Trade Showdown and Many Data Releases

June 28, 2019

The Group of Twenty annual summit kicked off in Osaka and looms as a crossroads in the U.S.-Sino dispute over trade. Either the conflict gets diffused here, or retaliatory tariffs are likely to escalate sharply.

Being the last business day of the second quarter and June, today’s data menu was plentiful.

The dollar eased overnight by 0.3% against the sterling, o.2% versus the Swiss frac and kiwi, and 0.1% relative to the euro, loonie and yuan. The yen, peso, and Aussie dollar are unchanged against the U.S. currency.

Stocks closed mostly lower in Asia but are somewhat higher in Europe and the U.S.

In central banking news, the Bank of Mexico’s overnight interbank interest rate was left unchanged at 8.25%, which is the highest level in over ten years, but one of six policymakers voted to cut the rate by 25 basis points, suggesting a rising downside directional risks. In Japan, a summary was published of the Bank of Japan’s June Board meeting, revealing that the pros and cons of additional stimulus were discussed. The majority that prefers the status quo again prevailed, but dissents in favor of more stimulus argued more forcefully than seen at prior meetings.

Released Japanese data showed

  1. An unchanged jobless rate of 2.4% in May.
  2. Core Tokyo CPI inflation of 0.9% in June.
  3. A 2.3% rebound in industrial production last month associated with a larger 1.8% 12-month rate of decline. Officials maintained a trend designation of “fluctuating indecisively.” A 4.7% on-year rise of motor vehicle output followed a 4.1% decline experienced in April.
  4. An 8.7% on-year slide in housing starts, most in 16 months, and an even bigger 16.9% plunge in May construction orders compared to their year-earlier level.

The preliminary estimate of CPI inflation in the euro area for June put such at 1.2%, same as in May and down from 2.0% in June 2018. Price growth in energy decelerated 2.2 percentage points to 1.6%, whereas core CPI inflation recovered to 1.1% after dropping half a percentage point to 0.8% in May.

German import prices, which slid 0.1% on month and 0.2% on year, posted their first 12-month decline in May since March of 2018.

French consumer price inflation accelerated to a 2-month high of 1.2% in June, but PPI inflation in May was slashed to 0.8% from 1.9% posted in both March and April. French consumer spending rose 0.4% last month but was unchanged on balance over the latest four reported months.

Italian consumer price inflation eased 0.1 percentage point to a 14-month low of 0.8% in June. PPI inflation in May dropped to 1.5% from 2.1% in April and 5.8% last October.

British consumer confidence sank three index points in June and had a reading of -13 for the fourth time in the past five months.

British GDP grew 0.5% in the first quarter according to revised data, resulting in a six-quarter high of 1.8% in the year-on-year growth rate. The British current account deficit soared to GBP 30.045 billion, equal to 5.6% of GDP versus a deficit equal to 4.4% of GDP in the final quarter of 2018 and one equivalent to 3.4% of GDP in the first quarter of last year. The largest calendar year current account deficit was 5.2% of GDP in 2016.

Spanish GDP rose 0.7% in the first quarter and by 2.4% from a year earlier. Spain’s year-to-April current account deficit of EUR 5.96 billion was much bigger than the EUR 3.29 billion deficit in the first four months of 2018. Spanish retail sales in May were 2.4% higher than a year earlier, their largest 12-month increase since May.

The Swiss leading economic index fell to a 4-month low in June.

India’s current account deficit of $4.6 billion last quarter was substantially lower than the deficit of $13.047 in the first quarter of 2018 and equivalent to only 0.7% of Indian GDP.

Canadian GDP compiled from the supply side on a monthly basis got off to a decent second-quarter start with a 0.3% increase in April. After recording four straight contractions, industrial production advanced 1.1% in March and another 0.6% in April but was just 0.8% greater than in April 2018.

Canadian producer price inflation dropped to just 0.6% in May from 1.7% in April.

U.S. personal income (+0.5%) and personal consumption expenditures (+0.4%) expanded somewhat more sharply in May than forecast, but inflation as measured by the PCE deflator eased to a sub-target 1.5%, and core PCE inflation held steady at a subdued 1.6%.

Kamala Harris is being considered the most impressive Democratic presidential candidate in last night’s debate. That may be a problem for the presumed front-runner, Joe Biden.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: , , ,

ShareThis

Comments are closed.

css.php