More Chinese Data, and a Downgrade of Italian Debt

July 13, 2012

Chinese GDP, retail sales, and industrial production figures were about as expected rather than worse than feared.

  • On-year GDP growth slowed to 7.6% last quarter from 8.1% in the first quarter, 8.9% in 4Q11, 9.1% in 3Q11, 9.5% in 2Q11, 9.7% in 1Q11, and 11.8% in the first quarter of 2010.  Quarter-over-quarter growth of 1.8% was the same in 2Q as in 1Q.
  • Retail sales rose 13.7% in the year to June, down from on-year increases of 13.8% in May, 14.1% in April and 15.2% in March.
  • Industrial output climbed 9.5% in the year to June, similar to gains of 9.6% in May and 9.3% in April  but well below a rise of 14.0% in the year to July 2011.
  • One lingering concern is the integrity of Chinese data, since anecdotal evidence has suggested that the slowdown may be harder than official data imply.

The Moody’s credit agency downgraded its assessment of Italian sovereign debt by two notches to Baa2 from A3 and left its outlook at “negative.”  Moody’s cited higher risks of contagion and the continuing elevation of funding costs in Italy and other peripheral Ezone economies.

The dollar shows only modest overnight changes as July’s second week winds down this Friday.  The greenback is 0.1% firmer against the euro and Swiss franc but down by 0.3% versus the kiwi, 0.2% relative to the loonie and Aussie dollar, and 0.1% against the yen and sterling.  The dollar rose 0.2% versus the yuan.

Stocks in an otherwise poor week are up today in Europe by 0.9% in Frankfurt, 0.7% in London, 0.5% in Paris and 0.2% in Madrid.  In the Pacific Rim, equites rose 0.9% in Indonesia, 1.5% in South Korea, 0.8% in Singapore, 0.4% in Australia and hong Kong, and 0.1% in Japan and China.

The already record low 10-year German bund yield slid another two basis points to 1.23%.  But British gilts are steady, and the Japanese JGB has edged up a basis point to 0.78%.

Gold and oil prices show advances today of 0.9% and 0.8% to $1579.80 per ounce and $86.80 per barrel.

Real GDP in Singapore continues to be volatile, dropping 1.1% on quarter in 2Q after a previous sequence of +1.5% in 3Q11, down 2.5% in 4Q11, and +9.4% in the first quarter of this year.  On-year growth last quarter of 1.9% was about a half percentage point less than forecast.  Retail sales in Singapore sank 2.7% in May and recorded only a 0.5% increase from May 2011.

The drop in Japanese industrial production in May was revised to 3.4% from 3.1% reported initially.  Output in April-May was 1.6% lower than the 1Q average level.  Output in May was 6.0% higher than a year earlier.  The inventory ratio fell by 3.7% on month and 2.4% from May 2011.  Capacity fell 2.2% in the month but rose 12.4% on year, and capacity usage dipped 0.1% on month and fell 1.3% on year.

A day after surprising investors with a rate cut, the Bank of Korea released downwardly revised growth and inflation forecasts.  Officials expect GDP to rise 3.0% this year and 3.8% in 2013, and they foresee consumer prices advancing by 2.7% and 2.9% in those years.

Peru’s central bank did not change its 4.25% benchmark interest rate, which has been at that level since May 2011.

Britain’s index of leading economic indicators slumped 0.8% in May. 

Switzerland’s PPI/import price index fell by 0.3% in June and by 2.2% from a year earlier.  The import component was 0.8% lower than in May.  Spanish consumer prices (off 0.2% from May and up 1.9% from June 2011) matched the changes estimated in the earlier preliminary inflation report.  Italian consumer price inflation ticked 0.1 percentage points higher to 3.3% last month.  Greek import prices fell 1.9% on month in May but were 5.1% higher than a year earlier.

Borrowings from the ECB by Spanish banks rose 12.3% in June.  Italy’s 3-year auction produced a lower yield and higher bid:cover ratio than last month’s tender.

The Irish trade balance of EUR 3.45 billion in May was unchanged from April.  The Czech current account swung to an 8.155 billion koruna deficit in May from a CZK 5.275 billion surplus in April.  Industrial production in Hungary posted on-year declines of 0.4% in May and 0.7% in January-May.

U.S. producer price data will be released at 12:30 GMT (08:30 local time).  The U. Michigan index of consumer sentiment also arrives today.  Lockhart of the Federal Reserve speaks publicly.

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

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