Another Week Has Passed With Little Progress in the U.S. Debt Limit Stalemate
May 12, 2023
Debt talks that were to have occurred today have been reportedly postponed. The debt limit sword hanging over financial markets is taking a toll on sentiment, but markets are acting more like a dripping faucet than a broken water main. Equities had a down week, including overnight losses of 1.1% in China, 0.7% in Indonesia and 0.6% in Hong Kong and South Korea. The German Dax, British Ftse and Paris Cac are actually up 0.4% today, and U.S. share prices remain near Thursday’s closing levels.
Ten-year sovereign debt yields rose overnight by 5 basis points in the U.K., 2 bps in Germany and a single basis point in the U.S..
The dollar, which tends to get bid in times of general uneasiness even when the source is American made, climbed overnight by 1.2% against the kiwi, 0.4% relative to the Turkish lira and Australian dollar, 0.3% vis-a-vis the Japanese yen, 0.2% versus the euro and loonie and 0.1% against the Swiss franc. Dollar relationships against sterling, the Mexican peso and Chinese yuan are holding steady.
Bitcoin continues to behave like a fair-weather friend only, dropping 1.7% overnight. Prices for WTI oil and gold, by contrast, rose 0.9% and 0.2%.
The U. Michigan/Reuters index of U.S. consumer sentiment this month fell 5.8 index points to 57.7, which was its most depressed level since last November.
A slew of British data released today featured positive GDP growth last quarter, a bigger-than-projected rise of industrial production including higher factory output and construction, and the smallest goods and services trade deficit in four months. Although lower in March, real GDP edged up 0.1% in 1Q 2023, marking the third such rise in the last four quarters that also included a 0.1% dip last summer. Real GDP rose 0.2% over the past year but remained a tad below its pre-pandemic level. Despite a 0.7% rise in March that more than reversed back-to-back declines in the first two months this year, industrial production was still 2.0% below its year-earlier level. Construction went up 0.2% on month and by 4.1% compared to March 2022. Manufacturing rose 0.7% on month. The goods and services trade deficit totaled GBP 9.2 billion in 1Q, but trade in goods only racked up a deficit of GBP 49 billion in the quarter.
Price data reported this Friday showed
- The first monthly increase in U.S. import prices (0.4%) since December, mainly due to the first year-on-year increase in imported fuel prices (+4.5%) in 10 months. Overall import prices were 4.8% below their year-earlier level, turning around a 12.5% on-year increased posted in April 2022.
- U.S. export prices rose 0.2% on month but fell 5.9% on year in April.
- Consumer price inflation in India fell to an 18-month low of 4.7% in April from 5.7% in March and an 8-year peak of 7.8% in April 2022.
- Brazilian CPI inflation of 4.2% in April was its lowest in 30 months and down from a 19-year high of 12.1% in April 2022.
- Serbian CPI inflation in April settled back 1.1 percentage points below March’s record high of 16.2% but still exceeded the April 2022 10.4% level by a considerable margin.
- Likewise, Romanian consumer price inflation of 11.2% last month was down from a 227-month peak of 16.8% last September and its lowest posting in 13-months.
- CPI inflation last month were confirmed at their preliminary estimates in both France and Spain. Spanish inflation rose to a 2-month high of 4.1% from a 19-month low of 3.3% in March, while French inflation of 5.9% was up from 5.7% in the prior month but below February’s 38-year high of 6.3%.
Norwegian real GDP only rose 0.2% last quarter after stagnating in the final quarter of 2022. Nonetheless, growth from the first quarter of last year amounted to 3.0%.
After slumping 1.7% in 4Q 2022, Malaysian GDP recovered 0.4% last quarter and exceeded its year-earlier level by 5.6%. The Malaysian current account surplus shrunk to a 3-quarter low in the latest period.
Distorted by very high inflation, Turkish retail sales had plunged 6.5% in February but rebounded 7.3% in March and was also 28.6% above its year-earlier level.
Mexican industrial production posted the largest monthly drop (0.9%) in a year and a half during March. This halved the 12-month rate of increase to just 1.6%.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and trade, stalled U.S. debt limit talks, U.S. import prices
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