Contending With Super Tuesday Primaries, China’s Lackluster Growth Outlook, and Uncertain Monetary Policy
March 5, 2024
There’s an uneasy mood in the financial community. The likelihood of a second and far more chaotic Trump presidency keeps growing. Once today’s U.S. primary results are counted, the Republican nomination race will be effectively over. Meanwhile, the Democrats can’t find a convincing way to dispel comparisons of Biden’s current health to those of Woodrow Wilson in his final year (1920) or FDR seeking a fourth term in 1944.
Investors are equally skeptical about today’s Chinese official 2024 growth forecast amid that country’s continuing depressed property market, struggling exports, and deflation-prone pricing dynamic. The government rolled out a projection that GDP will expand around 5% and be accompanied by a rise of inflation back to 3%. Much more policy stimulus will be required to make such forecasts credible. Equities in the Pacific Rim, fell today by 2.6% in Hong Kong, 0.9% in South Korea, and 0.4% in Taiwan but ticked 0.3% higher in China. U.S. stock futures are slightly lower, and European equities are narrowly mixed so far.
Ten-year sovereign debt yields have dropped today by 7 basis points in Italy, 6 bps in the U.K., 4 bps in France and Spain, 3 bps in the United States and Germany, and a basis point in Japan.
Both Bitcoin ($66,713) and gold ($2,134) are hovering around record price highs. Their earlier respective peaks were of $69k and $2,135 were set in November 2021 and December 2023.
The dollar is narrowly mixed, as investors await U.S. political news, Fed Chairman Powell’s congressional testimony on Wednesday and Thursday, President Biden’s state of the union address on Thursday, European Central Bank President Lagarde’s press conference also on Thursday, and U.S. jobs data on Friday. A needed truce between Israel and Hamas meanwhile remains elusive.
A great deal of economic data have also been reported today.
Core consumer price inflation in Tokyo jumped 0.7 percentage points to 2.5% in February. Tokyo data get reported about 3 weeks ahead of national figures.
Producer price inflation in the euro area recorded a third straight monthly decline in January, this time of 0.9%, but the 12-month rate of decrease (-8.6%) was the least in a half year, and non-energy costs swung into positive territory with a 0.6% monthly advance associated with a 1.5% year-on-year decline.
Consumer price inflation in Thailand (-0.8%) and Armenia (-1.7%) were below zero last month, but Filipino CPI inflation rose to a 2-month high of +3.4%.
Italian GDP grew 0.2% last quarter, same as in the third quarter. Growth between the final quarters of 2022 and 2023 was 1.2%, but Italy’s calendar year average growth rate slowed to 0.9%.
GDP in Hungary was unchanged last quarter from the 3Q level and from the final quarter of 2023. Calendar year GDP fell 0.9% in 2023 following a 4.6% expansion rate in 2022.
South African GDP edged 0.1% higher last year, avoiding the technical definition of recession after a 0.2% contraction in the third quarter. GDP growth slowed from 1.9% in 2022 to 0.6% in 2023, and 4Q-over-4Q GDP growth printed in the middle of that range at 1.2%.
South Korean real GDP posted quarterly growth of 0.6% for a third straight period in the final quarter of 2023. GDP last quarter was 2.2% above its year-earlier level.
A 1.1% monthly plunge in French industrial production in January was much steeper than anticipated.
British same store sales posted their smallest year-on-year rise (just 1.0%) in 18 months during February.
Many more February purchasing manager survey findings were reported today.
- Euroland’s composite and service sector PMI indices were each revised a tad higher to an 8-month high of 49.2 and a 7-month high of 50.2. Job hiring and business optimism improved, but inflation is proving too sticky for ECB officials to yet take their foot off the brake either rhetorically or actually.
- Among members of the joint European currency area, Germany and France — the region’s two largest economies — have not emerged from sub-50 readings, thus implying continuing stagnation or worse. Germany posted a 4-month composite PMI low of 46.3, and France’s reading improved to a 9-month high of 48.1. Ireland topped the Euroland leader board with composite and service PMI scores of 54.4 and 52.2.
- China’s composite PMI in February merely matched January’s 2-month low of 52.5, and the Chinese service sector PMI fell to a 3-month low of 52.6.
- Japan’s composite PMI of 50.6 and service sector PMI of 52.9 were each at 2-month highs. Service sector inflation printed at its second lowest level almost 2-1/2 years.
- India’s revised composite and service PMIs in February were each 60.6, slightly lower than their preliminary estimates but consistent with dynamically expanding economic activity amid receding inflation.
- Australia’s composite and service sector purchasing managers indices of 52.1 and 53.1 represent the best results in ten months and a return to positive growth in the composite index’s case.
- The British February composite and service sector PMI got revised somewhat lower. The services index of 53.8 was also lower than January’s 8-month high, but the composite index improved to a 7-month high.
- Sweden’s composite and service sector PMI reading of 50.1 and 50.5 were at 2-month lows. Swedish GDP contracted 0.2% on average last year.
- Russia’s war of aggression against Ukraine has made a turn for the better from a military standpoint but not without immense domestic economic cost. Russia’s composite and service sector purchasing manager indices dropped 2.9 and 4.7 points in February to 13-month lows of 52.2 and 51.1.
- Hong Kong’s private PMI slid 0.2 points to a 4-month low of 49.7 in February.
- Lebanon‘s private PMI reading of 49.7 was also at a 4-month low.
- But private PMI readings in Singapore of 56.8 and in South Africa of 50.8 were at respective 17- and 6-month highs.
- The non-oil PMI readings of Egypt, Saudi Arabia and the United Arab Republics (respectively at 47.1, 57.2 and 57.1 in February) were at an 11-month low in Egypt’s case and 2-month highs in Saudi Arabia and the UAE.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: composite and service sector purchasing manager surveys, Euroland producer prices, GDP growth in South Korea and South Africa, Tokyo CPI
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