European Consumer Confidence Taking a Hit from Putin’s War

April 21, 2022

Irish consumer sentiment sunk 9.3 index points in April to an 18-month low on top of a 10-point slide in March. At 57.7, the index has fallen from 86.8 a half year earlier.

Danish consumer confidence printed at a 403-month low of minus 20.9 in April versus readings of -14.4 in March, -3.2 in February and +8.2 last September.

Dutch consumer sentiment dropped nine index points to a record low of -48 in April. The long-term mean score of this measure is -8.

Turkish consumer confidence slumped 7.3% in April to 67.3, eclipsing the previous record low of 68.9 last December.

In Belgium, consumer confidence bounced up two index points to -14 in April from a 17-month low in March but remained far weaker than in September 2021 when the reading was +8.

The weighted DXY dollar index dipped 0.1%, mainly due to a 0.3% downtick against the euro, which has a 57.6% weight in that measure. Against other currencies, the dollar rose overnight by 0.5% against the Chinese yuan, 0.4% versus the Japanese yen, 0.3% relative to the Aussie dollar and kiwi, 0.2% vis-a-vis sterling and 0.1% versus the Swiss franc and Turkish lira. The Canadian dollar remains steady.

The dollar continues to benefit from two significant factors, geopolitical tensions and Fed monetary policy guidance that is calling for aggressive monetary policy tightening in 2022. Analysts are now pricing in an additional rise of a full percentage point in the federal funds rate target by midyear.

In other central bank action today, the Central Bank of Uzbekistan, which had raised the country’s policy interest rate by three percentage points at the previous review in March, left the rate at 17.0%. However, officials revised projected CPI inflation this year up 4-5 percentage points to a range of 12-14%. Such currently stands at 10.5%.

The last military holdout in the Ukrainian city of Mariupol has been spared an all-out immediate assault by Russian forces, which  instead have chosen a blockade tactic.

Confidence in China continues to sour, and Hong Kong’s unemployment rate jumped to an 8-month high of 5.0% in March from 4.5% in February and 3.9% in both December and January. Share prices in China fell 2.3% today and Hong Kong’s Hang Seng index closed down 1.3%. But markets elsewhere in Asia rose 1.2% in Japan, 1.5% in India, 0.7% in Indonesia, and 0.4% in South Korea and Singapore. In Europe, the German Dax and Paris Cac are up 1.5% and 1.8%, and U.S. stock futures are showing decent additional gains as well, led by the tech sector.

Ten-year sovereign debt yields have risen four basis points so far today in the United States, Canada and Germany and by two bps in Japan.

The price of West Texas Intermediate oil is 0.9% firmer. Bitcoin costs 3.1% more today, while the price of gold has slipped 0.7%.

CPI inflation in Euroland in March was revised down 0.1 percentage point to a monthly 2.4% increase and a 12-month 7.4% rate of increase. Both advance metrics still represent record highs, and the year-on-year advance compares to 1.3% in March 2021. The revision stemmed from a downtick of the energy component to 44.4% year-on-year from a rise initially estimated of 44.7%. Food price and core inflation (excluding food and energy) were at 2.9% and 5.0% last month. Between March 2021 and March 2022, CPI inflation accelerated from 2.0% to 7.6% in Germany, 0.6% to 6.8% in Italy, 1.2% to 9.8% in Spain, 1.9% to 11.7% in the Netherlands, 1.6% to 9.3% in Belgium and -2.0% to +8.0% in Greece.

In other price news,

  • Consumer price inflation in New Zealand rose 1.8% on quarter and 6.9% on year in 1Q 2022. The 12-month rate of increase was the most since 2Q 1990.
  • Russian producer prices leaped 5.9% in March, their largest monthly advance in 21 months, and the 12-month rate of increase (26.7%) was 3.1 percentage points greater than that in February. Russian share prices are down 1.0% so far today.
  • South Korean producer prices (+1.3%) posted their largest monthly jump since early 2017, lifting their 12-month rate of increase by 0.3 percentage points to 8.8%.
  • Polish producer price inflation accelerated 3.9 percentage points in March to a 317-month high of 20.0%.
  • In Bangladesh, CPI inflation of 6.22% in March was its highest in 17 months.

French business confidence softened to a reading of 105.9 in April from 106.8 in March, and 112.7 in February. The pandemic low point in April 2020 had been 47.7. The reading for manufacturers of 108.2 was down from 112.8 in January, and retail printed at 93.4 after 99.3 in March and 107.0 in February.

Although located not far from Russia, Norway is a producer and exporter of energy, so business confidence in the first quarter of 2022 reversed a 0.2-point downtick in the previous quarter and, at +8.8, compared favorably with readings of -17.2 and -9.9 in the first two quarters of 2020 when the pandemic was new and scary.

New U.S. jobless insurance claims last week dipped 2k to 184k, the ninth sub-200k weekly reading in a row. But the Philly Fed manufacturing index dropped 9.8 points in April to a 2-month low of 17.6. In yesterday’s released Fed Beige Book of regional economic conditions, eight of the twelve Federal Reserve districts earned activity growth characterizations of moderate. That majority was flanked by modest activity in the Boston and Philly Fed regions and robust conditions in the Dallas and Kansas City districts.

Yesterday’s U.S. Covid readings continued to show a wide divergence between cases on the one hand and deaths on the other. 62.9k new cases were identified, and their 7-day average of 43.3k was 49% higher than two weeks earlier. But there were only 611 deaths on Wednesday, and their 7-day average of 386k was 35% below the level two weeks earlier. It is taking longer to reach a death toll of 1 million, but at 988,610 so far that milestone is merely a matter of time. Covid restrictions continue to be reduced in the United States, a marked contrast with China’s approach.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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