New Overnight Developments Abroad: Unexpected And Shocking British GDP Decline in 3Q

October 23, 2009

Sterling lost 1.2% (two cents) on news that real British GDP fell 0.4% (1.6% annualized) last quarter.  Analysts had anticipated a 0.1% uptick.  This was the sixth consecutive quarterly drop, and GDP was 5.2% lower than in 3Q08.  Production fell 0.7% and 10.4% on year.  Services dropped 0.2% and 3.8% on year. Construction tumbled 1.1% and 13.0% from 3Q08.

The dollar is unchanged against the euro but has risen 0.5% against the Canadian dollar, 0.4% relative to the kiwi, 0.3% against the yen, 0.2% against the Aussie dollar, and 0.1% versus the Swiss franc.

Stocks are ending the week on a rising notes.  Bourses closed up 2.0% in China, 1.7% in Hong Kong, 1.5% in The Philippines, 2.1% in Sri Lanka, 1.0% in Australia, 1.4% in Indonesia, 0.6% in South Korea and 0.2% in Japan.  The British Ftse, Paris Cac, and German Dax are trading 1.3%, 1.1%, and 0.9% higher.

The ten-year British gilt yield fell 5 basis points, while Treasury yields are higher.  The 10-year JGB ticked back down a basis point to 1.37%.

Oil is steady at $81.21 per barrel.  Gold edged 0.3% higher to $1061.60 per ounce.

The German IFO business climate index did not rise quite as much as projected, printing at 91.9 after 91.3 in September, 90.5 in August and 82.2 in March.  Still the result represents a 13-month high and exceeds the October 2008 reading of 89.9.  Both current conditions and expectations improved.  The retailing sub-index worsened.  IFO officials said the “recovery continues hesitantly.”

The sister IFO index for services suffered a setback, dropping to 2.4 in October from 3.8 in September.  The March low was minus 10, and the reading in October 2008 was at minus 4.3.

Flash PMI scores for Euroland, Germany and France were released.  All readings exceeded 50, pointing to positive economic growth at the start of the current quarter.  Euroland’s composite, service, and manufacturing readings rose by 1.9, 1.4 and 1.4 points to 53.0, 52.3 and 50.7.  The French composite, services and manufacturing PMIs rose by 3.6, 4.6, and 2.3 points to readings of 58.4, 57.8, and 55.3.  The French composite reading represents a 35-month high.  Germany’s scores were not as good as anticipated.  The services index fell 1.2 points to 50.9, a three-month low.  The composite index ticked up two-tenths to 52.6, and the index for manufacturing climbed 1.5 points to 51.1.

Industrial orders in Euroland jumped another 2.0% in August on top of monthly gains of 3.0% in July, 4.2% in June, and 0.5% in May.  But all of the latest advance was concentrated in intermediate goods.  Orders in July-August were 7.1% greater than their second-quarter level.  Orders fell 25.3% from a year earlier.

According to British Banking Association figures, mortgage approvals rose 3.1% to 42.1K in September. Mortgage lending was unchanged from a year ago.

French consumer spending posted a big 2.3% increase in September and was also 1.0% greater than in September 2008.  The increase was led by autos.  Dutch consumer spending fell 3.5% in the year to August.

Spanish unemployment steadied at 17.93% in 3Q09 after 17.92% in 2Q.

Polish retail sales recorded a smaller 2.5% increase in the year to September than had been anticipated.

Consumer prices in Singapore edged 0.1% lower in September and were 0.4% below year-earlier levels.  The CPI in January-September was up 0.4% from a year earlier.

Australian import prices fell 3.0% last quarter, but export prices plunged 9.6% and by a record 20.7% from 3Q08.

Consumer confidence in Brazil improved to a 17-month high in October of 113.6 from 111.2 in September.

Urban unemployment in China was 4.3% last month.  Nobel Prize-winner Paul Krugman said China’s continuing policy of not allowing the yuan to rise against the dollar is restraining the recovery of other economies.

U.S. existing home sales data will be released later today, and Fed Chairman Bernanke speaks publicly.  The central bank of Colombia is expected to announce no change in its 4.0% benchmark interest rate.

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


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