ECONOMIC DATA OF THE DAY

Time	CY	Indicator	Forecast	Previous
1445	EUR	Industrial Production MoM	0.10%	-0.50%

(Source: FabTrader)

OVERNIGHT NEWS

• US: 
• Nonfarm Productivity dropped -0.5% (Exp. +0.4%) during Q2, which is the third consecutive quarterly decline. 
• Wholesale Inventories unexpectedly rose 0.3% MOM in June (Exp. 0.0%) from an upwardly revised rise in May of 0.2%. The component of wholesale inventories that is used in the calculation of GDP - wholesale stocks excluding autos - grew 0.3% 
• UK: 
• The BOE’s QE purchasing program had an issue yesterday with the Central bank failing to find enough sellers to reach its 1.17-billion-pound target. 

FOREIGN EXCHANGE (INDICATIVE RATES)

Currency	Last	% Change	Overnight Range
DXY	96.18	-0.40%	96.077 – 96.524
EURUSD	1.1117	0.33%	1.1071 – 1.1123
USDJPY	101.95	-0.55%	101.79 - 102.51
AUDUSD	0.7664	0.59%	0.7622 – 0.7687
GBPUSD	1.3006	0.08%	1.2956 - 1.3017

(Source: FabTrader)

Commodities (INDICATIVE RATES)

Currency	Price USD	% Change	Overnight Range
Gold	1342.28	0.31%	1330.67 - 1342.75
Silver	19.93	0.50%	19.594 - 19.8847
Oil (BRENT)	44.98	0.69%	44.8 - 49.22
Oil (WTI)	42.69	0.35%	42.5 - 43.52

(Source: Bloomberg and Saxo)

COMMODITIES

Precious Metals: Gold rebounded following the weaker USD and the drop in global bond yields. Silver had a similar move. Both precious metals trade in the middle of the recent ranges

Oil: Oil dropped after The EIA boosted its U.S. crude output forecasts for this year and next while cutting price projections. WTI will average $41.16 this year, and the view for Brent was revised down to $41.60. Global supply and demand will fall into a deficit of 170,000 barrels per day in 2017, according to its monthly energy outlook.

FOREX NEWS

• The USD resumed its move lower with bond yields hitting all-time lows in several countries and rally in European equities
• BOE’s QE program had a glitch (see above) pushing GBP below 1.3000 for the first time in a month but failed to close below. A confirmed break below should trigger more selling interests
• USDJPY is resuming its move lower after the rally following the NFP. The main target is 100
• In Emerging Markets, the currency to watch is BRL with USDBRL confirming the break of the 3.2000 level. The market is more and more in search of yields and despite the poor economic data, the investor economy is still rushing to buy local bonds and equities

U.S. productivity falls for third consecutive quarter

U.S. worker productivity fell for the third straight quarter in the spring this year, suggesting that corporate profits may continue to decline and wage growth may remain sluggish.

The Labor Department said on Tuesday that productivity, which measures hourly output per worker, dropped at a 0.5 percent annual rate in the April-June period, extending the longest decline since 1979. Productivity fell at an unrevised 0.6 percent rate in the first quarter.

In the second quarter, productivity decreased at a 0.4 percent rate compared to the same period last year, the fastest year-on-year pace of decline in three years.

Revisions to data going back to 2013 also confirmed the softening productivity trend, but strong employment gains have helped to raise output overall with U.S. payrolls growing by more than 500,000 jobs in June and July.

"The reason the economy has still been able to expand is because of labor input. Firms are hiring people at a reasonably healthy rate," said Joseph LaVorgna, chief economist at Deutsche Bank Securities in New York.

"However, we do not believe this can last, because strong hiring in the face of weak productivity necessarily implies a further deterioration in corporate profit margins."

After rising rapidly in the 1990s as computers made workers more efficient, productivity has fallen as companies have been reluctant to invest in new equipment in the past 18 months given the outlook for sluggish economic growth globally.

In the long run higher incomes and rising living standards depend on rising productivity though. The U.S. economy expanded at an annual pace of only 1.0 percent during the first six months of this year, roughly half the average of the past seven years.

U.S. stock prices were little changed at Tuesday's close, near record highs set recently, as investors shrugged off the productivity data, while U.S. Treasury yields edged lower as lower productivity suggests inflation may remain subdued.

SLUGGISH CORPORATE PROFITS

Corporate profits declined 5.3 percent in 2015 partly due to the lagging impact of a strong U.S. dollar and lower oil prices, before seeing an 8.1 percent rebound in the first quarter 2016 according to government data. Corporate profits data for the second quarter will be published later this month.

The Commerce Department reported last month that gross domestic product rose at a 1.2 percent annual rate in the second quarter following a 0.8 percent rise in the first quarter.

The estimate for second-quarter GDP growth could be revised slightly up after a separate report from the Commerce Department on Tuesday showed wholesale inventories increased 0.3 percent in June. The government had previously reported wholesale inventories as being unchanged in June.

DOUBTS ABOUT DATA

Productivity has increased at an annual rate of less than 1.0 percent in each of the last five years, suggesting the economy's potential rate of growth has declined, but some economists have questioned whether it is being accurately measured.

"Innovations are everywhere, in cancer research, iPhone apps, Olympic sports training, cloud computing - they are just not showing up in the GDP accounts," said Patrick Newport, a U.S. economist at IHS Global Insight in Lexington, Massachusetts.

"Are we just about running in place or is the radar that measures growth malfunctioning? It's both. Productivity growth is understated. Economists are just unsure by how much."

Unit labor costs, the price of labor per single unit of output, increased at a 2.0 percent pace in the second quarter. Second-quarter unit labor costs rose at a 2.1 percent rate compared to the same period of 2015.

First-quarter unit labor costs were revised to show a 0.2 percent rate of decrease, instead of the previously reported 4.5 percent increase.

Hourly compensation per hour rose at a 1.5 percent rate in the second quarter after falling at a 0.8 percent pace in the prior quarter.

"Labor compensation growth that outpaces productivity growth must either be passed through into faster price increases or squeeze profit margins," said John Ryding, chief economist at RDQ Economics in New York.

Read More at www.reuters.com