Reminders that Covid’s Negative Effect on Economic Activity Isn’t Going Away Quickly
March 2, 2021
Yesterday was a good day from a data release point of view, and equities rallied around the world. Today’s news has been more sobering.
German retail sales, which had tumbled 9.1% in December but been forecast to be fairly flat in January, instead took a further 4.5% dive and recorded an even greater year-on-year slide (8.7%) than seen last April. Sales in January remained 5.8% below their pre-pandemic level in February 2020.
The number of German unemployed workers had fallen seven straight months through January and was expected to dip further in February but instead rose 9K.
A string of monthly rises in Australian building permits going back to last August was abruptly ended by a 19.4% plunge in January permits.
Real GDP in 2020 declined by 5.6% in the Czech Republic, 5.1% in Cyprus, and 5.0% in Hungary. On-year contractions in the fourth quarter alone amounted to 4.2%, 4.5%, and 3.6%, respectively.
The Reserve Bank of Australia‘s monthly policy review left the Official Cash Rate unchanged at a record low of 0.10% and reaffirmed the forward guidance that includes a prediction that the earliest onset of tightening will not be before 2024 and then only if inflation has moved back into the 2-3% target corridor and been accompanied by accelerating wage growth, decent job growth, and lower unemployment. The central bank continues to buy government bonds and isn’t ruling out the possibility of an even more accommodative stance.
A preliminary estimate of CPI inflation in the euro area showed no further rise in January’s 0.9% total on-year increase, while core inflation settled back 0.3 percentage points to 1.1%. ECB President Lagarde said monetary policy will not be snugged prematurely.
The number of unemployed workers in Spain climbed 44.4k last month, their largest rise for the month of February in eight years.
South Korean industrial production fell 1.6% on month in January, while the level of retail sales was unchanged from a year earlier.
Forceful quantitative monetary stimulus has continued in Japan. On-year growth of the monetary base averaged 19.35% in January-February, up from 17.0% in the final quarter of 2020, 11.9% in 3Q, 4.1% in 2Q and 3.1% in the first quarter of 2020.
A separate Japanese report revealed the third straight on-year drop in business investment last quarter. The decline of 4.8% followed on-year plunges of 10.6% in 3Q and 11.3% in 2Q.
Stocks took a step backwards in the Pacific Rim today, with drops of 1.2% in Hong Kong and China, 0.9% in Japan, and 0.4% in Australia. Share prices are up so far by 0.5% in Germany, France and the U.K., but U.S. futures show a marginal dip.
Compared to the Monday close, the dollar is unchanged against sterling and the loonie, down 0.4% versus the Australian dollar, but up 0.3% vis-a-vis the peso and Swiss franc and by 0.1% against the yen, euro, kiwi, and yuan. The trade-weighted dollar also shows a 0.1% uptick.
Ten-year U.S. Treasury and German bund yields recovered two basis points each, but their Japanese counterpart slid back 3 basis points.
Among commodities, the price of WTI oil is marking time just above $60 per barrel ahead of Thursday’s scheduled virtual meeting of OPEC and non-OPEC oil ministers. Gold has risen 0.2% so far today.
Other data released overnight included the Australian 4Q 2020 current account surplus of A$ 14.52 billion, up from A$ 10.71 billion in 3Q and A$ 3.7 billion in the final quarter of 2019.
New Zealand’s export/import price ratio, i.e. its terms of trade, went up 1.3% last quarter.
The Taiwanese and South Korean manufacturing purchasing manager indices printed in February at 60.4 and 55.3, and each result showed the fastest improvement of operating conditions since April 2010.
Japan’s jobless rate remained at 2.9% in January for a third straight month.
The British Nationwide house price index accelerated in February, rising 0.7% on month and to a 2-month on-year high of 6.9%.
Still to come: Canadian December and 4Q GDP figures and the U.S. New York regional purchasing managers survey and IBD/TIPP optimism index.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian current account, German retail sales, Japanese labor statistics
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