Europe:
Euro zone factory growth surges to record; more uneven in Asia
Euro zone factories ended 2017 growing at their fastest pace in more than two decades while performance in Asia was more uneven, with its third-largest economy India leading the field and manufacturing giant China unexpectedly resilient. With a similar business survey covering the United States forecast to be strong, the synchronized global growth that took hold last year looks set to continue based on the first major economic data releases of 2018. Euro zone factory activity is handily outpacing its peers, including Britain. That has added to expectations that the European Central Bank, which this month will halve its monthly bond purchases, will shutter the program later this year. “The euro zone manufacturing boom gained further momentum in December, rounding off the best year on record and setting the scene for a strong start to 2018,” said Chris Williamson, chief business economist at IHS Markit, which compiles the surveys. The December euro zone final manufacturing Purchasing Managers’ Index (PMI) was 60.6, matching an earlier preliminary reading, the highest since the survey began in June 1997. Any figure above 50 represents growth.
Asia:
China central bank injects more funds in December via liquidity tools
China’s central bank injected a net 212.36 billion yuan ($32.7 billion) into the financial system via short- and medium-term liquidity tools in December, rising sharply from November as it sought to ease tight cash conditions before the year-end. In November, the People’s Bank of China only injected 4.74 billion yuan of funds into the financial system, amid a sustained crackdown on riskier lending to reduce financial risks. On Dec. 14, the PBOC nudged money market interest rates upward just hours after the Federal Reserve raised the U.S. benchmark, as Beijing sought to prevent destabilizing capital outflows without hurting economic growth. The PBOC said in a statement published on Tuesday that it lent 476 billion yuan to financial institutions via its medium-term lending facility (MLF) in December. Outstanding MLF was 4.5215 trillion yuan at the end of December compared with 4.4205 trillion yuan at the end of November, implying a net injection of 101 billion yuan last month. The PBOC also extended 134.06 billion yuan of loans to local financial institutions in December via its standing lending facility (SLF), it said. The total outstanding amount of SLF loans was 130.42 billion yuan at the end of December, compared with 19.06 billion yuan a month earlier, implying a net injection of 111.36 billion yuan.
U.S.:
As U.S. budget fight looms, Republicans flip their fiscal script
The head of a conservative Republican faction in the U.S. Congress, who voted this month for a huge expansion of the national debt to pay for tax cuts, called himself a “fiscal conservative” on Sunday and urged budget restraint in 2018. In keeping with a sharp pivot under way among Republicans, U.S. Representative Mark Meadows, speaking on CBS’ “Face the Nation,” drew a hard line on federal spending, which lawmakers are bracing to do battle over in January. When they return from the holidays on Wednesday, lawmakers will begin trying to pass a federal budget in a fight likely to be linked to other issues, such as immigration policy, even as the November congressional election campaigns approach in which Republicans will seek to keep control of Congress. President Donald Trump and his Republicans want a big budget increase in military spending, while Democrats also want proportional increases for non-defense “discretionary” spending on programs that support education, scientific research, infrastructure, public health and environmental protection. “The (Trump) administration has already been willing to say: ‘We’re going to increase non-defense discretionary spending … by about 7 percent,’” Meadows, chairman of the small but influential House Freedom Caucus, said on the program.