Divergent Data Reports in Japan and China

February 17, 2014

The lack of U.S. leadership on this President’s Holiday held down currency movement.  The dollar is unchanged against the euro after touching a 3-week low of 1.3725 overnight.  The greenback is also flat against the Swissie, Aussie dollar and sterling.  The dollar is up 0.1% against the yen and kiwi, but down by 0.3% relative to the loonie and 0.1% vis-a-vis the yuan.

Japan’s Nikkei advanced 0.6% despite disappointing GDP data.  Share prices elsewhere in the Pacific Rim are up 1.1% in Hong Kong and Indonesia, 0.7% in China, 0.9% in the Philippines, 0.5% in Australia and India and 0.3% in South Korea.  In Europe, the Ftse has risen 0.8%, but the bourses in Paris, Frankfurt, Madrid, Milan and Zurich show nil change.

Gold ($1,326 per ounce)  is up 0.5% and at a 3-month high.  WTI crude oil is also firmer, up 0.4% at $00.87 per barrel.

The 10-year German bund yield firmed a basis point, while the British gilt yield shed that amount.  The Japanese JGB stayed at 0.59%.

Japanese real GDP grew only 0.3% (1.0% annualized SAAR) in 4Q13, about a third as much as forecast.  Nominal GDP went up 0.4%, half the expected advance.  Real GDP growth in 2013 of 1.6% was little different from 1.4% in 2012.  Growth in the three-year 2011-13 period averaged less than 1.0% per annum, but the increase between the final quarters of 2012 and 2013 was 2.7% after a dip of 0.3% in the year to 4Q12.  Last quarter saw a 2.2 percentage point drag from net foreign demand on the annualized GDP growth rate.  Imports soared 14.9% annualized between 3Q and 4Q, while exports went up only 1.7%.  Government spending slowed sharply as public investment rose 9.3% saar after gains of 31.9% in 3Q and 30.3% in 2Q.  Private non-residential investment, personal consumption, and housing climbed at annualized rates of 5.3%, 2.0%, and 5.3%, beating 3Q-over-2Q results in each case.  The 1.0% annualized GDP growth was very similar to a 1.1% gain in 3Q but less than a fourth as much as the pace during the first half of 2013.  The GDP price deflator recorded an on-year decline of 0.4%, twice as much as forecast and following a drop of 0.7% in the year to 4Q12.  All this news, coming just six weeks before Japan’s national consumption tax is to rise to 8% from 5%, raises new questions about whether Abenomics is stimulating the economy enough. 

The Bank of Japan Board began a two-day policy meeting today.  Meanwhile, Japanese industrial production growth for December was revised down 0.2 percentage points to 0.9%.  December output was 0.6% greater than the 4Q average level and 7.1% higher than in December 2012.  Industrial production posted quarter-over-quarter gains in each quarter of 2013, but because of the 2012 recession, output in 2013 as a whole was still 0.8% lower than in 2012.  Capacity usage in December was 2.2% higher than in November and 8.8% larger than a year earlier. 

Investors were relieved to learn that new Chinese bank loans jumped 1.32 trillion yuan in January, 20% more than forecast.  Lending in January tends to go up more than in any other calendar month of the year because of credit demand ahead of the Lunar New Year, but this January saw the largest increase since 2010.  Outstanding loans were 14.3% greater than a year ago.  M2 money growth, on the other hand, slowed to 13.2%, a 20-month low, from 13.6% in the year to December.  M1 grew only 1.2%, way less than the 9.3% December-over-December rise.

New Zealand’s performance of services index (PMI) improved 0.6 points to a six-year best reading of 58.1.  Retail sales in this economy went up 1.2% last quarter and by 3.9% between 4Q12 and 4Q13.

Australian motor vehicle sales fell last month by 3.5% compared to December and 3.0% versus a year earlier.  Turkey’s jobless rate of 9.9% in November was the same as in the previous month.

Real GDP in Thailand slowed sharply to a 0.6% on-year rate from 2.7% in the year to 3Q, prompting Thai officials to revise projected GDP growth in 2014 downward to 3.1%.  Singapore’s trade surplus narrowed to SGD 3.97 billion in January, 6% less than in the prior month.

Last Friday, officials in Russia kept monetary policy unchanged.  The Monetary Board at the Central Bank of Sri Lanka announced today that their 6.5% deposit rate and 8.0% lending rates would likewise stay unchanged.

The British Rightmove house price index jumped 3.3% this month, most in over six years, and recorded an on-year 6.9% increase, which is the most in six years.

Danish producer prices rose 1.0% between January of 2013 and last month. 

European finance ministers are meeting today and tomorrow.  When the U.S. market returns from holiday tomorrow, the Empire State manufacturing index, National Association of Home Builders housing index, and Treasury Department data on international capital flows will get reported.  British consumer and producer prices get released on Tuesday as well, and so do Canadian existing home sales.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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