·
The 8.6% mom
contraction in China's June imports which shocked at the start of the week was
the key to unlock most of what happened next. The crucial thing was the sharp
fall in China's commodity imports – crude oil, refined products, copper, iron
ore – and the impact this has on commodity prices.
·
All regions
reported on producers’ prices, wholesale prices and trade prices. Except for US
PPI, these indexes fell more sharply than expected. These are generally positive
surprises, because prices of raw materials and intermediate goods fell more
sharply than final goods, and import prices fell more than export prices.
Relative price movements thus improved both industrial margins, and terms of
trade for all but commodity-producers. The result is that trade balances are
generally improving even though trade volumes remain uninspiring.
·
Just as
expectations about monthly data have deteriorated enough to make it far easier
to surprise than to shock, economists have finally downgraded forecast growth
and inflation for the US and Europe. A month ago, the US expected 2H growth of
2.4% - now this is down to 2.2%. A month
ago, Europe’s recession was expected to be done by year-end – now that has been
pushed out to 2Q13. Bucking the trend, Japanese forecasters, have raised their
forecast for the next six months to around 2% from the previous 1.5% in capitulation
to a run of surprisingly positive monthly
data.
This is an extract from a weekly four-page publication "Global Shocks & Surprises" which summarises developments in US, Asia and Europe, and draws out the key messages from the data in a concise form. If you wish to take a look at this please email me at michael.taylor18@btconnect.com
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