Positive GDP Growth Reported in the Euro Area

August 14, 2013

Markets barely reacted to the news that Euroland as a whole returned to positive growth last quarter.  The 0.3% non-annualized increase from 1Q exceeded analyst expectations and trimmed the four-quarter rate of GDP decline to 0.7% from 1.1% in 1Q.  Italy, Spain, Cyprus and the Netherlands were among the countries that saw GDP contract further, while the turnaround was spearheaded by GDP rising 0.7% in Germany and 0.5% in France.

The dollar appreciated 0.5% against the Swiss franc and 0.1% versus the yen, euro and loonie.  The dollar fell overnight by 0.7% relative to the kiwi, 0.2% versus sterling and 0.1% vis-a-vis the Australian dollar.  The yuan remained steady.

Stocks in Europe only have risen 0.4% in France, 0.2% in Germany, and 0.1% in Britain. Spanish equities are off 0.2%, and Italy’s market is unchanged.  In the Pacific Rim, share prices closed unchanged in New Zealand and Australia, down 0.4% in China and Taiwan, and up 1.6% in the Philippines, 1.2% in Hong Kong, 1.0% in Indonesia, and 0.7% in India.

Ten-year German bund and British gilt yields have firmed two basis points, and the Japanese JGB yield is a basis point higher.

The price of WTI crude oil is 0.7% lower at $106.06 per barrel.  Gold firmed 0.3% to $1325.50 per ounce.

Martin Weale of the Bank of England Monetary Policy Committee voted against Governor Carney’s plan of unemployment-linked forward interest rate guidance.  He expects a need to raise rates sooner than such guidance would imply.  The dissent was not anticipated by analysts.  The votes at the August meeting to retain a 0.5% Bank Rate and a GBP 375 billion asset purchase plan ceiling were unanimous, that is 9-0.

Australia’s labor cost index rose 0.7% between 1Q and 2Q13, trimming the on-year pace to 2.9% from 3.2%. 

Retail sales in New Zealand jumped 1.7% in the second quarter, beating expectations slightly.  Such was the third quarterly rise in a row.

Chile’s 5.0% central bank rate was not cut as some analysts were expecting, but officials released a statement that leaves the door open to possible easing within a few months.

The Swiss producer price/import price index was unchanged on month and just 0.5% higher than a year earlier in July.  The Swiss ZEW expectations index, a gauge of investor sentiment, rose less than forecast in August, printing at 7.2 after 4.8 in July.

French CPI inflation likewise remained benign, dropping 0.3% between June and July.  On-year French inflation was 1.1% but just 0.6% from the core CPI.  Finnish consumer prices rose 1.6% in the year to July.

British labor statistics, which have acquired greater policy significance from the Bank of England’s adopted forward interest rate guidance, showed another decent decline in the claimant jobless count (29.2K in July following 29.4K in June), a lower 4.3% claimant unemployment rate but, most critically, an unchanged ILO-basis jobless rate of 7.8% in 2Q.  Barring significant deviations from forecast in inflation and financial stability, the MPC doesn’t plan to begin raising the Bank Rate until such drops to at least 7.0%.

On-year South African retail sales growth slowed to 1.9% in June from 6.0% in May.

Wholesale price inflation in India of 5.79% in July surpassed 5.0% for the first time since April.

U.S. producer price data will be released today.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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