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225 matches for " net trade":
When trade-weighted sterling fell by 20% in 2016, it was widely expected that net trade would cushion GDP growth from the hit to households' real incomes.
It's tempting to conclude from the third quarter's GDP figures, which showed output rising 0.5% quarter-on-quarter, despite a record drag from net trade, that the U.K. economy is comfortably weathering sterling's appreciation. But a closer look at the data shows the net trade drag is the counterparty to some erratic inventory movements. The real net trade hit is still to come.
Trade data yesterday added to the downbeat impression of the German economy, following poor manufacturing data earlier in the week. Exports plunged 5.2% month-to-month in August--the second biggest monthly fall ever--pushing the year-over-year rate down to 4.4%, from a revised 6.3% in July. Surging growth in the past six months, and base effects pointed to a big fall in August, but we didn't expect a collapse.
The outlook for growth in the EZ economy is currently both stable and relatively uncomplicated, at least based on the most widely-watched leading indicators.
If we're right with our forecast that real consumers' spending rose by just 0.1% month-to-month in February -- enough only to reverse January's decline -- then it would be reasonable to expect consumption across the first quarter as a whole to climb at a mere 1.2% annualized rate.
September's industrial production figures likely will not surprise markets today. We look for a 0.3% month-to-month rise in production, matching the consensus and the ONS assumption in the preliminary estimate of Q3 GDP.
The euro area's trade surplus slipped further mid- way through the second quarter; falling to a 15-month low of €16.9B in May, from a downwardly-revised €18.0B in April, and extending its descent from last year's peak of nearly €24.0B.
Yesterday's industrial production report was grim reading, with volatility in Greece and the Netherlands, as well as revisions, throwing off our own, and the market's, forecasts. Output fell 0.4% month-to-month in May, well below the consensus and our expectation for a 0.2% rise, pushing the year-over-year rate higher to 1.6%, from a revised 0.9% in April.
Last week's national accounts confirmed that the economy lost momentum abruptly in Q1, with net trade and investment failing to offset weaker growth in households' spending.
Sterling's depreciation, which began over two years ago, has inflicted pain on consumers but fostered a negligible improvement in net trade.
Net trade and inventories cushion Korea's historic consumption collapse in Q1. Nasty Japan manufacturing readings, but we can extrapolate light at the end of the tunnel. A devastating services PMI report for Japan.
Net trade in India likely contributed positively to headline GDP growth in the lockdown-plagued second quarter, but for all the wrong reasons.
China's manufacturing PMIs turn less grim, but look unsupported, for now. China's non-manufacturing PMI receives a one-off singles day boost. Japan's capex data suggests Q3 upgrade. Net trade is shaping up to be a drag on Q4 GDP, as Korean exports remained weak in November. Korea's exit from deflation is complete, thanks largely to more favourable base effects. Korea's PMI jumps in November... and that's before the likely sentiment boost from normalising ties with Japan.
Yesterday's detailed EZ GDP report showed that real output rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2. The year-over-over rate rose marginally to 1.7% from 1.6%, trivially higher than the first estimate, 1.6%. The details showed that consumers' spending and public consumption were the key drivers of growth in Q3, offsetting a slowdown in net trade.
A year has now elapsed since sterling began its precipitous descent, and the trade data still have not improved. Net trade subtracted 0.9 percentage points from year-over-year growth in GDP in Q3. And while the trade deficit of £2.0B in October was the smallest since May, this followed extraordinarily large deficits in the previous two months. In fact, the trade deficit has been on a slightly deteriorating trend over the last year, as our first chart shows, and we expect today's data to show that the deficit re-widened to about £3.5B in November.
With plenty of evidence emerging that consumer spending and business investment are set to suffer from a collapse in confidence, attention is turning to whether other sectors of the economy are ready to step up and support growth. But the fruits from reduced fiscal contraction and stronger net trade will be small and will take a long time to emerge.
Friday's economic data in Germany left markets with a confused picture of the Eurozone's largest economy.
The June durable goods, trade and inventory reports today, could make a material difference to forecasts for the first estimate of second quarter GDP growth, due tomorrow.
We expect the second estimate of Q1 GDP, released today, to restate that quarter-on-quarter growth slowed to just 0.3%, from 0.7% in Q4. The second estimate of growth rarely is different to the first.
The FOMC minutes confirmed that most FOMC members were not swayed by the weak-looking first quarter GDP numbers or the soft March core CPI. Both are considered likely to prove "transitory", and the underlying economic outlook is little changed from March.
Yesterday's detailed GDP data in Germany confirmed that the economy shrank slightly in the second quarter, by 0.1% quarter-on-quarter, following the 0.4% increase in Q1.
The decline in headline durable goods orders in May, reported yesterday, doesn't matter.
The second estimate of Q3 GDP last week confirmed that the Brexit vote didn't immediately drain momentum from the economic recovery. But it is extremely difficult to see how growth will remain robust next year, when high inflation will cripple consumers and the impact of the decline in investment intentions will be felt.
Fourth quarter GDP growth is likely to be revised down today.
The second estimate of GDP left the estimate of quarter-on-quarter growth unrevised at 0.3%, a trivial improvement on Q1's 0.2% gain.
Yesterday's final Q2 GDP report in Germany confirmed the initial data showing that the economy slowed less than we expected last quarter. Real GDP rose 0.4% quarter-on-quarter in Q2, after a 0.7% jump in Q1. The working-day adjusted year-over-year rate fell marginally to 1.8%, from 1.9% in Q1.
The key data today, covering March durable goods orders and international trade in goods, should both beat consensus forecasts.
need to add docMea culpa: We failed to spot the press release from the Commerce Department announcing the delay of the release of the advance December trade and inventory data, due to the government shutdown.
By the close on Friday, the initial reaction in U.S. markets to the U.K. Brexit vote could be characterized as a bad day at the office, but nothing worse. Not a meltdown, not a catastrophe, no exposure of suddenly dangerous fault lines.That's not to say all danger has passed, but the first hurdle has been overcome.
The November IFO report suggests that the headline indices are on track for a tepid recovery in Q4 as a whole, but the central message is still one of downside risks to growth
The dovish members of Banxico's board garnered further support on Friday for prolonging the current easing monetary cycle over coming meetings.
India's GDP report for the second quarter, due on Friday, is likely to show a decent rebound in growth from the first quarter.
Friday's economic reports delivered more sobering news for the euro area economy.
The second estimate of Q1 GDP made for grim reading. Quarter-on-quarter GDP growth was revised down to 0.2%--the joint-slowest rate since Q4 2012--from the preliminary estimate of 0.3%.
The second estimate of Q1 GDP confirmed that the recovery has lost momentum and revealed that growth would have ground to a halt without consumers. GDP growth likely will slow further in Q2, as Brexit risk undermines business investment.
In the absence of reliable advance indicators, forecasting the monthly movements in the trade deficit is difficult.
Last week's detailed Q3 GDP data in Germany verified that GDP fell 0.2% quarter-on-quarter, down from a 0.5% rise in Q2, a number which all but confirms the key story for the economy over the year as a whole.
Today's wave of data will bring new information on the industrial sector, consumers, the labor market, and housing, as well as revisions to the third quarter GDP numbers.
I need to ask your indulgence today, because the release of the durable goods and advance international trade reports coincides with my elder daughter's college graduation ceremony.
The German economy finished last year on the back foot.
In November, existing home sales substantially overshot the pace implied by the pending home sales index.
Japan's trade balance remained in the red in June, though the deficit narrowed sharply, to -¥269B from -¥838B in May.
We think this week's main economic surveys in the Eurozone will take a step back following a steady rise since the end of Q3. Today's composite PMI in the Eurozone likely slipped to 54.0 in February, from 54.4 in January, mainly due to a dip in the manufacturing component. Even if we're right about slightly weaker survey data in February, though, it is unlikely to change the story of a stable and solid cyclical expansion in the EZ.
Incoming data confirm our view that the Chilean economy to rebound steadily in the second half of the year, with real GDP increasing 1.5% quarter-on-quarter in Q3, after a relatively modest 0.9% increase in Q2 and a meagre 0.1% in Q1.
Economic growth in France has been the key downside surprise in the Eurozone this year.
Chile's central bank kept rates unchanged last Thursday at 2.50% with a dovish bias, following an unexpected 50bp rate cut at the June meeting.
The national accounts, released on Friday, likely will restate that quarter-on-quarter GDP growth picked up to 0.4% in Q3, from 0.3% in Q2.
The latest balance of payments figures, released Wednesday, look set to show that the current account deficit widened in Q3, underlying the U.K.'s vulnerability to a sudden change in overseas investor sentiment. The risk of a full-blown sterling crisis, however, is lower than the enormous current account deficit would appear to suggest.
Production in the EZ construction sector slumped at the end of Q4. Data yesterday showed that output slid by 3.1% month-to-month in December, comfortably reversing the 0.7% increase in November.
Halfway through the third quarter, we have no objection to the idea that GDP growth likely will exceed 2% for the third straight quarter.
China's current account surplus grew further in the final quarter of 2018, more than doubling to $54.6B, from $23.3B in Q3.
Yesterday's headline economic data in the euro area were solid across the board, though the details were mixed.
We still don't have the complete picture of what happened to the EZ construction sector in Q2, but we have enough evidence to suggest that it rolled over.
China's prime loan rates were unchanged for September, as widely expected.
India's trade data for March highlight the immediate severity of the country's sudden nationwide lockdown.
We can't yet know how bad the spread of the coronavirus from the Chinese city of Wuhan will be.
We expect today's second estimate of Q2 GDP to confirm that the U.K. has been the slowest growing G7 economy this year.
Survey data in Germany showed few signs of picking up from their depressed level at the start of Q4.
We suspect that under the calm surface of the BoJ, a major decision is being debated.
Korea's GDP report for the second quarter was a huge let-down.
Korean GDP contracted by 1.4% quarter-on- quarter in Q1, erasing the 1.3% jump at the end of last year. The pullback was sharper than we expected, with the cliff-edge drop in private consumption, in particular, catching us by surprise.
Today's EZ calendar is a busy one.
Taken at face value, the GDP data continue to suggest that the Brexit vote has had no adverse consequences for the economy. The official estimate of quarter-on-quarter GDP growth in Q4 was revised up yesterday to 0.7%, from 0.6%. The revision had been flagged earlier this month by stronger industrial production and construction output figures.
U.K. activity data have consistently surprised to the downside over the last month.
Recent data in Colombia have confirmed that virus containment measures caused much bigger declines in activity in early Q2 than initially expected.
The recovery in the French economy since the sovereign debt crisis has been lukewarm. Growth in domestic demand, excluding inventories, has averaged 0.4% quarter-on-quarter since 2012. This comp ares with 0.8%-to-1.1% in the two major business cycle upturns in the 1990s and from 2000s before the crisis.
Yesterday's second estimate of Q3 GDP confirmed that the U.K. economy has underperformed this year.
Yesterday's EZ money supply data confirmed that liquidity conditions in the private sector improved in Q3, despite the dip in the headline.
The wide spread in first quarter GDP growth "trackers"--which at this point are more model and assumption than actual data--is indicative of the uncertainty surrounding the international trade and inventory components.
LatAm assets have struggled in recent days as it has become clear that the Fed will hike next week. But we don't expect currencies to collapse, as domestic fundamentals are improving and the broader external outlook is relatively benign.
Efforts to contain the coronavirus outbreak severely dented industrial activity in Brazil.
Korean exports ended the third quarter on a solid note, though nowhere near as strongly as the headline growth rate suggested.
Following the publication of Korea's preliminary Q4 GDP report last month--see here--we said the consensus-beating print would be susceptible to downgrades, unless the economy had a miraculous end to 2018
In today's Monitor, we'll let the economy be, and focus instead on what are fast becoming the two defining political issues for the EU and its new Commission, namely migration and climate change.
Brazil's industrial sector is still suffering, but the pain is easing as the economy gradually reopens. That said, full recovery is a long way off, and the pandemic is still far from over, adding downside risks to the recent upbeat picture.
The MXN came under pressure last week as news broke that Banxico Governor Agustin Carstens plans to resign next year. Mr. Carstens has led the bank since 2010; during his term, Banxico cut interest rates to record low levels and managed to keep inflation under control.
Brazilian February industrial production data, released yesterday, were relatively positive. Output rose 0.1% month-to-month, pushing the yearover- year rate down to -0.8% from 1.4% in January. Statistical quirks were behind February's year-over-year fall, though.
The majority of headlines from last week's advance Q4 GDP data in the Eurozone--see here--were negative.
It will take a while for the economic data in the euro area fully to reflect the Covid-19 shock, but the incoming numbers paint an increasingly clear picture of an improving economy going into the outbreak.
Yesterday's detailed Q3 growth data in the Eurozone offered no surprises in terms of the headline.
Korea's final GDP report for Q4 was little changed, in the end.
Mortgage applications have risen, net, over the past couple of months, despite the 70bp surge in 30-year mortgage rates since the election. Indeed, we'd argue that the increase in applications is a result of the spike in rates, because it likely scared would-be homebuyers, triggering a wave of demand from people seeking to lock-in rates, fearing further increases.
In contrast to the strong December trade numbers in France--see here--yesterday's German data were soft. The seasonally adjusted trade surplus dipped to €21.5B in December, from €22.3B in November.
German industrial production data were presented by Bloomberg News as signs that the recovery is "gathering momentum", but it is slightly premature to make that call. Narrow money growth is currently sending a strong signal of higher GDP growth this year in the euro area, but the message from the manufacturing sector is still one of stabilisation rather than acceleration.
The German manufacturing sector appears to have settled into an equilibrium of sustained misery.
Friday's industrial production data in Germany added to the manufacturing optimism following the sharp rise in new orders--see here--reported earlier in the week.
Leave it to an economist to tell contradictory stories; German manufacturing orders, at the start of the year, rose at their fastest pace since 2014, but it doesn't mean anything.
Friday's industrial production report in Germany capped a miserable week for economic data in the Eurozone's largest economy.
CPI data in Colombia released on Saturday confirmed that inflation is well under control, due to plunging domestic demand on the back of Covid, and despite the lagged effect of the COP depreciation earlier this year.
The contrast between November's very modest 67K ADP private payroll number and the surprising 254K official reading was startling, even when the 46K boost to the latter from returning GM strikers is stripped out.
German GDP growth likely accelerated in the second quarter, following a disappointing 0.3% quarter-on-quarter expansion in Q1. Growth in the manufacturing sector remains modest, and the trend in consumers' spending remains solid. Industrial production was unchanged in May, pushing year-over-year growth to 2.1% from a revised 1.1% in April.
German GDP growth jumped in the first quarter, but monthly economic data suggest the economy all but stalled in Q2. Yesterday's industrial production data are a case in point. Output slid 1.3% month-tomonth in May, pushing the year-over-year rate down to -0.4% from a revised 0.8% gain in April. Adding insult to injury, the month-to-month number for April was revised down by 0.3 percentage points
Yesterdays' industrial production report capped a poor week for German manufacturing. Output fell 1.2% month-to-month in August, well below the consensus, +0.2%, though note that a 0.5% upward revision to the July data made the August headline look worse. Similar to the factory orders report earlier this week--see our October 6th Monitor--base effects also mean that production accelerated to 2.5% year-over-year, from a revised 0.8% gain in July.
We have argued for some time that much of the early phase of the downturn in global manufacturing was due to the weakening of China's economic cycle, rather than the trade war.
Recent hard data have confirmed the severe shock from Corona to the Chilean economy in Q2.
India's GDP shrank by 23.9% year-over-year in the second quarter, following growth of 3.1% in Q1.
The Monetary Policy Board of the Bank of Korea yesterday voted unanimously to lower its base rate by 25 basis points to a record low of 0.50%.
The picture of the economy's recent performance will be redrawn today, when the national accounts are published.
Economic data released on Friday underscored our view that bolder rate cuts in Brazil are looming. The BCB's latest BCB's inflation report, released on Thursday, showed that policymakers now see conditions in place to increase the pace of easing "moderately" .
Korean trade ended the year strongly, salvaging what was shaping up as a dull fourth quarter for the economy.
The national accounts, released today, likely will restate that quarter-on-quarter GDP growth held steady at 0.4% in Q4.
The publication yesterday of the first BCB quarterly inflation report under the new president, Ilan Golfajn, revealed his initial views on inflation, the currency, and monetary policy. Overall, Mr. Golfajn has taken a hawkish approach. We think Brazil's first rate cut will come no earlier than Q4, likely at the final meeting of the year, providing the government continues the fiscal consolidation process and inflation keeps falling.
Sterling's shaky performance so far this year-- the trade-weighted index currently is 3% below its end-2019 level and was down 8% at the peak of the mid-March market frenzy--raises the question of whether a renewed depreciation would have a better chance of boosting GDP growth than last time.
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
Britain still has nothing to show for sterling's depreciation, even though nearly two years have passed since markets started to price-in Brexit risk, driving the currency lower.
Brazil's external accounts remain relatively solid, making it easier for the country to withstand any potential external or domestic threat.
The substantial gap between the key manufacturing surveys for the U.S. and China, relative to their long-term relationship, likely narrowed a bit in December.
The end of Korea's first Covid-19 wave, coupled with the government's economic support measures, has been a boon for the retail industry.
The Brazilian manufacturing sector remains very depressed by weak end-demand, but the misery is easing, at the margin. Industrial production fell 2.5% month-to-month in February, equivalent to an eye-watering 9.8% contraction year-over-year, but this was rather less bad than the 13.6% slump in January.
Yesterday's data dump in the EZ delivered something investors haven't seen for a while, namely, positive surprises.
Data released yesterday confirm that Brazil's recovery has continued over the second half of the year, supported by steady capex growth and rebounding household consumption.
Markets were left somewhat disappointed yesterday by the G7 statement that central banks and finance ministers stand ready "to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
It's a myth that the 10-ye ar decline in the unemployment rate has not driven up the pace of wage growth.
Yesterday's advance inflation data in Germany fell short of forecasts--ours and the consensus--for a further increase. Inflation was unchanged at 0.8% year-over-year in November, but we think this pause will be temporary.
Yesterday's final manufacturing PMIs confirmed that all remained calm in the EZ industrial sector through February.
Six developments over the summer have increased the likelihood that the government will make concessions required to preserve unfettered access to the single market after formally leaving the EU in March 2019.
The biggest single surprise in the second quarter GDP report was the unexpected $28B real-terms drop in inventories.
The models which generate the ADP measure of private payrolls will benefit in May from the strength of the headline industrial production, business sales and jobless claims numbers.
It seems reasonable to think that manufacturing should be doing better in the U.S. than other major economies.
The Q1 Tankan survey headlines were close to our expectations, chiming with our call for year-over-year contraction in Japanese GDP of at least 2%, after the 0.7% decline in Q4.
Japan is the only major advanced economy to have recently experienced an exchange rate depreciation as large as Britain's. Between July 2012 and May 2013, the yen f ell by 24%, matching sterling's depreciation since its peak in August 2015.
On a headline level, the Spanish economy conformed to its image as the star performer in the EZ in Q4.
Hopes that GDP growth might be boosted soon by a pick-up in net exports continue to be undermined by the latest data.
The key question for the MPC at this week's meeting is whether it is prepared to tolerate the consequences for inflation of sterling's further depreciation since its last meeting in August.
The Brazilian economy fell into recession over the first half of the year due to the severity of the Covid shock on domestic demand.
Friday's data force us to walk back our recession call for Germany. The seasonally adjusted trade surplus rose in September, to €19.2B from €18.7B in August, lifted by a 1.5% month-to-month jump in exports, and the previous months' numbers were revised up significantly.
French industrial production data surprised to the upside yesterday. Output rose 0.1% month-to-month in September, a solid gain following an upwardly-revised 1.7% rise in August, and also higher than the consensus, forecast for a 0.4% fall. The details, however, were less upbeat than the headline. Transport equipment fell, as expected, following production being pushed forward ahead of the Summer holidays. But this story was overshadowed by a 22.5% month-to-month jump in oil refining-- included in manufacturing--as refineries resumed full production following maintenance over the summer.
Yesterday's economic reports in the Eurozone were ugly.
The Fed paved the way with a 50bp emergency rate cut on March 3, with more to come.
Last week's official data supported our forecast that GDP growth likely will slow further in Q1, suggesting that a May rate hike is not the sure bet that markets assume.
Today's ECB meeting is supposed to be a slam-dunk.
The Q2 GDP figures show that the economy has little underlying momentum.
The fact that Italy's economy is in poor shape will not surprise anyone following the euro area, but the advance Q4 GDP headline was astonishingly poor all the same.
Long-standing readers will know that we have been downbeat on the potential for net external trade to boost the economy following sterling's 2016 depreciation.
It often is argued that the MPC will raise interest rates in November--even if the economic data are not pressuring the Committee to tighten--because markets would go into a tailspin if the MPC failed to meet their expectations.
The headline figures from yesterday's GDP report gave a bad impression. September's 0.1% month-to- month decline in GDP matched the consensus and primarily reflected mean-reversion in car production and car sales, which both picked up in August.
Next week is a big one for China. The five yearly Party Congress opens on Wednesday, and on Thursday, the monthly raft of activity data is published, along with Q3 GDP.
China's October foreign trade headlines beat expectations, but the year-over-year numbers remain grim, with imports falling 6.4%, only a modest improvement from the 8.5% tumble in September.
If Brent oil prices remain at their current $41 through the end of the second quarter--a big ask, we know, but you have to start with something--the average price of petroleum products imported into the U.S. will rise at an annualized rate of about 70% from their first quarter level.
External demand for the Eurozone's largest economy is going from strength to strength. Seasonally adjusted German exports rose 3.4% month-to-month in December, equivalent to a solid 7.5% increase year-over-year.The revised indices show that the annualised surplus rose to an all-time high of €218B, or 7% of GDP, last year, indicating that the level of external savings remains a solid support for the economy.
Yesterday's economic data in Germany were stellar, but base effects mean that the story for Q4 as a whole is less upbeat.
History is repeating itself in France. When the Republican Nicolas Sarkozy defeated the Socialist candidate Ségolène Royal in April 2007, consumer sentiment briefly soared to a six-year high, before plunging to an all-time low a year later.
Friday's industrial production data in the core EZ economies, for December, were startlingly poor. In Germany, industrial production plunged by 3.5% month-to-month, comfortably reversing the revised 1.2% rise in November.
Japan's GDP growth was revised up, to 0.4% quarter-on-quarter in Q3, from 0.1% in the preliminary reading.
The latest national accounts show that the economy is holding up much better in the face of heightened Brexit uncertainty than previously thought.
Yesterday's trade data added to the evidence that momentum in the German economy slowed sharply at the start of the year.
Yesterday's trade data in Germany added to the evidence of a relatively slow rebound as the domestic and European economies emerged from lockdown.
News yesterday that exports surged to a record high in April was leapt on as "evidence" that sterling's Brexit-related weakness already is having positive side-effects and that therefore the economy would be relatively unscathed by a Brexit. However appealing this explanation may sound, it is nonsense.
Yesterday's deluge of output and trade data broadly supported our call that quarter-on-quarter GDP growth likely slowed to 0.3% in Q4, from 0.4% in Q3.
The German trade surplus increased slightly in May, following weakness in the beginning of spring. The seasonally adjusted surplus rose to €20.3B in May, from €19.7B in April; it was lifted by a 1.4% month-to-month jump in exports, which offset a 1.2% rise imports.
It's still unclear how exactly Covid-19 will impact the euro area as a whole, but little doubt now remains that Italy's economy is in for a rough ride.
Yesterday's Sentix investor sentiment survey provided the first glimpse of conditions on the ground in the EZ economy in the wake of the coronavirus scare.
Industrial production hit its stride last year, notching up eight consecutive month-to-month gains--the longest run of unbroken growth since May 1994--before a setback in December, which was triggered by the temporary closure of the Forties oil pipeline.
Data yesterday suggest that EZ investor sentiment is on track for a modest recovery in Q3.
Friday was a busy day in the Eurozone economy. The third detailed GDP estimate confirmed that growth was unchanged at 0.4% quarter-on-quarter in Q2, pushing the year-over-year rate down by 0.4 percentage points to 2.1%, marginally below the first estimate,2.2%.
Brexiteers have downplayed the economic consequences of a no-deal exit by arguing that a further depreciation of sterling would cushion the blow.
The seasonally adjusted trade surplus in Germany slipped to €19.6B in July, from €21.2B in June, its lowest since April, and we are confident that it has peaked for this cycle.
New home price growth in China has held up longer than we expected.
The half-way point of the quarter is not, alas, the half-way point of the data flow for the quarter.
Our first impression of the proposed Brexit deal between the EU and the U.K. is that it is sufficiently opaque for both sides to claim that they have stuck to their guns, even if in reality, they have both made concessions.
Japan's economy shrank by an historic 7.8% quarter-on-quarter in Q2, much worse than the 0.6% slip in the first quarter.
Japan's exporters have largely shrugged off the country's second wave of Covid-19.
Yesterday's trade data showed that the Eurozone's external balance continues to improve markedly. The seasonally adjusted trade surplus in the euro area rose to €23.3B in December, a new all-time high, from a revised €21.6B in November.
The beleaguered EZ car sector finally enjoyed some relief at the end of Q3, though base effects were the major driver of yesterday's strong headline.
The Eurozone's trade surplus rebounded slightly over the summer, rising to €16.6B in August from €12.6B in July, helped mainly by a 2.0% month-to- month jump in exports.
Japan's economy contracted by 0.9% quarter-on- quarter in Q1, following a downwardly-revised 1.9% plunge in the previous quarter.
The construction sector in the Eurozone probably stumbled in March. Advance data for the major economies suggest that output fell 1.2% month-to-month, pushing the year-over-year rate down to 1.6% from 2.4% in February.
The French manufacturing data delivered another upside surprise last week, following the solid numbers in Germany; see here. French industrial production rose slightly in November, by 0.3% month-to-month, extending the gains from an upwardly-revised 0.5% rise in October.
We'll cover Friday's barrage of EZ economic data later in this Monitor, but first things first. We regret to inform readers that the ECB is behind the curve. Last week, Ms. Lagarde downplayed the idea that the central bank will respond to the shock from the Covid-19 outbreak.
Brazil's GDP growth slowed to just 0.1% quarter- on-quarter in Q4, from an upwardly-revised 0.2% in Q3. This pushed the year-over-year rate up to 2.1%, from 1.4%, but this was weaker than market expectations.
Most of the data were consistent with the idea that fourth quarter growth will be a two-part story, with real strength in domestic final demand partly offset by substantial drags from net foreign trade and inventories.
Data on EZ consumption were soft while we were enjoying our Christmas break. The advance EC consumer confidence index slipped to a three-year low of -8.1 in December, from -7.2 in November, breaking its recent tight range.
A powerful cocktail of cheap money, labour and commodities, allowed to infuse by a hiatus in the government's austerity programme, has reinvigorated the U.K. economy over the last three years. But these supports are now weakening while new headwinds are emerging. The U.K. economy is heading for a pronounced slowdown, one that is under-appreciated by most forecasters and under-priced by markets.
While were out over the holidays, the single biggest surprise in the data was yet another drop in imports, reported in the advance trade numbers for November.
Friday' second Q4 GDP estimate revealed that the EZ economy barely grew at the end of 2019. The report confirmed that GDP rose by 0.1% quarter-on-quarter in Q4, slowing from a 0.3% rise in Q3, but the headline only narrowly avoided downward revision to zero, at just 0.058%
In the wake of last week's national accounts release, markets judge that the probability of a Bank Rate hike at the August 2 MPC meeting has increased to about 65%, from 60% beforehand.
Data on Friday showed that the upturn in French manufacturing petered out at the end of Q1.
Friday's data added further colour to the September CPI data for the Eurozone.
The EZ Q4 GDP data narrowly avoided a downward revision in yesterday's second estimate.
We've already raised a red flag for today's second Q4 GDP estimate in the Eurozone, but for good measure, we repeat the argument here.
Data released earlier this week show that Japan's current account surplus continued its downtrend in October, falling to ¥1,404B, on our seasonal adjustment, from ¥1,494B in September.
The Eurozone's trade surplus remained subdued at the end of the second quarter; it dipped to €16.7B in June from €16.9B in May.
Japanese PPI inflation continues to be driven mainly by imported metals and energy price inflation. Metals, energy, power and water utilities, and related items, account for nearly 30% of the PPI.
Italy's economy was in trouble before the Covid-19 hammer-blow. The new government's ill-fated threat in 2018 to leave the Eurozone, unless Brussels allowed a looser budget, threw the economy into a technical recession, from which it never made a convinicing recovery.
Don't worry about the weakness of the recent retail sales numbers. The three straight 0.1% month-to- month declines tell us nothing about the underlying state of the consumer.
Net exports should come roaring back as a driver of Eurozone GDP growth in the second quarter. The euro area trade surplus leapt to €24.3B in April, a new all-time high, up from a revised €19.9B in March. A 1.7% month-to-month fall in imports--mean-reversion from a 3.9% increase in March--was a big contributor to the higher surplus.
We are sticking to our view that the Eurozone's trade surplus will fall in the next six months, despite yesterday's upbeat report. The seasonally adjusted trade surplus leapt to a record high of €25.0B in September from revised €21.0B in August, lifted by an increase in exports and a decline in imports.
Yesterday's final inflation data in France for September were misleadingly soft.
Normal service was resumed in the euro area with Friday's GDP reports pointing to solid growth in Germany amid weakness in Italy and France. Real GDP in the Eurozone grew 0.3% quarter-on-quarter in the final three months of last year, up from 0.2% in Q3.
Judging by the solid advance data in the major economies, yesterday's EZ industrial production report should have hit desks with a bang, but it was a whimper in the end.
Investors face a busy EZ calendar today, but the second estimate of Q3 GDP, and the advance GDP data in Germany, likely will receive most attention. Yesterday's industrial production report in the Eurozone was soft, but it won't force a downward GDP revision, as we had feared.
Few Eurozone investors are going blindly to accept the rosy premise of last week's relief rally in equities that both a Brexit and a U.S-China trade deal are now, suddenly, and miraculously, within touching distance. But they're allowed to hope, nonetheless.
A 45bp rise in long-term interest rates--the increase between mid-August and last week's peak--ought to depress stock prices, other things equal.
March data for retail sales and manufacturing have tempered our optimism for the advance Q1 GDP estimate in Germany next week. Industrial production fell 0.5% month-to-month in March, equivalent to a mere 0.1% increase year-over-year, mainly as a result of weakness in core manufacturing activities.
Germany's external balance was virtually stable at the beginning of the second quarter. The seasonally adjusted trade surplus rose marginally to €23.9B in April from a revised €23.7B in March, mainly due to weakness in imports. Demand for goods abroad fell 0.2% month-to-month, which pushed up the surplus despite amid unchanged exports. Imports fell 1.5% year-over-year in April, up slightly from a 2.5% decline in March.
Chinese exports grew by just 5.5% in dollar terms year-over-year in August, down from 7.2% in July. Export growth continues to trend down, with a rise of just 0.2% in RMB terms in the three months to August compared to the previous three months, significantly slower than the 4.8% jump at the p eak in January.
Korea's final GDP report for the third quarter confirmed the economy's growth slowdown to 0.4% quarter-on-quarter, following the 1.0% bounce-back in Q2.
Yesterday's detailed German GDP report raised more questions than it answered. The headline confirmed that growth accelerated to 0.4% quarteron- quarter in Q4, from 0.1% in Q3, leaving the year-over- year rate unchanged at 1.7%.
The IFO did its part to alleviate the stock market gloom yesterday, with the business climate index rising slightly to 108.3 in August from 108.0 in July. The August reading doesn't reflect the panic in equities, though, and we need to wait until next month to gauge the real hit to business sentiment. The increase in the headline index was driven by businesses assessment of current output, with the key expectations index falling trivially to 102.2 from a revised 102.3 in July. This survey currently points to a stable trend in real GDP growth of about 0.4% quarter-on-quarter, consistent with our expectation of full year growth of about 1.5%.
The growing perception that the U.K. MPC will lag further behind the U.S. Fed in this tightening cycle than previously has pushed sterling down to $1.49, a long way below its post-recession peak of $1.72 in mid-2014. But this has done little to enhance the overall competitiveness of U.K. exports, and net trade still looks likely to exert a major drag on real GDP growth in 2016.
Real GDP in the Eurozone rose 0.4% quarter-on-quarter in Q1, in line with the consensus, but slightly below our expectation for a 0.5% increase. We don't get much detail from the country-specific advance estimates but all evidence indicates that the technical hit from net trade was much larger than we expected.
Our new Chief U.K. economist, Samuel Tombs, initiated his coverage yesterday with a sombre, non-consensus, message on the economy. Headwinds from fiscal tightening and net trade will weigh on GDP growth next year, but the BoE will likely have to look through such cyclical weakness, and hike as inflation creeps higher. An intensified drag from net trade in the U.K. will, other things equal, benefit the Eurozone. But a slowdown in U.K. GDP growth still poses a notable risk to euro area headline export growth, especially in the latter part of next year.
Hopes that the economy will not slow over the next year are largely pinned on the idea that net trade will be boosted by the drop in sterling. The pound has tracked sideways over the last two months and is about 15% below its trade-weighted peak in November 2015.
Industrial production data yesterday confirmed downside risks to today's GDP data in the Eurozone. Output fell 0.3% month-to-month in September, pushing the year-over-year rate down to 1.7% from a revised 2.2% in August. Weakness in Germany was the main culprit, amid stronger data in the other major economies. A GDP estimate based on available data for industrial production and retail sales point to a quarterly growth rate of 0.4% quarter-on-quarter, but we think growth was rather lower, just 0.2%, due to a drag from net trade.
The Chilean economy improved in the first quarter, growing 2.0% year-over-year, up from 1.3% in the fourth quarter. Net trade led the improvement, with exports rising 2.1% quarter-on-quarter, thanks to the modest rise in metal prices and an increase in exports of services, especially tourism.
The first quarter probably saw continued weakness in German net trade, despite the modest February rebound in gross exports. The seasonally-adjusted trade surplus rose to €19.7B from €18.7B in January, lifted by a 1.3% month-to-month rise in exports, which offset a 0.4% increase in imports.
Household spending has been the sole source of growth in the economy so far this year, amid worsening investment and net trade. Today's official retail sales figures, however, look set to show that consumers suffered the Brexit blues in June.
German exports had a sluggish start to the fourth quarter, falling 1.2% month-to-month in October. The monthly drop pushed the year-over-year rate down to 3.0% from 4.2% in September, well down from the 5.6% third quarter average and extending the loss of momentum in recent months. Imports fell 3.6%, so net exports rose, but it's too early to make any useful estimates of net trade in the fourth quarter as a whole.
German exporters stumbled at the end of last year. The seasonally adjusted trade surplus in Germany dipped to €18.4B in December, from €21.8B in November, hit by a 3.3% month-to-month plunge in exports. Imports were flat on the month. The fall in exports looks dramatic, but it followed a 3.9% jump in the previous month, and nominal exports were up 2.5% over Q4 as a whole. Advance GDP data next week likely will show that net trade lifted quarter-on-quarter growth by 0.2 percentage points, partly reversing the 0.3pp drag in Q3. Real imports were held back by a jump in the import price deflator, due to rebounding oil prices.
German trade data yesterday added further evidence that net exports likely will wreak havoc with the Q3 GDP report this week. Exports rose 2.6% month-to-month in September, partially rebounding from a 5.2% plunge in August. But imports jumped 3.6%, further adding to the net trade drag on a quarterly basis. Our first chart shows our estimate of real net trade in Q3 as the worst since the collapse in 2008-to-09.
Germany's nominal external surplus rebounded smartly over the summer, but real net trade looks set to be a drag on Q3 GDP growth, again. The seasonally adjusted trade surplus increased to €21.6B in August from a revised €19.3B in July.
In one line: Q1 net trade hit confirmed; a rebound in Q2?
In one line: Net trade offset a crash in inventories; but consumption also picked up.
In one line: Horrible manufacturing data, but an upward revision to Q4 net trade looms.
In one line: Solid start to Q4 for net trade; wage growth dipped, slightly, in Q4.
In one line: Solid export headline, but net trade probably fell in Q1.
In one line: Capex and net trade data are going haywire.
In one line: Hit by slowdown in net trade and consumers' spending.
Consumer spending has been the main locomotive of the economic recovery over the last couple of quarters, as investment and net trade have dragged on growth. Signs are emerging, however, that consumption is slowing too.
Net trade has been a major drag on the economy's growth rate in recent quarters, and February's trade figures, released today, are likely to signal another dismal performance in the first quarter.
The Tankan points to a q/q contraction for capex in Q3, but GDP growth overall will stay strong. Japan's unemployment steady, but details bode ill for Q4. September's full-month data dispel some export worries in Korea; expect a Q3 lift from net trade. Korea's PMI pours cold water on the spectacular jobs report for August. September is as bad as it gets for Korean CPI deflation.
Real GDP in Germany grew 0.7% quarter-on-quarter in Q4, thanks mainly to a 0.4% contribution from private consumption, and a 0.2% boost from net trade. Household consumption grew 2.2% annualised in 2014, the best year for German consumers since 2006.
In one line: Don't panic over the dip in consumer sentiment; net trade likely lifted Q4 GDP growth.
Why is the EZ current account surplus rising and net exports falling at the same time?
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