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Good morning! Today we look at slower growth in China, more fallout from Turkey’s economic crisis, Germany pulling away from the rest of Europe, and which U.S. manufacturers are driving the sector’s resurgence.
SIGNS OF SLOWER GROWTH IN CHINA
China’s economy is cooling. Spending on factory machinery, public-works projects and other fixed-asset investments in China’s nonrural areas grew at the slowest pace in nearly two decades. Retail sales also slowed and unemployment ticked up, Liyan Qi, Grace Zhu and Dominique Fong report. The economy is still expanding. But the data suggest further escalation in trade tensions with the U.S. come at a particularly bad time for China.
The slowdown in fixed-asset investment reflects Beijing’s campaign to curb risky borrowing by local governments and companies. A government spokesperson said infrastructure investment will probably stabilize and accelerate in the second half of the year as the government moves to pump up the economy in face of a protracted trade conflict.
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WHAT TO WATCH TODAY
U.S. import prices for July, out at 8:30 a.m. ET, are expected to fall 0.1% from the prior month.
TOP STORIES
INDIA’S RUPEE HITS RECORD LOW
The Indian rupee fell to an all-time low against the U.S. dollar, the latest casualty from the Turkish lira’s collapse. Analysts said the rupee could fall further, Manju Dalal and Debiprasad Nayak report.
LIRA STEADIES
While the rupee tanked, the Turkish lira and other emerging-market currencies steadied. The lira remains down more than 40% this year. Investors are concerned about political and economic stability, a continuing trade spat with the U.S., and potential spillover to other economies.
“The direct economic hit from Turkey for European economies, let alone the wider world, should be fairly small.” – James Cheo, senior investment strategist at Bank of Singapore
GERMANY PERKS UP
Germany’s economy accelerated in the second quarter, helping lift growth in the eurozone. But global trade tensions and a spiraling currency crisis in Turkey are clouding the outlook for businesses. Germany’s gross domestic product grew at a quarterly rate of 0.5%, or 1.8% in annualized terms, Nina Adam reports. Germany is outpacing the eurozone’s 1.5% but lags the U.S. Spending by households and the government helped lift Germany’s economy in the second quarter.
MANUFACTURING JOBS
The manufacturing sector has become a growth engine for the economy. New data from the Federal Reserve on Wednesday will show where output is strongest. A look back at the July jobs report shows a handful of heavy industries are leading the way in hiring. Overall, manufacturers added 327,000 jobs from a year earlier. Better than half that gain came in three categories: machinery, fabricated metal and autos. Those sectors account for just 30% of all manufacturing jobs, so they’re punching above their weight. Payrolls for primary-metal making, like steel and aluminum, are growing slower than manufacturing as whole. That suggests that tariffs haven’t yet bled into hiring data. - Eric Morath
READERS RESPOND
On Monday, we wrote: Turkey sneezed. Do you think Western markets will catch cold?
I don’t think so, but I do think there’s a low-probability chance that the Fed could skip a rate hike, especially if financial markets get more rattled than they are. Higher rates boost the dollar, and the stronger dollar both dampens price pressures and worsens debt servicing pressures for countries like Turkey with debts in dollars. [Fed Chairman Jerome] Powell’s argued, reasonably, that such dynamics won’t deter their “normalization campaign,” but this bears watching. - Jared Bernstein, Center on Budget and Policy Priorities
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Electric vehicles use about a third fewer parts than today’s average car. “Here’s a sample of what you won’t find in an EV: spark plugs, pistons, camshafts, fuel pumps, injectors, and catalytic converters,” Connor Cislo and Nao Sano report for Bloomberg Businessweek. That heralds painful downsizing in Japan’s automotive industry.
U.S. tariffs are meant to slow imports. They’re also likely to slow exports. “The end result is likely to be lower imports and lower exports, with little or no improvement in the trade deficit,” Mary Amiti, Mi Dai, Robert Feenstra and John Romalis wrote at the New York Fed’s Liberty Street Economics blog.
UP NEXT: WEDNESDAY
The U.K. consumer-price index for July is due out at 4:30 a.m. ET.
U.S. retail sales for July, out at 8:30 a.m. ET, are expected to rise 0.1% from the prior month.
U.S. second-quarter productivity, out at 8:30 a.m. ET, is expected to advance 2.4%.
The New York Fed Empire State survey for August, out at 8:30 a.m. ET, is expected to fall to 20.0 from 22.6 the prior month.
U.S. industrial production for July, out at 9:15 a.m. ET, is expected to rise 0.3% from the prior month.
The National Association of Home Builders housing market index for August, out at 10 a.m. ET, is expected slip to 67 from 68 the prior month.
from Real Time Economics https://ift.tt/2MunTzU
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