Euroland & Japanese GDP Released Before U.S. Consumer Prices
February 14, 2023
On this significant data release day, investors already have perused fourth-quarter GDP figures for many economies, British labor market statistics, and Swiss and Indian producer prices. Now they await the January U.S. CPI report.
In financial market action, the dollar fell overnight by 0.6% against sterling, 0.4% versus the euro, 0.3% relative to the Australian and New Zealand dollars and 0.2% against the Japanese yen. Yesterday’s rally in U.S. share prices has been extended marginally in futures trading, and stock markets rose 0.6% in Japan, 0.5% in South Korea, 0.7% in Taiwan, 1.0% in India and 0.3% in China. Key European bourses have advanced 0.4-0.6%. The ten-year British gilt yield fell 5 basis points, while the 10-year U.S. Treasury yield is 2 basis points lower ahead of the U.S. CPI report. WTI oil dropped 1.5%, and gold and Bitcoin rose 0.3% and 0.5% thus far.
Japanese GDP rose just 0.2% last quarter, less than half analyst expectations. Expressed at an annualized rate, growth was only 0.6% following the 1.0% contraction pace in 3Q. Compared to the same quarter a year earlier, GDP advanced 1.1%, and average GDP growth of 2.1% in 2022 followed 0.4% in 2021, -4.7% in 2020, and -0.6% in 2019. Japan’s economy remains fragile. Growth last quarter was paced by net exports and personal consumption, but business investment and inventories exerted a large drag. The GDP price deflator rose 1.1% year-on-year in 4Q 2022 but posted only a 0.2% average rise in 2022 versus 2021.
Euroland GDP rose 0.1% last quarter, matching the preliminary estimate and good enough for a 1.9% advance from the same quarter a year earlier. An almost universally projected recession has been avoided thus far. Employment in the euro area climbed 0.4% in 4Q, most since last year’s first quarter and associated with a 1.5% year-on-year increase.
There were still many European economies that shrank somewhat last quarter, including 0.2% contractions in Germany and Finland, a 2.4% plunge in Polish GDP, drops of 0.7% in Austria, 0.6% in Sweden, 0.4% in Hungary, and 0.1% in Italy. GDP last quarter expanded only 0.1% in France and Belgium, 0.2% in Spain and Portugal, but also by a livelier 0.6% in the Netherlands, and 1.1% in Denmark, Romania, and Cyprus. Irish GDP jumped 5.5% on quarter but only 1.1% year-on-year.
The combined Swiss producer price and import price index accelerated in January to a 0.7% monthly increase and 3.3% from the same month a year earlier, which was the most since November but down from the 6.9% 41-year peak last June. Domestic PPI inflation was 2.8%, while import prices were 4.3% above their year-earlier level.
Indian wholesale price inflation slowed to a 23-month low of 4.73% in January. Analysts had projected a slightly larger deceleration, but the actual result still represents a substantial drop from 16.6% last May, which had been the highest since late 1998. Compared to January 2022, producer price inflation for fuel slowed to 15.2% from 32.3% and for food dropped to 2.4% from 10.3%.
British wage inflation unexpectedly accelerated to 6.7% in the three months through December, and jobless claims in the U.K. dropped 12.9k. Unemployment held steady at a low 3.7%. Labor productivity growth of 0.3% on quarter in 4Q matched the third quarter’s outcome.
Japanese industrial production in December got revised from a preliminary estimate of a 0.1% monthly dip to a rose of 0.3%. Compared to a year earlier, production fell 2.4% in December, 0.2% in 4Q 2022, and by 0.1% in calendar 2022. Industrial capacity dropped 0.7% in 2022, following declines of 1.1% in 2021 and 0.9% in 2020. Capacity usage fell 0.7% last year.
Romanian consumer price inflation slowed 1.3 percentage points to a 6-month low of 15.1% in January, still not far from November’s peak of 16.8%, however.
German wholesale price inflation of 10.6% in January was less than half the record high of 23.8% last April and the lowest 12-month increase in 20 months.
The downside stickiness of U.S. consumer price inflation, about which Fed officials have been warning, is showcased in the January report. A 0.1 percentage point dip to a 15-month low of 6.4% was smaller than forecast. Core consumer price inflation of 5.6% was also just 0.1 percentage point less than in December and just a percentage point below September’s 6.6% peak. January was the second straight month with higher on-year increases in food (10.1%) than energy (8.2%), and shelter costs have become increasingly problematic with that component’s 12-month increase at 7.9% after 7.5% in December and 7.1% in November. Comparing consumer prices in January to the previous month, the overall gain of 0.5% was the most in three months, and a 0.6% rise in core CPI followed increases of 0.4% in December and 0.3% each in October and November. While the CPI data series is not the Fed’s favorite barometer for discerning inflation trends in the short term, these latest results leave officials no alternative to imposing additional monetary restraint.
Another U.S. data release today revealed a 0.4-point rebound in the NFIB index of U.S. small business sentiment to a 2-month high from December’s six-month low of 89.9.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British labor market data, German WPI, Indian WPI, Japanese and Euroland GDP, Japanese industrial production and capacity usage, U.S. consumer prices
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