Several Japanese Data Reported but Investors Marking Time Ahead of U.S. Figures

April 26, 2019

Shortly before the first release of U.S. first-quarter GDP, the dollar showed no net overnight change against the euro, loonie or sterling. There were 0.1% upticks relative to the yen, Swiss franc and peso, a 0.1% downtick vis-a-vis the yuan and drops of 0.5% against the kiwi and 0.3% versus the Australian dollar.

European share prices are barely changed. In the Pacific Rim, equities fell 1.2% in China, 0.8% in Taiwan and New Zealand, 0.5% in South Korea and 0.2% in Japan but rose 0.9% in India and 0.4% in Indonesia.

Ten-year sovereign debt yields slipped a basis point in the U.S., Germany and Japan.

Gold rose 0.3% overnight, but WTI oil sank 1.9% to $64.00 per barrel.

Japan’s unemployment in March advanced 0.2 percentage points to 2.5%, and the previously rising job offers-to-seekers ratio remained stalled at 1.63. Employment, which as recently as November had posted on-year growth of 2.4%, showed a 1.0% 12-month increase in March.

A 0.9% month-on-month drop in Japanese industrial production last month versus expectations of a slight uptick persuaded officials to downgrade their assessment of this key trend from “pausing” to being “in a weak tone recently.” Compared to a year earlier, industrial production sank 4.6% in March and 1.8% for the whole first quarter. Output growth in fiscal 2018 was barely positive at +0.2%.

Japanese retail sales rose 0.2% in March from February and by 1.0% versus a year earlier.

Japanese construction orders were unchanged in March compared to a year earlier, but today’s brightest bit of news was a 10% on-year advance in housing starts, the most in 26 months.

Australian producer price inflation slipped to a 3-quarter low of 1.9% in the first quarter from 2.0% in the final quarter of 2019 and 2.1% in 3Q18. Export prices soared 15.3% on year, three times more than the latest 5.2% on-year increase in import prices.

New Zealand posted a much larger trade surplus last month, NZD 922 million, than analysts were expecting to learn. The year earlier month had seen a deficit of NZD 151 million. Nonetheless, the cumulative deficit over the past 12 reported months was nearly twice the size accrued in the previous twelve months to March 2018. A separate New Zealand release revealed a 1.1% improvement in consumer confidence to a 13-month high.

South Korean consumer confidence also climbed in April, reaching a 10-month high.

But Singapore industrial production in March fell by a greater-than-forecast 2.6% on month and 4.8% on year.

French consumer confidence in April held steady at the 7-month high seen in March.

Swiss National Bank President Jordan rejected calls for an end to negative interest rates, asserting that negative rates and the threat of intervention are appropriate tools for countering excessive franc strength. He defended the right of central bank independence.

Officials at the Central Bank of the Russian Federation left the one-week repo rate unchanged at 7.75% for a third straight policy review. Such had been raised by 25 basis points each last September and December. But a released statement expressed confidence that a nascent upturn in inflation was nipped early by those tightenings and that it may be possible to cut rates by the middle quarters of this year.

 Short-term proinflationary risks have abated. The Bank of Russia’s decisions to raise the key rate made in September and December 2018 were sufficient to curb the effects of one-off proinflationary factors. According to the Bank of Russia’s forecast, annual inflation will return to 4% in the first half of 2020.

In its key rate decision-making, the Bank of Russia will take into account inflation and economic dynamics against the forecast, as well as risks posed by external conditions and the reaction of financial markets. If the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of turning to cutting the key rate in Q2-Q3 2019.

Just in: U.S. real GDP grew 3.2% at a seasonally adjusted annualized rate (SAAR) last quarter, which is close to a percentage point higher than was predicted. Year-on-year growth in the first quarter was also 3.2%. The acceleration of quarter-on-quarter growth to 3.2% from 2.2% SAAR did not stem from the usual suspects. Real final private domestic demand in aggregate contributed only 1.1 percentage points to GDP growth. Instead, exports rose 3.7% versus a 3.7% drop in imports, augmenting GDP growth by 1.03 percentage points. Faster inventory building contributed an additional 0.65 percentage points to GDP expansion, and a 2.4% advance in government expenditures accounted for 0.4 percentage points of GDP growth. During the Obama presidency, contrary to Republican complaints about excessive deficit spending, government expenditures habitually contracted. Faster GDP growth last quarter was accompanied by smaller on-year increases the personal consumption price deflator to 1.4% overall and 1.7% excluding food and energy. Each had climbed 1.9% in the year through 4Q18.

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

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