Plenty of Disappointment to Go Around

July 29, 2016

Second quarter U.S. GDP growth of 1.2% was only about half as much as forecast, due mainly to a big drag from inventories.

Canadian GDP sank 0.6% in May as industrial production there plunged 3.7% on month.

The Bank of Japan produced less stimulus than hoped, limiting its action to an increase of EFT buying but refraining from enhancing JGB purchases or cutting interest rates.

Japanese core CPI inflation became more negative in May at minus 0.5%.

A 1.9% advance in Japanese industrial production in June failed to fully offset May’s drop of 2.6%, leaving the average level in 2Q unchanged from the level in 1Q.

In the year to June, Japanese motor vehicle production, housing starts and construction orders respectively fell by 1.0%, 2.5% and 2.4%.  Real household spending fell 1.1% on month and 2.2% on year in June.  Retail sales rose 0.2% on month after back-to-back 0.1% declines and recorded a June over June decline of 1.4%. Labor statistics showed increased tightness with a lower 3.1% jobless rate.

Consumer confidence in the U.K. slumped 11 points in July to a reading of minus 12, worse than expectations of -8.

French GDP was unchanged last quarter, undershooting expectations of a 0.2% quarterly rise and increases of 0.4% in 3Q15 and 4Q15 followed by 0.6% in the first quarter of this year.  French consumer spending was 0.8% lower in June than a year earlier.

Eurozone GDP grew only half as strongly last quarter (0.3%) as it did in the first quarter of this year.

Eurozone unemployment stayed at an elevated 10.1% in June.

Harmonized CPI inflation in Euroland of 0.2% in July was up from 0.1% in June and -0.1% in May but also unchanged from the 0.2% pace of inflation in the year to July 2015. Core inflation of 0.9% was the same as in May and down from 1.0% in the year to July 2015.

The U.S. employment cost index rose 0.6% last quarter, matching the quarterly increase in 1Q.  The ECI was 2.3% higher than a year earlier.

The U.  Michigan U.S. consumer sentiment index fell to a 3-month low of 90.0 in July from 93.5 in June.

German retail sales volume slipped 0.1% in June.  An encouraging 0.7% increase in May had followed four very weak results in January-through-April.  Retail sales in 2Q were on average 0.3% below the 1Q mean level.

Australian producer prices edged up just 0.1% last quarter after falling 0.2% in the first quarter.  On-year PPI inflation eased to 1.0% from 1.2% in 1Q and 1.9% in the final quarter of 2015.

Swedish GDP grew 0.3% last quarter, the softest gain in three years.

Russia’s central bank did not cut its key interest rate of 10.5% further, releasing a statement that noted a stalled decline in expected inflation but also expressing confidence in a return to the 4% inflation target by end-2017.

Retail sales in Norway fell 0.6% last month and in Greece dropped 2.0% on month in May.

Producer prices in the year to June dropped 3.0% in Italy, 8.0% in Singapore, 2.4% in Austria and 1.3% in Malaysia.  Spanish consumer prices in the year to July declined by 0.6%.

The dollar plunged 2.6% against the yen, 1.7% versus the kiwi, 1.1% relative to the Aussie dollar and Swiss franc, 0.9% vis-a-vis the euro, 0.7% against sterling and 0.3% relative to the yuan.

Gold jumped 1.0% to $1,345.40 per ounce, while WTI oil dropped 1.1% to $40.70 per barrel.

Among 10 year sovereign debt yields, the Japanese JGB leaped nine basis points on the BOJ’s disappointing efforts, while the U.S. and German yields are down by two bps each.  The 10-year gilt is a basis point lower.

The Nikkei was very volatile overnight, first falling more than 1% but closing with a 1.2% net rise.  Stocks fell 1.9% in China but rose 1.7% in Spain and Italy and 1.5% in France.  The FTSE is 0.7% higher.

The DNC convention ended with mixed reviews given to Hillary Clinton’s acceptance speech.

Besides its policy statement, the Bank of Japan released an updated Outlook for growth and prices and a schedule of planned Board meetings in the first half of next year.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express  permission.



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