ECB View: Sources say Draghi could set scene for September taper announcement next month – ECB President Mario Draghi is set to pave the way to an announcement of a tapering of asset purchases at the September Governing Council meeting next month. According to an off the record briefing by ECB officials to the Wall Street Journal, Mr Draghi intends to do that in a speech at Jackson Hole in late August. This year’s edition takes place on 24-26 August. The ECB Governing Council meeting would take place two weeks later (7 September). If that is indeed the case, the ECB President would be finishing what he started at the Economic Symposium sponsored by the Federal Reserve Bank of Kansas City. At this event, in 2014, he signalled to financial markets that the ECB could launch a QE programme before long. Unofficial briefing from ECB officials are sometimes unreliable. However, the direction and timing of the communication would make sense to us. Indeed, our base case is that the ECB will announce a tapering of its asset purchases from January 2018 onwards at the September meeting. In the past, it has tended to communicate 3-months in advance of ‘soft’ end dates of its QE programme about what happens next. At the same time, we think the ECB will try to sweeten the pill by making tapering slow and signalling that rate hikes are a long way off. The ECB’s goal is surely to exit without a tantrum. (Nick Kounis)170713-Global-Daily.pdf (43 KB)
China Macro: Imports and exports solid in June – China’s import data for June published this morning were better than expected. Import growth in dollar terms came in at a three-month high of 17.2% yoy and averaged 15% yoy in Q2. While being lower than the bumper growth of 24% in Q1, it remains at solid levels, certainly compared to the average monthly decline of around 5.5% yoy last year. Still, we expect import growth to cool faster than real GDP growth in the course of this year, also taking into account base effects. Meanwhile, export growth also did better than expected in June (+11.3% yoy in dollar terms) and has sharply recovered from the average monthly contraction of around 7.5% in 2016. That stronger export performance relates to a pick-up in global growth and trade, as well as the lagging effects from a more competitive yuan. Moreover, trade frictions between the US and China have been quite contained so far. Although trade issues (for instance related to steel) will keep coming to the fore from time to time, we still do not expect a major, damaging trade war between the US and China. All in all, the latest trade data are in line with our view that China’s economic slowdown will remain very gradual this year. We expect real GDP growth in Q2 to come in at 6.8% yoy, down marginally from 6.9% yoy in Q1. The report will be published on Monday. (Arjen van Dijkhuizen).