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Economic recovery from Covid ‘running out of steam’ – OECD – The Guardian

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A downturn in the global industrial economy is already underway, currency chart confirms – CNBC

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One economic forecaster predicted a slowdown in global industrial activity earlier this summer.

Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, says the currency markets are now confirming his call.

“We made that earlier global Industrial downturn call, and that meant that you were going to see this slowdown in industrial materials price inflation, industrial commodity price inflation and the top line of the chart shows that,” Achuthan told CNBC’s “Trading Nation” on Thursday.

ECRI’s industrial materials price index shows the growth rate at its lowest level in around a year after a sharp runup from mid-2020 to early 2021.

“That weakness in industrial materials inflation, commodity price inflation, is also negative for commodity currencies like the Canadian dollar or the Australian dollar because those are commodity-exporting countries and they rely more on commodity exports,” said Achuthan.

The Canadian and Australian dollar, both commodity currencies, are closely tied to commodity price inflation, and the fact they have begun to roll over confirms the downturn in industrial price inflation, he said. The Canadian dollar is closely tied to oil prices, while the Aussie dollar has a high correlation with oil and gold.

That could portend trouble for the commodity trade as well as other areas of the market, Achuthan said.

“A lot of people are excited about the runup in commodities. We’re saying directionally you got to look the other way. It has knock-on effects to commodity currencies vis-a-vis the dollar. And that has knock-on effects I think for other asset classes — what’s going on with some of those currencies can obviously impact commodities themselves, bonds, even stocks,” he said.

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The US economy is powering through Delta – CNN

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

London (CNN Business)“Delta? What Delta?”

That was the take from Ian Shepherdson, chief economist at Pantheon Macroeconomics, after seeing the data on US retail sales for August.
What’s happening: Contrary to expectations, US retail sales increased last month as consumers continued to shell out on clothing, furniture and groceries.
It’s a promising sign heading into the crucial holiday shopping season, and indicates that the US economy is demonstrating resilience despite a spike in coronavirus cases triggered by the Delta variant.
“We see only very modest evidence that the spread of the Delta variant is having an impact on demand,” Citi’s Veronica Clark and Andrew Hollenhorst said in a note to clients.
Another signal: There were 332,000 initial jobless claims in the United States last week. That’s only a slight uptick from the week prior, when claims hit a pandemic low.
The four-week moving average has now dropped to 335,800 claims, its best level in the Covid-19 era, according to Jim Reid of Deutsche Bank.
That’s not to say the Delta variant isn’t having any impact. Seatings at restaurants in the United States appear to have dropped sharply in recent days, according to data from OpenTable.
On the radar: In August, spending at restaurants was flat month-over-month. Grocery store spending also climbed 1.8%, suggesting that Americans were opting to dine more at home again.
And we can’t forget the jarring US jobs report for August, when just 235,000 positions were added. Restaurants and bars registered a loss of 42,000 jobs.
Big picture: The data is promising, but also messy. Rising prices due to inflation could be contributing to higher retail sales, muddying the picture. Plus, there’s a huge element of uncertainty about the economic trajectory as colder weather sets in. The Federal Reserve, which meets next week, doesn’t have an easy job charting the path forward.
For the time being, many are choosing to look on the bright side. New variants may weigh on the economic recovery, but could be far less damaging than early in the pandemic, as vaccinations help consumers feel more confident and allow governments to avoid reimposing strict rules.
“You’ll see more resilience with each wave,” Jeffrey Sacks, head of investment strategy for Europe, the Middle East and Africa at Citi Private Bank, predicted earlier this week.

Wall Street is unfazed by China’s potential ‘Lehman moment’

The implosion of Lehman Brothers 13 years ago this week showed how the collapse of a single business can send shockwaves around the world.
Now, more than a decade later, policymakers and investors in the United States are watching closely as a massive property developer thousands of miles away teeters on the brink of default, my CNN Business colleague Matt Egan reports.
Catch up: The risk is that the collapse of Evergrande, a Chinese real estate company with a staggering $300 billion of debt outstanding, could set off a chain reaction that spreads overseas.
“Some fear an Evergrande meltdown will have systemic risks on par with the impact Lehman Brothers’ demise had on the US stock market,” Ed Yardeni, president of Yardeni Research, wrote in a note to clients Thursday.
Like Lehman in its heyday, Evergrande is massive. It’s one of the world’s biggest businesses by revenue, and employs about 200,000 people.
But for now, investors are confident that authorities in Beijing would use their vast control over the Chinese economy to limit the damage. So far, there’s no evidence of contagion in US markets.
“I don’t think the Evergrande meltdown, and the financial problems of Chinese property companies more broadly, will reverberate back on the US economy,” Mark Zandi, chief economist at Moody’s Analytics, told CNN Business.
Not alone: “We think that the ‘China’s Lehman moment’ narrative is wide of the mark,” Simon MacAdam, senior global economist at Capital Economics, wrote in a note on Thursday. MacAdam said even a “messy collapse” of Evergrande would have “little global impact beyond some market turbulence.”
Only time will tell, however, how systemically important the company really is — and what Beijing may do to cushion the blow.

These were the week’s hottest IPOs

Companies that made their public market debuts in the United States this week are generating tons of hype, benefiting from investor enthusiasm for new stocks in industries ranging from software to athletic wear.
The highlights: ForgeRock, a San Francisco-based company that makes identity verification software, hauled in $275 million through its stock sale. Its shares also enjoyed a huge pop in their first day of trading on the New York Stock Exchange, jumping 46% on Thursday.
Stock in Swiss sportswear brand On, which is backed by tennis superstar Roger Federer, has surged 56% above the company’s initial public offering price since Wednesday.
And Thoughtworks, a tech consultancy, has seen its stock on the Nasdaq jump almost 50% in its first two days of trading.
Bloomberg calculates that IPOs on US exchanges — excluding special-purpose acquisition companies, or SPACS — raised almost $4.4 billion this week.
Step back: Buzzy IPOs have generated mixed returns this year. The Renaissance IPO exchange-traded fund, which tracks the biggest newly-listed public companies in the United States, is up just 7.3% year-to-date, compared to a 19.1% rise in the S&P 500. Its top holdings include Snowflake, Palantir, Datadog and Coinbase.
But newer stocks have started to perform better in recent months. The Renaissance IPO ETF has climbed 4.6% in the third quarter, versus a 4.1% increase in the S&P 500.

Up next

Manchester United (MANU) reports results before US markets open.
Also today: The University of Michigan’s survey of consumer sentiment posts at 10 a.m. ET.
Coming next week: The Federal Reserve holds a policy meeting as investors scrutinize the central bank’s next steps.

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Charting the Global Economy: Retail Sales Stumble in UK, China – BNN

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(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

The global economy is still feeling the weight of Covid-19, which is complicating recovery efforts and sparking inflation.

Retail sales in the U.K. and China continued a stretch of weakness, while those in the U.S. unexpectedly rose. Inflation remains elevated in most parts of the world, and soaring food prices are especially hurting populations in emerging markets.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

World

Covid-19 still isn’t done hobbling the global economy. From the U.S. to China and Germany, the latest data are flagging an economic slowdown as the new form of the coronavirus hits spending just as supply chain snarl ups threaten to keep inflation elevated. Both the world’s two largest economies are feeling a squeeze. 

Companies around the world from noodle makers to semiconductor giants are spending on new plants and machinery in ways they haven’t done for years. Globally, corporate capital expenditure, or capex, will jump by 13% this year, according to S&P Global Ratings, with growth in all regions and broad sectors — especially in semiconductors, retail, software and transportation.

The global economy is expected to undergo its fastest recovery in almost five decades this year, but deepening inequities between advanced and developing countries threaten to undermine this, the United Nations warned.

U.S.

Prices paid by U.S. consumers rose in August by less than forecast, snapping a string of hefty gains. The data offered some comfort for “team transitory” –- those at the Federal Reserve and elsewhere who say price spikes caused by the economy’s reopening will soon abate.

Retail sales rose unexpectedly in August as a pickup in purchases across most categories more than offset weakness at auto dealers, showing resilient consumer demand for merchandise. The report showed firmer receipts at online retailers, general merchandise stores, furniture outlets and grocery stores.

Europe

U.K. retail sales fell unexpectedly for a fourth month in August, the longest stretch of declines in at least 25 years, raising concerns about the economic recovery as a resurgence of coronavirus cases and supply shortages take a toll.

U.K. inflation surged more than expected to the strongest pace in more than nine years, prompting investors to anticipate a sharper increase in interest rates in 2022. Consumer prices jumped 3.2% in August from a year ago, the most since March 2012, the Office for National Statistics said on Wednesday.

France’s sooner-than-expected economic recovery from the slump during the Covid-19 pandemic is reviving deep problems in the labor market that have long hobbled growth, the country’s central bank said. 

Asia

China’s economy took a knock in August from stringent virus controls and tight curbs on property, fueling concerns about the global recovery as countries battle to get delta outbreaks under control. Retail sales growth slowed to 2.5% from a year ago.

Australia’s fiscal coffers are under assault on two fronts as its largest export goes into free-fall while the nation’s biggest cities and swathes of the east coast are under virus lockdown, driving up emergency spending.

Emerging Markets

Global food prices were up 33% in August from a year earlier with vegetable oil, grains and meat on the rise, data from the United Nations Food and Agriculture Organization show. It’s unlikely to get better as extreme weather, soaring freight and fertilizer costs, shipping bottlenecks and labor shortages compound the problem.

©2021 Bloomberg L.P.

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