Friday, Friday… Can’t Trust that Day
January 26, 2024
Economic outlooks among the major economies have widened. The United States has been a very bright spot, with a combination of much more robust economic growth than expected yet continuing disinflation with some measures essentially aligning themselves with the Fed’s 2% definition of price stability. China and Germany are worries. In spite of fresh promises of Chinese macroeconomic stimulus, there were a number of out-sized equity declines this Friday in Asia: -1.3% in Japan, -1.6% in Hong Kong, and fairly flat net movement in China, South Korea, India, and Taiwan. European equity gains are widely disparate so far. The German Dax is only 0.3% firmer after a disappointing consumer confidence report, whereas the British Ftse and Paris Cac are 1.8% and 2.3% stronger. U.S. stock futures await the U.S. monthly personal income and personal consumption data.
The dollar is a touch softer, with losses of 0.3% against the loonie, Swiss franc and euro, 0.2% relative to sterling and the Turkish lira, and 0.1% versus the Chinese yuan. The euro briefly got as low a $1.0813, its weakest point since early December, but bounced back into the black.
Movements in 10-year sovereign debt yields overnight were unremarkable as were price changes in gold and oil. But bitcoin tokens cost 3% more than yesterday.
Minutes from the Bank of Japan’s December Board meeting revealed a decision that debate about an exit strategy is now on the table, but it is being framed in subtle changes such as an uptick of the short-term interest rate from -0.1% to a low positive level. The intent remains that policy will remain quite expansive even after that happens. The FOMC meets next week, and Fed officials have entered the period of rhetorical silence which is observed for the week preceding every scheduled policy review. ECB President Lagarde’s press conference yesterday was a downer: no consideration yet of cutting rates but conceding that growth risks in the region are negatively skewed.
German consumer confidence unexpectedly dropped 4.2 index points this month to an 11-month low, whereas French consumer confidence was reported two index points higher and at its best level in 23 months. Likewise, British consumer confidence rose from a reading in December of -22 to a 24-month high of -19.
Three Japanese economic indicators were reported. Consumer price data for Tokyo, which are released three weeks ahead of national figures, revealed a 0.6 percentage point drop in the overall and core inflation rates to a 22-month low of 1.6%. Secondly, corporate service price inflation held steady at November’s reading of 2.4%, which was its highest in 104 months. And third, the revised indices of leading and coincident economic indicators printed at respective 37- and 8-month lows.
Iceland experienced sub-zero producer price inflation for a tenth straight time in December. The -3.9% year-on-year PPI rate was its most negative since September and well below the 146-month PPI inflation high of 29.6% in April 2022.
Danish and Norwegian retail sales recorded monthly declines of 1.0% and 0.9% in December, but their year-on-year changes of +4.5% and -0.3% were widely different.
Irish GDP contracted 0.4% last quarter, marking its fifth straight quarter-on-quarter drop. The year-on-year GDP change swung from 10.2% in the final quarter of 2022 to -3.4% one year later. A slew of other European GDP figures for the fourth quarter plus that for the whole Euroland economy are scheduled for release next week.
The European Central Bank (ECB) reported December money and credit growth today for the month of December. M3 money was 0.1% higher than a year earlier; for the fourth quarter, the year-on-year change was a drop of 0.6% versus -1.0% seen between 3Q 2022 and 3Q 2023. A 0.3% on-year rise in bank loans to households in December was the smallest in 105 months. Bank credit fell 0.4% on year.
Mexico’s trade deficit imploded from $26.9 billion in 2022 to $5.45 billion last year. Sweden’s trade balance improved from a SEK 44.9 billion deficit in 2022 to a SEK 50.8 billion surplus last year.
The U.S. personal income and spending December figures were generally good but not entirely so. The notable red flag involved the price deflator for core services, which Fed Chairman Powell has highlighted several times as a source of continuing concern. Such printed at an unchanged and still elevated 3.9%. Otherwise, personal income rose by an as-expected 0.3%. Personal consumption climbed by a greater-than-projected nominal 0.7% and inflation-adjusted 0.5%. The total PCE price deflator went up by a benign 0.2% on month and an as-expected and unchanged 2.6% on year. Finally, inflation measured by the total core PCE price deflator fell to a lower-than-expected 2.9% from 3.2% in November, 3.4% in October, 3.6% in September and 3.7% in August.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: consumer confidence in Germany France and the UlK., U.S. PCE price deflator
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