Meaningful Data from Abroad and a Paralyzed U.S. Federal Government

November 22, 2019

Today’s main dollar move has been a 0.4% rise against sterling. Provisional U.K. purchasing manager survey results from November revealed surprisingly weaker-than-expected developments. The composite PMI fell 1.5 points to a sub-50 reading of 48.5, lowest since July 2016 or, that is, right after the infamously ill-advised Brexit referendum. Both manufacturing (48.3) and services (48.6) had readings that showed contracting activity. The ten-year British gilt yield dropped six basis points in response, but the Ftse has outpaced other stock markets with a 1.4% advance.

Share prices elsewhere fell by 0.6% in China and 0.5% in India but rose 0.6% in Australia, 0.5% in Hong Kong and 0.3% in Japan. Equities are up in Continental Europe but to a much lesser extent than the British Ftse.

The ten-year German bund and U.S. Treasury yields have slipped 3 and 2 basis points, while their Japanese counterpart rebounded 3 basis points.

The price of gold is 0.4% higher, while that of WTI oil has settled back 0.3%.

Japan’s November composite, manufacturing, and service-sector purchasing manager indices printed at 2-month highs of 49.9, 48.6 and 50.4. The data depict stagnating business conditions.

Australia’s provisional PMI reports compiled by the Commonwealth Bank of Australia were also disappointing. A score of 49.5 on the composite index represents a 3-month low. The reading fro manufacturing (49.9) was below 50 for the first time since this data series began in May 2016. Australia was one of the few economies not to succumb to the Great Recession. The November PMI score of 49.5 on services was a 3-month low.

Euroland’s preliminary PMI results for November point to slower economic growth in the final quarter of 2019 than seen during the summer period. The composite PMI slid 0.3 points to a 2-month low of 50.3, which is also the average over the last three months. While a 3-month high of 46.6 in manufacturing indicates lessening contraction there, the services index dropped 0.7 points to a 10-month low of 51.5.

The German and French composite purchasing manager indices of 49.2 and 52.7 were each at 3-month highs. The feature that distinguishes November from earlier months is that trade-related weakness in the two largest economies using the euro is more clearly spreading into the smaller economies in the euro area.

Revised German GDP figures for the third quarter confirmed the preliminary results. Real GDP rose just 0.1% on quarter, getting a 0.5 percentage point lift from net exports but depressed by negative contributions of 0.7 percentage points from inventories and 0.2 percentage points from business investment inĀ  machinery and equipment. Year-on-year growth of 1.0% was positively affected by having one more business day in 3Q19 than 3Q18. Adjusted for this calendar year distortion, growth from a year earlier amounted to just 0.5% after on-year growth in the second quarter of 0.3%.

Japanese October core CPI inflation, which excludes only perishable food, rose to a 2-month high of 0.4% in October. When excluding energy as well as fresh food, consumer price inflation also picked up to 0.7%. The energy component was 2.7% lower than in October 2018. The month-on-month changes in seasonally adjusted CPI was zero percent for the total index and 0.2% for the core index. A separate Japanese release on department store sales reflects the distortion of a 2 percentage point sales tax hike to 10% done in October. Ahead of that change, sales in September had been 23.1% greater than a year earlier, but in October a 17.5% plunge was reported.

After back-to-back increases in July and August, Canadian retail sales dipped 0.1% in September. That’s the third drop in five months and leaves the year-on-year comparison at just 1.0%, a 3-month low and well below a 3.7% on-year advance last April.

Polish PPI inflation in October of -0.1% represents a 19-month low. Irish producer prices that month were 3.9% lower than a year earlier.

The U. Michigan/Reuters monthly measure of U.S. consumer sentiment gets released later this morning. Yesterday brought U.S. news of a 1.9% greater-than-forecast rise in existing home sales but a 0.1% decline in the October index of leading economic indicators and a slightly higher 4-week average in new jobless insurance claims of 221k.

Turning away from data, the House of Representatives investigation into whether to impeach President Trump is picking up momentum. While a conviction in the senate seems highly implausible given Republican unity, the matter is clearly consuming the attention of the Trump administration to the point that little else is happening.

The ECB president and vice president spoke overnight, urging more fiscal stimulus and predicting no near-term rise in the negative central bank interest rate.

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

Tags: , , ,


Comments are closed.