Some Data Surprises

April 17, 2018

There’s been a surprisingly large downward revision in Japanese industrial production during February from an increase of 4.1% reported initially to a zero percent month-on-month change. That flat performance follows a 3.1% drop recorded in January and left output just 1.6% higher than a year earlier. By comparison, industrial production posted a 4.3% on-year advance during the second half of 2017 and a 4.4% increase for last year as a whole.

Capacity utilization in Japan rebounded 1.3% in February from a 3.8% plunge the month before. Capacity was unchanged from a month earlier as well as from a year earlier.

The quarterly 1.4% rise of Chinese GDP in the first quarter of 2018 was the smallest gain since a 1.3% increase in the first quarter of 2016. On-year GDP growth equaled 6.8% for a third straight quarter.

On-year increases in Chinese industrial production of 6.0% in March and of fixed asset investment (7.5% in the first quarter) were less than had been forecast, but the March-on-March increase of 10.1% in retail sales represented a greater-than-anticipated acceleration of consumer spending.

The cloud cast over investor sentiment toward Germany and the whole euro area by hostilities in Syria and President Trump’s threat of import tariffs was apparent in the ZEW Institute’s monthly survey. Investor expectations toward Germany swung to a negative 8.2 reading in April from +5.1 in March, +17.8 in February and +20.4 in the first month of 2018. Likewise, expectations about Euroland fell to a score of 1.9 this month dropped from +13.4 in March, 29.3 in February and 31.8 in January. Perceived current conditions also deteriorated by much more gradually in April.

U.S. data on capital flows compiled by the U.S. Treasury Department revealed that solid net inflows continued in February. There was a net long-term capital inflow of $49.0 billion and January-February combined saw a total net long-term inflow of $110.4 billion. Likewise, the aggregated inflow of both long- and short-term capital was $44.7 billion in February, leaving a two-month total inflow of $167.3 billion, according to the so-called TIC statistics.

British labor market statistics were mixed. There was an 11.6K rise in jobless insurance claims last month to follow February’s increase of 15.1K, but the ILO-basis unemployment rate for the three months ending February declined to a 42-year low of 4.2%. On-year wage growth stayed under the 3.0% threshold and at 2.8% was lower than forecast.

The dollar overnight shows no net movement against the euro, yen or sterling. The greenback edged 0.1% lower relative to the peso and loonie but has risen by 0.2% versus the Swiss franc and kiwi and by 0.1% vis-a-vis the Australian dollar and yuan.

Some large stock market declines were recorded in the Pacific Rim, notably drops of 1.4% in China and Hong Kong, 1.3% in Taiwan, and 1.0% in New Zealand. But the Japanese Nikkei rose 0.1%, and markets in Australia, Indonesia, and Singapore are unchanged. In European trading, share prices are up 0.9% in Germany, 1.1% in Italy, 0.4% in Switzerland and France, 0.3% in Spain, and 0.2% in Great Britain.

Ten-year German bund, British gilt, and Japanese JGB yields are unchanged.

Comex gold has fallen 0.4%, while West Texas Intermediate crude oil is up 0.2%.

Minutes from the Reserve Bank of Australia’s Board meeting earlier this month indicate no inclination to changed the 1.5% Official Cash Rate level soon. The minutes acknowledged the elevation of household debt but do not reflect much anxiety about such. Inflation is expected to rise only gradually.

Italian consumer price inflation was revised down a tenth of a percentage point to 0.8% in March. Italy posted a EUR 3.1 billion trade surplus in February, which was considerably bigger than the surplus of EUR 1.88 billion a year earlier.

On-year growth in Turkish retail sales slowed to a still rapid 8.0% in February from 10.7% in January.

The IMF will be releasing revised macroeconomic forecasts shortly.

U.S. scheduled data releases today cover industrial production, capacity usage, housing starts, and building permits. Chicago Fed President Evans speaks publicly. So will outgoing San Francisco Fed President and incoming N.Y. Fed President John Williams. Canada releases its monthly survey of manufacturing sales, orders and inventories.

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

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