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Daily Market Digest: Eurozone inflation inches higher, UK GDP unchanged

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Japan’s industrial production was weaker, falling 2.30% on the month. In the Eurozone inflation was positive for the first time in five months. UK’s GDP for the first quarter remained unchanged, but business investment fell.

Today’s Economic events

  • UK Gfk consumer confidence -1 vs. -2
  • Japan industrial production preliminary m/m -2.30% vs. -0.10%
  • New Zealand ANZ business confidence 20.2 vs. 11.3 previously
  • Australia private sector credit m/m 0.40% vs. 0.50%
  • Japan housing starts y/y 9.80% vs. 4.90%
  • German retail sales m/m 0.90% vs. 0.70%
  • French consumer spending m/m -0.70% vs. -0.10%
  • France preliminary CPI m/m 0.20% vs. 0.20%
  • UK current account -32.6bn vs. -27.3bn
  • UK final GDP q/q 0.40% vs. 0.40%; index of services 3m/3m 0.50% vs. 0.40%
  • Eurozone flash estimate y/y 0.10% vs. 0.0%; core CPI y/y 0.90% vs. 0.80%
  • Canada GDP m/m 0.10% vs. 0.10%
  • Canada IPPI m/m 1.10% vs. 0.40%; RMPI m/m 6.70% vs. 4.90%
  • US weekly unemployment claims 268k vs. 267k

Coming Up

  • Chicago PMI
  • BoE Carney speech
  • FOMC Bullard speech

Japan industrial output weakens

Industrial output in Japan fell to a seasonally adjusted 2.30% in the month of May compared to the previous month. The 2.30% declines mark the first drop in nearly three months, data from the Ministry of Economics, Trade and Industry showed on Thursday. The report cited weakening in the manufacturing and electronics sectors. Index of output at factories and mines was reported at 95.0. May’s decline in industrial output followed April’s increase of 0.50%. The ministry maintained its basic assessment that trends in output remained fluctuating and indecisive.

Transport machinery sector, on the whole, gained 0.70%, while the chemicals sector posted the biggest drag on industrial output falling 7.50% from April. The auto industry also continues to recover following the earthquakes in Kyushu, which hit the supply chains. The machinery sector in the construction category fell 2.20% while electronic parts fell 3.20%.

Shunsuke Kobayashi, economist for Daiwa Institute of Research, said: “We expect production to be weak for the time being, taking into account factors such as financial market turmoil triggered by Britain’s decision to leave the European Union.”

The weak industrial output adds more pressure as speculation starts to build that the BoJ could add more policy easing when it meets on July 28 – 29th. BNP Paribas chief Japan economist Ryutaro Kono said: “I am quite skeptical that negative rate policy carries more benefits than drawbacks, but considering those economic and exchange-rate conditions, BOJ Governor (Haruhioko) Kuroda probably can’t afford to continue his wait-and-see approach.”

Busy day for the Eurozone economic data

Eurozone economic calendar was packed today with preliminary flash inflation data among other things.

In France, preliminary inflation data released by statistics office, Insee showed that inflation edged higher in June, rising at a pace of 0.20% in June on a year over year basis. Inflation also increased at the same pace in June but was slower than May’s increase of 0.40%.

In Germany, retail sales data rebounded, rising at a pace of 0.90% in May on a month over month basis. This follows an upward revision to April’s retail sales data which is now estimated to have fallen 0.30% on a month over month basis, compared to previous estimates which showed a 0.90% decline. On a year over year basis, German retail sales increased at a pace of 2.60%, slightly lower than May’s 2.70% revised increase. In real terms, retail sales increased 2.0% on an annualized basis. Food, beverages, and tobacco sales gained 2.20% in May on the year while non-food sales increased 2.80%. Internet sales and mail orders gained 8.50%, data from Destatis showed on Wednesday.

In Germany, jobless claims continued to fall in June, staying at record lows. Jobless claims were down 6k from May.

The Eurozone inflation estimates turned positive in June for the first time in five months, rising 0.10% from a year ago. Inflation pressures increased as the pace of energy price declines slowed, data from Eurostat showed today. Core consumer prices also accelerated during the month, rising 0.90% from May’s 0.80%.

UK Q1 GDP unchanged at 0.40%

UK’s Office for National Statistics released the final revision to the first quarter GDP confirming that the British economy grew at a pace of 0.40% during the first three months of the year. The final GDP estimate showed an annual GDP growth rate of 2.0% in the first three months of this year. Household spending increased 0.70% while GDP per capita up was up 0.30% for the period.

Services sector continued to remain at the forefront, driving growth. Services rose 0.60% on the quarter over quarter basis, while construction and industrial production fell 0.30% and 0.20% respectively. UK’s current account deficit narrows in the first quarter, falling to 32.6 billion from revised estimates of 34 billion in the previous quarter. Still, the current account was 6.90% of GDP in the quarter and worse than expected.

Business investment in the UK was also weak, falling 0.60% and contracting more than expected from the previous quarter posting the lowest levels since Q1 of 2014. Joe Grice, Chief economist for ONS, said: “here was very little evidence of a ‘referendum effect’ in the data, though the vote was not called until more than half-way through the quarter.”

The British pound was little changed on the news.

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