Digesting End-August Data
August 30, 2011
European currencies were depressed by weak end-month regional data. The dollar has gained 0.8% against the euro, 0.7% relative to the Swissie, and 0.5% against sterling. The dollar otherwise edged up 0.1% against the Australian and Canadian dollars but fell 0.4% against the kiwi and 0.1% against the yen. The yuan is steady.
Stocks advanced in Asia by 1.7% in Hong Kong, 1.6% in India and Singapore, 1.2% in Japan, 0.9% in Taiwan, and 0.8% in South Korea. In Britain, which was closed Monday, the Ftse climbed 2.3%. However the German Dax (down 0.8%) and Paris Cac (off 0.3%) are trading lower.
Ten-year British gilts rose nine basis points, while their German counterpart is six basis points lower. Japanese JGBs are steady.
Oil fell 0.7% to $86.69 per barrel. Gold firmed 0.2% to $1795.70 per ounce.
European sentiment indices for August show substantial further deterioration.
- Euroland’s overall business sentiment index fell by 4.7 points to 98.3. Such crested at 108.0 six months earlier. The German component plunged 5.7 points to 107.0, while the Spanish and Italian indices softened 0.3 and 0.7 points to 92.7 and 94.1. Industrial confidence swung to minus 2.9 from +0.9 in July and +3.5 in June. Consumer sentiment dropped 5.3 points to negative 16.5. Confidence among retailers weakened 5.1 points to minus 8.7, and service sector confidence fell 4.2 points to 3.7. Construction firmed a point to a still extremely depressed minus 23.3 reading.
- Euroland’s business climate index worsened to 0.07, lowest since March 2010, from 0.44 in July and a top reading of 1.46 last February.
- The British business sentiment index dropped 5.6 points to 92.9.
- The UBS gauge of consumption in Switzerland arrived at 1.29 in July, down from 1.52 in June.
The euro area’s purchasing managers index for retail activity slid 0.2 points to 48.0, lowest since October 2010. Such was the fourth straight sub-50 reading, signifying a trend of contraction. A 3.2-point improvement in Germany’s retail PMI to 53.9 was offset by a 3.7-point decline in the French index to 46.0. The French index was at 58.4 last January. Italy’s retail PMI printed a tenth softer at 42.4 in August and has been lower than the 50 no-change line since March.
Austria’s manufacturing PMI reading of 50.1 in August after 50.8 highlights a virtual stall.
According to an Italian source, the draft of next month’s IMF World Economic Outlook projects euro area growth of 1.9% this year and 1.4% in 2012, down from estimates released in June of 2.0% and 1.7%. The projected U.S. growth rate for this year has been revised down to 1.6% versus 2.5% predicted in June. U.S. growth in 2012 is put at 2.0%, down from 2.7%.
Japan released retail sales, household spending, small business sentiment, auto production, and labor statistics. Results were mixed.
- Large-store retail sales in July were 0.8% higher than a year earlier. That was the first on-year increase since the earthquake.
- Total retail sales dipped 0.3% on month but posted a second consecutive on-year increase, gaining 0.7% after a 1.2% rise in the year to June.
- Real household expenditures climbed 0.5% on month and recorded a smaller 2.1% on-year drop after declining 3.5% in the year to June. Real incomes were 1.6% higher than a year earlier.
- The Shoko Chukin small business sentiment barometer, a diffusion index in which readings of 50 connote neutrality between optimism and pessimism, sank 0.7 points to 46.4 in August after improving from 37.8 in May to 43.1 in June and 47.1 in July. The manufacturing component (46.1) and non-manufacturing (46.6) each were below 47 in August.
- Auto output was 4.7% lower in July than a year earlier.
- The unemployment rate rose by a tenth percentage point for a second straight month in July, reaching 4.7%. Such had averaged 4.65% in 1H11. Employment last month was 0.3% lower than in July 2010, but the job offers/seekers ratio continued to edge higher, rising to 0.64 from 0.63 in June and 0.62 last February.
Japan’s parliament formalized the selection of former Finance Minister Noda to follow Kan as prime minister. Noda will attempt to fund earthquake reconstruction with some tax increases. Recall that a sales tax hike in 1997, pushed hard by the Ministry of Finance at the time, resulted in a recession for an economy that was unprepared for fiscal restraint.
Business sentiment among South Korean manufacturers weakened to a 25-month low of 86 in September from 91 in the prior month. The non-manufacturing index stayed at 86.
New Zealand building permits jumped 13.0% in July to a 3-year high. Australian building permits rose just 1.0%, half as much as forecast and following three consecutive declines. Australian permits were 15% lower than a year earlier. The kiwi hit a two-week high against the Aussie dollar.
Indian GDP was 7.7% greater than a year earlier in 2Q11 after gaining 7.8% in the year to 1Q11. Indian growth has slowed from around 9% prior to the Great Recession.
Belgian CPI inflation settled back to 3.6% on year in August from 3.75% in July. Spanish consumer prices rose 2.9% in the year to August. Dutch producer prices rose 0.3% on month and 10.0% on year in July. Icelandic producer prices rose only 0.2% last month but accelerated to a 12-month 17.1% rate of increase.
Italian business sentiment printed at 99.9 in August, 1.1 points higher than July’s revised reading and 2.8 points better than forecast. Italian retail sales dipped 0.2% in June and were 1.2% lower than a year earlier. Portuguese consumer confidence weakened to minus 49.1 in August from negative 49.4 in July. Portuguese industrial output was 4.5% lower than a year earlier in July.
British M4 contracted 1.1% in the year to July after a 0.7% on-year drop in June. U.K. mortgage lending amounted to GBP 0.7 billion in July, while net consumer credit totaled GBP 0.2 billion. The number of approved mortgages reached 49.24 thousand, up from June’s 48.50 thousand total.
Polish GDP rose 1.1% on quarter and 4.5% on year in 2Q11.
South African GDP rose 1.3% on quarter but by 3.0% in the year to 2Q, down from 3.6% in the year to 1Q. On-year growth in South African M3 money of 5.6% and private credit (5.7%) both surpassed expectations.
The data focus in the United States soon turns to the labor market with tomorrows ADP estimate of private jobs, Thursday’s jobless claims figures, and Friday’s Labor Department monthly jobs survey. In the meantime, today sees the release of the Case-Shiller house price index, the Conference Board gauge of consumer confidence, minutes from the last FOMC meeting, and weekly chain store sales. Canada will be reporting the quarterly current account and monthly producer prices and raw material prices. Kocherlakota and Evans, presidents of the Minneapolis and Chicago Feds, speak publicly today.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: EU sentiment, Japan Noda, retail PMI
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