Several Instances of Weak Data Released Today

August 13, 2014

Japanese real GDP fell 6.8% annualized in the second quarter.  The decline reversed the first-quarter gain but was not quite as much as analysts had feared.  Because of a 20.5% dive in imports, net exports enhanced the growth rate by 4.4 percentage points, and involuntary inventory building accounted for another 3.9 percentage points of growth.  Private consumption plunged 18.7% and subtracted 12.4 percentage points of GDP growth, and residential and non-residential investment were also big negatives.  GDP was 0.1% lower than in the second quarter of 2013, and the GDP price deflator went up 2.0% on year.

Chinese bank lending grew just 385 billion yuan in July, the smallest in 54 months and half as much as forecast.  On-year growth in M2 of 13.5%, M1 of 6.7% and M0 of 5.4% were also below expectations.  So were the reported on-year advances of industrial production (9.0%), retail sales (12.2%), and fixed asset investment (17.0% in January-July).  Each of these showed deceleration from June.

British wages including bonus pay were 0.2% lower in May-July than a year before, while regular pay only went up just 0.6%.  Because of the Bank of England’s focus on measures of labor market slack, extended weakness in the growth of wages was the main takeaway from labor statistics despite news of a 33.6K drop in the claimant count of unemployment and a lower ILO-basis unemployment rate of 6.4% in 2Q14.

The Bank of England’s quarterly Inflation Report raised projected 2014 GDP growth and CPI inflation marginally to 3.5% and 1.9% but had a less hawkish tone than analysts were anticipating.  While slack has been reabsorbed faster than assumed, new estimates indicate that the amount of slack to be reabsorbed was initially also greater than expected.  Governor Carney stressed that rate normalization would occur at a very gradual pace of only just over a quarter percentage point per half year and that the next cyclical peak would be barely above 2.0%.

Industrial production in the euro area fell by 0.3% in June on top of May’s 1.1% slide.  Output was unchanged from June 2013 and also unchanged between 1Q and 2Q.  Analysts were expecting output to have increased slightly in the month.

U.S. retail sales were unchanged on month in July, trimming the 12-month increase to 3.7% from 4.3%.  This result, too, fell below market expectations.  U.S. mortgage applications dropped 2.7% last week after a 1.6% rise the week before.

German wholesale prices edged up 0.1% on month but fell 0.7% on year in July.  Final German consumer price data confirmed a 0.8% 12-month pace, lowest since February 2010.   According to the Conference Board, Germany’s index of leading economic indicators dipped 0.1% in June, and the index of coincident economic indicators merely reversed May’s drop of 0.2%.

Greek real GDP slipped 0.2% between 2Q13 and 2Q14.  Dutch retail sales fell 1.5% between June 2013 and June 2014.

French consumer prices were just 0.5% higher than a year earlier in July.  Spanish CPI inflation in July stood at negative 0.3%.

South African retail sales sank 0.4% on month and were unchanged on year.

The dollar has declined by 0.5% and 0.4% against the Australian and New Zealand dollars.  Consumer confidence in Australia rose 3.8% on month to an 11-month high of 98.5.  Aussie labor cost inflation stayed level at 2.6% in the second quarter.

The dollar otherwise rose by 0.6% versus sterling and 0.1% against theyen but is down 0.1% relative to the euro, Swissie, and yuan. The loonie is steady.

Share prices advanced 1.0% in South Korea, 0.7% in Indonesia and Taiwan, 0.8% in Hong Kong and 0.4% in Japan.  Equities show gains of 0.9% in Germany, 0.6% in France, and 0.4% in Italy but just 0.1% in Britain.

Gold has firmed 0.3% to $1,314.30 per ounce.  Oil is steady at $97.40 per barrel.

Ten-year Treasury and British gilt yields are 2 and 3 basis points lower.  The 10-year German bund is up a basis point, and the 10-year JGB is unchanged at 0.50%.

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



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