Little Growth and Even Less Inflation

October 23, 2014

As on Wednesday, data released today have accentuated subdued growth and disinflation.

The kiwi fell 1% against the U.S. dollar, which otherwise shows no change against the loonie, Australian dollar or yuan, downticks of 0.2% relative to the euro and Swiss franc, and rises of 0.3% vis-a-vis the yen and 0.2% against sterling.

Share prices dropped 0.9% in China, 0.4% in Japan, and 0.3% in South Korea and Hong Kong.  Markets in Singapore, India and Indonesia strengthened by 1.1%, 0.8% and 0.6%, but in Europe, stocks have fallen 0.6% in the U.K., 0.4% in Italy and Spain and 0.2% in Switzerland.  The German Dax has edged 0.1% higher, and the Paris Cac is unchanged.

Ten-year German bund and British gilt yields slid two basis points apiece.

Comex gold declined 0.6% to $1,238.60 per ounce.  WTI oil firmed 0.3% to $80.72 per barrel.

British retail sales and the core measure that excludes autos each fell 0.3% in September, underperforming expectations.  The British Bankers Association reported only 39,271 mortgage approvals in September, 5% less than in August, 10% smaller than a year earlier and the lowest total since July 2013.  The CBI measure of U.K. industrial trends deteriorated another two points in October after a 15-point slide in September.  The level (-6) was at a 16-month low.

New Zealand consumer prices rose just 0.3% last quarter, depressing the on-year inflation rate to 1.0%, lowest since the second quarter of 2013, from 1.6% in 2Q.  Lower-than-expected inflation reduces the chances of a near-term further hike in the central bank interest rate and depressed the kiwi.

Citing lower oil prices and concerns about global growth, the central bank in the Philippines left its key interest rates unchanged and did not tighten the Special Deposits Account rate or reserve requirements either.  Filipino CPI inflation of 4.4% is at a 3-month low but above the central bank overnight borrowing rate of 4%.  The overnight borrowing rates had been raised by 25 basis points in July and September of this year.

The only good news from China’s preliminary manufacturing purchasing managers survey was that it stayed above the 50 no change threshold and in fact touched a 3-month high of 50.4 in October after back-to-back readings of 50.2.  But production sank to a 5-month low, domestic and foreign orders grew more slowly, and there was evidence of intensifying disinflation.

Euroland’s composite purchasing managers index in October was 52.2, up 0.2 points from September’s 10-month low.  However, output prices fell at their fastest pace since February 2010, jobs contracted, orders hit a 15-month low, and business confidence fell to more than a 1-year low.  The service-sector PMI score stayed at 52.4, which had been its weakest rate of expansion since January, and the manufacturing index was only 50.7. 

The French composite PMI confirmed deepening recession in Euroland’s second largest economy.  It was 48.0, an 8-month low.  Manufacturing (47.3) hit a 2-month low.  Output price inflation was at a 5-year low.

Although Germany’s composite PMI of 54.3 was a 3-month high, orders grew at their slowest pace in more than a year.  The services PMI was at a 4-month low, too, while the manufacturing measure was at a 3-month high but only 51.8. 

Insee, France’s statistical agency, reported the first rise in manufacturing business sentiment in seven months, a 1-point rise and 3-month high of 97.  For services, however, business confidence stayed at a lowly 91 level.

Norway’s central bank retained a 1.5% interest rate, noting increased uncertainty from the slide in oil prices and economic problems of surrounding Europe.

Consumer prices in Singapore dipped 0.1% on month during September and slowed to a 12-month 0.6% rise from 0.9%.  Producer prices in Ireland fell 0.6% in the year to September.

On a brighter note, Japan’s manufacturing PMI rose 1.1 points to 52.8 in October, best since before the sales tax hike, but even that survey had a surrounding cloud in the slowest growth in orders since February.

Japanese stock and bond transactions generated a JPY 892 billion net capital inflow last week, reversing a JPY 416 billion outflow in the previous week.

Spain’s jobless rate last quarter of 23.7% was down from 24.5% in 2Q and the lowest since 4Q11.

Australian business sentiment remained steady last quarter, while business conditions improved two points to a reading of +3 on NAB’s quarterly measure.

Scheduled U.S. data today include weekly jobless insurance claims, the FHFA monthly house price index, the Conference Board’s index of leading economic indicators, and Markit Economics manufacturing PMI measure.  Turkey will be announcing its latest decision on monetary policy, and the preliminary gauge of Ezone consumer sentiment will be reported by Eurostat.

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

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