New Overnight Developments Abroad: Another Big Drop Reported in Euroland Industrial Output

May 13, 2009

Euroland industrial production fell 2.0% in March, twice expectations, and by 20.1% from a year earlier.  Output plunged 28.1% annualized in 1Q09, more than the 23.4% pace of drop in the prior quarter.

The Bank of England released a quarterly inflation report that has weighed on sterling.  The pound is down 0.7% against the dollar, euro and Aussie dollar.

The dollar otherwise fell 0.5% against the yen and Canadian dollar and 0.1% versus the Swissy but has advanced 0.9% relative to the kiwi.  Strength in the Thai baht was tempered by intervention.

Stocks were mixed in the Pacific Rim, with gains of 0.9% in China, 0.4% in Japan, 1.3% in The Philippines, 1.5% in Thailand, and 0.5% in South Korea but drops of 0.6% in Hong Kong, 1.0% in Vietnam and Sri Lanka, 1.1% in India and 0.5% in Australia.  In Europe, the British Ftse is off 0.3%, and the German Dax is 0.1% lower.

The 10-year JGB yield is flat at 1.46%.  Other sovereign debt instruments are similarly little changed.

Oil firmed 1.0% to $59.43/barrel.  Gold is trading firmly at $924.10 per ounce.

The Bank of England inflation report revised inflation and growth lower.  At market interest rates, consumer price inflation doesn’t rise back to its 2% target until 2012 and is at 1.2% in two years’ time.  Even if central bank rates remain unchanged, such climbs only to 1.7%.  Growth troughs at negative 4.5% on year.  In Q&A, Governor King depicted a slow recovery fraught with risk to its sustainability unless proper balance sheet adjustments are made.

British labor statistics were leaked accidentally on Tuesday.  They showed average earnings dropping 0.4% in 1Q09 from a year earlier, unemployment climbing two-tenths to 4.7% and by 57.1K on a claimant count basis, and the largest quarterly rise of unemployment on an ILO basis since early 1981.

Japan’s Economy Watchers’ index, a gauge of retail activity, improved to 34.2 in April from 28.4 in March and a low of 15.9 in December.  The current account fell 48.6% in the year to March and by 50.1% in fiscal 2008 to Y 1.486 trillion and Y 12.22 trillion, respectively.  Merchandise exports dropped 46.5% in the year to March and by 42.6% y/y in April 1-20.  The seasonally adjusted current account surplus widened 31.7% in March to Y 902 billion from Y 685 billion in February.

Japanese M2 growth accelerated to a 12-month gain of 2.6% in April from 2.1% in 1Q09.  M3 growth rose to 1.7% from 1.1% in 1Q.  Broad liquidity in April was unchanged from a year earlier, and bank lending grew by 3.4%, same as the on-year pace in March.  Japanese bankruptcies increased 9.4% in the year to April but were associated with a 51.6% decline in resulting debt liabilities.

Non-Chinese Asian reserves rose another $15.2 billion last month, a sign that much still needs to be done to reduce net savings in the region.

Russia’s central bank cut its refinancing rate and minimum 1-day repo rate by 50 basis points to 12.0% and 9.0%.  Georgia’s central bank left its key refinancing rate unchanged at 6.0%.

South African real retail sales fell 5.3% in March, most in nearly nine years.

French consumer prices rose just 0.1% in the year to April, least since 1957 as energy fell by 13.8%.  France’s current account deficit widened to EUR 2.2 billion in April from EUR 2.0 billion in March.  A quarterly business survey in France indicated a likely 18% plunge of investment this year.  Surveys in January and last October had penciled in declines of 12% and 3%, respectively.

Chinese retail sales increased 14.8% in the year to April, marginally less than the 15% rise in 1Q09.  But industrial production growth of 7.3%, although above the on-year 5.1% climb in 1Q, fell a percentage point shy of analyst expectations.

Consumer prices in the year to April fell by 0.2% and 0.5% in Spain and Portugal, respectively.

South Korean unemployment stayed at a 3-1/2 year high of 3.7% in April.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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