More Weak Data Reported Around the World

August 9, 2012

China, Japan, Britain and India released data accentuating economic weakness.

Central banks in Japan, Indonesia, and Korea left policy stances unchanged.

The dollar has risen 0.4% against the euro, Swissie and kiwi.  It is up 0.1% versus sterling, down 0.2% against the yen, and unchanged overnight relative to the loonie, Aussie dollar and yuan.

Stocks were mixed in the Pacific Rim but have mostly lost ground in Europe.  Equities gained 2.0% in South Korea, 1.1% in Japan, 1.6% in Taiwan, 1.0% in Indonesia and Hong Kong, but losses were recorded of 1.0% in the Philippines, 0.5% in Singapore, 0.2% in India and 0.1% in Australia.  The German Dax, Spanish IBEX, Paris Cac and British Ftse have lost 0.6%, 0.5%, 0.2% and 0.1%.

Yields on 10-year German bunds and British gilts edged up a basis point.  The JGB is unchanged after climbing in yield yesterday.  Otmar Issing, former chief economist of the ECB, suggested some members of the common currency area may need to leave the group.  The ECB monthly Bulletin was released.

Oil prices rose 0.3% to $93.63 per barrel, while gold is steady at $1615.40 per ounce.

Japanese consumer sentiment slid to 39.4 in July from 40.4 in June.  This was the first sub-50 reading since February and prompted officials to downgrade their assessment of consumer confidence.  Readings below 50 connote more pessimism than optimism.  For the first time since last September, officials also downgraded their view of machinery orders, now claiming such to be trending back and forth between rises and drops instead of on an improving trend.  The assessment followed news that core domestic machinery orders only rebounded 5.6% in June from a plunge of 14.8% in May.  That left core orders down 4.1% for 2Q as a whole, 6.6 percentage points lower than the predicted outcome made three months ago.  Core machinery orders fell by 9.9% between June 2011 and June 2012, and officials anticipate a 1.2% decline further sequential decline this quarter.  Foreign machinery orders meanwhile tumbled 17.1% in 2Q from 1Q and are projected to fall another 5.6% in the third quarter.  Domestic machinery orders are a leading indicator of private business investment.

In other released Japanese data, M2 money rose 2.3% between 2Q11 and 2Q12, while broad liquidity edged up just 0.2%.  Stock and bond transactions last week generated a JPY 251 billion net capital inflow.  Machine tool orders were 6.5% smaller in July than a year earlier.

Industrial production in India was 1.8% weaker in June than a year earlier, defying analysts projections of a very modest on-year increase.

Chinese retail sales, industrial production and fixed asset investment produced weaker-than-expected results in July.

  • Retail sales rose 13.1% on year, following increases of 13.7% in June, 14.1% in May, and 15.2% in April. 
  • On-year growth in industrial production slowed to 9.2% from 9.5% in June and 9.6% in May.  Output for the first 7 months of 2012 surpassed the year-before total by 10.3%.
  • Business investment in January-July was 20.4% greater than a year earlier, down from 20.1% in May and a gain of 23.8% in full-2011.
  • Meanwhile inflation in China continues to recede, further strengthening the case for another monetary easing there.  CPI inflation of 1.8% in July constitutes a 30-month low and was down from 2.2% in June and 6.5% in July 2011.  Producer prices fell by 2.9% in the year to July, their greatest on-year drop since October 2009.  Producer prices had risen 7.5% between July 2010 and July 2011.

Britain’s index of leading economic indicators fell 0.3% in June, and the index of coincident indicators slipped 0.1%.  The U.K. merchandise trade deficit widened 21% on month to GBP 10.1 billion in June.  The Queen’s Jubilee was a factor behind a 4.6% monthly decline in exports.  The goods and services trade deficit rose to GBP 4.31 billion in June from an average deficit in April-May of GBP 3.4 billion.

The Bank of Japan made no changes to its 0-0.1% target interest rate range, nor to planned quantitative easing or its monthly economic assessment.

The Bank of Korea retained a 3.0% 7-day repo rate.  A 25-basis point cut was made at July’s meeting, the first cut since February 2009.

Bank Indonesia kept its key interest rate steady at 5.75%.  As in the cases of the BOJ and BOK, the decision had been expected.  The last rate change was a cut of 25 basis points in February of this year.

Greece reported record joblessness of 23.1% in May, up from 16.8% a year earlier.

New Zealand employment edged 0.1% lower in the second quarter, the first decline since the final quarter of 2010.  The jobless rate rose to a 2-year high of 6.8% from 6.7% in the first quarter.

Australia, by contrast, had surprisingly upbeat labor market data to report.  The unemployment rate slipped back to 5.2% in July from an upwardly revised 5.3% in June, and employment climbed by 14K, topping forecasts and bringing the net increase to 79K over the last five reported months.  The number of full-time and part-time workers both increased in July.

Irish CPI inflation edged lower to 1.6% last month from 1.7% in June.  Czech CPI inflation of 3.1% was down from 3.5% in June.  Dutch CPI inflation, on the other hand, ticked upward to 2.3% from 2.1%.

U.S. and Canadian trade figures will be released at 12:30 GMT.  The U.S. also reports jobless insurance claims and wholesale inventories, while Canadian housing starts and home price data are due.  Peru is holding an interest rate meeting.

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

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