Atsushi Kawakami, a financial adviser, recently held a financial seminar on trends and analysis of the world economy. The US Federal Reserve's (FRB) plan to reduce quantitative easing (tapering) by the end of the year, as the numbers in the U.S. employment statistics for August fell far below market expectations. Mr.Kawakami said, "There is no decision in September. It is necessary to think about it. It is necessary to determine the employment situation, and it will be decided after October. "

On September 3, the US Department of Labor released employment statistics for August (preliminary figures, seasonally adjusted). The number of employees in the non-agricultural sector was 235,000, well below market expectations (720,000). The Fed will hold the FOMC on September 21-22. While the tapering decision is drawing attention, the consensus among market participants is that the decision to start in September has disappeared in response to the results of this employment statistics.

Regarding the employment statistics this time, Mr. Kawakami said, "If you look at the business situation in the United States, the increase of 1 million people may have peaked. However, all industries including the agricultural sector increased by 500,000 from the previous month. "There is no decision for September, but we need to think about it," he emphasized. As a point to be noted in the future, he added, "It is necessary to settle the prices of commodities such as crude oil and determine the future employment situation."

At the Jackson Hole meeting in the US at the end of August this year, Fed Chair Powell said he was willing to start tapering, and Mr.Kawakami said, "Powell's remarks made it clear that he would not follow the rut of former Fed Chair Bernanke."

This means that in 2013, then-Chairman Bernanke suddenly announced tapering and the market was confused. Powell seems to be aiming for a soft landing through dialogue with the market.

In addition, the issues pointed out by Mr. Kawakami at the seminar are as follows. In particular, with regard to economic trends in the United States and China, the economic recovery has come to an end, and there are signs of a peak, he said.

[US economy]

The consumer sentiment index has recovered. Real consumption has exceeded 2019 levels since March, but we should pay attention to what will happen in the future. Retail sales are showing signs of peak recovery. Car sales have returned to the same level as 2019 (levels have leveled off). The PMI (Purchasing Managers' Index) remains high after recovery, but the manufacturing industry has peaked.

On the other hand, nominal private capital investment has been positive for the last three consecutive quarters. It is at the highest level on a monetary basis, "We are making solid capital investments in the digital industry, etc. It can be said that we are making investments with an eye on the future of corona pandemic," (Mr. Kawakami).

[Chinese economy]

The business sentiment index has leveled off from a rapid recovery after the spread of the new coronavirus infection. Mr. Kawakami pointed out that he was "mildly hitting the ceiling." Automobile sales from May to July are in a situation where the quantity is not increasing due to the problem of the semiconductor supply system. The consumer price index slowed to 1.0 year-on-year in July. He described it as a "deflationary image."

In addition, investment trends have peaked from a sharp decline, and construction investment has remained almost unchanged at the 2017 level. "It's better to see the Chinese economy past its peak return and about to enter an adjustment phase," he said.

[Industrial situation in Japan]

Mr. Kawakami pointed out that "the rate of return and asset efficiency are further declining at a low level" after securing sufficient surplus and net assets of Japanese companies. Looking at the April-June period of 2021, we can see that the cash is still not available for capital investment. Japanese companies have warned that asset turnover is slow and "if profitability is not improved, it will be a serious situation." Personnel costs per person in the non-manufacturing industry are almost flat, "the same as the 1994-96 level" (Mr. Kawakami).He expressed concern about the Galapagos of Japanese industry in the world market.

Jiro Arihara

Global Commodity Watcher