Daily Market Digest: Japan GDP, UK Industrial Production, China trade data

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Japan’s GDP for the first quarter was revised higher to 0.50%. In the UK, industrial production in April surged the most in two years. China’s trade balance numbers remained muted, and World Bank cut global growth forecasts. Here’s what’s moving the markets today.

Today’s Economic events

  • Japan GDP q/q 0.50% vs. 0.50%; GDP y/y 1.90% vs. 1.90%
  • Japan nominal GDP q/q 0.60% vs. 0.60%
  • Australia home loans m/m 1.70% vs. 2.50%
  • China exports y/y -4.10% vs. -4.20%; imports y/y -0.40% vs. -6.80%
  • China trade balance 49.80 billion vs. 55.60 billion
  • Switzerland CPI m/m 0.10% vs. 0.20%; y/y -0.40% vs. -0.40%
  • UK industrial production m/m 2.0% vs. 0.00%; y/y 1.60% vs. -0.40%
  • UK manufacturing production m/m 2.30% vs. 0.0%; y/y 0.80% vs. -1.50%
  • ECB’s Nouy speech
  • Canada housing starts 188.6 k vs. 190 k
  • Canada building permits m/m -0.30% vs. 2.30%

Coming up

  • NIESR GDP report
  • DoE Crude oil inventories
  • RBNZ monetary policy meeting

Japan first quarter GDP revised higher

Japan’s economy in the first three months of the year, grew faster than initially anticipated, with some attributing the rise in economic growth to the “leap year effect.”

Data from Japan’s Cabinet Office released earlier today showed that the GDP was revised to 0.50% for the quarter, up from previous estimates of 0.40%. The 0.50% QoQ growth follows a 0.30% contraction in the economy during the fourth quarter of 2015. On a year over year basis, Japan’s economy grew at a pace of 1.90%, a higher revision from previous estimates of 1.70% and reversing the -1.10% contraction seen in the fourth quarter. Japan’s nominal GDP was revised to 0.60% matching forecasts and up from a -0.20% contraction in the previous period. The gains in the GDP number came from an upward revised private consumption which increased 0.60%.

Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, said not to read too much into the report. He notes, “The upward revision is very slight, and when you exclude the impact of leap year growth is not that strong. We expect growth to slow in the current quarter. The government should focus on steps to help low-income earners, but consumption may not rise much if consumer sentiment worsens.”

The Bank of Japan meets next week for its policy review on June 16th.

China exports fall more than expected in May

Import/Export data released by the General Administration of Customs showed that exports from the world’s second largest economy fell at a faster than expected pace in May. Exports fell 4.10% in May on a year over year basis, slightly below consensus estimates of a 4.0% decline. Imports dropped 0.40% on the month but the declines were slower than the 6.70% decline expected. On an annualized basis, China’s exports are 7.30% lower while imports are down 10.30%.

China’s trade surplus was accounted for at $49.98 billion for the reporting month of May, slightly below estimates of expected surplus of $55.85 billion.

The weak data was attributed to soft global demand. Julian Evans-Pritchard, China economist at Capital Economics, said, “China’s export growth is likely to remain subdued going forward. While we don’t anticipate much more of a slowdown in global growth given that the worst is probably over for many emerging markets, we don’t foresee a significant pick-up either.”

UK April industrial productions soars

Industrial and manufacturing production data from the UK, released by the Office for National Statistics earlier today showed industrial production rising 2.0% on a month over month basis while manufacturing production jumped 2.30% on a month over month basis, reversing the declines from the previous months. On a year over year basis, industrial production edged higher, rising 1.60% while manufacturing output gained 0.80%, beating analysts’ estimates by a wide margin.

The gains came as pharmaceutical and drugs manufacturing surged 8.6% between March and April, adding a total of 0.48 percent points to the total production with much of the products set for the export markets. Transportation equipment increased 4.70% primarily with cars for domestic use increasing. Electricity and gas sectors combined gained 3.90%. The data was the first positive print after Markit surveys showed a slowdown in the industrial and manufacturing sectors.

World Bank downgrades global growth forecasts to 2.40%

The World Bank’s latest report expects global growth to rise 2.40%, lower than from the 2.90% projection given in January this year. In its report entitled “Global Economic Prospects – Divergences and Risks” (the report can be accessed here) the World Bank said that sluggish growth in the advanced economies and low commodity prices alongside weak trade could result in an “insipid” recovery coinciding with a build-up in corporate debt.

The World Bank maintained China and India’s growth rates at 6.70% and 7.60% respectively but said that Brazil, Russia, and Japan could head deeper into recession.

The report said that commodity-exporting emerging markets and developed economies failed to adapt to a world of lower oil prices which accounted for nearly 40% of the downward revision. Growth in the emerging market and developing economies is expected to advance 0.40% this year, down from 1.20% projection from January.

World Bank Group President Jim Yong Kim said, “This sluggish growth underscores why it’s critically important for countries to pursue policies that will boost economic growth and improve the lives of those living in extreme poverty”.

Cautioning on the rise of corporate debt, World Bank Chief Economist and Senior Vice President Kaushik Basu said “However, one development that bears caution is the rapid rise of private debt in several emerging and developing economies. In the wake of a borrowing boom, it is not uncommon to find non-performing bank loans, as a share of gross loans, to quadruple.”


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