New Overnight Developments Abroad: Bank of Japan Projects Negative Inflation in Fiscal 2011

October 30, 2009

The dollar is mixed so far on this final trading day of October, with gains of 0.3% against the kiwi and 0.1% relative to sterling and the Canadian dollar but losses of 0.5% against the yen, 0.2% against the Swiss franc and 0.1% against the euro and Australian dollar.

Stocks in the Pacific Rim are up 2.3% in Hong Kong, 1.5% in Australian, 1.4% in Japan, 1.6% in The Philippines, and 1.0% in Vietnam, China and Indonesia, but such fell 1.1% in India, 0.7% in Thailand and 0.3% in South Korea.  In Europe, the Dax (down 0.3%) and Cac40 (off 0.1%) are lower, while the Ftse is 0.3% firmer.

Treasury, bund, and gilt yields are lower.  The yield on 10-year JGBs edged up a basis point to 1.42%.

Oil and gold slid 0.4% and 0.1% to $79.55 per barrel and $1045.70 per ounce.

Japan’s jobless rate unexpectedly fell to 5.3% in September from 5.5% in August and 5.7% in July.  Employment was 1.5% less than in September 2008.  The job offers to seekers ratio edged up to 0.43 from 0.42, its first improvement since July 2007.

Japanese consumer prices were unchanged on month in September and off 2.2% on year, the same 12-month drop as in the prior two months.  Core (ex food) CPI fell 2.3% in the past 12 months.  Consumer prices less both food and energy (so-called core-core CPI) fell 1.0% in the year to September after on-year drops of 0.9% in July and August.  In the third quarter, headline, core, and core-core CPI dropped at a seasonally adjusted annualized rate of 1.2%, 0.8%, and 0.8%.

Japanese real household spending rose 0.4% on month in September, following a 2% gain in August.  Such also climbed 1.0% in the year to September despite on-year declines of 0.1% and 0.4% in real incomes and real disposable incomes.

Japan’s manufacturing PMI edged down to 54.3 in October from 54.5 in September.

Japanese housing starts in September were 37.0% lower than a year earlier, which was in line with expectations and near to August’s 38.3% drop.  Construction orders fell just 14% on year, only about half as much as forecast after a decline of 25.2% in the year to August.

The Bank of Japan retained a policy interest rate of 0.1% as expected and pledged not to raise such for “some time.”  The vote was unanimous after a meeting lasting four hours.  As also expected, BOJ officials agreed by a 7-1 vote (Mizuno dissenting) to terminate outright JGB and commercial paper purchases at the end of 2009 but to provide unlimited collateral-backed lending through end-March 2010, which is the end of Japan’s fiscal year.  The BOJ also released new price and growth forecasts.  Projected GDP growth was revised up two-tenths to minus 3.2% this fiscal year and 1.2% in FY10.  Growth in Fiscal 2011 is initially penciled in at plus 2.1%.  Domestic corporate goods prices and core consumer prices are expected to each post declines in Fiscal 2011 (minus 0.7% and minus 0.4%, respectively) as well as Fiscal 2009 and Fiscal 2010. Fiscal 2011 doesn’t end until March 2012, so deflation will be hanging around a long time further.

German retail sales in September were disappointing yet again, declining 0.5% from August and 3.9% from a year earlier.  Real retail sales declined 3.3% at a seasonally adjusted annualized rate last quarter and by a similar amount in the year between 3Q08 and 3Q09.

Unemployment in Euroland rose further to 9.7% in September from 9.6% in August, 9.0% last March and 7.7% a year earlier.

The Flash indication for on-year CPI inflation in Euroland is a 12-month dip of 0.1% in October following a drop of 0.3% in the year to September.

Italian producer prices fell 0.3% in September and by 7.9% from a year earlier.  French producer prices dropped 0.3% last month and by 8.1% in the past 12 months.  Italian consumer prices in September firmed 0.1% and posted the highest on-year increase, 0.3%, since June.  PPI inflation in Hungary slowed to 3.4% in September, a 13-month low, from 4.6% in August.

EU leaders meeting in Brussels pledged to promote growth until the recovery is assured.

British consumer confidence edged up to a still-weak reading of minus 15 in October from minus 16 in September.

The Swiss index of leading economic indicators improved to 1.45 in October from 0.85 in September.

Australian private sector credit declined 0.2% in September, which was the first monthly drop of 2009, and posted a reduced 12-month increase of 1.7% after advancing 2.6% in the year to August.  This is a weak figure but probably will not stop Australia’s central bank from implementing a second rate hike in November.

In New Zealand, where the central bank did not raise rates at this week’s policy meeting, building permits rose 3.3% in September, which was about twice as much as in August but not as great as forecast.  Prime Minister Key expressed worry over the kiwi’s strength but said there is little policymakers can do about that, since U.S. dollar softness is the cause.

Thai industrial production unexpectedly recorded a rise, 0.4%, in the year to September after falling 10.1% in the year to August.  Business sentiment in Thailand picked up to 49.0 last month from 46.1 in August.  The Thai trade and current account surpluses narrowed 9.7% and 34.4% between August and September to $2.05 billion and $1.26 billion.

China’s central bank indicated that PPI inflation likely hit bottom last quarter and that the containment of inflation will become a higher priority next year.

Industrial output in South Korea advanced 5.4% last month and gained 11% from September 2008.  Those results exceeded expectations.  Singapore’s jobless rate edged up to 3.4% last quarter from 3.3% in 2Q09.

U.S. data on personal income, personal expenditures and consumer confidence arrive today as do monthly Canadian GDP.

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


Comments are closed.