Fire and Rain: Data Deluge and Debt Frustration

July 29, 2011

Still lacking enough votes to pass, the U.S. House of Representatives postponed Thursday’s debt ceiling vote.

Moody’s placed Spain’s Aa2 sovereign debt rating on review for a possible downgrade.

The dollar is higher, not lower, on generalized risk aversion.  It has advanced 0.7% against the euro, 0.6% versus the Aussie dollar, and 0.5% against the kiwi and sterling.  It is unchanged against the Canadian and Swiss currencies and has dipped 0.1% relative to the yen and yuan.

The ten-year Treasury yield is indicated closer to 2.90% than to 2.95%.  Ten-year German bund and British gilt yields fell four and five basis points to 2.59% and 2.92%.  Euroland peripherals are under strain.

Risk aversion continued to hammer equities.  Markets closed down 1.4% in Taiwan, 1.1% in South Korea, 0.9% in Australian and 0.7% in Japan, while in Europe, the Paris Cac, British Ftse, and German Dax have lost an additional 1.2%, 1.0%, and 0.9%.

Oil prices eased 0.6% to $96.89 per barrel.  Gold edged 0.1% higher to $1617.70 per ounce.

Investors will get their first peek at U.S. 2Q GDP, which probably failed to grow even 2%.  Other releases include the Chicago and Milwaukee regional PMIs, the final July University of Michigan gauge of consumer sentiment, and the employment cost index.  Canada will be reporting May GDP, producer prices and raw material prices.  Bullard and Lockhart of the Federal Reserve speak today.

Several Japanese statistics were released.

  • Unemployment unexpectedly rose to 4.6% from 4.5% in May.  Jobs were 0.1% higher than a year earlier for a third straight time.  The job offers ratio unexpectedly improved by 0.02 points to return to March’s 0.63 high for the move.
  • Consumer prices fell 0.2% in June and showed a smaller on-year advance of 0.2%.  Core inflation slowed to 0.4%, while the core core index that also excludes energy remained at 0.1% relative to a year earlier.
  • Tokyo CPI data for July, however, showed a renewed pick-up in prices.
  • Japan’s manufacturing purchasing managers index improved to 52.1 in July from 50.7 in June.  Such had average readings of 49.2 in 2Q11, 50.2 in 1Q11, and 47.5 in 4Q10.
  • Real household spending increased 0.8% last month but posted a 4.2% on-year decline from June 2010.  Real disposable incomes were 6.6% lower than a year earlier.
  • Housing starts and construction orders were 5.8% and 6.0% higher in June than a year earlier.
  • Industrial production climbed 3.9% in June following May’s 6.2% rebound.  Indications for July and August suggest that production then will average 8.0% more than the 2Q mean.  Nonetheless, output fell 4.0% in the second quarter following drops of 0.1% in 4Q10 and 2.0% in 1Q11.  Industrial production, which fell by 1.6% between June 2010 and June 2011, is likely to show little change in the year to 3Q11.  Other monthly June-over-May changes were an 8.5% rise in shipments, a 2.8% decline in inventories and a 7.3% plunge in the inventory-to-sales ratio.  Officials maintained their assessment that industrial production is on a recovery path.  The view was upgraded previously from “appears sluggish” in April and “dropping sharply” in March.

British consumer confidence weakened five points to a reading of minus 30 in June.  On-year U.K. M4 money growth was negative 0.7% in June.  However, mortgage applications that month of 48.4K surpassed May’s 46.4K total and beat forecasts.  net mortgage lending slid GBP 0.1 billion, and net consumer credit rose GBP 0.4 billion in the month.

The preliminary estimate of euro area CPI inflation is 2.5% in July, down from 2.7% in June and still at least 0.6 percentage points above the ECB’s target.

German retail sales volume rose 6.3% in June but was 1.0% smaller than in June 2010.  Sales slid 0.4% in the second quarter and were 1.3% higher in the first halfo of 2011 than in 1H10.

French producer prices slid 0.1% in June but posted a greater 6.1% on-year advance.  French consumer spending rose 1.1% on month and 2.2% on year in June.  Expenditures on manufactured goods firmed 1.2% on month and 1.8% on year.  These results exceeded expectations.

Italian consumer prices rose 0.3% on month and by an unchanged 2.7% on year in July.  Harmonized consumer price inflation slowed to 2.1% from 3.0%, however.  Italian producer prices edged up 0.1% in June and registered a 4.3% increase from June 2010 after a 12-month 4.5% rise in May.

Dutch producer price inflation slowed to 8.9% in June from 10.4% in May.  Greek producer price inflation of 6.6% was also lower than May’s pace of 7.3%.  Greek retail sales were 8.0% below a year earlier in May.  The flash estimate for Spanish CPI inflation was 3.0% in July, same as in June but down from a 2-1/2 year high of 3.5% in April.  Spanish unemployment of 20.9% after 21.3% in 1Q eased marginally last quarter but remained above the 20% threshold.  Spain’s current account deficit widened in May to EUR 3.6 billion from EUR 3.4 billion in April but was smaller than a deficit of EUR 5.0 billion in May 2010.  Hungarian producer prices fell by 0.8% on month and 1.0% on year in June. 

Swedish GDP growth in 2Q11 of 1.0% versus the first quarter and 5.3% from a year earlier surpassed expectations.  Investment was 8.1% higher than in 2Q10.  However, business sentiment slipped to a reading of 16 in 2Q from 25 in 1Q and 31 in 4Q10.  Likewise, Swedish economic sentiment fell 5.5 points in July to 104.4, and consumer confidence dropped 4.7 points to 12.0.

South Korean industrial production rose 0.7% in June and by 6.4% from a year earlier.  Those results were significantly less than forecast and followed gains of 1.7% on month and 8.3% on year in May.  Singapore PPI inflation accelerated in June to 4.4% total and 7.9% for domestic goods. Business sentiment in Thailand improved to 53.1 in June from 50.9 in May.

New Zealand building permits fell 1.4% on month and by 28.0% from a year earlier in June. Australian M3 money fell 0.5% on month and recorded a smaller on-year advance of 8.7% in June.  Aussie private credit grew by 2.7% in the year to June, down from a 3.1% on-year gain in May.

South African private credit and M3 money were 5.3% and 6.0% greater than a year before in June.

Today’s main attention getters will be continuing debt discussions in Washington and the U.S. second quarter national income account statistics.

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

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One Response to “Fire and Rain: Data Deluge and Debt Frustration”

  1. Jimbo says:

    China is about as bad off as the US and is a bigger player in many respects than the European countries. I would like to see more on the Chinese debt to GDP ratio and its implications. Based on my experience with Chinese vendors,I think China is in big trouble also ( but has a unique position of being a dictatorship and having state owned companies).

    Great coverage as usual, but more articles on CHina, India, Brazil, and the rest of Asia would be appreciated.