation of 0.3%. This followed 0.1% rise back in May. Ben James, Director of Quarterly Economy Wide Surveys said “there were rises in five of the six industries this month, although overall the retail environment remains subdued”. Full release here.

              In seasonally adjusted terms, there were rises in New South Wales (0.3%), Western Australia (0.8%), Queensland (0.4%), Victoria (0.3%), Tasmania (1.5%), and the Australian Capital Territory (0.3%). South Australia (-0.3%) and the Northern Territory (-0.2%) fell.

              Also from Australia, PPI rose 0.4% qoq, 2.0% yoy in Q2, above expectation of 0.2% qoq, 1.9% yoy.

              Fed reduces net monthly treasury purchases by 10B, MBS by 5B, to lower at same pace ahead

                FOMC decided to start reducing monthly net asset purchase by USD 10B for treasury securities and USD 5B for MBS. That is, Fed will increase holdings of treasury securities by only USD 70B and MBS by USD 35B per month. Additionally, Fed will further lower net purchases of treasury securities to USD 60B and MBS to USD 30B per month in December.

                Fed expects “similar reductions in the pace of net asset purchases will likely be appropriate each month” depending on the economic outlook.

                Also, Fed keeps federal funds rate target unchanged at 0-0.25% as widely expected.

                The decisions were unanimous.

                Full statement here.

                US Mnuchin had productive meetings with China

                  There is so far no known progress as US-China trade talks conclude in Beijing. US Treasury Secretary Steven Mnuchin just tweeted “Productive meetings with China’s Vice Premier Liu He and @USTradeRep Amb. Lighthizer”, without any elaboration.

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                  On the Chinese side, Foreign Ministry spokesman Geng Shuang said in a regular press briefing that “just wait for a while and the answer will be revealed soon”.

                  Mnuchin and Lighthizer will meet Chinese President Xi Jinping later this afternoon.

                  German Ifo business climate dropped to 90.1, second wave brought recovery to a halt

                    Germany Ifo business climate dropped to 90.1 in January, down from 92.2, below expectation of 92.0. Current assessment index dropped to 89.2, down from 91.3, missed expectation of 90.7. Expectations index dropped to 91.1, down from 93.0, below expectation of 93.2.

                    Looking at the sectors, manufacturing index dropped from 9.1. to 8.8, first decline after eight straight rises. Services dropped from -0.4 to -4.4. Trade nose-dived sharply from 0.3 to -17.2, steepest fall since April 2020. Construction dropped from -0.8 to -5.1.

                    Clemens Fuest, President of the ifo Institute: “The second wave of coronavirus has brought the recovery of the German economy to a halt for now.”

                    Full release here.

                    Eurozone exports rose 13.3% yoy in Jul, imports surged 44.0% yoy

                      Eurozone exports of goods rose 13.3% yoy to EUR 235.5B in July. Imports rose 44.0% yoy to EUR 269.5B. Trade deficit with the rest of the world came in at EUR -34B. Intra-Eurozone trade rose 24.0% yoy to EUR 224.8B.

                      In seasonally adjusted term, Eurozone exports dropped -1.7% mom to EUR 236.7B. Imports rose 1.5% mom to EUR 277.0B. Trade deficit widened to EUR -40.3B, larger than expectation of EUR -32.5B. Intra-Eurozone trade rose from EUR 225.1B to EUR 229.3B.

                      Full release here.

                      US PMI Composite dropped to 40-month low, GDP growth slipped to 1.4%

                        In June, US PMI Manufacturing dropped to 50.1 in June, down from 50.5 and missed expectation of 50.5. That’s the lowest level in 117 months. PMI Services dropped to 50.7, down from 50.9 and missed expectation of 51.0. That’s the lowest level in 40 months. PMI Composite dropped to 50.6, down from 50.9, a 40-month low.

                        Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                        “Business activity edged closer to stagnation in June, expanding at the slowest rate since February 2016 and rounding off a second quarter in which the survey data point to the pace of economic expansion slipping to 1.4%.

                        “Recent months have seen a manufacturing-led downturn increasingly infect the service sector. The strong services economy seen earlier in the year has buckled to show barely any expansion in June, recording the second-weakest monthly growth since the global financial crisis.

                        “Business optimism has also become more subdued, with sentiment about the year ahead down to a new series low amid intensifying worries about tariffs, geopolitical risk and slower economic growth in the months ahead.

                        “The labor market is also showing signs of weakening. The survey data for June indicate non-farm payroll growth of 140k,averageing 150k in the second quarter after a 200k signal for the first three months of the year .

                        “Prices for goods and services meanwhile rose at a slightly increased rate in June, mainly due to tariffs. To illustrate, some two-thirds of all manufacturers attributed some or all of their raw material cost increases to tariffs during the month. However, the inflationary impact of tariffs was offset by a broader softening of demand, which reduced suppliers’ pricing power. The overall rate of input cost inflation in manufacturing eased to a two-year low, while average selling prices for goods and services showed one of the smallest rises seen since late-2016.”

                        Full release here.

                        Fed chair Powell’s testimony, live stream

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                          Introductory statement.

                          UK PMI composite finalized at 50.8, economy to flatline at best

                            UK PMI Services was finalized at 51.5 in July, down from June’s 53.7. PMI Composite was finalized at 50.8, down from June’s 52.8, sparking concerns over the possibility of an economic stagnation in the coming months.

                            Tim Moore, Economics Director at S&P Global Market Intelligence: “The loss of momentum signalled by service providers in July suggests that the UK economy is set to flatline at best in the coming months.

                            “There were sporadic reports that subdued demand had led to more competitive pricing and the pass through of lower fuel costs, which contributed to a slowdown in output charge inflation to its second-lowest since August 2021.

                            “However, there was no let-up in pressure on business expenses as the rate of input cost inflation was virtually unchanged from that seen on average in the second quarter of 2023.

                            “Survey respondents widely commented on strong cost pressures due to higher salary payments in July, which will add to concerns among policymakers that sticky inflation and stagnant growth will prove a persistent challenge for the UK economy during the second half of the year.”

                            Full UK PMI Services release here.

                            EUR/CHF holding above 0.9530 temp low after selloff

                              Euro drops broadly today, in particular against Swiss Franc. The selloff came after Russian President Vladimir Putin announced partial military mobilization for the invasion of Ukraine. That’s the first such mobilization since World War II, and would call up 300k reservists. Putin also warned that Russia has “various means of destruction”. “If the territorial integrity of our country is threatened, we will certainly use all the means at our disposal to protect” he said, adding that “this is not a bluff!”.

                              Last week, Putin had the first face-to-face meeting with Chinese President Xi Jinping since the pandemic, in Uzbekistan. China’s official news agency reported that Xi told Putin China will work with Russia to deepen practical cooperation in trade, agriculture, connectivity and other areas.

                              For now, EUR/CHF is still holding above 0.9530 temporary low, and down trend resumption is not confirmed yet. On break of 0.9530, EUR/CHF should target 61.8% projection of 1.0512 to 0.9550 from 0.9864 at 0.9269.

                              Singapore slashes 2019 growth forecasts to 0.0-1.0%, uncertainties and risks increased

                                Singapore Ministry of Trade and Industry downgraded 2019 growth forecast to 0.0-1.0%, and expect growth to come in at around mid-point of the forecast range. That’s notably lower from prior estimate of 1.5-2.5%, after Q2 GDP contracted by -3.3%. The Ministry noted in the statement that “GDP growth in many of Singapore’s key final demand markets in the second half of 2019 is expected to slow from, or remain similar to, that recorded in the first half.”.

                                Also, “uncertainties and downside risks in the global economy have increased since three months ago”. The risks firstly include US new tariffs on USD 300B in Chinese imports. Secondly, a “a steeper-than-expected slowdown” of China, as precipitated by US tariffs, could lead to a “sharp fall” in Chinese import demands and “negatively affect the region’s growth”. Thirdly, risk of no-deal Brexit “has increased with the recent change in UK’s political leadership.” Fourthly, there are risks from uncertainties in Hong Kong, the trade dispute between Japan and South Korea, as well as geopolitical tensions in North Korea and the Strait of Hormuz.

                                Full release here.

                                China PBoC Yi outlines specifics on opening financial market access at Boao

                                  New People’s Bank of China Governor Yi Gang pledged to further open the financial markets in the Boao Forum for Asian in China. And some specifics were offered by Yi too.

                                  Firstly, the government will remove foreign ownership caps on Chinese banks by the end of June.

                                  Secondly, foreign securities and life insurance companies will be allowed to hold majority stakes in their Chinese counterparts. That is, ownership could be raised from 49% to 51%. And such restriction will also be abolished in three years.

                                  Thirdly, by the end of June, the permitted business scope for foreign insurance agents will be expanded.

                                  Fourthly, the daily quota for foreign investors to buy Chinese stocks and for Chinese investors to buy Hong Kong traded stocks will be quadrupled.

                                  In addition, by the end of 2018, China will launch a trading link between Shanghai stock markets to London’s.

                                  Separately, Yi also said that China won’t devalue Yuan as part of the moves of trade war with the US.

                                  ECB accounts: Recent market developments might be based on overly optimistic expectations

                                    In the accounts of July 15-16 monetary policy meeting, ECB warned that “recent positive market developments were not fully backed by economic data”. They might be based on “overly optimistic expectations” about the Next Generation EU recovery package, and progress on vaccine development.

                                    “A highly accommodative monetary policy stance continued to be appropriate on account of the subdued medium-term outlook for price stability, characterised by inflation expectations standing near historical lows and significant economic slack. Careful monitoring was warranted while uncertainty about economic outlook remained elevated. Current monetary stance was seen as “adequate” and a “recalibration” was “not deemed necessary”

                                    Looking ahead, additional information, including more hard data releases, new staff projections and news on fiscal measures, would become available by September. That would provide “more clarity regarding the medium-term inflation outlook”. “In any case, at its September meeting the Governing Council would be in a better position to reassess the monetary policy stance and its policy tools.”

                                    Full meeting accounts here.

                                    Australia retail sales rose 0.7% mom, boosted by sales events

                                      Australia retail sales turnover rose 0.7% mom to AUD 35.52B in May, well above expectation of 0.1% mom. Through the year, sales turnover was up 4.2% yoy.

                                      Ben Dorber, ABS head of retail statistics, said: “Retail turnover was supported by a rise in spending on food and eating out, combined with a boost in spending on discretionary goods.

                                      “This latest rise reflected some resilience in spending with consumers taking advantage of larger than usual promotional activity and sales events for May.”

                                      Full Australia retail sales release here.

                                      US said to consider interim China trade deal

                                        According to a Bloomberg report, based on unnamed sources, US President Donald Trump’s advisers are considering an interim trade deal with China, that would involve delaying or even rolling back some tariffs. In return, China has to offer commitments on intellectual property protection and agricultural product purchases.

                                        Separately,  Treasury Secretary Steven Mnuchin said Trump is a “negotiator” and he’s “prepared to keep these tariffs in place. He’s prepared to raise tariffs if we need to raise tariffs”. Though, Mnuchin is “cautiously optimistic” about upcoming meetings with China’s trade team.

                                        Eurozone PMI manufacturing finalized at 48.5, output at 50.1

                                          Eurozone PMI Manufacturing was finalized at 48.5 in February, down from January’s 48.8. Manufacturing output was finalized at 50.1, up from 48.9, a 9-month high.

                                          Looking a some member states, readings for Italy (52.0, 10-mont high), Greece (51.7, 9-month high), Ireland (51.3, 4-month high), and Spain (50.7, 8-month high) improved. The Netherlands (48.7, 2-month low), France (47.4, 4-month low), Austria (47.1, 3-month low), and Germany (46.3, 3-month low) deteriorated.

                                          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

                                          “A marginal expansion of output reported by Eurozone manufacturers in February is welcome news in representing the first increase since last May… Unfortunately, inflows of new orders continued to fall at a marked rate, reflecting persistent weak demand… In the meantime, the combination of improved supply and sustained weak demand – as well as lower energy prices – is helping bring inflationary pressures down sharply”.

                                          Full release here.