Even German GDP Contracted Last Quarter

January 11, 2012

The dollar has firmed overnight by 0.6% against the Swiss franc, 0.5% relative to the euro and sterling, 0.3% versus the Aussie dollar, 0.2% against the yen and 0.1% versus the loonie.  The kiwi and yuan are steady.

Pacific Rim equities were mixed.  Share prices rose 0.9% in Australia, 1.9% in The Philippines, 1.0% in Singapore, 0.8% in Hong Kong, and 0.3% in Japan, but they fell 0.7% in Indonesia, 0.5% in China, and 0.4% in South Korea.  In Europe, the British Ftse and German Dax are 0.3% and 0.2% softer.

The ten-year German bund, British gilt, and Japanese JGB yields dipped by 2, 1, and 1 basis points.  Germany’s auction of 5-year bunds was very well subscribed and produced an average yield of 0.90%.

Gold prices are 0.6% higher at $1641.40 per ounce, while oil slid 0.3% to $101.89 per barrel.

The big story of the day is that even Germany, Euroland’s healthiest economy, had a contraction of real GDP in the fourth quarter of 2011.  Such appears to have fallen 0.25%.  Such a decline is implied by the reported 3.0% growth rate for 2011 as a whole, which followed a 3.7% advance in 2010 and a 5.1% contraction in 2009.  In 2011, exports rose 8.2%, machinery and equipment spending went up 8.3%, construction expanded 5.4%, but personal consumption and government expenditures rose only 1.5% and 1.2%.  Domestic demand accounted for about two-thirds of the 3.0% rise of GDP, and net foreign demand was responsible for the rest.  Inventories exerted a marginal 0.1 percentage point drag.  GDP growth in the four years to 2011 averaged just 0.6% per annum, the same pace as during the five years to 2005.  In between, GDP grew 3.5% per annum in 2006-07.  GDP is projected to climb merely 0.6% in 2012 and to remain slightly below 2% in 2013.  Germany’s budget deficit was only about 1.0% of GDP last year.

Spanish industrial production posted a 7.0% on-year drop in November, the largest decrease since October 2009.

The U.K. goods and services trade deficit of GBP 2.57 billion in November was slightly bigger than forecast and followed a deficit of GBP 1.86 billion in October.  Merchandise trade produced a GBP 8.64 billion shortfall in November.  British shop prices rose 1.7% in the year to December, their smallest increase in 16 months.

Greek harmonized CPI inflation settled back to 2.2% last month from 2.8% in November.  Portugal’s harmonized CPI inflation also eased, reaching 3.5% after a rise of 3.8% in the year to November. Romania’s CPI rose 0.2% in December and 3.1% from a year earlier.

Japanese international reserves fell back $8.9 billion last month after leaping $94.9 billion in November.  Reserves climbed $199.7 billion in 2011 to $1.296 trillion.

Japan’s index of leading economic indicators improved 0.9 points to 92.9 in November, while the index of coincident indicators fell 1.1 points to 90.3.

As expected, the central bank repo rate in Sri Lanka was left unchanged at 7.0%.

Mitt Romney scored a large victory in the New Hampshire Republican primary.  Ron Paul established a hold on second place, and Newt Gingrich and Rich Perry were the big losers.  With 91% of ballots counted, Romney had taken 39%, and Paul secured 23% of the votes.  Gingrich and Santorum, Iowa’s second-place winner in a photo finish, got 9%, while Perry won just 1%.

Evidence emerged of softening labor markets down under.  Australian job vacancies fell 3.3% in November.  New Zealand’s employment confidence index fell 4.6 points to 99.6 last quarter.  But South Korea’s low jobless rate stayed at 3.1% in December instead of edging upward as projected.

Turkey’s current account deficit widened 25% to $5.2 billion in November.

The Federal Reserve Beige Book of regional economic conditions will be reported later today.  Fed officials Evans and Lockhart speak publicly.  In Europe, IMF Director Lagarde is in Paris meeting with French President Sarkozy, and Italian Prime Minister Monti goes to Berlin for talks with German Chancellor Merkel.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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