Surge in German factory orders kindles hope for recovery. The German Economy Ministry said on Thursday that factory orders in Europe’s largest economy surged in June, giving hope that the country is on track for a recovery following the severe declines suffered from the coronavirus lockdown earlier in the year. Orders advanced by 27.9 percent on a monthly basis, faster than the 10.4 percent increase seen in May. Economists had forecast a 10.1 percent rise for June. Germany's economy took a massive hit during the coronavirus shutdowns, contracting by 10.1 percent during the April-June period from the previous quarter as exports and business investment collapsed. Yet, even with the surge in June, industrial orders are still down by more than 11 percent on the year.
Bank of England leaves rates unchanged. The Bank of England’s interest rate setting Monetary Policy Committee left interest rates unchanged at 0.1 percent on Thursday and maintained its current stock of quantitative easing at £745 billion. The move comes as the bank issued a warning saying it expects UK unemployment to jump to 7.5 percent by the end of the year. Its nine-strong Monetary Policy Committee voted unanimously to hold rates. It also added a caveat on negative rates saying "The MPC will continue to review the appropriateness of a negative policy rate as a policy tool alongside its broader toolkit.” On the inflation front, the central bank forecasts the inflation rate to be around two percent in two years’ time.
China Services Sector Slows In July. Growth in China's services sector slowed in July from a decade high the previous month, as new export business fell and job losses continued, an industry survey showed on Wednesday, pointing to cracks in the sector's post-pandemic recovery. The Caixin/Markit services Purchasing Managers' Index (PMI) fell to 54.1 from June's 58.4, which was the highest reading since April 2010. PMI readings above 50 indicate expansion, while those below that signal contraction. The services sector, which accounts for about 60 percent of the economy, had been slower to recover than large manufacturers, but the recovery has gathered pace in recent months as the nationwide restrictions on public gatherings were gradually lifted. However, pressures remain. Heavy job losses, pay cuts and now fresh localised Covid-19 outbreaks have made some consumers cautious about spending and going out again.
India's central bank holds rates on inflation risk, but more easing seen. India’s central bank kept interest rates on hold on Thursday, as it attempted to curb a rise in retail inflation while vowing to keep monetary policy sufficiently loose to help revive growth in the pandemic-ravaged economy. The Reserve Bank of India (RBI) kept its repo rate at four percent and the reverse repo rate at 3.35 percent. Analysts had predicted a 25 basis point cut in the repo rate. The RBI has already reduced the repo rate by a total of 115 basis points since February, on top of the 135 basis points in an easing cycle last year, from 6.50 percent. RBI Governor Shaktikanta Das said space for monetary policy easing remains, but the central bank will ensure inflation stays within its target range.
Australia's economy set to recover slowly: RBA. Australia's economy is on track to log a slow recovery given the ongoing spread of the coronavirus and the policies to contain it, the Reserve Bank of Australia (RBA) said in its quarterly Statement on Monetary Policy, released on Friday. According to baseline scenario of RBA, gross domestic product is expected to contract by around six percent this calendar year, but then grow by around five percent in 2021. The outlook for 2020 was largely unchanged from the previous outlook but the projection for 2020 was downgraded from six percent. "We now think that, even though the initial contraction was smaller, the subsequent recovery is likely to be more protracted and progress on reducing unemployment will be slower," Luci Ellis, RBA Assistant Governor, said.