February Ends with a Snag in the U.S. Fiscal Package, Plenty of Price and GDP Data, and President Biden’s First Military Action

February 26, 2021

World financial are exiting February in a highly volatile conditions.

  • Share prices tumbled today by 5.0% in Taiwan, 4.0% in Japan, 3.8% in India, 3.6% in Hong Kong, 2.8% in South Korea, 2.4% in Australia, and 2.1% in China.
  • Equity markets in Europe are down 1.5% in the U.K., 0.9% in France and Italy, and 0.5% in Germany and Spain. U.S. futures, by comparison, are rather steady.
  • The 10-year U.S. Treasury yield leaped to an intra-day and one-year high yesterday of 1.61% but has retreated to 1.48% now.
  • West Texas Intermediate crude oil fellĀ  back 1.8% in overnight trading. Gold is 0.9% lower.
  • The cost of bitcoin appears headed for its largest weekly decline in 11 months.
  • The dollar scored overnight gains especially commodity-sensitive currencies like the Aussie and New Zealand dollars against which it rose 1.5% and 1.3%. The dollar also is up 0.6% versus sterling and 0.4% relative to the euro and Canadian dollar, but the greenback is unchanged against the yen and just 0.1% firmer relative to the Swiss franc.

Released GDP data for several economies further confirm the slowdown last quarter caused by renewed restrictions against social gathering.

  • In France, real GDP had revived 18.5% last summer but dropped 1.4% in the final quarter of the year and was 4.9% lower than a year earlier. For 2020 as a whole, French GDP sank 8.2% after climbing 1.5% in 2019.
  • Swiss GDP last quarter remained barely positive at 0.3% but was still 1.6% below its year-earlier level and weak enough to result in a 2.9% average contraction in 2020. Swiss GDP in the third quarter had rebounded 7.6%.
  • Swedish GDP slipped 0.2% on quarter in 4Q and 2.2% from a year earlier, resulting in an average contraction of 2.8% in all of 2020.
  • Danish quarterly growth stayed positive at 0.6% last quarter, but GDP dropped 2.6% between 4Q 2019 and 4Q20 and also posted an average 3.3% decline in 2020.
  • Portuguese quarterly GDP growth slowed from 13.3% in 3Q to 0.2% in 4Q, and that economy’s average contraction in 2020 of 7.6% was the worst result in 84 years.
  • Finnish GDP rose 0.4% last quarter but still recorded negative on-year growth of -1.4%.
  • In spite of a 4.8% quarterly advance in Icelandic GDP, there was still a 5.1% decline compared to the final quarter of 2019, and average growth in 2020 was negative 6.6%.
  • Indian on-year growth turned positive last quarter at +0.4% following declines of 7.3% in 3Q 2020 and a whopping 24.4% in the second quarter. Officials in India now expect the economy this fiscal year to have contracted by 8.0%.

In price data released today, inflation is more apparent at the wholesale level than in the final stage, underscoring that with so much slack in global demand after the pandemic, firms are finding it hard to pass on increased costs of production.

  • Belgian producer prices leaped 2.0% on month in January, resulting in the first on-year increase (0.3%) in a year.
  • Greece‘s PPI jumped 2.3% on month, resulting in the smallest on-year drop (5.4%) in 11 months.
  • A 1.9% monthly leap in GermanĀ  import prices trimmed the on-year rate of decline to a 1-year low of 1.2%. As recently as September, such had fallen 4.3% on year.
  • Swedish producer prices rose 1.0% in January and likewise recorded the smallest on-year drop (0.8%) in a year.
  • A 0.9% monthly increase in Austrian producer prices was the most since late 2011 and still not enough to flip Austrian PPI inflation above zero percent.
  • Finnish producer prices went up 1.4% in January, reducing on-year PPI deflation to a 13-month low.
  • Canadian producer prices shot up 2.0% on month and 4.0% on year in January.
  • French producer prices rose 1.2% in January but only 0.4% from a year earlier.
  • And French consumer prices still dipped 0.1% in February and were only 0.4% above the level in February 2020.
  • Portuguese consumer prices fell for a fourth consecutive month in February, this time by 0.5% and were only 0.5% above their year-earlier level.
  • Spanish consumer prices fell 0.6% in February, their biggest month-on-month drop in seven months. On-year CPI inflation was merely zero percent.
  • Total and core Tokyo CPI inflation in February were each minus 0.3%.

The results of U.S. personal income and spending growth in January were close to analyst expectation and reflect the immediate impact of the last pandemic relief package enacted by Congress on December 27. Personal income leaped 10.0% on month and was associated with advances of 11.4% in disposable income and 2.4% in personal consumption expenditures. The PCE price deflator rose 0.3% on month and 1.5% on year. The core PCE deflator did the same.

The advanced $83.74 billion estimate of the U.S. merchandise trade deficit in January was just 0.7% wider than the prior month’s deficit.

Among today’s other data release highlights is a batch of Japanese reports. There was a strong 4.2% month-on-month advance in industrial production in January. IP, retail sales, and housing starts were 5.3%, 2.4%, and 3.1% below their January 2020 levels, while construction orders posted a 14.1% on-year advance.

The Swiss index of leading economic indicators improved to a 2-month high in February.

Brazilian unemployment slid 0.2 percentage points in December to a 6-month low of 13.9%.

Taiwan’s current account surplus swelled to $94.3 billion last year from $65.2 billion in 2019.

Swedish retail sales in January rebounded 3.4% on month, resulting in a 3.1% rise from a year earlier after an 8-month low of -0.9% on such a basis in December.

The U.S. bombed some Syrian facilities used by Iran-backed militia to mark the first military action of the Biden Administration.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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