A Time for Waiting

November 15, 2021

Meaningful data were reported Monday in Japan and China, but investors chose to maintain an advent posture pending other pieces of information that could emerge in the next 24-hour period. These include a virtual summit between Presidents Joe Biden of the U.S. and Xi Jinping of China that is intended to quell mounting tension between the two governments, plus the release Tuesday of a slew of U.S. economic statistics covering retail sales, industrial production, import prices, the housing market, and capital flows with the rest of the world.

Meantime, the dollar dipped overnight by 0.1% against the euro, Swissie, sterling, Mexican peso, Turkish lira, Canadian dollar and weighted DXY index. Ten-year U.S. Treasury, British gilt and Japanese JGB yields also slipped marginally. U.S. stock futures are up a fraction, as are stock markets so far in Germany, France, Italy and Spain. Equities in the Pacific Rim closed up 0.7% in Taiwan, 0.6% in Japan, 1.0% in South Korea, and 0.4% in Australia, New Zealand and Singapore but down 0.5% in Indonesia and 0.2% in China.

A 1.4% drop in the price of WTI oil has taken such below the $80 per barrel threshold. Gold costs a bit less than on Friday.

The first estimate of Japanese GDP growth last quarter revealed a contraction of 0.8% (3.0% in annualized terms) that was four times more steep than predicted. This decline was twice as great as the positive rate of growth booked in the second quarter, which in turn had followed a 4.1% annualized quarter-on-quarter slide in the first quarter. All this left GDP just 1.4% higher than in the third quarter of 2020 and 4.2% weaker than in the third quarter of 2019. Positive growth contributions last quarter from government expenditures, unplanned inventory accumulation and, to only a minor extent, net foreign demand were overwhelmed by 2.4 percentage point drags each from personal consumption and nonresidential investment and a drop in residential spending as well.  Japan’s third quarter contraction compares unfavorably with positive growth of 2.0% annualized in the United States and a non-annualized 2.2% in the euro area.

Japan’s GDP price deflator in 3Q 2021 was 1.1% below its year-earlier level. That drop was roughly twice as much as was anticipated. Finally, the final industrial production data for September was unrevised from the preliminary estimate that had shown a 5.4% monthly plunge and a 2.3% year-on-year rate of decline. Industrial production fell 3.7% in the third quarter and was associated with a 5.7% quarter-on-quarter leap in the ratio of inventories to industrial shipments. Capacity utilization plunged 7.3% on month and 4.9% on year in September.

Among Chinese data for October reported earlier today,

  • A 3.5% on-year increase in industrial production exceeded expectations. For the first ten months of 2021, output surpassed the year-earlier total by 10.5%, which compares with an average rise during 2020 of just 2.8%.
  • Retail sales rose 4.9% on year in October, up from 4.4% in September and the largest 12-month advance since July. But similar to production, sales growth has been decelerating from the first-half pace of 23.0%.
  • Fixed asset investment in the first ten months of this year exceeded the year-earlier total by 6.1%.
  • The unemployment rate stayed at September’s 33-month low of 4.9%.
  • A 3.4% on-year rise in property prices last month was the smallest increase in 69 months.
  • Capacity utilization, which started 2021 with a 39.9% on-year advance in the first quarter, now shows a 17.8% year-on-year increase over the whole January-through-October period.

Today’s menu of price data releases around the world shows an acceleration of total and core Swedish consumer price inflation to 2.8% and 3.1%, which are their highest in 119 and 113 months, respectfully. Indian wholesale price inflation rebounded from September’s 6-month low to a 3-month high of 12.5% in October, which isn’t far below May’s 22+ year peak of 13.1%. Polish CPI inflation climbed another 0.9 percentage points in October to a 125-month high of 6.8%, and Finnish CPI inflation of 3.2% was the most in 117 months. The British Rightmove house price index fell back 0.6% on month but was 6.3% above its year-earlier level in October.

Real GDP in Thailand fell only 1.1% last quarter, roughly half as much as analysts had been predicting, but growth compared to the year-earlier quarter still swung back into the red, albeit to only -0.3%.

Indonesia reported a record monthly trade surplus of $5.74 billion in October. By contrast, India experienced its second largest trade deficit since 2013 that month, a shortfall of $19.72 billion.

Euroland also released trade statistics this morning, which revealed a further shrinkage of the external surplus to only EUR 7.3 billion from EUR 24.1 billion a year earlier. On-year growth in imports of 21.6% was a bit more than twice the rise in exports. The seasonally adjusted surplus of EUR 6.1 billion in September was down from EUR 9.7 billion in August and a 2021 high-point of EUR 27.6 billion way back in January. Between July and September, Euroland imports advanced 3.9%, whereas exports ticked just 0.1% higher.

The U.S. Empire State manufacturing index reversed most of October’s deterioration and, printing at a value of 30.9, was the third highest reading in the past twelve months.

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

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