Some Surprises But Not All in Same Direction
April 18, 2023
Chinese data reported this Tuesday exceeded expectations, but officials cautioned that solid recovery isn’t yet firmly entrenched. Real GDP last quarter rose 2.2% on quarter, and the prior quarter’s change was revised to an increase of 0.6% from the earlier estimated zero percent quarterly growth rate. Year-on-year growth of 4.5% in 1Q was up from 2.9% in 4Q 2022 and full-2022 growth of 3.0%. Industrial production grew year-on-yer by 3.9% in March, 3.0% in 1Q 2023, and 3.6% in 2022. A 10.6% year-on-year surge in retail sales in the wake of loosened covid restrictions was the most in 18 months. Such exceeded analyst expectations and increases of 3.5% on average in January-February and a 0.2% contraction in 2022. Fixed asset investment rose 5.1% in the year between the first quarters of 2022 and 2023, but capacity utilization of only 74.3% last quarter was the lowest since the record low of 67.3% seen in the first quarter of 2022. Finally, China’s jobless rate fell from February’s 3-month high of 5.6% to a 7-month low of 5.1%.
The Reserve Bank of Australia’s Official Cash Rate had been left unchanged at 3.60% earlier this month, breaking a streak of ten straight hikes totaling 350 basis points. However, released minutes today from April’s meeting reveal that officials came close to engineering a 25-basis point hike and suggest that more than one more increase could become necessary. The pause was merely done to better gauge the impact of tightening thus far.
U.S. quarterly earnings from major banks such as Bank of America exhibit greater resilience than analysts had presumed in the wake of the early March failure of Silicon Valley Bank and Signature Bank.
The latest batch British labor market statistics reveal more wage pressure than assumed, as the growth of average wage earnings (+5.9% on year overall and +6.6% excluding bonuses) failed to recede as forecast, and employment shot up three times faster than thought. But the jobless rate rose to an 8-month high, and jobless claims rose rather than fell.
The ZEW measures of investor sentiment toward the euro zone and German economies fell for a second straight month in April instead of rebounding slightly as analysts were anticipating.
European Central Bank President Lagarde warned that U.S.-Sino tensions, if unresolved, risk dampening global growth and more inflationary pressure than hoped. She also opined that the U.S. is unlikely to default this summer. The arguments that the debt ceiling will be raised rest firstly on the fact that such standoffs have happened several times before but always resulted in a successful congressional vote to raise the debt ceiling. The danger that this time will be different lies in the increasing militancy of Republican conservatives who put party politics above the best national interest. In repeated and escalating games of chicken, a pile-up is bound to happen sooner or later.
In overnight market action, the dollar retreated 0.6% against the New Zealand dollar, 0.5% relative to the Aussie dollar and sterling, 0.4% versus the euro, sterling and DXY weighted index, and 0.3% vis-a-vis the Swiss franc.
Late yesterday,U.S. capital movements measured by the Treasury Department between the United States and other countries revealed a greatly diminished net inflow, which in theory ought to correlated with lessening dollar strength. The net long-term inflow of $51.5 billion in January-February was less than half its year-earlier size, and February’s combined short-term and long-term inflow of $28.0 billion was down from $183.2 billion in the prior month.
Ten-year sovereign debt yields fell by 3 basis points in the United States, France, and the Netherlands, 4 bps in Spain, 5 bps in Italy, 2 bps in Germany, and 1 bps in Japan. But greater-than-expected British wage pressure boosted the 10-year British gilt yield by three basis points.
Around the Pacific Rim, equities fell 0.6% in Hong Kong and Taiwan and 0.3% in India, Australia and Singapore but rose 0.5% in Japan and Indonesia and by 0.2% in China. The German Dax ,Paris Cac and Nasdaq futures have risen 0.7%, but the British Ftse is only 0.1% firmer.
Bulgarian CPI inflation, which crested at a 292 month high of 18.7% last September, decelerated two percentage points further to a one-year low of 14.0% in March.
Italy’s EUR 2.11 billion trade surplus in February represents a swing from a EUR 1.5 billion deficit a year earlier and was the largest surplus since November 2021. Ireland’s EUR 6.5 billion trade surplus in February was 21% narrower than a year earlier.
Officials at Bank Indonesia left their policy interest rate unchanged at 5.75% at its April review. The rates last change was a 25-basis point hike in January that culminated 225 basis points of tightening since August 2022. The previous pandemic low of 3.5% had been maintained for a year and a half. A released statement expresses confidence that policy is now sufficiently restrictive to promote a return of CPI inflation to its 2-4% target range this year.
Consumer price inflation in Canada receded in line with expectations to a 19-month low of 4.3% in March from 5.2% in February and a 39-year high of 8.1% in the middle of 2022. There was a huge on-year 13.8% drop in gasoline prices, and food price inflation slowed to 8.9% from 9.7%. Excluding food and energy, inflation slowed to 4.5% from 4.8% in the prior month.
U.S. housing starts dipped 0.8% on month to a 2-month low in March and fell 17.2% on year. Building permits also were at a 2-month low, 8.8% below the number in February and down 24.8% on a year-on-year basis.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, Canadian consumer prices, Chinese GDP, German and Euroland ZEW expectations, Reserve Bank of Australia minutes, U.S. housing starts
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