Fed announces shift in price-stability mandate. In a highly anticipated speech, Federal Reserve Chair Jerome Powell announced a widely expected shift with regard to the price-stability side of the central bank's dual mandate. Powell revealed that the Fed will change its approach to a "flexible form of average inflation targeting." Powell also said that appropriate monetary policy will therefore likely aim to achieve inflation moderately above two percent following periods when inflation has been running below that level. Powell stressed the Fed's monetary policy decisions will not be dictated by any formula and said the central bank will not hesitate to act if excessive inflationary pressures were to build. The Fed chief stressed that the longer-run goal continues to be an inflation rate of two percent.
US consumer confidence at six-year low. US consumer confidence dropped in August to the lowest level since 2014, indicating that Americans are becoming more pessimistic amid persistently high unemployment. The Conference Board’s gauge of consumer confidence fell to 84.8 in August, the lowest level since the pandemic began, from a revised 91.7 the prior month. Economists had expected a reading of 93 for August. The report indicates an uneven economic recovery as Americans struggle with high unemployment and uncertainty about future government stimulus. It also shows that consumer confidence remains well below pre-crisis levels, demonstrating the depth of the economic problems created by the pandemic, as well as the impact of the increase in the spread of the virus in June and July.
German consumer confidence hit as coronavirus cases mount. The mood among German consumers has darkened significantly as a potential second wave of coronavirus cases threatens to strangle the recovery, a closely-watched survey showed Friday. The GfK institute’s forward-looking barometer of consumer confidence heading into September fell for the first time in four months, hitting minus 1.8 against minus 0.2 in August. Economists had forecast 0.5 points for September. Expectations for a rapid recovery in the consumer climate in Germany were dealt a significant blow in August, GfK said. GfK uses data from three sub-indices from the current month to derive a sentiment figure for the coming month, measuring economic expectations, income expectations and propensity to buy. In August, economic expectations and propensity to buy showed marginal gains, while income expectations fell sharply.
UK car manufacturing slumps in July. UK car manufacturing outputs fell by 21 percent in July despite nearly all automobile factories in the country being open throughout the month. According to the Society of Motor Manufacturers and Traders (SMMT), just 85,696 new vehicles left the assembly line last month, which is 22,543 fewer than in the same month last year. By the end of July, UK output stood at 467,053 units for this year - some 308,000 short of the same period 12 months earlier, which the SMMT says has resulted in more than 11,000 job losses in the sector. With almost all UK car showrooms open throughout July and registrations of new models rising by 11 percent in the month, there were hopes of a bounce back in the fortunes of UK car manufacturers following the coronavirus pandemic. However, the latest decline points to another turbulent five months ahead.
China industrial profits grew at fastest pace in July. As the Chinese manufacturing sector slowly recovers from its coronavirus slump, profits at industrial firms grew for the third month in a row in July and at the fastest rate since June 2018. Profits grew by 19.6 percent on-year to 589.5 billion yuan ($85.58 billion), the country’s statistics bureau reported on Thursday, following the 11.5 percent increase seen in June. China's recovery has been gaining momentum after the pandemic paralysed huge swathes of the economy as pent-up demand, government stimulus and surprisingly resilient exports gave a boost to activity. However, some signs of weakness have emerged in July, with industrial output growing slower than expected.