Fresh Data to Consider

February 28, 2018

In addition to yesterday’s testimony by Fed Chairman Powell, which if anything raised the odds of more than three interest rate hikes in 2018, investors today have a slew of data releases on this final day of February to consider. Thursday’s data release calendar is very heavy as well.

The Pacific Rim picked up the baton from the steep sell-off yesterday in U.S. equities. Stock markets overnight closed down 1.4% in Japan, 1.7% in Hong Kong, 1.2% in South Korea and 1.0% in China. European equity markets have been a bit more resilient, falling so far by just 0.4% in Switzerland and Spain, 0.2% in France 0.1% in Italy and Germany and not at all in the U.K..

Ten-year British gilt and German bund yields fell by four and one basis points. The 10-year Japanese JGB yield is a basis point firmer but very low at 0.04%.

Among commodities, Comex gold rose 0.3%, WTI oil edged a mere 0.1% higher, and copper has dropped nearly 1%.

A mixed dollar includes drops of 0.7% versus the Swiss franc and 0.3% against the yuan, Aussie dollar and yen but rises of 0.6% relative to sterling, 0.2% against the kiwi and yuan and 0.1% vis-a-vis the loonie.

The Chinese government-compiled purchasing manager indices dropped surprisingly steeply in February. Manufacturing declined 1.0 points to a 19-month low of 50.3, the non-manufacturing PMI lost 0.9 points to a 2-month low, and those moves together contributed to a 1.7-point slide in the composite PMI to a reading of 52.9.

In Asia’s second largest emerging economy, India’s manufacturing PMI dropped 0.3 points to a 21-month low of 52.1 in February, and input price inflation accelerated to a one-year high.

Fourth-quarter GDP data were reported for several economies.

U.S. real quarter-on-quarter GDP growth was revised down 0.1 percentage point (ppt) to 2.5% at an annualized rate. Net exports and and inventories together accounted for a 1.83 ppt drag on GDP growth. The PCE price deflator posted a fourth quarter-over-4Q16 increase of 1.7%, up from 1.5% in the third quarter and 1.6% in the year to 4Q16. Core inflation was 1.5%.

French GDP climbed 0.6% between 3Q and 4Q, not annualized, and by 2.5% from the final quarter of 2016. A separate release revealed that French consumer spending had dropped 1.9% on month, surprising analysts who’d anticipated a small increase.

On-year growth in Hong Kong slowed to 3.4% in the fourth quarter from 3.7% in 3Q, 3.9% in 2Q and 4.3% in the first quarter of last year.

Polish on-year growth of 5.1% was 0.2 percentage points more than seen in the year through 3Q17. Belgian growth also quickened 0.2 ppts, reaching 1.9% in the final quarter of 2017.

Swedish on-year GDP growth accelerated to 3.3% in 4Q from 2.9% in 3Q.

In Finland and Denmark, growth slowed to 2.7% and 1.2% from 3.0% and 1.5% experienced in the year through 3Q.

Indian GDP growth accelerated in quarter-on-quarter terms to 1.6% and also on a year-on-year basis to 7.2%.

Reported price data around the world today were generally subdued:

  • Consumer price inflation in the euro area decelerated for a third straight month, reaching 1.2% in February versus 1.5% last November and 2.0% in February 2017. Energy went up just 2.1% on year compared to a 9.3% jump in the previous year to February 2017. Non-energy CPI inflation slowed to 1.1% from 1.2%.
  • British shop prices in February were 0.8% lower than a year earlier.
  • On-year Italian CPI inflation in February of 0.6% was at a 14-month low.
  • From a 5-year high in January, French CPI inflation dipped 0.1 percentage point to 1.2% in February. French PPI inflation of 0.9% in February was down from 1.7% the month before.
  • Portuguese CPI inflation droppd to 0.6% in February from 1.0% in January and 1.5% in the final two months of last year.
  • Malaysian CPI inflation of 2.7% in January was down from 2.7% in December and well below September’s on-year pace of 4.3%. Producer prices in Malaysia were 1.2% lower in January than a year earlier.
  • Greek PPI inflation slipped 0.2 percentage points to 1.9% in January.
  • Icelandic PPI inflation dropped 0.7 ppts to 1.7% in January.
  • In Cyprus, producer prices were 0.4% lower in January than a year before. Singapore’s negative on-year producer price decline tripled to 1.9%.
  • Canadian PPI inflation of 2.0% in January was down from 2.2% in December and 2.7% in November. The energy component had risen 12.0% on year, while the rest of the producer price index collectively went up by just 0.6%.

Released Japanese data today for January showed a 13.2% year-on-year drop in housing starts, a 3.8% decline in motor vehicle production and, most surprisingly, a 6.6% month-on-month plunge in industrial production. That was almost twice as steep as the expected drop following December’s increase of 2.9%. Industrial production, which had recorded a 4.6% on-year advance in the final quarter of 2017, was just 2.7% greater in January than a year earlier. All in all, the reported prompted officials to downgrade production from “picking up” to “picking up slowly.” Retail sales fell 1.8% on month, slicing the 12-month rate of increase to 1.6% in January from 3.6% in December.

German consumer confidence settled back to a 2-month low in March of 10.8 from a 16-year high of 11.0 in February. Germany also released labor statistics that revealed an as-expected 5.4% jobless rate for a second straight month, a greater-than-forecast 22K decline in the number of unemployed workers, and a slightly smaller on-year 1.4% rise of jobs in January versus a 1.5% rate of increase during the second half of 2017.

British consumer confidence dipped a point to minus 10, a two-month low in February.

Switzerland’s index of leading economic indicators went up 0.4 points to a 2-month high in February but remained 3.4 points below December’s reading. Investor sentiment toward Switzerland fell to a score of 25.8 in February from 34.5 in January and 52.0 in December.

Australian M3 money and private sector credit respectively grew by 4.3% and 4.9% in the year to January. In South Africa, M3 and private domestic credit were 5.8% and 5.5% higher than in January 2017.

The latest reading of -19 in New Zealand business confidence was only half as negative in February as such had been in January.

The Chicago regional purchasing managers index for manufacturing dropped 3.8 points to a 6-month low of 61.9 in February following a 2.1-point decline incurred in January.

Higher mortgage rates and a squeeze on supply were blamed for a sharp  4.7% decrease in U.S. pending home sales last month, which caused their on-year change to swing from +0.5% in December to -3.8% in January. At noon in New York trading, the 10-year Treasury yield was down two basis points on the day, and both the DOW and S&P were virtually unchanged from Tuesday’s sharply lower closing, having squandered an initial bounce.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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