Quarter-End Finds Focus on Brexit, Sino-U.S. Trade Talks and a Data Shower

March 29, 2019

Today was to have been Brexit Day, but it appears the Prime Minister May’s plan will be defeated in parliament for a third time. More confusion ahead.

The United States and Chinese trade talks haven’t yet sealed a deal, but one seems to be getting a lot closer. Many pundits on such matters doubt it will make any enduring impact on trade relations between the two countries.

The dollar was narrowly mixed overnight, showing no change versus the euro, Swiss franc or kiwi, sliding 0.4% against the yuan and peso, 0.3% relative to sterling, and 0.1% vis-a-vis the loonie and Aussie dollar but gaining 0.2% on the yen.

Share prices soared 3.2% in China, 1.8% in Taiwan, 1.0% in Hong Kong and 0.8% in Japan and New Zealand. Stocks are so far up 0.4% in the U.K., France, Switzerland and Spain but 0.2% in Germany.

Ten-year sovereign debt yields recovered 2 basis points in Germany and a basis point each in the United states and Japan but show big declines nonetheless for the first quarter.

West Texas Intermediate crude oil rose 1.1% and is back very close to $60 per barrel. Gold is trading somewhat below $1,300 per ounce despite a 0.1% overnight uptick.

Released Japanese data were more upbeat. Industrial production rose 1.4% in February but still 1.0% lower than a year earlier. Japan’s jobless rate declined 0.2 percentage points to a 5-month low of 2.3% in February, while Tokyo core CPI inflation (1.1%), retail sales (0.4%), motor vehicle production (7.0%) and housing starts (4.2%) all recorded positive year-on-year gains last month. Construction orders, however, were 3.4% lower than in February 2018.

German import price inflation doubled to a 2-month high of 1.6% in February but remained just a third as much as its reading last October.

German retail sales volume, which had been projected to post a 0.9% drip, instead rose 0.9% in February, almost doubling the 12-month rate of increase to 4.7%. German labor statistics also reflected resilience. On one measure, the unemployment rate fell to 3.1% in February, least since March 1980. On separate data reported by the Bundesbank, the number of unemployed workers dropped by a greater than forecast 20K last month, and jobs were 1.0% higher in January than a year earlier.

British GDP growth of 0.2% on quarter was only a third as much in the fourth quarter as it had been in 3Q. This lowered on-year GDP growth to 1.4%, a joint low going all the way back to the second quarter of 2012. Average GDP growth in 2018 was also 1.4%, down from 1.8% in 2017 and 3.1% in 2014. Britain’s current account deficit of GBP 23.7 billion in 4Q18 was the biggest quarter deficit of last year.

The British Nationwide house price index in March was 0.7% higher than a year earlier. That compares to gains of 2.1% in the twelve months through March 2018 and 3.5% in the year to March 2017. But in light of the train wreck that is Brexit, it was surprising to see that consumer confidence in the U.K. didn’t weaken further during March.

French consumer price inflation eased to a 17-month low of 1.1% in March. Monthly consumer spending in France fell 0.4% in February from January and by 1.8% compared to a year earlier.

Italian CPI inflation remained steady at 1.0% in March, matching its average pace in December-February but down from 1.6% last October-November. Italian producer prices dipped 0.1% in February, trimming the 12-month rate of PPI increase to an 8-month low of 3.1% from 3.4% in January and 5.8% last October.

Revised Spanish GDP figures for last quarter clipped 0.1 percentage point off the preliminary estimates of quarter-on-quarter and year-on-year growth. The data now show GDP rising 0.6% from 3Q and 2.3% from the final quarter of 2017. Calendar year growth slowed to 2.6% from 3.0% the year before.

Danish GDP expanded twice as rapidly in 4Q18 (0.8%) than in 3Q, resulting in an unchanged 2.6% on-year advance.

Portuguese PPI inflation held steady at 0.9% in March. Filipino PPI inflation slowed to 3.6% in February from 4.3% in January. Austrian producer prices were flat on month. On-year PPI inflation of 1.6% was the same as in January but half as much as 3.4% in October. Hungarian producer price inflation of 2.7% in February was down from 3.8% in January and 6.4% in October.

The Swiss index of leading economic indicators rose 4.4 index points in March to a four-month high.

Spain’s January current account swung to a EUR 1.47 billion deficit in January from a EUR 4.67 billion deficit in the final month of 2018.

Turkey’s trade deficit in January-February of $4.6 billion was roughly 70% smaller than a year earlier.

In February 2019, industrial production and retail sales in South Korea declined by 2.7% and 2.0% from levels a year earlier.

On-year growth in Australian M3 money and private sector credit was at 3.0% and 4.2% in February. M3 and private credit in South Africa expanded in the same 12-month period by 5.3% and 6.03%.

Consumer confidence in New Zealand between January and March held steady on balance, which is surprising in light of business sentiment being at a 6-month low and the recent mass shooting on the South Island.

On the central banking front, St. Louis Fed President Bullard thinks the recent soft patch in U.S. data will be temporary. Dallas Fed President Kaplan said it’s too soon to even consider if rates ought to be cut. And the Bank of Mexico’s latest monetary policy review left the overnight interbank rate target unchanged at 8.25% and released a statement that called growth low and downwardly biased and predicted that inflation — now at 3.95% overall and 3.51% on an underlying basis — will be converging on target under the current prudent monetary policy stance.

Canadian monthly real GDP, which is compiled from the supply side, advanced by a greater-than-forecast 0.3% in January, more than in any of the five previous months. Canadian PPI inflation rose 0.2 percentage points in February to 1.2%.

U.S. personal income (+0.2% on month) rose less sharply than expected in February. So did personal consumption spending (0.1%) in January. 12-month increases in the PCE price deflator and core PCE price index decelerated more than anticipated to 1.4% and 1.8%, respectively.

U.S. new home sales jumped 4.9% on month to an 11-month high in February, and the U. Michigan/Reuters consumer sentiment index in March was revised upward to a 5-month high of 98.4. But the Chicago regional purchasing managers index dropped more than forecast in March to a 2-month low of 58.7 from a three month-high in February of 64.7.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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