Japanese GDP and FOMC Minutes

May 20, 2015

Japanese first-quarter real GDP growth of 2.4% at an annualized rate (SAAR) was the second increase in a row, the best quarter since 1Q14, and faster than street expectations of 1.5%.  Growth last quarter was powered by stronger-than-predicted personal consumption (1.4%) and inventory building that augmented GDP growth by 2.0 percentage points (ppts).  Net exports exerted a drag of 0.7 ppts, in contrast, and public sector spending depressed GDP growth by 0.2 ppts.  Real GDP in the first quarter was 1.4% lower than in the first quarter of 2014, and GDP growth over the two years since Abenomics was launched averaged only 0.1% per year, which was less than the 0.5% rise in the year to 1Q13.  The GDP price deflator advanced 3.4% on year, thanks to the April 2014 consumption tax hike to 8% from 5%.

In other released Japanese data this Wednesday, supermarket sales posted their first on-year increase of 2015 in April, a rise of 6.4% following March’s decline of 8.6%.  And the index of leading economic indicators for March was revised upward to a six-month high of 106.0 from 105.5 reported originally and 105.3 in February.  The index of coincident economic indicators was revised lower, however, and at a 19-month low of 109.2.  On-year growth in machine tool orders of 10.5% in April was considerably less than gains of 14.9% in March, 28.8% in February, 20.4% in January and 33.9% in December.

Today’s main upcoming event will be the release of FOMC minutes by the Fed, which may shed further light on the likeliest timing of the first federal funds rate hike.  Chicago Fed President Evans earlier today reiterated his wish not to see a rate hike before early 2016, but he is one of the Open Market Committee’s most dovish members and not representative of the group’s consensus.

U.S. mortgage applications fell 1.5% last week on top of a 3.5% drop in the prior week, and the 30-year fixed mortage rate crept another four basis points higher to 4.04%.

Minutes from the Bank of England’s May 7-8 meeting revealed another unanimous vote for unchanged policy settings but showed that two of the nine policymakers felt the choice between unchanged policy and a small interest rate hike was finely balanced.  The Monetary Policy Committee is looking beyond sub-zero inflation, as it expects a substantial acceleration later this year and estimates slack in the economy to be currently only 0.5%.

The dollar has slipped 0.4% against sterling but otherwise shows overnight gains of 0.4% relative to the kiwi and euro, 0.3% vis-a-vis the Australian dollar, 0.2% versus the yen, and 0.1% against the Swiss franc.  The loonie and yuan are steady.

Share prices rose 0.9% in Japan and South Korea, 0.7% in India, 0.5% in China, and 0.4% in Indonesia.  In Europe, however, stocks have dipped 0.4% in Greece, 0.3% in Germany, 0.1% in France and 0.2% in Italy.  The Ftse and Swiss Market Index are 0.1% firmer.

The 10-year British gilt yield rose four basis points to 1.98%.  The German bund is steady, and the U.S. Treasury yield has settled partly lower.

The West Texas Intermediate oil price rose 0.9% to $58.52 per barrel.  Comex gold is up 0.2% at $1,208.90 per ounce.

The Central Bank of the Republic of Turkey made no changes to its one-week repo rate of 7.50%, overnight lending rate of 10.75%, or overnight borrowing rate of 7.25%.

Construction output in the eurozone rose 0.8% on month in March and 0.3% between 4Q14 and 1Q15.  The March level was still 2.7% lower than a year earlier.  Gains of 2.1%, 2.0% and 2.7% in Portuguese, German and Dutch construction dominated the monthly change in March, offsetting Spain’s decline of 1.4%.

German producer prices edged up 0.1% for a third straight month in April, trimming the 12-month decline to 1.5%. Energy prices dropped 4.4% on year, while all other producer prices collectively edged down only 0.3%.

Mainland GDP in Norway increased 0.5% last quarter, while total GDP including Offshore oil production went up 0.2% after a gain of 0.9% in the final quarter of 2014.

Sweden’s jobless rate stayed at 7.8% in April.  Icelandic consumer prices slid 0.3% between April 2014 and last month.  Polish producer prices and retail sales fell 2.6% and 1.5% in the year to April, while industrial output climbed 2.3%.

The Swiss ZEW expectations index improved to -0.1 in May from -23.2 in April and -37.9 in March.

Spain’s trade deficit EUR 5.32 billion last quarter was 15% narrower than that in the first quarter of 2014.

South African retail sales dipped 0.5% on month in March and posted an on-year increase of just 2.0%.  CPI inflation in that economy accelerated to a 4-month high of 4.5% in April from 4.0% in March.

India’s index of leading economic indicators rose 0.6% in April following a 1.1% slide in March.

Australian consumer sentiment rose 6.4% in May, rebounding form a 3.2% drop in April, according to the Westpac index.

Wholesale turnover in Canada advanced 0.8% in March following a 3.5% slide between December and February. Such sales were 5.6% greater than a year earlier.

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

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