U.S.:
U.S. consumer spending barely rises; core inflation retreats
U.S. consumer spending barely rose in August likely as Hurricane Harvey weighed on auto sales and annual inflation increased at its slowest pace since late 2015, pointing to a moderation in economic growth in the third quarter. The weak report from the Commerce Department on Friday did little to change expectations that the Federal Reserve would raise interest rates in December. Chair Janet Yellen said on Tuesday the Fed needed to continue gradual rate hikes despite uncertainty about the path of inflation. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month also as unseasonably mild temperatures in some parts of the country reduced demand for utilities. That followed an unrevised 0.3 percent increase in July. August’s gain in consumer spending was in line with economists’ expectations. When adjusted for inflation, consumer spending slipped 0.1 percent in August, the first drop since January. The government said the data reflected the effects of Hurricane Harvey. However, it could not separately quantify the total impact of Harvey on the data. It said it made adjustments to estimates where source data were not yet available or did not fully reflect the effects of the storm. The dollar fell to a session low against a basket of currencies after the data, while prices for U.S. Treasuries rose.
Europe:
Jobless drop, retail sales fall paint mixed picture of German economy
Germany’s jobless rate fell to a new record low in September and the number of unemployed people fell far more than expected but retail sales disappointed, sending mixed signals about the state of Europe’s largest economy. The unemployment rate dropped to 5.6 percent, the lowest level since reunification in 1990, after 5.7 percent in August, data on Friday from the Federal Labour Office showed. Economists polled by Reuters had expected it to hold steady. The jobless total fell by 23,000 to 2.506 million in seasonally adjusted terms. That compared with the consensus forecast in a Reuters poll for a fall of 5,000 and was a steeper drop than that projected by even the most optimistic economist, who had expected a fall of 15,000. “The economic cycle in Germany is moving toward its peak stage and that’s giving the labor market a further boost,” said Joerg Zeuner, chief economist at state development bank KfW. An economic upturn in Europe has boosted exports and corporate investment, suggesting further rises in employment and noticeable wage rises – including beyond 2017, he said. But he added there were risks for the economy, with a further strong appreciation of the euro chief among them.
Asia:
Chinese creditors find even state-backed credit protection has its limits
Since the collapse more than two years ago of China’s second-biggest loan guarantor, the state-backed Hebei Financing Investment Guarantee Group, creditors including powerful financial institutions have been trying to get billions of dollars of their money back. They have failed. The creditors say they have been stonewalled by the group, including its most important stakeholders, the Hebei provincial government and the local office of SASAC, a state-run organization that manages government assets. “Basically, financial institutions are all trapped with a feeling of powerlessness when dealing with defaulting big state-owned enterprises,” said one manager who works for a national institution and who travelled with a group of creditors to the northern region to urge authorities to produce a debt-workout plan. Reuters spoke to more than a dozen creditors of Hebei Financing for this story. The sides have not even been able to agree on how much debt is owed by Hebei Financing. When Hebei Financing collapsed, it said it owed 32 billion yuan ($4.83 billion), but nine creditors told Reuters that they estimated the debt was as high as 60 billion yuan.
