Daily Brief Macro: UK: Unseasonably Resilient In Q3 and more

• Slight growth in August sustains an above trend level of activity and is tracking to a 0.2% q-o-q pace for Q3, matching our forecast and the consensus, but disappointing the BoE.
• The ongoing slowdown in service sector activity repeats residual seasonality that would leave a trough in two months, but there is slightly more resilience this year.
• Policymakers shouldn’t react to statistical noise, and are unlikely to amid ongoing excesses in underlying inflation that a stabilising labour market wouldn’t break.

• Ayako Takashi advocates for responsible expansionary fiscal policy, focusing on income distribution rather than aggressive fiscal expansion.
• Takashi’s comments on the relationship between the government and the Bank of Japan do not necessarily indicate clear intervention, but may put pressure on the central bank.
• The BOJ may need to deliver rate hikes every six months to combat elevated inflation, with market expectations of a terminal rate around 1%. Timing of rate hikes may be tricky, especially with fluctuating exchange rates.

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• India’s rubber output in April–July up 4.4% year-on-year.  
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• Domestic auto sector weakness tempers consumption

• Crude oil futures were slightly lower in late-day Wednesday trading after benchmarks settled at fresh five-month lows in the previous session, amid pressures from a growing oil surplus and global trade jitters.
• Front-month Dec25 ICE Brent futures were trading at $62.21/b (2012 BST) versus Tuesday’s settle of $62.39/b, while Nov25 NYMEX WTI was at $58.55/b against a previous close of $58.70/b.
• Prices plummeted on Tuesday, wiping out early week gains, after the IEA trimmed its global oil demand growth forecast while upping its supply projection, in turn pushing markets into a deeper surplus this year and next.