A Mixed Bag of GDP Figures and Leaked Yellen Testimony

November 14, 2013

Japanese GDP expanded 1.9% at an annualized rate between 2Q and 3Q, down from 3.8% in the second quarter but a shade stronger than expected.  The GDP price deflator was 0.3% lower than a year earlier.  On-year GDP growth more than doubled to 2.7%.  Among components of demand, consumption rose 0.4%, nonresidential investment climbed 0.7%, public investment leaped 28.7%, and overall public-sector demand advanced 6.5%.  Inventories augmented growth by 1.8 percentage points, but net exports exerted a 1.4-percentage point drag.

Janet Yellen’s confirmation hearing is set to begin at 15:00 GMT, but her written testimony was leaked overnight.  Obama’s nominee for Fed Chairwoman believes the current aggressive stimulus offers the best route to eventual policy normalization and is justified by excessive unemployment and sub-target inflation that will continue for some time longer.  The testimony was expected to be dovish and is.

Euroland GDP growth slowed somewhat more sharply than forecast last quarter to 0.1% from 0.3% in 2Q.  GDP was 0.4% below its year-earlier level.  Negative growth in the quarter was seen in France (0.1%), Cyprus (0.8%), and Italy (0.1%).  Positive quarterly growth was experienced in Germany (0.3%), Spain (0.1%), Belgium (0.3%), Austria (0.2%), the Netherlands (0.1%), Portugal (0.2%) and Finland (0.4%).  Greek GDP was 3.0% lower than in 3Q12, continuing a streak of negative on-year growth since the summer of 2008.

The dollar has strengthened overnight by 0.7% against the yen and touched 100.05.  The dollar also gained 0.5% against the Swiss franc and Aussie dollar, 0.4% versus the loonie and kiwi, 0.3% relative to the euro but just 0.1% relative to sterling.  The yuan is steady.

Share prices climbed by 2.1% in Japan, 1.5% in Indonesia, 1.0% in India, 0.8% in Hong Kong and Singapore, 0.7% in Australia and China and 0.4% in Taiwan.  European equity moves have been mixed, with drops of 0.9% in Italy and 0.4% in Spain but gains of 0.8% in Germany and 0.5% in both Paris and London.

The 10-year German bund and British gilt yields are a basis point lower, while the 10-year JGB is up a basis point.

Gold rose 1.2% to $1283.80 per ounce.  Oil is 0.2% softer at $93.70 per barrel.

The string of surprisingly buoyant British data was broken by news of a 0.7% drop in retail sales last month. Core retail sales fell by 0.6%.

The Bank of Korea retained an unchanged bank rate of 2.5% as expected.  It’s been at that level since a 25-basis point cut in May.  There were also cuts of that amount in July and October of 2012.  Low inflation and a negative output gap continue.

Japanese industrial production was revised to show a 1.3% advance in September.  The preliminary estimate had been 1.5%.  Capacity use climbed 1.2%, while capacity went up 0.2%.

Motor vehicle sales in Australia dropped 0.7% on month and 3.1% on year in October.  Expected Aussie inflation dipped below the 2-3% target corridor to 1.9%.

New Zealand retail sales, like British retail sales figures, were disappointing.  Volume climbed just 0.3% in 3Q, a third as much as forecast.  But New Zealand’s business purchasing managers index improved to 55.7 in October from a 54.3 reading the month before.

Chinese short-term money market rates jumped to a 2-week high after the central bank there failed to inject liquidity.

The Swiss PPI/import price index in October fell 0.4% on month and 0.3% on year.  This deceleration from no change in the year to September surpassed expectations.  Finnish retail sales volume was 1.2% weaker in September than a year before.

In Eastern Europe, GDP in 3Q rose 0.8% (1.7% on year) in Hungary and 0.6% (1.7%) in Poland but fell 0.5% (1.6%) in the Czech Republic.

Wholesale turnover in South Africa fell 0.3% in September but was 8.3% greater than in September 2012.

Scheduled U.S. data to be released today feature the trade deficit, productivity, unit labor costs, and weekly jobless insurance claims.  Canada reports trade numbers and home prices.  Main event will be the Yellen testimony before the Senate Committee.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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