New Overnight Developments: European GDP Grew More Slowly Than Expected Last Quarter

November 13, 2009

The dollar is broadly softer to close out the week on this Friday the 13th, with declines of 0.7% against the kiwi, 0.6% against sterling, the yen and Australian dollar, and 0.3% against the Canadian dollar, euro and Swiss franc.

Ten-year JGB and gilt yields are four basis points lower, while the ten-year bund is off two basis points.  Japanese officials had been worried about upwardly creeping long-term rates earlier this month, but the JGB is 14 bps below its level at the start of this week.

The Nikkei lost another 0.4%, but the Dax and Ftse are 0.3% firmer.  Stocks elsewhere fell 0.9% in Australia, 1.3% in the Philippines, and 0.1% in South Korea and Taiwan, but bourses are up 0.7% in Hong Kong and Vietnam, 1.8% in Sri Lanka, 1.7% in Pakistan, 0.9% in India and 0.5% in China.

After dropping yesterday, oil recovered 0.7% to $77.49 per barrel.  Gold is 0.2% firmer at $1108.30 per ounce.

At the Fed Foreign Department’s quarterly foreign exchange press conference, officials confirmed that no intervention had been undertaken in 3Q and attributed a 4.4% trade-weighted dollar depreciation to capital outflows caused by improved risk appetite and a reassessment of relative growth prospects.  U.S. international reserves total $83.1 billion.  Enhanced intervention by several emerging market central banks (e.g., Korea, Mexico, India and Brazil) was noted.

GDP in the euro area increased 0.4% in 3Q after drops of 0.2% in 2Q, 2.5% in 1Q and 1.8% in 4Q08.  The contraction from a year earlier narrowed to 4.1% from 4.8% in the year to 2Q09.  Analysts had projected a 0.5% quarterly rise and a 3.9% on-year drop.  Growth stemmed from inventories and government spending, while business investment continued to drop.  Individual country results are shown below.

  3Q09 2Q09 3Q vs 3Q08
Germany +0.7% +0.4% -4.8%
France +0.3% +0.3% -2.4%
Italy +0.6% -0.5% -4.6%
Spain -0.3% -1.1% -4.0%
Netherlands +0.4% -1.0% -3.7%
Belgium +0.5% -0.1% -3.5%
Greece -0.3% -0.1% -1.6%
Portugal +0.9% +0.5% -2.4%
Greece -0.3% -0.1% -1.6%

Spanish consumer prices rose 0.7% last month from September but posted a 12-month decrease of 0.7% after falling 1.0% in the year to September.

Japanese industrial output growth in September was revised sharply higher to a gain of 2.4% from 1.4%.  The September level is already 1.9% higher than the 3Q base.  Although output was still 18.4% lower than in September 2008, such advanced at a 35.3% seasonally adjusted annualized rate in the two quarters between 1Q09 and 3Q09.  Capacity usage increased 1.6% in the latest month and by 15.4% from a year earlier, while capacity slid 1.9% in the year to September.

Japanese consumer confidence edged up just a tenth to 40.8 in October from 40.7 in September.  Such was 37.6 last June and bottomed in December 2008 at a reading of 26.2.

Czech GDP sank 4.1% in the year to 3Q after an on-year drop of 4.7% in 2Q.  Czech retail sales tumbled 7.6% in the year to September, twice as much as in August.  Hungarian GDP fell another 1.8% between 2Q and 3Q and by 7.2% in the year from 3Q08, clear evidence of a continuing recession there.

In Finland, monthly GDP fell 11.6% in September.  Retail sales volume dropped 1.3% in the year to September, and consumer prices posted declines in October of 0.5% from September and 1.5% from a year earlier.

Singaporean retail sales posted an on-year decline of 11.8% in September, more than twice what had been forecast and the -4.7% in the year to August.

GDP growth in Hong Kong slowed to 0.4% last quarter from a jump of 3.5% in 2Q, but the on-year pace of drop still improved to 2.4% from 3.6% in 2Q and 7.8% in 1Q.

Chile’s central bank left its benchmark interest rate unchanged at 0.5% and said it would not increase before 2Q10.

Brazilian retail sales firmed 0.3% in September, their fifth consecutive increase, and by 5.0% from a year earlier.

New Zealand home sales rose 3.6% in the year to October.  House prices firmed 1.3%.

Scheduled U.S. data include monthly trade data, import prices and the U. Michigan index of consumer sentiment.  Canada releases auto sales and trade data.

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


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