Lots of Data and a Weakening Yen on Final Day of July
July 31, 2023
The dollar rose 0.7% against the Japanese yen but mostly softened against other currencies including drops of 1.0% against the Australian dollar, 0.9% relative to the New Zealand dollar, 0.3% versus the Canadian dollar and 0.1% vis-a-vis the euro.
Share prices rose 1.3% in Japan, 0.9% in South Korea, 0.8% in Kong Kong, 0.6% in India, 0.5% in Indonesia and China, and 0.4% in Australian. Stock market gains in Europe and U.S. futures have been only marginal.
The 10-year Japanese government bond yield advanced four additional basis points. The price of WTI oil and Bitcoin tokens went up 1.1% and 0.5%; that for gold has dipped 0.1%.
The initial estimate for GDP growth in the euro area last quarter of 0.3% is a tad better than forecast but only half as strong as the U.S. pace. Year-on-year growth of 0.6% was its lowest in nine quarter and down from 4.2% in the second quarter of 2022. In contrast, year-on-year U.S. growth of 2.6% was twice as much as in the first quarter and also stronger than 1.8% between the second quarters of 2021 and 2022.
Within Euroland, quarterly GDP growth in Germany of zero percent in 2Q was non-positive for a third straight time, and year-on-year growth of -0.1% was negative for a second straight time. Italian GDP also contracted last quarter; a drop of 0.3% was the second decline in three quarters and resulted in a year-on-year growth rate of 0.6% versus 5.0% recorded in 2Q 2022. But French and Spanish GDP went up 0.5% and 0.4%, although their on-year increases of 0.9% and 1.8% were also significantly slower than in the year ending in 2Q 2022.
Euroland consumer prices dipped 0.1% in July, slowing the inflation rate to an 18-month low of 5.3% from 5.5% in June and 8.9% in July 2022. Energy posted a larger 6.1% on-year decline, and food inflation slowed to 10.8% in July from 11.6% in June and 15.5% in March. But ECB officials are more focused on service sector prices now, and this component’s price advance accelerated further to 5.6% from 5.4% in June and 5.0% in May. Core CPI stayed at 5.5%, well above 4.0% in July 2022 and above total CPI inflation as well.
Germany’s July CPI inflation rate of 6.5% was more than a percentage point above the Euroland mean in spite of a significantly downward pull from import costs. Import prices sank 11.4% year-on-year in June, their largest 12-month decline in 166 months. Yet another German data release today for June retail sales revealed an unexpected 0.8% month-on-month drop resulting in a 1..6% slide from a year earlier.
Among other GDP releases today,
- Swedish GDP fell 1.5% last quarter and by 2.4% from the same quarter a year earlier.
- Hong Kong GDP fell 1.3% in 2Q, reversing a third of the first quarter’s outsized jump and resulting in a much smaller 1.5% on-year growth rate.
- Mexican GDP advanced 0.9% on quarter and 3.7% on year in 2Q 2023.
- On-year GDP growth in Serbia accelerated to a one-year high of 1.7% in 2Q.
Japanese retail sales fell 0.4% last month, the second contraction in three months, but sales were 5.9% higher than in June 2022, which matched expectations. Industrial production rebounded in June by a smaller-than-forecast 2.0%, leaving such 0.4% below its year-earlier level. Japanese housing starts posted a much bigger 4.8% on-year decrease than forecast in June. On the other hand, construction orders rose 8.6% year-on-year, and consumer confidence improved 0.9 index points to a 19-month high. At 37.1, sentiment remains historically low but has recovered from 28.6 last November.
Sri Lankan CPI inflation continues to recede from last September’s record high of 62.4%, entering single-digit territory at 6.3% this month.
Polish CPI inflation of 10.8% in July was its lowest in 17 months.
Late Friday came news of a full percentage point reduction in the Central Bank of Chile‘s key interest rate to 10.25%. The rate had been lifted from 0.5% to 4.0% in 2021 and to a 24-year high of 11.25% in seven additional incremental policy tightenings by October 2022. Chilean CPI inflation of 7.6% last month was at a year and a half low and down from a 362-month high of 14.1% last August. “The Board has initiated the cycle of reducing the monetary policy rate (MPR) based on the consolidation of the inflationary convergence process. The macroeconomic scenario remains in line with estimates in the June Monetary Policy Report.” Chile thus becomes one of the first monetary authorities to commence easing. Other central banks that have cut rate in 2023 include central banks in Georgia, Sri Lanka, and Belarus.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Chile, Euroland GDP and CPI, Japanese retail sales and industrial production
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