Now Official that Japan Relapsed into Recession

May 19, 2011

The dollar has risen 0.4% against the recession-laden yen but has otherwise lost 0.5% against the Canadian dollar, 0.4% relative to the euro, kiwi and Aussie dollar, and 0.2% against sterling.  The yuan is steady.

Investors showed greater interest in reacquiring risk after Strauss-Kahn resigned as Managing Director of the IMF.  The dollar is up 0.2% against the Swiss franc, and stocks are higher in Europe with gains of 1.4%, 1.3%, and 1.0% in the German Dax, Paris Cac and British Ftse.

Asian equities were mixed, falling by 1.9% in South Korea, 0.6% in China and Taiwan, and 0.4% in Japan but climbing 1.3% in Australia, 0.7% in Hong Kong, 0.5% in Indonesia and 1.0% in Singapore.

The yields on ten-year British gilts and German bunds firmed by three and two basis points.  That on Japanese JGBs is steady at 1.16%.

Oil prices firmed 0.3% to $100.44 per barrel.  Gold prices are 0.4% softer at $1489.80 per troy ounce.

Japanese real GDP sank by a greater-than-expected 0.9% last quarter (or 3.7% at an annualized rate).  Nominal GDP fell by 5.2% annualized.  Real GDP was 1.0% lower than in 1Q10 and 6.2% below its first quarter of 2008 level.  The economy was hammered by the Sendai earthquake, which restricted electric power, destroyed productive facilities, and interrupted supply lines.  Net foreign demand and inventory run-offs respectively accounted for drags of 0.6 percentage points (ppts) and 1.8 ppts, accounting for roughly two-thirds of the 3.7% plunge of GDP.  Government spending enhanced growth by 0.6 percentage points.  The GDP price deflator was 1.9% lower than a year earlier.

Revised Japanese industrial production in March recorded a 15.5% monthly drop and was 13.1% weaker than a year earlier.  Output fell by 2.0% in the first quarter.  Productive capacity sank 21.5% on month, while capacity use was unchanged.

Japanese stock and bond transactions generated a JPY 1.54 trillion inflow in the week to May 14.

The New Zealand government budget was presented, showing a swing from a deficit of NZD 16.7 billion in the present fiscal year to June but a restored surplus of NZD 1.3 billion just four years later.  A measure of expected inflation in Australia settled back to a five-month low of 3.3% in May from 3.5% in April.  South African wholesale turnover rose 3.5% in March and was 6.9% higher than a year earlier.

Three British indicators were released.

  1. Retail sales volume grew 1.1% in April, topping expectations, and by 2.8% from a year earlier.  The increases excluding automotive fuel were 1.2% on month and 2.7% on year.  Retail sales in February-April, however, were just 0.2% greater than in the previous three months.
  2. The CBI’s monthly survey of industrial trends revealed a much bigger-than-forecast improvement, printing in May at minus 2, nine points better than in April.
  3. The Nationwide consumer confidence index scored a 43 in April, a point less than in March and worse than forecast.

Year-over-year GDP growth in Singapore was revised to 8.3% in 1Q.  GDP in 4Q10 had been 12.0% greater than in the final quarter of 2009.  Hong Kong unemployment in February-April averaged 3.5%, up from 3.4% in 1Q and better than anticipated.  The Filipino current account surplus in April was only half as large as in the previous month. Taiwanese GDP grew 6.6% last quarter according to revised data. 

The Swiss ZEW expectations index weakened sharply to minus 11.5 in May from +8.8 in April.  The franc fell somewhat against most currencies today. Italy recorded an EUR 5.5 billion current account deficit in March, down 13.1% on month and 8.5% on year.  The Dutch 5.0% jobless rate in April was a shade below expectations.

The United States is scheduled today to release the index of leading economic indicators, the Philly Fed manufacturing index, existing home sales, and weekly jobless insurance claims.  Dudley and Fisher of the Federal Reserve have speaking engagements, as do Trichet and Tumpel-Gugerell of the ECB and Bank of Canada Governor Carney.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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