Macrocast report – Busy September by Gilles Moëc

Key points:

• US labor market softening but no hard landing yet: The August employment report indicates a cooling labor market in the US, with job creation slowing and unemployment slightly rising. Despite this, wage growth remains robust, signaling a "soft landing" rather than a severe downturn. The market briefly speculated about a potential 50bp rate cut by the Fed, but the consensus remains for a smaller 25bp cut next week.
• ECB expected to cut rates by 25bps: The European Central Bank is likely to announce a 25bps rate cut, with market focus on any forward guidance from Christine Lagarde. The latest Euro area data suggests businesses are reducing profit margins to cope with labor costs, hinting that the ECB may be on track for more decisive easing, though Lagarde may remain cautious on future moves.
• China faces fiscal challenges amid weak consumer demand: With a slowing global economy, China is struggling to stimulate demand. The country’s declining revenue from land-use sales, combined with a weak tax base and high savings rates, means Beijing may need to expand its tax system. However, this could further suppress already weak household consumption, making it unlikely for China to become a significant driver of global demand.

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