17 August 2021
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US Empire manufacturing survey falls short

US empire manufacturing came in at 18.3 in August, down from a record high of 43.0 in July.

By Daniel Richards

  • US empire manufacturing came in at 18.3 in August, down from a record high of 43.0 in July. This was also below consensus expectations of 28.5. The survey seemed to indicate that price pressures would remain prevalent in the near term at least, as selling prices rose to a record high of 46.0, although falling supplier delivery times on the six-month ahead measure indicates that some of these pressures should ease from here.
  • The release of the minutes of the Reserve Bank of Australia’s August MPC meeting showed that it would continue to assess its QE policy as the country needed. The bank had previously reaffirmed the change in the rate of bond purchases, but given what was said in the minutes, and the fact that Australia is grappling with renewed outbreaks of Covid-19 and associated lockdowns and restrictions on activity in key states, the AUD weakened on its release this morning.
  • Dubai’s CPI rose 0.3% m/m in July, but declined -2.5% y/y.  Both food and housing, the biggest components of the CPI basket, declined on an annual basis last month.  However, this was offset by higher transport costs as well higher prices for furnishing & household equipment, recreation & culture and restaurants & hotels.  The annual decline in Dubai’s CPI was the slowest since March 2020 and we expect inflation to turn positive by the end of this year.

Today’s Economic Data and Events

13:00 Eurozone real GDP growth q/q, Q2. Forecast: 2.0%

16:30 US retail sales m/m, July. Forecast: -0.2%

17:15 US industrial production m/m, July. Forecast: 0.5%.

Fixed Income

  • USTs were mixed across the curve to start the week as the 2-yr saw yields climb a modest 0.2 basis points to 0.2072%, while the 10-yr fell -1.17bps to 1.265%. The weak data points seen out of both China and the US yesterday will have weighed on sentiment.
  • Markets will be taking their cue from US retail sales later today to gauge the strength of the US consumer, followed by a public appearance by Fed chair Jerome Powell.
  • The minutes from the RBA indicated that the Australian central bank might yet reverse its modest earlier tightening as the pandemic situation deteriorates there.


  • The dollar remained supported yesterday despite weaker-than-expected data in the afternoon, as concerns are greater elsewhere and it retains its haven status. The dollar index climbed 0.1% to 92.628.
  •  Both the Euro and Sterling lost -0.2% against USD. The single currency now stands at 1.1769, while GBP is at 1.382.
  • The Australian dollar continues to weaken against the greenback, facing the twin pressures of domestic pandemic challenges that might lead to looser monetary policy, and potentially diminished demand for its commodity exports from a slowing China. The currency is trading at 0.7308 currently, down from 0.7338 at yesterday’s close. This is its lowest level since July 21. The NZD also lost ground after a Covid-19 case was reported in Auckland.


  • Disappointing data out of China early morning yesterday, alongside ongoing concerns about the spread of the Delta variant weighed on equity markets to start the week. In Asia, while the Shanghai Composite managed to close flat, the Nikkei lost -1.6%.
  • Commodity exporters were particularly hit. The Brazilian Ibovespa lost -1.7% yesterday, while in the UK, commodities companies were amongst the biggest losers, helping drive the FTSE 100 down -0.9%.
  • Nevertheless, the US managed to shake off the gloom later in the day as the S&P 500 and the Dow Jones both reached new record highs, both gaining 0.3% to start the week. The NASDAQ closed -0.2% lower.
  • Within the region, the Tadawul lost -0.3% while the DFM gained 0.3% and the ADX 0.8%.


  • The weak data out of China in particular weighed on oil markets yesterday, fuelling the concerns around demand that were already exerting a drag on prices last week. Brent futures lost -1.5% to start the week, falling back to USD 69.5/b, while WTI lost -1.7% to USD 67.3/b.
  • Prices are ticking up modestly this morning, and there was positive news from India, where gasoline sales in the first half of August were 3.7% higher than the corresponding period in 2019, prior to the pandemic. As one of the world’s biggest oil importers, Indian demand is hugely important for the commodity.
  • Bloomberg is reporting that discussions around Saudi Aramco taking a stake in Reliance Industries are at an advanced stage and could be completed soon. The proposal is said to involve Aramco taking around 20% of Reliance for USD 20bn-USD 25bn. The deal has been under discussion since prior to the pandemic, and Aramco has previously stated that it was carrying out due diligence on Reliance.

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Written By

Daniel Richards Senior Economist

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