Week Ends with a BOJ Meeting, U.S. and U.K. GDP Revisions, and an EU Banking Plan in which Few Trust

December 20, 2013

The Bank of Japan left its quantitative monetary policy and economic assessment unchanged.  Governor Kuroda believes 2% inflation will be reached by the spring of 2015 despite the coming sales tax increase.

U.S. third-quarter GDP was revised up a half percentage point to 4.1% at an annualized quarterly pace, the fastest rate since the first quarter of 2005.  More inventory investment occurred than estimated at first.  Growth in personal consumption and public-sector spending were revised higher, whereas imports grew more slowly than thought.  The core personal consumption price deflator went up 1.2% between 3Q12 and 3Q13, down from 1.8% in the previous four quarters.

U.S. share prices are up more than a half percent in response to the GDP news.  Stocks rose 0.7%, 0.4% and 0.1% in Germany, Britain and Japan.  Chinese stocks plunged 2.3% as short-term interest rates remained elevated in spite of a belated injection of liquidity.  The PBoC had refrained from lending the money market support for several days previously.

On-year British GDP growth in the third quarter was revised to 1.9% from 1.5%. Quarterly growth was 0.8%, same as in 2Q.

The deal among EU leaders for shared responsibility to depose of troubled banks has not inspired investor confidence.

The dollar fell 0.7% against the Australian dollar and 0.3% versus the kiwi but has otherwise moved 0.2% or less today.

Ten-year Treasury and gilt yields have settled back 3 and 2 basis points.  Gold has recovered 0.9%, but oil prices are steady.

British consumer confidence slipped a point to negative 13, while the latest German consumer confidence index rose by 0.2 to a reading of 7.6.  Consumer confidence in the euro area improved 1.8 points to minus 13.6 in December.  Danish consumer confidence fell 1.1 points this month to 2.9.

Canadian consumer prices rose 0.2% seasonally adjusted in November, but the 12-month increase of 0.9% was less than 1.0% for the seventh time in thirteen months.  Core CPI was flat on month and dipped by 0.1 percentage points to 1.1% on year.  After an unadjusted 3.7% plunge in October, energy prices firmed 0.3%.  Canadian retail sales edged 0.1% lower in October and posted a smaller 3.0% 12-month rate of increase. 

French business sentiment improved unexpectedly by two points to a 26-month high reading of 100 in December.  But business confidence in Belgium worsened 2.1 points to negative 6.4. 

The British current account deficit leaped threefold to a record 20.7 billion pounds last quarter.  Business investment in the U.K. expanded 2.0% in the quarter, surpassing expectations and reversing a sizable drop in 2Q. 

Danish GDP recorded quarterly and on-year growth of 0.4% and 0.5% in 3Q, matching preliminary estimates.  Retail sales went up 1.0% in November but only half as much from a year earlier.  Italian retail sales dipped 0.1% in October and posted a 1.6% 12-month decline.  Italian industrial orders, a choppy data series, fell 2.5% in October after having climbed 2.1% in August and 1.7% in September.

German producer prices declined in November by 0.1% from October and 0.8% from November 2012.  Swedish producer prices fell 0.4% between November 2012 and November 2013.  Icelandic consumer price inflation accelerated to 4.2% in December, but producer prices recorded a sizable 5.9% on-year decline in November. 

The Kansas City manufacturing index weakened 10 points to minus 3 in December.

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

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