Barrage of Data and a Surprising Russian Interest Rate Cut

January 30, 2015

Russia’s one-week central bank auction rate was cut by 200 basis points to 15.0%.  Such had been raised by 900 bps during November-December.  Officials attribute the spike in inflation to ruble depreciation that will not continue and expressed concern about slowing growth.

U.S. quarterly GDP growth slowed to 2.6% last quarter from 5.0% in 3Q.  Calendar year growth of 2.4% in 2014 was little different from 2.2% in 2013 and 2.3% in 2012.  Without the boost from increasing inventory accumulation, growth in 4Q would have been less than 2.0%.  The personal consumption price deflator contracted 0.5% between 3Q and 4Q and posted an on-year rise of 1.1% in 4Q14 versus 1.0% in 4Q13, 1.6% in 4Q12, and 2.7% in 4Q11.

The quarterly U.S. employment cost index posted a slightly slower 0.6% quarter-on-quarter advance in 4Q14 than in 4Q13 and the same on-year increase of 2.2%.

The midwestern January purchasing manager indices produced mixed results.  Milwaukee’s PMI dropped to 51.60 from 57.61 in December and 68.93 in November, whereas Chicago’s survey improved to 59.4 from 58.8 the month before.

The Reuters/U. Michigan consumer sentiment index for January was revised down 0.1 to 98.1 but still exceeded December’s score by 4.5 points and November’s by 9.3 points.  A dichotomy between personal consumption and corporate activity was also reflected in the aforementioned GDP figures.  Consumption grew 4.3% last quarter, while non-residential investment growth slowed to 1.9% from 8.9% in 3Q.

Japanese industrial production climbed 1.0% last month and was accompanied by a forecast increase of 6.3% this month.  Officials upgraded their assessment of output to “signs of increasing at a moderate pace.”  Japan’s jobless rate dipped 0.1 percentage point to 3.4%, lowest since August 1997.  Jobs rose 0.6% on year, and the job offers-to-seekers ratio indicated the healthiest labor market in over 20 years.  But the household spending index posted another on-year drop in December, this time of 3.4% after 2.5% in November.  Motor vehicle output (-2.5%) and housing starts (-14.7%) also recorded on-year declines in December, while construction orders growth slowed to 7.5% following on-year advances of 16.9% in November and 15.7% in October.

Japanese core CPI inflation slowed to a 9-month low of 2.5% in December, which translates into just 0.5% when the effect of last April’s sales tax hike also is excluded.  On-year Tokyo core inflation slid 0.1 percentage point further to 2.2% in January, a 10-month low.

Euroland consumer price inflation was negative 0.6% in January, reflecting an 8.9% on-year plunge in energy.  Inflation had been at –0.2% in December and +0.8% in January 2014.  Core inflation eased to 0.6% from 0.7% in December and 0.8% in January 2014.  The euro area jobless rate eased 0.1 percentage point to 11.4% in December, a 28-month low. 

German retail sales volume rose 0.2% in December and 4.0% from a year earlier.  Such climbed 1.4% on average in 2014 after minuscule 0.1% upticks in both 2012 and 2013.  Greek retail sales recorded both a month-on-month and year-over-year drop of 1.5% in November.  In Portugal, retail sales rose 1.2% in the year to December, but industrial production dropped by 3.5%.

French producer prices dived 0.9% on month in December, sending the 12-month rate of PPI deflation to 2.9%.  French consumer spending rose just 0.5% between December 2013 and December 2014.

Spanish GDP advanced 0.7% between 3Q and 4Q14, the best quarterly pace since the final quarter of 2007, and average growth in 2014 of 1.4% was positive for the first time in six years.  Austrian GDP stagnated last quarter as slid 0.1% compared to the 4Q13 level.  Belgian GDP edged 0.1% higher last quarter and registered a 0.9% rise from the final quarter of 2013.

Consumer confidence in Britain improved much more than assumed in January, rising five points to +1 according to the GFK measure.  British M4 money contracted by a smaller 1.6% in December, and mortgage approvals of 60.3K surpassed analyst expectations.

Canadian real GDP unexpectedly contracted 0.2% in November because of a 1.2% slide in industrial production that month.  GDP was 1.9% higher than a year earlier, a deterioration from on-year growth of 2.3% in October.

Australian producer prices ticked 0.1% higher last quarter and eased 0.1 percentage point in year-over-year terms to 1.1%.  Import prices climbed 4.1%, but domestic producer prices edged down 0.1% on quarter and rose just 0.9% on year, down from 1.6% in the prior four quarters to 4Q13.  Australian M3 money and private credit posted 12-month advances of 7.7% and 5.9% in December, similar to November results.  In New Zealand, M3 money grew 6.3% on year in December, but building permits ended 2014 with a 2.1% month drop. 

The dollar is 1.0% stronger today against the loonie but has depreciated by 0.7% relative to the yen.  The dollar is up 0.5% versus the kiwi, 0.3% against sterling and the Swiss franc, 0.2% vis-a-vis the euro and 0.1% against the yuan and Australian dollar.

The DJIA opened lower by around 0.5%.  Stocks fell 1.4% in China and 1.7% in India but rose 0.4% in Japan and 0.3% in Australia.  Equities are down 0.3% in Spain and Germany and 0.2% lower in Italy and Britain.

Ten-year sovereign debt yields are considerably lower , with drops of 8 basis points in U.S. treasuries, six bps in British gilts, and a basis point in Japanese JGBs.

Among commodities, oil and gold are up 0.7% and 0.8% at $45.35 per barrel and $1,265.50 per ounce.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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