Softer World Growth Troubling Stocks
September 7, 2023
In the Federal Reserve Bank Beige Book of regional economic conditions released yesterday, only the Dallas district had better than modest growth, and even that regional economy was tarnished by uneven activity across sectors. Four districts stagnated, and the Philly district experienced a modest contraction of activity.
Second-quarter GDP in the euro area has been revised to show a lower 0.1% positive growth from 0.3% estimated earlier. That was associated with year-on-year expansion of only 0.5%, least in the nine-quarter streak of above-zero percent results and down very sharply from 4.2% in the year through 2Q 2022. Net foreign demand exerted a 0.4 percentage point drag on the economy last quarter, and personal consumption provided no offsetting strength. Employment in Euroland went up just 0.2%, down from a 0.5% increase in the first quarter.
Euroland’s biggest economy, Germany, stagnated last quarter after contracting in each of the prior two quarters, and GDP there was 0.1% below its year-earlier level. A 0.8% monthly drop and 2.1% year-on-year decline in German industrial production in July was also reported today. It was the third straight month in which factory output fell.
Hungary, Poland, Austria, Sweden, Cyprus, Estonia, and Latvia experienced experienced drops in GDP during 2Q 2023.
Australia’s construction purchasing managers index fell to a four-month low in august.
Italian retail sales went up 0.4% in July but posted their smallest year-on-year increase (2.7%) in nine months.
British house price deflation according to the monthly Halifax survey deepened to -4.6% in August from -2.6% in July and a positive 11.0% reading in August 2022.
Equity markets this Thursday fell by 1.3% in Hong Kong, 1.2% in Australia, 1.1% in China, and 0.8% in Japan. European stock markets are modestly lower currently, and the Nasdaq and SPX indices show losses so far of 1.3% and 0.5%. Ten-year British gilt and German bund yields are down by five and 3 basis points, respectively, while commodity prices are very narrowly mixed.
The dollar has so far today strengthened 0.4% against the yen, 0.3% versus the Canadian dollar and 0.2% relative to the euro and sterling. The dollar advanced by a further 1.6% against the Polish zloty and has gained 5.25% since September 1, as investors continue to give a thumb-down to yesterday’s 75-basis point interest rate cut by the National Bank of Poland. The new 6.0% rate level there is four percentage points below the latest on-year rate of consumer price inflation.
Central bank policy reviews today in Malaysia and Serbia kept interest rate benchmarks on hold. The rate at Bank Negara Malaysia had been hiked four times in 2022 by 25 basis points in each case and underwent a fifth such move to 3.0% this past June. Malaysian CPI inflation has subsided to 2.0%, a 23-month low, and is projected to slide further later this year. At the National Bank of Serbia, the key interest rate previously had been lifted during 2022 from 1.0% to 5.0% and experienced six additional 25-basis point hikes earlier this year to its current 6.50% level. Although almost four percentage points below the 16.2% this past March, CPI inflation in Serbia of 12.5% at present is nearly twice the central bank interest rate level.
U.S. and Canadian data reported today showed
- The fewest new U.S. jobless insurance claims last week (219K) since the week of February 11, 2023.
- A slight downward revision in U.S. quarterly productivity growth to 3.5% from 3.7% reported earlier, along with an uptick in the quarter’s rise in unit labor costs to 2.2% from 2.1%. Compared to 2Q 2022, productivity and ULC rose by 1.3% and 2.5%.
- Canadian capacity usage ticked up to a two-quarter high of 81.9% last quarter from 81.8% in 1Q. Such was 81.9% in 2Q 2022.
- Canada’s IVEY PMI index rebounded 4.9 points to a 3-month high in August of 53.5.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Negara Malaysia, Euroland GDP, German industrial production, National Bank of Serbia, U.S. jobless insurance claims
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