Important Japanese, Euro Area, and Chinese Data Released

November 14, 2019

Japanese real GDP expanded at a lower-than-forecast 0.2% last quarter at a seasonally adjusted annualized rate. It was the weakest quarterly growth rate in a year. Net exports and inventories combined to exert a 1.8 percentage point drag on GDP growth. The GDP price deflator rose 0.6% between the third quarters of 2018 and 2019.

On brighter note, service sector activity in Japan, which is captured in the monthly tertiary index, went up 1.3% compared to August and by 3.8% from a year earlier. In the first half of 2019, the tertiary index had stagnated in 1Q and then posted only a 0.2% uptick in 2Q, but such advanced 0.7% on quarter and 1.9% on year in the summer period.

Real GDP in the euro area rose 0.2% for a second straight quarter in 3Q. On-year growth of 1.2% also matched the second-quarter result. GDP between 2Q and 3Q went up 0.4% in Belgium, Spain and the Netherlands, 0.3% in France and Portugal, but just 0.1% in Germany, Austria and Italy. Germany, where GDP had declined 0.2% in the second quarter, managed to avoid a widely feared recession according to this provisional report. Employment in the Euroland rose at a slower 0.1% quarterly pace in 3Q, trimming its on-year increase to 1.0% compared to 1.4% in the previous four quarters through 3Q18.

On-year Chinese growth in industrial production of 4.7% and retail sales of 7.2% in October was weaker than September’s results and also lower than analysts were anticipating. The same was true of a 5.2% rise in fixed asset investment in January-October and the latest jobless rate reading of 5.1%.

In overnight trading, the dollar on balance fell 0.2% against the yen  and Swiss franc, held steady relative to sterling and the yuan, and rose 0.7% versus the Australian dollar, 0.3% relative to the kiwi, 0.2% against the peso and 0.1% versus the euro and loonie.

In the Pacific Rim, where Hong Kong seemingly moved closer to a Tiananmen Square moment, stock markets fell 0.9% in the former British colony, 0.8% in Japan, and 0.7% in Indonesia but rose 0.2% in Taiwan and China, 0.4% in India, 0.6% in Australia and 0.7% in New Zealand. The British Ftse and German Dax have traded 0.3% lower.

Ten-year sovereign debt yields settled back another 5 basis points in the United States, 3 bps in Germany and Japan and 2 basis points in Great Britain.

Prices for WTI oil and Comex gold have risen 0.9% and 0.5%.

Policymakers at the Filipino central bank, who had previously enacted 25-basis point interest rate cuts in May, August and September, left their overnight reverse repo rate unchanged at 4.0% as analysts were expecting. A released statement from Bangko Sentral ng Pilipinas defended the pause:

The Monetary Board believes that prevailing monetary policy settings remain appropriate. This is supported by the benign inflation outlook and a firm outlook for domestic economic growth. At the same time, a prudent pause in monetary adjustments will enable the cumulative 75-basis-point reduction in policy rates as well as the cut in reserve requirement ratios to continue working their way through the economy. The Monetary Board also trusts that the fiscal budget for 2020 will be passed within this year.

British retail sales data out today were disappointing, falling on month by 0.1% overall and 0.3% excluding motor vehicle fuel and yielding respective year-on-year changes of 3.1% and 2.7%. In a separate release from the Royal Institute of Chartered Surveyors, the house price balance index weakened to a -5% reading in October from -3% in September.

Australian employment fell 19k in October, with drops in both full-time and part-time workers, and the jobless rate returned to August’s 5.3% from 5.2% in September. A lower unemployment rate is one of the preconditions that central bank officials want to see before considering any removal of monetary stimulus.

Indian wholesale price inflation was halved to a mere 0.16% in October, which represents a 40-month low.

French CPI inflation dropped 0.1 percentage point to a 27-month low last month of 0.8%.

Spanish CPI inflation in October remained at September’s 3-year low of 0.1%.

And the year-on-year change in the combined PPI/import price index of Switzerland hit a 42-month low, dropping further into the red to -2.4% from an on-year decline of 2.0% in September. The index fell on month for a fifth straight time.

Turkish industrial production swung from a 3.6% on-year decline in August to a 3.4% increase in September. That was the first 12-month increase in 13 months and compares with a 9.9% plunge between end-2017 and end-2018.

South African wholesale turnover fell 0.6% on month and 1.0% on year during September.

Among other European economies during the summer quarter, real GDP rose 0.3% on quarter and 2.5% on year in the Czech Republic, advanced 1.3% on quarter and 4.0% on year in Poland, climbed 1.1% on quarter and 4.8% on year in Hungary, grew 0.7% on quarter and 3.0% on year in Cyprus, increased 0.4% on quarter and 1.6% on year in Belgium, 0.1% on quarter and 1.5% on year in Austria, and 0.3% on quarter and 2.3% on year in Denmark. GDP stagnated in Norway, halving its year-on-year growth to 0.6%.

Like the U.S. CPI reported earlier, October producer prices went up by more than forecast. Such increased 0.4% overall from September. The core rate of PPI inflation nonetheless slowed to 1.6% from 2.0%. U.S. new jobless insurance claims rose 14k last week to 225k.

Fed Chairman Powell will be testifying again today in Congress, this time before the House Budget Committee. Several other Fed officials will also be speaking publicly, including Williams, Clarida, Daly, and Evans. The next session of public impeachment hearings is scheduled for tomorrow.

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

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