The Global Markets Weekly – 2/28/14

Posted March 3, 2014 by rvillareal

Japan’s January Economy

The first batch of Japan’s January real-economy indicators is clearly consistent with expectations for a significant consumer-led pickup in first-quarter GDP—and a second-quarter payback.   January retail sales results were absolutely in line with the scenario, jumping a more-than-generally expected 4.4% year-on-year.  That equated to a 1.4% seasonally adjusted rise from December—which, in turn, equated to a 1.3% rise ( a 5.1% annualized rate) from the fourth-quarter average. [private]

At the same time, January industrial production numbers showed huge increases in production of consumer goods, durable (+8.8% from December, and +8.5% from the fourth-quarter average) and non-durable (+4.5% from December, and +4.1% from the fourth quarter).    Unless those goods are for export, it does seem that the consumer-spending upswing is impacting first-quarter output growth, and the second-quarter spending downswing seems likely to depress second-quarter output.

But, the industrial production numbers also showed very strong capital-goods output (+6.8%, and +8.2% from the fourth quarter), something that would not be influenced by the consumption tax—and an indication that domestic investment is picking up and/or that exports are strengthening.  Strong progress on those fronts is central to hopes that the economy will plow through the consumption-tax swing with no lasting ill-effects.

• U.S.: The highlight will be the February labor market report (Fri), Other high-impact February indicators include the ISM Surveys, Manufacturing (Mon) and Non-Manufacturing (Wed). January personal income and spending (Mon) and the international trade balance (Fri) will be looked to for first-quarter GDP implications.
• Eurozone: Better real activity and monetary data, alongside higher-than expected February inflation figures, take the pressure off the ECB to take any further measures in the near future and especially at the Council meeting on Thursday.  The week may see better economic signs, including a bounce in Retail Sales (Wed).
• UK: No one expects the BoE to make any policy moves when the MPC gives its next verdict (Thu). After all, Governor Carney has done his utmost to suggest policy hikes are some way off, as have his colleagues, with the clear message that the MPC wishes to offer collectively being that no rate hike is imminent.
• Japan: A quiet schedule, featuring only fourth-quarter Ministry of Finance corporate financial statistics (Mon), February vehicle sales (Mon), and January business conditions composite indexes (Fri)
• Emerging Markets/Regions:  In China, the privately produced HSBC-PMIs are due.  In Korea, the CPI (Mon) arrives, but the expected small change will be irrelevant, and the Bank of Korea’s stance (a pause that may last all year) will not be affected. In Mexico, February CPI appears (Thu).  Inflation is likely to fall from January, and move towards the central bank’s ceiling of 4%.  In Brazil, February trade data (Wed) is scheduled, and in Turkey, there will be the February CPI (Mon).

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