Better-than-Forecast Chinese Data Tops a Light Start to the Week

July 17, 2017

Despite slight appreciation overnight, the dollar remains at rather soft levels such as 1.1445 per euro and JPY 112.60. 

Commodity prices are somewhat firmer. WTI oil, for instance, rose 0.4%, and Comex gold is up 0.2%. But commodity-sensitive currencies have dipped. The Canadian and Australian dollars softened 0.1% and 0.2%. The kiwi lost 0.3%, responding to dovish remarks by the deputy governor of the New Zealand’s central bank expressing a preference for some depreciation.

Japan’s market was closed in observance of Marine Day. In other stock markets around the Pacific Rim, equities fell 1.4% in China and 0.2% in Australia but rose 0.7% in New Zealand, 0.5% in Hong Kong, 0.4% in South Korea and Singapore, and 0.3% in India. Equities are up 0.3% in the U.K. and Italy but unchanged in Germany, Spain, and Switzerland.

10-year sovereign debt yields dipped two basis points in Spain, Italy, and Great Britain.

Led by stronger consumption, Chinese GDP growth accelerated last quarter, climbing 1.7% from the first-quarter level. GDP in the first half of 2017 was 6.9% greater than a year earlier, suggesting that the government’s objective of 6.5% for the year as a whole will be exceeded rather comfortably.

Chinese retail sales and industrial production data for June were also better than forecast. On-year growth in retail sales of 11.0% followed 10.7% in both April and May and was the best monthly result of the first half of 2017, when sales posted a rise of 10.4%. Industrial production growth rebounded to a 12-month increase in June of 7.6% from 6.5% recorded in each of the previous two months. Fixed asset investment, in contrast, grew more slowly in 2Q than 1Q and registered an 8.6% advance in the first half as a whole. The data, if accurate, confirm that progress is being made rotating the source of Chinese growth increasingly toward personal consumption and away from capital spending. Exports continue to contribute importantly to growth as well.

Indonesia’s trade surplus in June was almost three times larger than in May.

New Zealand’s Performance of Services index slipped 0.2 points to a 2-month low of 58.6 in June. During the first half of 2017, the fastest growth in service-sector activity was registered in January when the index was 59.5.

Final Euroland consumer price data for June confirm the preliminary indications that the total harmonized CPI recorded a 1.3% on-year advance, down from 1.4% in May, 1.9% in April and 2.0% in February but up from 0.1% in June 2016. Core inflation rose to 1.1% from 0.9% the month before, but the 12-month rise in energy prices declined to 1.9% in June from 4.5% in May. Food price inflation edged marginally lower and the 12-month increase in non-energy industrial goods remains minuscule at 0.4%. June inflation in the four largest member economies was at 1.6% in Spain, 1.5% in Germany, 1.2% in Italy and 0.8% in France.

The British Rightmove house price index showed continuing softness, edging up just 0.1% on month in July and 2.8% on year.

Danish producer prices dived 1.3% on month in June, slashing their 12-month rate of increase to just 0.5%.

Today is not a big day for U.S. data releases, limited to just the monthly Empire State manufacturing survey. Now at the start of a ninth year of recovery, U.S. economic growth keeps chugging along. Unemployment is below 4.5%, but price and wage inflation remain surprisingly tame. The sea-change in U.S. federal government policy on many fronts remains unsettling, and President Trump’s legal problems also continue to erode his approval rating, which stands just marginally above 33%.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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