Disappointing Japanese GDP, Another Flurry of U.S. Data Releases, and Elevated U.S. Equities
May 16, 2024
In U.S. stock futures trading ahead of the opening bell, the Nasdaq, SPX, and Dow are each hovering around record highs hit yesterday. Investors await the release today of U.S. industrial production, housing starts, jobless insurance claims, import prices, the latest Philly Fed manufacturing survey and more comments from Fed officials such as Bostic and Mester.
Share prices overseas closed up by 1.7% in Australia and New Zealand, 1.4% in Japan, 1.6% in Hong Kong, and 0.9% in India and Indonesia but are modestly lower in key European centers.
The 10-year Japanese JGB yield fell 3 basis points, depressed by a weaker-than-expected first quarter GDP report. Other key 10-year sovereign debt yields are little changed. The dollar trimmed Wednesday losses only marginally in overnight trading, with 0.1% upticks against the Swiss franc, euro and sterling but a 0.1% dip against the yen.
Prices for Bitcoin, WTI oil and gold are each 0.2% lower this morning.
Japanese real GDP fell 0.5% last quarter, or 2.0% at a seasonally adjusted annualized rate (SAAR). That slippage is a third more than analysts were anticipating. The sequence of quarterly growth since mid-2023 expressed in annualized terms was -3.6%, then +0.4% and now -2.0%, which is a recessionary pattern. Real GDP last quarter was also 0.2% below its year-earlier level. Negative growth in 1Q 2024 happened in spite of positive growth contributions of 1.0 and 0.9 percentage points from inventories and government expenditures. The biggest drags on GDP growth came from personal consumption and net foreign demand. On-year inflation measured by the GDP price deflator slowed to a 1-year low of 3.6% from 3.9% in the prior quarter and 5.2% in last year’s third quarter.
Japan got better economic news from an upward revision to March industrial production growth of 0.6 percentage points to 4.4%, which was the fastest monthly rise in 21 months. And yet, industrial production was still 6.2% below its March 2023 level, and capacity utilization recorded an 11.2% year-on-year plunge.
Australia’s jobless rate unexpectedly increased by 0.2 percentage points to a 3-month high of 4.1% last month, but employment grew by a larger-than-forecast 38.5 thousand. Separately, an Assistant Governor of the Reserve Bank of Australia delivered a bearish speech on the economy’s housing market, which continues to suffer from a glut of demand relative to supply.
The Central Bank of the Philippines policy interest rate was again left at a 17-year high of 6.5%, its level since a 25-basis point hike last October culminated 450 basis points of tightening since May 2022. Although consumer price inflation has declined from 8.7% in early 2023 to 3.8% last month, which lies within but near the top of the central bank’s 2-4% target range, a statement released by the Monetary Board warns of upside price risks from oil, food and electricity. BCP officials are being cautious about exiting the tight policy stance in order to avoid an upward creep in price expectations.
Norwegian GDP growth slowed sharply to just 0.2% on quarter in 1Q from 1.6% in the final quarter of 2023, due mainly to a swing in North Sea oil activity. Mainland GDP growth was also 0.2% following +0.3% in the prior quarter. Compared to a year earlier, GDP growth swung from +3.2% in the first quarter of 2023 to -0.8% last quarter.
Consumer price inflation in Italy during April has been revised down by 0.1 percentage point from preliminary estimates of 0.8%. Such was also at 0.8% in January and February but 1.2% in March and 11.8% at its cyclical peak in October 2022.
April U.S. import price figures delivered another shocker. The monthly 0.9% jump was three times greater than expected and the largest advance in 25 months. A 0.7% rise in non-fuel import costs was also the most since March 2022, while another hefty 2.4% rise in fuel resulted in a 3.3% 12-month rate of rise versus the 26.2% year-on-year drop booked in April 2023. Overall import price inflation last month of 1.1% was up from 0.4% in March and minus 2.4% at the end of 2023. U.S. export prices climbed 0.5% on month but dipped 1.0% on year.
U.S. building permits last month fell 3.0% on month to their weakest total in 16 months. Housing starts recovered 5.7% on month but were down 0.6% on year.
The monthly Philly Fed manufacturing survey had improved to a two-year high in April but relapsed more than forecast by 11 points to a reading of 4.5 in March.
U.S. new jobless insurance claims last week fell 10k to a 2-week low of 222k. And finally, industrial production flat-lined in April after a mere 0.1% uptick in the previous month. As a result, capacity usage slid to a 3-month low of 78.4%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian labor statistics, Central Bank of The Philippines, Japanese GDP and industrial prodution, U.S. import prices
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