New York Fed Consumer Survey Says Inflation Expectations Falling

The Federal Reserve Bank of New York released its latest Survey of Consumer Expectations today. Some good news for consumers: Medium one- and three-year-ahead inflation expectations declined sharply in July. They fell from 6.8 percent to 3.6 percent in June to 6.2 percent and 3.2 percent in July. Here is a link to the full survey.

One year inflation expectations (Federal Reserve Bank of New York Consumer Survey/August 8, 2022)

Three year inflation expectations (Federal Reserve Bank of New York Consumer Survey/August 8, 2022)

Are We Getting to An Attention Deficit Inflection Point with the Ukraine War?

A worrisome data point concerning the world’s ability to stay focused on Russia’s war on Ukraine: Social media engagement across the board - since May 29th - is essentially at its lowest since before the invasion in late February.

Obviously, no one wants to focus on war. As US General William Tecumseh Sherman famously and correctly said, war is hell. He meant that in the word's full, horrific, nightmarish sense. This, of course, is only one indicator. But the risk of the people living freely in democracies around the world becoming fatigued by the war is real - and it is something Russian President Vladimir Putin is betting on.

What Does the New ABC/Ipsos Poll Tell Us About the November Elections?

A newly released ABC/Ipsos poll caught our attention this weekend. While there has been a cascade of brutally bad polls for President Biden and Democrats in general, this poll may suggest there is a slight reconsideration among voters.

The poll clearly shows Republicans are more trusted to handle key issues like the economy, inflation, and crime. Moreover, the pattern shows that the same voters polled are enthusiastic about voting in the midterms this November - a continued negative for Democrats.

But the poll also showed that 1/3 of those polled - particularly independents - do not trust either party to do a particularly good job. Our read of this is Democrats have room to claw back what were thought to be lost voters, and Republicans still have a lot of work to do to win by the margins they and many in their base think they will be in November.

The poll shows - as so many other polls have shown - that President Joe Biden’s job approval rating holds steady across many issues, but he’s touching historic lows. The one bright spot for President Biden is his handling of coronavirus (56%). The negative? 29% percent approve of his handling of inflation, 37% approve of his handling of the overall economy, and 43% approve of his handling of the Russian invasion of Ukraine. Those figures will be incredibly hard to turn around between now and November. And if gas prices and food prices begin to spike again, they will only get worse.

The upshot is we now expect a particularly intense three-month sprint to November. There is little time for Congress to do much legislatively between now and then to alleviate inflation/broader economic concerns, and the so-called Inflation Reduction Act (passed by the Senate yesterday and expected to be passed by the House this Friday) will have virtually no impact on actual inflationary pressures. Moreover, voters broadly will not see or feel any significant benefits before the mid-terms. For Democrats, the legislative victory may be something of a tonic to energize Democratic voters who have been dismayed by the lack of success on many hoped-for agenda items - particularly among the Progressive wing of the Democratic Party.

Finally, we would argue polling going forward begins to take a sharper focus and, we believe, will be more telling and indicative than they have been did in recent months. Buckle up, everyone. As we said, it is going to be a very intense three months ahead.

You can access the ABC/Ipsos press release HERE and the toplines/details of the poll HERE.

The Global Week Ahead: August 7 - 14, 2022

The Week Ahead: Watching for more Chinese reactions to Speaker Pelosi’s Taiwan visit; Colombia swears in a new president; Iran launches satellites with help of Russia; the US braces for tough economic numbers; President Biden signs the CHIPS Act into law

After an extraordinary few months of intense geopolitical and economic events, a relatively quiet August in the northern hemisphere has begun to settle in.  Relations between the US and China continue to be tense following US Speaker of the House Nancy Pelosi's (D-CA) visit to Taiwan.

We will be watching  closely for any new measures implemented by Beijing against the US, Taiwan, and other nations beyond those already announced in retaliation of the visit.  Those actions include China’s largest military maneuvers in the Taiwan Strait in almost 30 years, canceling scheduled bilateral meetings with US political and military officials and Japanese officials, and trade sanctions on several Taiwanese goods (which are at more than 2,000 specific Taiwanese products). 

 We are also watching US Secretary of State Blinken's Africa trip, aimed at countering growing Russian and Chinese influence in the region.  Here is everything we are watching around the world in the coming week:

Sunday, 7 August 2022:

Global

Islamic holiday of Ashura begins.

Americas

Political/Social Events –

Colombia’s President-elect Gustavo Petro sworn into office for a four-year term.

US Secretary of State Anthony Blinken begins tour of Sub-Saharan Africa with a visit to Johannesburg, South Africa.  From there he travels to Rwanda and then the Democratic Republic of Congo.

Argentina’s Union of Workers of the Popular Economy expected to hold demonstrations demanding universal basic income.

Economic Reports/Events –

Nothing significant to report.

Asia:

Political/Social Events –

Chinese Foreign Minister Wang Yi travels to Bangladesh (August 7th) and Mongolia (August 8th) to discuss infrastructure cooperation via China’s proposed Global Security Initiative (which is seen as a counter the US-led Quad).

Economic Reports/Events –

Nothing significant to report.

Europe:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events

Nothing significant to report.

Monday, 8 August 2022:

Global

The UN Security Council is scheduled to hold an open debate on Peace and Security in Africa.

Americas

Political/Social Events –

US Deputy Secretary of State Wendy Sherman will meet with senior officials in Australia and then New Zealand on August 9th to discuss how to further strengthen security and economic in the region.

The US is expected to receive 332,000 pounds of infant formula as part of the Biden Administration’s “Operation Fly Formula.”

Former New York Mayor Rudy Giuliani will testify in front of a grand jury investigating attempts by former President Trump to overturn Georgia’s 2020 election results.

Economic Reports/Events –

Brazil’s central bank market readout

Asia:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Japan trade balance (June), bank lending (July), Economy Watchers Survey

Taiwan exports/imports/trade balance (July

New Zealand RBNZ Survey of Expectations (Q3)

Indonesia consumer confidence (July)

Japan’s Eco Watchers Survey (Current and Outlook July)

Europe:

Political/Social Events –

Russian President Vladimir Putin to meet with gubernatorial candidates from several Russian regions in Moscow.

Economic Reports/Events –

The Moscow Stock Exchange was scheduled (but is now delaying) to give permission for trading by clients from “friendly” jurisdictions to trade on its equity and derivatives markets.

UK retail sales monitor (July)

Middle East:

Political/Social Events –

Turkey holds its 13th annual ambassadors meeting in Ankara.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Tanzania inflation report (July)

Tuesday, 9 August 2022:

Global

Nothing significant to report.

Americas

Political/Social Events –

Numerous leading social organizations in Guatemala to hold two days of protests against President Alejandro Giammattei’s economic policies.

President Joe Biden to sign the CHIPS and Science Act of 2022 into law.

Connecticut, Vermont, Wisconsin, and Minnesota will hold primary elections.

Economic Reports/Events –

US NFIB Small Business Optimism Survey (July), unit labor costs (Q2), Redbook (August), IDB/TIPP Economic Optimism ((August), consumer inflation expectations (July)

Argentina industrial production (June)

Brazil Coporm Meeting minutes, inflation rate (July)

Mexico inflation rate (July), core inflation figures (July)

Asia:

Political/Social Events –

Nepal’s Foreign Minister Narayan Khadka travels to Beijing, China for consultation meetings.

Singapore celebrates Independence Day.

Economic Reports/Events –

Japan machine tool orders (July) M2, M3

Philippines GDP (Q2), exports/imports/trade balance (June), industrial production (June)

Malaysia industrial production (June), manufacturing sales (June)

Australia CBA household spending (July), WBC/MI consumer sentiment (August), NAB Business Survey (July)

Indonesia retail sales (June)

South Korea unemployment rate (July)

Europe:

Political/Social Events –

Slovenia’s President Borut Pahor visits Ankara, Turkey for meetings with President Recep Tayyip Erdogan to discuss security challenges int the wake of Russia’s invasion of Ukraine.

Ferry workers on the Isle of Wright will go on a day-long strike over wages.

Economic Reports/Events –

Middle East:

Political/Social Events –

The Islamic Solidarity Games begin in Konya, Turkey.

The Iranian Space Agency, working with Russia’s Roscosmos, is scheduled to launch weather data-focused satellite from Baikonur Cosmodrome in Kazakhstan. The satellites, however, are also expected to assist Russia’s war efforts in Ukraine.

Economic Reports/Events –

Africa:

Political/Social Events –

Kenya holds general election.

Economic Reports/Events –

Seychelles interest rate decision

South Africa non-farm payrolls, South African Reserve Bank quarterly bulletin for Q1

Wednesday, 10 August 2022:

Global

Nothing significant to report.

Americas

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

US CPIs (July), inflation rate (July), real average hourly earnings (July), wholesale inventories (June)

Brazil retail sales (June)

Asia:

Political/Social Events –

Australia’s New South Wales rail workers begin work stoppages to protest against wages and working conditions.

Thailand expected to see university students protest in Bangkok for “a return to democracy in society.”

Japan’s Prime Minister Fumio Kishida is anticipated to announce a reshuffling of his Cabinet.

Economic Reports/Events –

China CPIs, PPIs (July), M2

Japan PPIs (July)

South Korea unemployment rate (July)

Bank of Thailand meets on interest rates

Europe:

Political/Social Events –

Employees of Ireland’s Armagh City, Banbridge, and Craigavon Borough Council will go on strike for a day (affecting garbage collection, planning, and leisure services)

Economic Reports/Events –

Germany inflation figures (July)

Italy inflation rate figures (July)

UK RICS house price balance (July)

Russia inflation rate (July)

Middle East:

Political/Social Events –

Economic Reports/Events –

Saudi Arabia industrial production (June)

Turkey unemployment rate (June), participation rate (June)

Africa:

Political/Social Events –

South Africa’s opposition parties to meet. They are expected to announced the establishment of a committee to investigate alleged wrongdoings by President Cyril Ramaphosa regarding the Phala Phala Farm scandal.

Economic Reports/Events –

South Africa business confidence

Ghana inflation report

Rwanda inflation report

Thursday, 11 August 2022:

Global

The International Energy Agency and OPEC are scheduled to publish their monthly oil market reports.

Americas

Political/Social Events –

Brazil braces for a series of pro-democracy/anti-President Jair Bolsonaro demonstrations across the country.

The US Federal Election Commission will vote on whether Google’s proposed program to help prevent campaign emails from being directed to spam folders should be approved or if they violate campaign finance laws.

Economic Reports/Events –

US PPIs (July), initial jobless claims

Brazil business confidence (August)

Mexico central bank interest rate decision

Argentina inflation rate (July)

Asia:

Political/Social Events –

Japan celebrates Mountain Day (a public holiday).

Economic Reports/Events –

The Indonesia Shopping Festival 2022 begins and will last through August 21st aimed at boosting nationwide consumption.

South Korea import and export prices (July)

Australia MI consumer inflation expectations (August)

New Zealand housing report (July)

Europe:

Political/Social Events –

The Russian Parliament (Duma) is going to hold a previously unplanned council meeting.

Economic Reports/Events –

Germany current account balance (June)

UK RICS house price balance (July), Heathrow Airport Monthly traffic figures

Middle East:

Political/Social Events –

Tunisia’s General Labour Union to hold coordinated strikes in several food-related industries over wages and working conditions.

Economic Reports/Events –

Turkey current account (June), FX reserves (August)

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Rwanda interest rate decision

South Africa mining and manufacturing production reports (June)

Namibia inflation report (July)

Friday, 12 August 2022:

Global

Nothing significant to report.

Americas

Political/Social Events –

The US House of Representatives will return from recess to vote on the Inflation Reduction Act (Build Back Better-lite).

Economic Reports/Events –

US University of Michigan survey (August), import and export price index (July)

Asia:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

China vehicle sales (July), foreign direct investment (July), M2 money supply (July)

India CPI (Q2), industrial production (June), inflation rate (July), industrial production (June), passenger vehicles sales (July)

Malaysia GDP (Q2), current account balance (Q2)

New Zealand business manufacturing PMI (July), food price index (July)

Indonesia car sales (July)

Europe:

Political/Social Events –

Scotland’s Glasgow subway workers expected to strike over wages.

Economic Reports/Events –

France unemployment rate (Q2), inflation rate (July)

Spain inflation rate (July)

UK GDP (June & Q2), construction output (June), industrial and manufacturing production (June), index of services, trade balance (July)

Italy trade balance (June)

Eurozone industrial production (June)

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Turkey industrial production (June), retail sales (June)

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Uganda interest rate decision

Saturday, 13 August 2022:

Americas

Political/Social Events –

Hawaii holds primary elections.

Economic Reports/Events –

Nothing significant to report.

Asia:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Europe:

Political/Social Events –

Northern Ireland marks the anniversary of the Siege of Derry, imposed by King James II in 1689, with a parade in Londonderry.

UK train drivers from nine rail companies expected to strike over wages.

Economic Reports/Events –

Nothing significant to report.

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Sunday, 14 August 2022:

Global

The UN High Commissioner for Human Rights Bachelet visits Bangladesh to discuss human rights and the physical condition of more than 900,000 Rohingya Muslims who have fled genocide in Myanmar.

Americas

Political/Social Events –

Nothing significant to report.

Economic Reports/Events -

Nothing significant to report.

Asia:

Political/Social Events –

Pakistan celebrates its 75th  Independence Day, a public holiday.

Economic Reports/Events –

China house index (July), industrial production (July), retail sales (July), unemployed rate (July)

Europe:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

It’s Always Better in Napa…

Last week, I was proud and delighted to sit on a Catholic University Busch School of Business panel discussion in Napa, California. Held in conjunction with the Napa Institute annual conference, our panel examined the “how and why” a non-academic (like me) would want to transition from the professional world to the world of teaching. I’ve had the honor to teach two courses at CUA for the last two semesters: geopolitical Risk, Leadership, and strategy, and a class on Business Intelligence. 

Our extraordinarily talented Dean, Andrew Abela (left), moderated. What made this particularly fun was to sit with Andreas Widmer (a former Vatican Swiss Guard for St. John Paul II who went on to be a highly successful entrepreneur),  Harvey Seegers (who was CEO of GE’s Electronic Commerce Division and then went on to become President of homedepot.com), me, and Mark Webber (a legend of the software industry, having served in senior roles at NetApp, Sun Microsystems, and Hewlett-Packard).

The conversation revolved around Arthur Brooks latest book, From Strength to Strength - a marvelous guide to understanding how happiness and success in later life are found by accepting your gifts and talents and sharing them with others, especially the next generation. 

Listening to my colleagues and true friends (and true mentors as I build Fulcrum Macro Advisors LLC), I was inspired by the courage, the vision, the hard, hard work each undertook to achieve extraordinary success only to turn around and share with students. The joy and satisfaction these guys have is beyond infectious. I am a blessed man to know them.

Left to right: Dean Andrew Abela, Professor Andreas Widmer, Professor Harvey Seegers, me, and Professor Mark Webber.

CBO Estimates Inflation Reduction Act will Trim $102 Billion off Federal Deficit

The Congressional Budget Office (CBO) has scored the $739 billion “Inflation Reduction Act” (a.k.a. Build Back Better-lite). The CBO forecast the legislation will lead to a net deficit decrease of more than $102 billion over the next ten years.

You can access the CBO report HERE.

The CBO scoring will be seen as a victory for Senate Democrats and clearly helpful to their efforts to get the Reconciliation package voted on in the next week. Moreover, they hope it helps convince Senator Kyrsten Sinema (D-AZ) - whose vote will make or break the deal - to get to a “yes” vote on the deal.

As of this writing, Sinema has yet to comment on the bill, saying she wanted to see how the Senate Parliamentarian ruled on the package (e.g., will it qualify as a Reconciliation worthy bill, or will certain parts be struck as not meeting the Reconciliation standard).

The End of a Violent Life Doesn’t Mean the End of a Global Threat

The news of the death of Al-Qaeda leader Ayman al-Zawahiri leaves many of us with the sense an era has passed - or perhaps, a bad nightmare. al-Zawahiri was killed in a US intelligence operation by Hellfire Ninja R9X missile - a drone-fired missile that uses pop-out swords rather than explosives to take down high-profile targets. A gruesome but, quite frankly, appropriate end to an individual who helped plan the 9/11 attacks and a host of other violent, vicious attacks on civilians across the globe.

What will be interesting to read in the months and years to come as the mission is declassified is how long Western intelligence services had been tracking him. Perhaps for years - wouldn’t you want to track those he was in communications with so you could be ready to stop them before they attacked? Or did they just find his whereabouts in recent months as he moved to Kabul (a rather audacious move which one has to suspect the Taliban government likely was not too pleased with on some level)? Also, since the US left Afghanistan almost a year ago, what does this say for “Over the Horizon” intelligence? Is it that good or did we leave a large number of assets in place in Afghanistan that will make “Over the Horizon” up close and personal? All fascinating questions about the future of the War on Terror.

Either way, justice was delivered. But the threat remains. al-Zawahiri was only one ugly head of a multi-headed monster that constantly plots to strike targets worldwide.

Al-Qaeda is now believed to be led by Saif al-Adel, a former Egyptian Army Colonel who fled to Afghanistan in 1988 after being accused of trying to overthrow the government. After joining with Osama Bin-Laden and al-Zawahiri, he went on to help mastermind the 1998 bombing of the US Embassy in Kenya, which killed more than 200 people, the training of and participation with radicalized Somalis who attacked US troops in Mogadishu (“Black Hawk Down”) in 1993, the abduction and gruesome murder of Wall Street Journal reporter Richard Pearl, and the 2003 suicide bombing in Riyadh, Saudi Arabia. It is a resume of extraordinary audacity, meticulous planning, and brutal execution.

For the moment, the world is safer with al-Zawahiri’s death. But just for a moment. The fight continues in the Forever War against radicalized terrorists.

A Check-List to Getting the Inflation Reduction Act (“BBB-lite”) Done

Last Wednesday, Senator Joe Manchin (D-WV) surprised the markets and most of his fellow members of Congress by announcing he and Senate Majority Leader Chuck Schumer (D-NY) had reached an agreement on a new $739 billion energy/climate change/drug price cap/tax/deficit reduction package – in effect, Build Back Better-lite (BBB-Lite) but now being called “The Inflation Reduction Act.”

We have been warning since December 2021 – when the original $3.5 trillion Build Back Better (BBB) package was declared “dead” – that it really was still alive, albeit barely. We thought then, as we think now, it was just too important for the base of the Democratic Party going into the November mid-terms. Defeat was simply not an option – it was just a matter of how much they could winnow down the package from the original proposal without losing the support of Progressive Democrats in the House and Senate.

Passage is not a “slam dunk” by any measure, but we believe there is now more than a 60% chance they will get it done in the next two weeks and on the President’s desk to be signed into law.

Before we lay out what is in the bill, we thought it a good idea to offer a rough “check-list” of what must be done to pass this legislation into law. Here is our “check-list” – with the quick caveat we may find a few new items to add as Congress moves forward:

1. Getting Senator Krysten Sinema (D-AZ) to Sign-Off on the Deal: With a Senate divided 50-50 by Party, every vote matters, as we saw when Senator Manchin temporarily scuttled BBB last December. Now, all eyes are on Senator Sinema and whether she will support or oppose the package. As of this writing (Tuesday morning), Senator Sinema has not commented one way or another. Her staff has told reporters and other senate staffers, “she is reviewing the bill and waiting for the ruling from the Senate Parliamentarian” (see next item on what that means). But Sinema has long opposed making any changes to existing tax laws dealing with carried interest. This draft legislation closes the carried interest loophole. We have learned Sinema was not consulted on the deal. There have been issues between her and the Senate Majority Leader in the past and it is not clear what level of discussions are happening between Sinema and Leader Schumer now. If Sinema opposes the package, it will not pass;

2. Getting the Senate Parliamentarian to Sign-Off on the Legislation Qualifying as a Reconciliation Bill: Reconciliation legislation is very arcane and confusing. In short, it is legislation that cannot be blocked by filibuster in the Senate. A simple one-vote majority wins. But it must pass a strict requirement that the bill deals strictly with 1) spending, 2) revenue, and 3) federal debt limit. The Senate can only use Reconciliation once in a calendar year per those three criteria (e.g., three Reconciliation bills per year).  And a Reconciliation bill cannot add to the federal deficit. The Senate Parliamentarian – who is charged with interpreting the Standing Rules of the US Senate and parliamentary procedure – must decide if the bill meets these criteria.  We expect the Parliamentarian to approve by the end of this week.

3. Getting Sign-Off from the House SALT Caucus:  Last year, more than 15 Democratic House members sent a letter to Speaker of the House Nancy Pelosi (D-CA) threatening to vote against BBB unless there was a lifting of the $10,000 cap on state and local tax deductions. The letter signatories came from states with high state and local taxes (primarily New York and New Jersey). The current draft bill does not lift SALT caps – so what will these members do? Recall that Democrats only have a four-seat majority in the House, so every vote is needed if and when the bill comes over for a vote.  We believe all signatories will yield and vote in favor of the package. 

4. Making Sure All Senate and House Members Are Healthy/COVID-Free:  In the last month, at least six Senate Democrats have been diagnosed with COVID. This has, in turn, slowed Leader Schumer’s efforts on several pieces of legislation and a slew of presidential nominations needing all 50 votes plus the Vice President’s tie-breaking vote.  If this bill is to pass in the next seven to ten days, a completely healthy Democratic Caucus in both chambers is critical. But we would quickly note the same is true for Republicans – and Senator John Cornyn (R-TX) who is the Deputy Minority Leader announced yesterday he has tested positive.

5. Can Democrats Successfully Push Back on Two Studies Arguing the Bill Will Not Lessen Inflation and/or Will Actually Raise Taxes On Those Earning $400,000 or less?  The Congressional Joint Committee on Taxation (JCT) – a bipartisan congressional committee that is non-partisan – as well as the University of Pennsylvania’s Wharton School of Business Budget Model each offered an analysis of the bill which says it will do virtually nothing to reduce inflation. The Wharton study (HERE) actually says it will slightly increase inflation until 2024. And the JCT analysis (HERE) says it will raise taxes on households earning less than $400,000 (meaning it breaks President Biden’s promise not to raise taxes on those earning less than $400,000).  But will either or both reports help opponents of the Schumer-Manchin deal? In short, we do not think so. But they do not help and will be used by Republicans going into the November mid-term elections against Democrats. 

Turning to what is in the legislation, here is a link to the US Senate Majority Leader’s website that offers:

• The full text of the Inflation Reduction Act of 2022;

• A one-page summary of the Act;

• An overview of the tax provisions;

• An overview of the provisions aimed at capping drug prices and;

• A summary of the energy security and climate change investments in the bill.

The legislation includes roughly $790 billion in offsets to fund approximately $485 billion in new spending and tax breaks. Below is a breakdown of the expenditure and revenue:

Source: Committee for Responsible Federal Budget

We hope you find this helpful. Please let us know if you have any questions.

The Global Week Ahead: July 31-August 2022

This week, Asia will get a lot of focus both politically and economically. US Speaker of the House Nancy Pelosi (D-CA) is expected to visit Taiwan in the face of heavy criticism from China. She will be the highest-ranking US official to visit the island nation in decades.  Meanwhile, ASEAN Foreign Ministers will gather in Cambodia as well as Russian Foreign Minister Sergei Lavrov and US Secretary of State Anthony Blinken.  This all happens as the markets brace for a flood of major economic data reports from across the Indo-Pacific region.

As the Russian invasion of Ukraine grinds on, global leaders and markets will watch to see if grain shipments will finally begin to ship from Ukrainian ports.  And in the US, the US Senate will seek to pass a hefty climate/energy/tax “Reconciliation” package as markets closely watch Friday’s jobs numbers and signs of further economic downturn.  Here is what we are watching in the coming week:

Sunday, 31 July 2022:

Global

Nothing of significance to report.

Americas

Political/Social Events –

US Speaker of the House Nancy Pelosi (D-CA) continues her visit to the Indo-Pacific which may include a controversial visit to Taiwan. She is also visiting Japan, Indonesia, and Singapore.

Economic Reports/Events –

Nothing significant to report.

Asia:

Political/Social Events –

The 55tth ASEAN Foreign Ministers meeting in Phnom Penh, Cambodia.  Russia Foreign Minister Sergey Lavrov to attend.

Economic Reports/Events –

China NBS PMI Composite (July)

Europe:

Political/Social Events –

Russia celebrates Navy Fleet Day.  President Putin is expected to attend a parade in St. Petersburg.

Economic Reports/Events –

Nothing significant to report.

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Saudi Arabia GDP figures (Q2)

Africa:

Political/Social Events –

Senegal holds parliamentary elections.

Economic Reports/Events

Nothing significant to report.

Monday, 1 August 2022:

Global

The UN holds the 10th Review Conference of the Parties to the Treaty on the Non-Proliferation of Nuclear Weapons in New York.

Americas

Political/Social Events –

US Southern Command holds PANAMAX 2022 exercise in San Antonio, Texas through August 12th. The exercise brings together military representatives from seven Caribbean and South American countries to better plan for crises.

Jamaica marks Emancipation Day, the day African slaves in British colonies were granted freedom from slavery.

The US House of Representatives is out of session for the month of August.  The US Senate is in session this week and will seek to pass a Budget Reconciliation bill.

Economic Reports/Events –

US ISM Index (July)

Brazil central bank market readout, balance of trade (July)

Mexico Business Confidence (July), FX reserves (June), S&P manufacturing PMI (July)

Asia:

Political/Social Events –

Operation Garuda Shield military exercise to being in Indonesia.  It will include troops for the US, Singapore, Australia, and Japan.

Maldivian President Ibrahim Mohamed Solih visits India for four days.

China marks the anniversary of the founding of the People’s Liberation Army (PLA).

China’s latest amendments to anti-monopoly laws go into effect.

China to drop taxes on 98 percent of Afghan imports and resume issuing visas to Afghans.

Cook Island holds parliamentary elections.

Economic Reports/Events –

South Korea exports (July)

China Caixin PMI (July)

Thailand Markit manufacturing PMI (July)

Taiwan Markit manufacturing PMI (July)

Malaysia Markit manufacturing PMI (July)

Vietnam Markit manufacturing PMI (July)

South Korea Markit manufacturing PMI (July)

Philippines Markit manufacturing PMI (July)

India Markit manufacturing PMI (July)

Indonesia Markit manufacturing PMI (July), CPI (July)

Hong Kong GDP (Q2)

Australia manufacturing PMIs (July), inflation gauge (July)

Europe:

Political/Social Events –

The EU’s 15 percent voluntary demand reduction target for natural gas goes into effect until March 31, 2023.

Germany expected to halt purchases of Russian coal.

Hungary begins export ban on fuels.

Switzerland celebrates National Day.

Economic Reports/Events –

The UK marks St. Andrew’s Day (A bank holiday in Scotland)

In the UK, BT and Openreach union members set to strike for 24 hours over a pay dispute. They also struck this past Friday for 24 hours.

Germany retail sales (June), S&P/BME manufacturing PMIs (July)

Spain retail sales (June), S&P manufacturing PMIs (July)

Italy S&P manufacturing PMIs (July)

France S&P manufacturing PMIs (July)

Eurozone S&P manufacturing PMIs (July), unemployment rate (June)

Russia monetary policy report

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Turkey’s Istanbul Chamber of Industry Manufacturing PMI (July)

Africa:

Political/Social Events –

The corruption trial of former South African President Jacob Zuma resumes in Johannesburg.

The Economic Community of West African States deadline for Guinean junta to propose condensed timeline for transition to civilian rule due.

Economic Reports/Events –

South Africa manufacturing PMI (July)

Angola gross reserves (July)

Tuesday, 2 August 2022:

Global

Nothing significant to report.

Americas

Political/Social Events –

Missouri holds US Republican gubernatorial primary.

Washington State holds a congressional primary.

US Republican senatorial, congressional, and state primaries in Arizona.

Michigan holds a Republican gubernatorial primary and four congressional primaries.

Kansas holds vote on state constitution regarding abortion and Republicans hold primary for gubernatorial candidate and other candidates for November elections.

Argentina’s transportation workers expected to hold nationwide strike.

Economic Reports/Events –

US JOLTS Report (June), total vehicle sales (July)

Brazil industrial production (June)

Canada S&P manufacturing PMI (July)

Asia:

Political/Social Events –

South Korea to launch first lunar mission.

Economic Reports/Events –

South Korea CPI (July)

Hong Kong retail sales value (July), retail sales volume (June)

Singapore SIPMM Manufacturing PMI (July)

Central Bank of Australia rates decision, commodities price index (July)

Japan’s monetary base figures (July)

India  imports/exports/balance of trade (July)

Europe:

Political/Social Events –

Russia to celebrate Airborne Forces Day.

Economic Reports/Events –

Spain unemployment figures (July)

Middle East:

Political/Social Events –

Yemen’s UN-mediated cease-fire between Saudi-led coalition and Houthi militants to expire.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Seychelles interest rate decision

South Africa non-farm payrolls, South African Reserve Bank quarterly bulletin for Q1

Wednesday, 3 August 2022:

Global

OPEC+ set to meet to discuss calls for increased crude oil output.  The meeting will be held virtually.

Americas

Political/Social Events –

The Federal Reserve Bank of Philadelphia holds its 6th annual Fintech Conference.  A number of leading US regulators are expected to speak and potentially lay out new plans for regulatory decisions impacting cryptocurrency, consumer banking, and other fintech-related services.

Economic Reports/Events –

US ISM services index (July), factory orders (June)

Brazil IPC-Fipe inflation figures (July), central bank interest rate decision, S&P composite, and services PMIs (July)

Asia:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Hong Kong Markit PMI Composite (July)

Singapore Markit PMI Composite (July)

Australia services PMI (July), retail trade (Q2)

New Zealand household labor force survey (Q2)

India S&P global composite PMI (JulY0

Europe:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Spain unemployment figures (July)

Germany export and import figures and trade balance (June), S&P Services PMIs (July)

Spain S&P Services PMIs (July)

Italy S&P Services PMIs (July), retail sales (June)

France S&P Services PMIs (July)

Eurozone S&P Services PMIs (July), S&P Composite PMIs (July), PPI’s (June), retail sales (June)

Russia S&P services PMI (July)

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Saudi Arabia S&P PMI (July)

Turkey inflation rate (July), PPI (July)

Africa:

Political/Social Events –

Niger celebrates its Independence Day.

Economic Reports/Events –

Uganda PMIs (July)

Mozambique PMIs (July)

Kenya PMIs (July)

South Africa PMIs (July)

Ghana PMIs (July)

Thursday, 4 August 2022:

Americas

Political/Social Events –

The CPAC Conference begins in Dallas, Texas (through August 7th)

Tennessee holds a Republican congressional primary.

Economic Reports/Events –

US trade balance (June)

Canada building permits (June), international merchandise trade (June)

Mexico consumer confidence (July)

Asia:

Political/Social Events –

 China celebrates the Qixi Festival.

Economic Reports/Events –

Nothing significant to report.

Europe:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Bank of England rate decision (expected 50bp move to 1.75%)

Germany factory orders (June)

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Turkey FX reserves (July)

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Zambia PMIs (July)

Friday, 5 August 2022:

Global

Nothing significant to report.

Americas

Political/Social Events –

The island nation of St. Kitts & Nevis holds general elections.

Economic Reports/Events –

US employment numbers (July), non0farm payrolls (July), average hourly earnings (July), participation rate (July), consumer credit (June)

Canada unemployment figures (July)

Asia:

Political/Social Events –

The World Cosplay Summit is held in Nagoya, Japan.

Economic Reports/Events –

Indonesia GDP (Q2)

Philippines CPI (July)

Thailand CPI (July)

Singapore retail sales (June)

Taiwan CPI (July)

India exports/imports/trade balance (July)

Japan household spending (June), labor cash earning (June), lending and coincident index (June)

Europe:

Political/Social Events –

In the UK, approximately 150,000 Conservative Party members are due to receive their ballot to begin voting for the new leader (and new British Prime Minister)

Economic Reports/Events –

Germany industrial production (June)

France private sector payrolls (Q2), wages (Q2), industrial production (June)

Spain industrial production (June)

Italy industrial production (June)

Russia FX reserves (July)

Middle East:

Political/Social Events –

Turkish President Recep Tayyip Erdogan will travel to Sochi, Russia to meet Russian President Putin to discuss grain transport through the Black Sea and possible future Russian investments in Turkey, and the situation in Syria.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Mauritius inflation and gross reserves (July)

Seychelles inflation figures (July)

South Africa reserves and bond purchases (July)

Saturday, 6 August 2022:

Global

Nothing significant to report.

Americas

Political/Social Events –

Bolivia celebrates Independence Day.

Jamaica celebrates Independence Day.

Economic Reports/Events –

Nothing of significance to report.

Asia:

Political/Social Events –

77th anniversary of the bombing of Hiroshima, Japan.

Economic Reports/Events –

Nothing significant to report.

Europe:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Sunday, 7 August 2022:

Americas

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Asia:

Political/Social Events –

China exports/imports/trade balance (July)

Economic Reports/Events –

Europe:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Middle East:

Political/Social Events –

Nothing significant to report.

Economic Reports/Events –

Nothing significant to report.

Africa:

Political/Social Events –

Ivory Coast celebrates Independence Day.

Economic Reports/Events –

Nothing significant to report.

IMF Downgrades Global Economy Forecasts: Going From Bad to Worse

The International Monetary Fund (IMF) released their new baseline forecast this morning, and it is quite a gloomy outlook. Noting the global economy is “reeling from the pandemic, and Russia’s invasion of Ukraine [the world] is facing an increasingly gloomy and uncertain outlook.” You can access the full report HERE

With this in mind, the IMF downgraded their growth forecast from 6.1 percent (which they made only in April) to 3.2 percent for the remainder of 2022 and down further to 2.9 percent in 2023.

Of note, they see China - facing further COVID lockdowns and a deepening and worrisome real estate crisis — seeing its growth pushed down to 3.3 percent this year. That is the slowest growth in China in four decades.

The Eurozone is facing particularly rough waters ahead, with growth now projected to slow to 2.6 percent for 2022 and 1.2 percent in 2023.

Added to this, the IMF assessment sees global inflation spiking to 6.6 percent for advanced economies and 9.5 percent in emerging and developing countries.

With rapidly growing food security issues in Africa and the Middle East caused by Moscow’s aggression, these assessments will likely change again. Our assessment is this, in turn, will bring new pressures on the EU and US to either accelerate military aid to Ukraine or begin to contemplate ways to find a negotiated solution - something we believe Moscow will not be particularly interested in pursuing unless they continue to suffer significant military losses. It is going to be a tough fall with many historic decisions facing leaders everywhere.