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PATRIS Daily - 10 September 2018 - Part 2

10 Sep 2018



Spain: July Industrial Production

Spanish industrial output fell 0.3%m/m in July (vs. consensus +0.4%m/m). Output has declined in 3 of the last 4 months. The annual rate of growth stood at 0.5%y/y. The sectoral breakdown showed production declining in energy (-0.9%m/m), intermediate goods (-0.5%m/m) and consumer goods (-0.5%m/m). Production in capital goods picked up by 0.3%m/m. The reading for July stands 0.5% below the 2Q18 average, suggesting a weak start for the sector in the quarter. The 3M/3M rate of change remained little change at -0.7%, supporting the idea of a weak momentum by the Spanish industrial sector.

France: July Industrial Production

In France, industrial production excluding construction rose by 0.7%m/m in July (vs. consensus +0.2%m/m), consistent with an annual rate of change of 1.8%y/y. Manufacturing production increased by 0.5%m/m (vs. consensus +0.2%m/m), consistent with an annual rate of change of 1.9%y/y. By sector, production in the automobile industry rose by 2.3%m/m, while production in construction fell 1.8%m/m.

The July reading stands 1.1% above the 2Q18 average (or +0.8% for manufacturing production), which points to a positive start in the quarter for the sector. The 3M/3M rate of change for the manufacturing sector accelerated to 0.5% in July from 0.3% in June, suggesting an improved momentum over the latest months.

Germany: July Industrial Production

German industrial production including construction fell by 1.1%m/m in July and the June data was revised upwards by 0.2pp (-0.7%m/m vs. -0.9%m/m initially). This is well below market expectations (+0.2%m/m). These production numbers are a poor start to 3Q18. The y/y-growth rate decelerated (1.1% vs. 2.7% in June).

The manufacturing sector recorded a strong decline of 1.9%m/m, mainly reflecting lower motor vehicle production (-6.7%m/m). Intermediate goods (-1.4%m/m), capital goods (-2.5%m/m) and consumer goods (-0.9%m/m) all recorded declines in production. Production in energy was flat, while production in construction rose by 2.6%m/m in August, helping to partly offset the sharp decline in manufacturing production.

The July reading stands 0.9% below the 2Q18 average (-1.6% for the manufacturing sector). However, adjusting for monthly volatility, the 3M/3M rate of change stood at 1.0% (0.8% for the manufacturing sector) in August.

Separately, German exports declined by 0.9%m/m in July, while imports rose by 2.7%m/m (suggesting strength in domestic demand).

Eurozone: 2Q18 GDP data (final)

2Q18 GDP growth was confirmed at 0.4%q/q (or 0.381%q/q after +0.389% in 1Q18), according to Eurostat final estimates. In annualised terms, the economy expanded at a 1.5%q/q saar pace in 2Q18 (vs. 1.6%q/q saar in 1Q18). The economy slowed to 1.6%q/q saar in 1H18, from a 2.7% average pace of growth in 2017.

The breakdown shows that domestic demand excluding inventories was the main engine of growth, adding 0.5pp to growth. Household consumption rose 0.2%q/q in 2Q18 and added 0.1pp to growth in the quarter. On a more positive note, GFCF increased by a strong 1.2%q/q and added 0.3pp to growth. By contrast, net exports knocked 0.2pp off GDP growth. Exports rose 0.6%q/q reflecting the soft external environment in 2Q18, while imports increased by 1.1%q/q on the back of the stronger domestic demand. Inventories added 0.1pp to growth.

US: August Nonfarm Payrolls

At a gain of 201k with net revisions of -50k to previous two-months of data, the economy added a total of 151k new jobs, somewhat softer that consensus expected. July payrolls are now reporting as rising by 147k vs. 157k initially and June payrolls rose by 208k vs. 248k as originally reported. The latest data bring the 3-month average pace of payroll growth to 185k (vs. 207k since the beginning of the year and 182k in 2017).

Services sector payrolls expanded by a solid 178k. Goods sector payrolls rose by 26k, with manufacturing payrolls down by 3k and construction up by 23k. Temporary help payrolls were up by 10k, after +11k in July.

Elsewhere in the establishment survey, average hourly earnings were up by 0.4%, the strongest monthly increase since December 2017. The annual rate accelerated to 2.9% (vs. consensus 2.7%), a new high for the expansion and the highest reading since May 2009. Average weekly hours were unchanged at 34.5, in line with consensus expectations.

Employment in the household survey fell by 453k in August (6-month average of 55k vs. 192k in the establishment survey). The reading on household employment also contributed to the two-tenths decline in labour force participation to 62.7% on the month. The unemployment rate remained unchanged at 3.9% (vs. consensus 3.8%). The underemployment rate (U6) fell 0.1pp to 7.4%, a new low for the expansion and the lowest level since April 2001.


Ibersol: Consolidated turnover in 1H2018 amounted to €211.3mn, compared to €204.4mn in the same period of the previous year. EBITDA increased by 3.3% y/y to €26.5mn. The consolidated net income in the first six months of the year stood at €10.9mn, +12.2% y/y. Net debt, as of 30th of June 2018, stood at €78.5mn, €4.6mn lower than at the end of 2017. Regarding the outlook, the company expects sales growth to slow down, in line with what has been seen in recent months. In Angola, the profitability of the operations is estimated to decrease, in light of the currency devaluation and consumption decline. Ibersol states it will maintain the operation of the existing restaurants on the contracted terms and will have to agree with Telepizza the future development of new locations and renewals of the contracts (Ibersol’s filing on CMVM)

Galp: The Board approved an interim dividend of €0.275 per share to be payable as from 20 September 2018. The ex-dividend date is 18 September 2018 (Galp’s filing on CMVM)

Portugal: Nowo has launched an IPTV service that allows access to all its channels, including to Eleven Sports (Bloomberg)

Pharol: Shareholders approved a plan to raise between €26.9mn-€55.5mn to allow the company to participate in Oi’s capital increase, according to a regulatory filing (Bloomberg)

Spain: Economy Minister Nadia Calvino said that unless the EU reforms are implemented now, the region can find itself in a situation in which it doesn’t have solid enough structures for the next crisis (Bloomberg)

Grifols: The company obtained a €85mn loan with the European Investment Bank that includes a fixed interest rate for 10 years and a two-year grace period (Bloomberg)

Ferrovial: The company´s unit Webber has been awarded contracts for construction works on three highways in Texas for a combined value of $360mn (Bloomberg)

Italy: First Vice President Frans Timmermans said the European Commission is confident Italy won’t end up breaching budget rules (Bloomberg)

Enel: CEO Francesco Starace reiterated that he sees no sense in potential merger between Open Fiber, that ENEL operates jointly with CDP, and Telecom Italia’s broadband network (Bloomberg)

Italy: Deputy Premier Luigi Di Maio said that the BTPS yield spread and rating agencies cannot set the economic policy of a government that has the full support of Italian people (Bloomberg)

Telecom Italia: CEO Amos Genish started the process for the sale of Sparkle (Bloomberg)

WHAT TO WATCH TODAY: Sentix investor confidence index for September will be released in the Eurozone today. We will also get the Bank of France industry sentiment for August. UK will publish its trade balance, manufacturing and construction output for July.

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