Monthly economic update, August 2019
- The globe overall kept on slowing down, considering global and major-economy PMIs and global trade over the recent months. The manufacturing PMIs of the globe, the EU, the euro area, Japan, Germany, and the UK, started shrinking since May 2019. However, the services and composite PMIs of the globe and the US slightly show a pickup signal, while those of the other major economies kept expanding decreasingly or becoming closer to non-expansion. Additionally, the exports of major economies are also deteriorating on trade tensions and sluggish global demands.
- For the US, although its unemployment rate just reached its record lows, 3.6-3.7%, nonfarm payrolls are cooling down. Inflation pressures have been persistently muted, observably under 2% long-run target. By looking at retail sales and durable goods orders, US private spending is signaling deceleration. For China, after rounds of fiscal and monetary stimulus, economic recoveries are still unclearly bottoming out, via considering PMIs, inflation, and private expenditures, e.g. industrial production, fixed asset investment, and retail sales. Meanwhile, Europe and Japan seem to face similar situations: slowing economy, subdued inflation, somewhat mixed labor data, and worsening economic sentiments.
- In June, Thai economy was getting more subdued as private consumption signaled a slowdown, while private investment contracted. Exports and imports impacted by trade war tension continued to shrink, which were in tandem with tepid manufacturing production. Though the number of Chinese tourists continued to plunge, overall tourism slightly rebounded from growth in other nationalities.
- In 2019Q2, GDP expanded by +2.3% yoy and 0.6% qoq (seasonally adjusted), lower than the previous quarter (2.8%). This growth rate is the weakest pace since 2014Q4.
- TMB Analytics expects 2019 economic growth to be around 2.7% with 1 policy rate cut to 1.25% in December 2019. However, escalating trade tension as well as domestic economic slowdown could dampen economic outlook further.
- Global liquidity is expanding as major central banks are turning out to be growingly easing on weakening globe and rising global risks. The Fed looked to provide preventative cuts in total of 50 bps, while markets expected up to 100 bps, in 2019 with quantitative easing projected to return next year. Meantime, the ECB and the BoJ are likely to follow the US monetary authority as to cushion from mounting uncertainties and balance their currencies against the US dollar.
- Thai baht is expected to stay on a strengthening trend on anticipation of balance-of-payments surplus. Trade balance, tourism receipt-payment differential, and portfolio investment are projected to stay above zero. BoT’s measures on FX speculations in a short run appeared to help discourage short-term fund inflows or hot money from abroad. TMB Analytics expects to see about USDTHB 30.5 during late 2019.
- Government yield curves, including those of the US and Thailand, seem to stay relatively flat on existing recession fears and trade uncertainties. Meantime, the total amount of negative-yielding government bonds globally has been increasing to reach its record high of USD 16 trillion as capital has been flying to assets with low risks.