Japanese Growth and Deflation in 4Q09 Exceeded Expectations

February 15, 2010

Holidays in North America, Asia, and South America to dampen activity today: U.S. Presidents Day, Canadian Family Day, Chinese Lunar New Year and Mardi Gras in Brazil.

The dollar is narrowly mixed, showing upticks of 0.2% against the euro and 0.1% against the Swiss franc, sterling and the yen but dips of 0.2% relative to the New Zealand and Australian dollars.  The Canadian dollar/U.S. dollar pair is unchanged.

Asian bourses were closed in China, Hong Kong, Taiwan, Singapore, Malaysia and Vietnam.  China will remain closed all week, but a big story today was stirred by economist Jim O’Neill of Goldman Sachs, who thinks the yuan may get revalued as much as 5% soon after the holiday ends.

The Japanese Nikkei closed down 0.8%, and stocks fell 1.3% in Thailand, 0.7% in India and Indonesia, and 0.4% in Australian.  In Europe, however, the British Ftse, Paris Cac and German Dax are trading 1.3%, 1.0%, and 0.8% higher.

Ten-year sovereign gilt and bund yields have advanced 3 basis points and 2 basis points, but the 10-year JGB slid one basis point.

Gold climbed 1.0% to $1100.80 per ounce, while oil increased 0.2% to $74.28 per barrel.

Japanese GDP grew 4.6% at an annualized rate last quarter and was just 0.4% lower than in 4Q08.  Analysts had predicted growth of 3.5%.  However, the GDP price deflator was 3.0% less than a year earlier after on-year drops of 0.6% in the second and third quarters of 2009.  The largest on-year decline in the GDP deflator previously had been a decrease of 2.5% in the year to 1Q03.  The personal consumption deflator fell from a year earlier by 2.9% in 3Q09 and 2.7% last quarter.  It’s prior cyclical low-point had been a slide of 1.7% in the year to 1Q02.

  • Among key components of Japanese aggregate demand, personal consumption increased 2.7% annualized (saar) in 4Q, non-residential investment rose 4.0% saar, public-sector spending increased 1.4% saar and exports shot up 21.7% saar.  Residential investment fell 12.8% saar and 24.5% from 4Q08.
  • Net exports accounted for 2.2 percentage points (ppts) of GDP growth last quarter, and personal consumption chipped in another 1.6 ppts.
  • Real GDP fell 5.0% in calendar 2009, nonetheless, with drags of 1.2 ppts from net exports, 3.1 ppts from non-residential investment, and 0.6 ppts from personal consumption.

Revised Japanese industrial production December data showed an increase in December of 1.9% from November and 5.1% from a year earlier.  The inventories-to-shipments ratio fell 4.8% on the month and by 18.4% on the year.  Industrial production had risen 2.2% in November and was 2.0% higher in December than its 4Q09 average level.  Output in full-2009 still slumped by 22.4% after a drop in 2008 of 3.4%.  Capacity usage rose 1.4% in December and 7.4% from a year earlier, while capacity was unchanged from a year earlier.

Retail sales in Singapore excluding motor vehicles fell 0.9% in December but were 3.0% greater than a year earlier.

Indian wholesale price inflation accelerated to 8.56% on year in January from 7.31% in December.

EU finance ministers start a meeting in Brussels today to discuss Greece.  ECB President Trichet called on Athens to undertake further fiscal measures.  Weekend press left the impression that an aid deal for Greece has still not been hatched.  Many sources like the FT are urging an IMF-led package as only that will appear credible.  Political opposition to more fiscal austerity is very strong in Greece.

The Swiss producer price/import price index firmed 0.3% in January, trimming its 12-month rate of decline to 1.3% from 2.5%.  As deflation fades, Swiss monetary officials have become more tolerant of franc appreciation.

There has been a head-on train wreck in Belgium, with at least 20 deaths.

Norway’s trade surplus of NOK 34.4 billion in January was 6.2% wider than a year earlier.  Finland’s EUR 130 million current account surplus in December was not as large as expected.  Italy’s trade deficit of EUR 123 million in December was 86.5% smaller than in November.  Turkish unemployment increased to 13.1% in November from 12.6% a year earlier.

The British Rightmove house price index jumped 3.2% in February and by 6.1% from a year earlier.  Such had risen 4.1% in the year to January.

Czech retail sales fell 1.9% in December from a year earlier and by 4.3% in 2009 as a whole.  Czech producer prices rose 0.5% in January but were still 1.5% lower than a year earlier.  Import prices dropped 3.2% in the year to December.  Danish wholesale prices firmed 1.5% in January and 2.8% from a year before.  Hungarian industrial production fell 5.8% in December but recorded the same on-year drop of 1.4% as such did in November.  The EU Commission expressed satisfaction that the Hungary budget is likely to produce the targeted 3.8% of GDP deficit.

The United States is closed for Presidents Day, while Canada will be observing Family Day.  British consumer prices and the ZEW indices of investor sentiment toward Germany and Euroland are due Tuesday.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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