The Day at a Glance | September 15 2023

*August´s activity figures in China surprised to the upside, although there are certain risks poised on the horizon. 

*The New York Federal Reserve’s manufacturing index, better known as the Empire State index, rebounded in September to a three-month high at 1.9 points, up from the previous reading of -19.

*The Eurozone’s trade balance recorded a surplus worth 6.5 billion euros in July.

*Wage growth in the Eurozone continued to slow down for the second consecutive quarter by logging a 4.6% figure in the 2Q23. Similarly, the labor cost index recorded a 4.5% y/y, down from the 5.2% y/y figure reported in the 1Q23.

*In the US, import and export price indices accelerated to 0.5% m/m and 1.3% m/m in August. However, the annual data continues to be negative as -3.0% and -5.5% readings were logged. 

Economic environment

After two consecutive months of negative figures, US industrial production recorded a slight year on year increase (0.2%) in August. This positive performance was backed by an unexpected upward shift in the monthly reading, which logged a 0.4% figure – compared to a previous 0.7% m/m (revised from 1.0% m/m) – exceeding the 0.1% m/m expected by the analysts´ consensus. The progress seen in the US industrial sector stemmed from a rebound in mining, which grew by 1.4% m/m in August, following a -0.2% m/m setback. However, services, and to a lesser extent, manufacturing, recorded a slowdown, as they went from 4.4% m/m and 0.4% m/m, respectively, to 0.9% m/m and 0.1% m/m. Taking all of this into account, mining reported 3.9% annual growth, followed by services at 1.2% y/y, while manufacturing activities remained in negative territory for a sixth consecutive month, slightly accelerating its contraction rate to -0.64% y/y from July’s -0.59% y/y. Finally, capacity utilization increased to a four-month high of 79.7%, with manufacturing at 77.9%, and remained 0.3 percentage points below its long-term average (1972-2022). While August´s figures are positive, as they logged better than expected momentum, the strike in the automotive industry – specifically involving the “Big Three” – starting on Friday, September 15th, which includes 12,700 employees, poses a risk for future readings.

China’s economy shows signs of stabilization, although the real-estate sector threatens the outlook. Industrial production in China grew at a faster pace in August, with an annual 4.5% expansion, up from July’s 3.7%, surpassing the market expectation of 3.8% y/y. This reading marked the largest increase in industrial activity since April. Similarly, retail sales recorded an annual 4.6% increase in August, significantly higher than the 3.0% y/y consensus estimate and up from a previous 2.5% y/y reading. Additionally, fixed investment expanded by 3.2% y/y (3.3% e.), while investment in the real-estate sector plummeted by -19.1% (-17.8% prev.). Overall, August´s readings indicate that China’s economy is stabilizing with stronger than expected growth. However, the decline in investment in a key sector (real-estate) has halted the brief economic recovery seen after COVID. With this, Chinese authorities face the challenging task to revive growth amidst persistent weakness in the real-estate industry, a wavering currency, and weak global demand for their manufactured products.