Some Good Economic News for a Change

October 28, 2014

Industrial profits in China reverted to positive on-year growth in September, albeit a gain of only 0.4%.  A 0.6% decline in the year to August was negative for the first time in almost two years.

Japanese retail sales increased 2.7% on month in September, three times more than forecast, and posted the largest on-year advance, 2.3%, since March, which was the last month before a 3-percentage point consumption tax hike.  Prime Minister Abe will be deciding in December whether to go ahead with a tentatively scheduled further 2-ppt tax hike in October 2015.  Large-store retail sales recorded a second straight on-year increase, a gain of 0.5% in the year to September.

Italian business confidence improved unexpectedly to a reading of 96.0 in October from 95.5 in September and 88.2 in August.

German import prices rose 0.3% on month in September, most in at least a year and trimming the 12-month decline to a 3-month low of 1.6%.  There has been concern that Germany is slipping into a deflationary state of mind.

Share prices rose 2.0% in China, 1.7% in Taiwan, 1.6% in Hong Kong and 0.5% in India.  In European markets, stocks have risen thus far by 1.7% in Italy, 1.5% in Spain, and 1.4% in Germany and Switzerland.  Not all stock markets rose.  Japan’s Nikkei settled back 0.4%, and shares in Indonesia and Singapore fell by 0.5%.  The price of Twitter fell in after-hours trading yesterday on a poor quarterly report of user growth.

Consistent with risk-on trading, the dollar and yen are softer against commodity-sensitive currencies.  The dollar has declined 0.4%, 0.2%, and 0.1% versus the Australian, Canadian and New Zealand dollars.  The greenback is unchanged against sterling and the yuan and has strengthened 0.3% relative to the yen and 0.1% against the euro and Swissie.

Gold and oil prices have dipped 0.2% and 0.1% to $1,227.50 per ounce and $80.90 per barrel.

The United States has a busy schedule of data releases today — consumer confidence, durable goods orders, the Richmond Fed manufacturing index, the Case Shiller index of home prices, and weekly chain store sales.  The FOMC policy announcement is set for tomorrow, but there will not be a press conference afterward.

Three central bank policy announcements are scheduled today.

  • The Swedish Riksbank flagged a growing risk of deflation, cut its repo rate more than expected to zero from 0.25%, pushed out the likely timing of a first interest rate hike further into the future (to mid-2016), and lowered the ensuing interest rate path.
  • Magyar Nemzeti Bank in Hungary is not expected to change its 2.1% benchmark interest rate level.
  • Copom, the monetary policy committee at Brazil’s central bank, will reveal its first Selic rate decision since Dilma Rousseff was narrowly reelected President of Brazil in run-off elections this past Sunday.  Her victory has adverse implications for Brazilian economic growth.

Bank of Japan Governor Kuroda defended yen depreciation as doing more good than bad for Japan’s economy.

Small business sentiment in Japan slid for a third straight time to a 5-month low of 47.4 in October from 47.6 in September, 47.7 in August and 48.7 in July.

South Korean consumer sentiment fell to a 3-month low of 105 in October after back-to-back readings of 105 in August and September.

Thailand’s trade balance swung from a $1.15 billion surplus in August to a $1.80 billion deficit in September.

Norwegian business sentiment fell to a 5-quarter low of 2.0 in the third quarter from 7.0 in 2Q and 6.8 in 1Q.

Sweden’s trade balance, which was in deficit in August (SEK 2.7 billion) for the first time in three months, returned to the black last month with a surplus of SEK 1.4 billion.  The year-to-date SEK 22.4 billion surplus was half as big as a year earlier.  Swedish retail sales volume fell 0.6% on month in September, cutting the 12-month rate of rise to 2.8% from 4.7%.  Swedish producer prices dropped 0.3% in September, cutting their 12-month rise to 1.7% from 2.7%.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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