A Busy Day on Several Fronts

December 5, 2019

U.S. House of Representatives Speaker Pelosi has instructed Democratic members to draw up articles of impeachment against President Trump.

Revised third-quarter GDP data for the euro area left the quarterly growth rate unchanged at 0.2%, which matches the second-quarter result. Consumption, business investment, and government spending made positive growth contributions, but net exports and inventories exerted drags. On-year growth of 1.2% was the same as in the second quarter. Job creation slowed from a quarter-on-quarter 0.3% rise in the first quarter of 2019 to 0.2% in the second quarter and 0.1% last quarter. As a result, year-on-year employment grew 0.9% in 3Q versus 1.2% in 2Q and 1.4% in 1Q.

German industrial orders once more proved disappointing, contracting 0.4% on month in October instead of rising that amount as had been forecast. Weakness was concentrated in domestic demand and left the level of total orders 5.5% below the year-earlier level.

The volume of retail sales in the euro area fell 0.6% in October, marking the fourth contraction in six months. October sales were 0.5% lower than their third-quarter average and just 1.4% higher than in October 2018.

Euroland’s construction purchasing managers index fell to a 2-month  low of 50.6 in November, indicating near stagnation. Whereas Germany’s construction PMI of 52.5 was the strongest reading  in 7 months, those of France and Italy dropped to 8- and 3-month lows, respectively. Moreover, Italy’s score was below the 50 no-change level for the third time in five months.

The Reserve Bank of India sprung an interest rate surprise of omission. Reviewing policy every other month, the RBI had cut India’s repo rate in February, April, June, August and October by a total of 135 basis points to 5.1%, and analysts were predicting another reduction at this year’s final scheduled review. In spite of a significant downward reduction  in projected domestic growth this fiscal year, officials decided to leave its interest rate structure unchanged. A released statement explains that officials “recognise that there is monetary policy space for future action. However, given the evolving growth-inflation dynamics, the MPC felt it appropriate to take a pause at this juncture.”

Officials at the Central Bank of Chile also left their policy rate unchanged. Now 1.75%, it was cut by 50 basis points in both June and September and by a further 25 bps in October. The vote not to cut further at this final meeting of 2019 was made unanimously. A statement released after the meeting talks of two-sided risk to  inflation. “On one hand, lower
inflationary pressures deriving from widened capacity gaps and, on the other, cost push pressures above those previously considered, in particular because of the idiosyncratic nature of the recent peso depreciation.” Domestic political uncertainty has depressed the exchange rate. “uncertainty that surrounds the future evolution of the macroeconomic scenario is higher than normal, so it is still premature to figure out which of these two factors will dominate.”

The U.S. goods and services trade deficit of $47.199 billion in October was the smallest imbalance in 17 months. Merchandise imports fell 1.2% on month and 4.0% on year, eclipsing declines of 0.5% on month and 2.2% on year in exports. A drop in the collective imbalance with Mexico, South and Central America and OPEC between September and October outweighed increased deficits with Europe, Canada, and the Pacific Rim.

U.S. factory orders rose 0.3% on month but fell 1.3% on year in October. Orders in the first ten  months of 2019 were 0.4% smaller than a year earlier. U.S. new jobless insurance claims fell 10k  last week to a mere 203K. There four-week average was 217.75k.

Canada’s trade deficit unexpectedly narrowed in October to C$ 1.078 billion due to the largest surplus versus the United States since 2008.  The IVEY-PMI index jumped 11.8 points to a 3-month high of 60.0 in November, providing another piece of favorable Canadian economic news.

Australian retail sales were unchanged in September. A modest rise had been predicted. On-year growth in sales amounted to 2.4% for the third time in five months. Australia’s trade surplus of A$ 4.502 billion in October was down from A$ 6.847 in the prior month and the smallest surplus in 10 months.

British new car registrations in November were 1.3% fewer than a year earlier, the fourth 12-month decline in five months.

The non-oil purchasing  managers  index of the United Arab Emirates fell to a 123-month low of 50.8 in November. Such had been as high as 59.4 five months earlier.

Filipino CPI inflation accelerated a half percentage point to a 3-month high of 1.3% in November.

Share prices rose in most Pacific Rim markets but are down in Europe. U.S. stocks are slightly lower.

Ten-year sovereign debt yields increased in  most economies today.

WTI oil is up 0.7%. Gold is little changed.

Sterling has traded firmly for a second straight day with a 0.4% rise against the dollar, which slipped less sharpy against the euro, Swiss franc, yen or peso.

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


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