"The only defense is
offense, which means that you have to kill more women and children more quickly
than the enemy if you wish to save yourselves."
—Stanley Baldwin (English,
1867-1947)
Word for the day
Debunk (v)
Malice towards none
When religion begins to
become a menace, the society needs to stop, sit and introspect. If any changes
are needed, implement those changes. Else, life is moving on anyways!
First random thought this morning
IKEA opened its first India store yesterday in Hyderabad. This is
a watershed event in Indian lifestyle.
IKEA is not just a furniture company. It represents the modern
western lifestyle. Standardization to the last point vs. customization;
mobility of the user vs. stability; short life span of furniture akin to
apparels vs. lifelong durability; self assembly and maintenance vs. feudal
mindset of engaging help for everything etc. are some changes we shall witness.
A number of online furniture retailers shall face serious pressure
and even existential threat! Other retailers will learn to think big terms of
size.
Recent data on global economic growth has been little benign. Some
analysts see this as peaking of the recovery stimulated by non-conventional
monetary policies that have been in vogue since 2008-09. But most have chosen
to attribute the weakness visible in the current round of economic data to the
tensions related to trade relation and elevated geopolitical risks.
As one of the recent report by Bank of America Merrill Lynch very
succinctly outlined, "The global economic outlook remains fundamentally
sound. However, there is a long tail of “man-made” downside risks to growth,
including a messy Brexit, Japan’s consumption tax hike, a spike in oil prices
due to the sanctions on Iran and, most importantly, a full blown trade
war."
In the US, the July employment data disappointed, despite very
encouraging 2QGDP numbers. Nonetheless, The Fed is expected to hike two times
more more this year and three times next year.
In the Euro area, GDP data surprised to the downside as inflation
came in higher than expected. Though the EU-US trade tensions have been
relieved due to auto tariff ceasefire, there are still many potential areas of
conflict that need to be sorted out.
Deteriorating debt dynamics in the periphery of Europe, limited
fiscal capacity, higher oil prices, and political risks continue to cloud the
outlook on Euro Area growth outlook. ECB is widely expected to hold rates till
3Q2019.
A no-deal Brexit remains a tail risk, but it is becoming more
likely due to political compulsions. The Irish border issue is another major
challenge to be sorted out. The decision of BoE to hike recently has surprised
the markets.
In Japan, inflation continues to rebound for a second consecutive
month. The manufacturers are fairly upbeat about the near term outlook. This
may force BoJ to hasten the review of monetary policy stance.
In China, growth has slowed down and the impact of trade related
measures is visible. The policymakers are attempting to cushion the impact of
the trade skirmish with the US. In recent Politburo meeting, president Xi
called for policy to stabilize employment, finance, trade, FDI, and investment.
Clearly, the policy makers are seeing downside risks to growth and that further
policy easing is likely to come.
Insofar as the economists' consensus is concerned, most economists
estimate US, EU and Chinese growth rate to slow down in 2019, as compared to
2018. Japan and EM (ex China) in aggregate may do only slightly better in 2019
as compared to 2018.
Also, the consensus feels,
USD and JPY to strengthened and EUR and GBP to weaken. Brent crude is expected
to average ~USD73-75/bbl, vs. USD70/bbl in 2018....to continue next week
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