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Daily Market Digest: Japan Jobless Rate at 21-Year Low. Germany HICP Weakens

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Market Summary

  • Japan unemployment rate falls to a 21 year low
  • Japan Household spending continues to decline
  • Japan retail sales fall 0.20%
  • UK mortgage approvals fell in July
  • Germany headline inflation flat on month over month basis
  • Germany HICP lower at 0.30% in August

Today’s Economic events

  • Japan household spending y/y -0.50% vs. -1.30%
  • Japan unemployment rate 3.0% vs. 3.10%
  • Japan retail sales y/y -0.20% vs. -0.90%
  • Australia building approvals m/m 11.30% vs. 0.0%
  • German import prices m/m 0.10% vs. -0.10%
  • Spain flash CPI y/y -0.10% vs. -0.50%
  • UK Mortgage Approvals 61k vs. 63k
  • UK M4 money supply m/m 1.20% vs. 1.20%
  • Germany CPI m/m 0.0% vs. 0.10%; y/y 0.40% vs. 0.40%
  • Germany HICP m/m -0.10% vs. 0.10%; y/y 0.30% vs. 0.40%
  • Canada current account -19.9bn vs. -20.6bn
  • Canada RMPI m/m -2.70% vs. -1.30%; IPPI m/m 0.20% vs. -0.10%
  • US S&P HPI y/y 5.10% vs. 5.0%

Coming Up

  • (USD) Consumer confidence

Japan’s household spending falls less than expected in July

Household spending in Japan fell 0.50% in July compared to a year ago. It was better than the forecasts of a 0.90% decline, data from the Internal Affairs Ministry showed on Tuesday.

July’s declines, although better than estimates still marked the downtrend which is now into its fifth straight month of declines. June’s data was revised down slightly to show a decline of 2.20%. The pace of declines in household spending decelerated after heat wave led to a demand for air conditioners. But the demand was offset by lower expenditures on automobiles and declining overseas tours to Europe. Core household spending that excludes housing, motor vehicles, and other volatile items rose 0.30% on the month, in July.

Japan unemployment rate July 2016: 3.0% (Prev. 3.10%)
Japan unemployment rate July 2016: 3.0% (Prev. 3.10%)

In a separate report, Japan’s Labor Force Survey showed that the seasonally adjusted average unemployment rate in July fell to a 21 year low to 3.0% in July from 3.10% in June. It was the lowest level, last seen in May 1995. The headline figure also beat estimates of 3.10%. Despite the better than expected data, the improvement in the jobless rate has yet to see the effects in terms of higher wages and consumer spending.

Retail sales data also released showed that the headline figure fell 0.20% on the year in July for a fifth straight month compared to 1.30% declines in June. Economists were expecting to see a 0.90% decline instead. The pace of decline was the slowest in recent months. On a seasonally adjusted basis, retail sales were up 1.40% in July rising from 0.30% in June.

UK mortgage approvals fell in July

The number of new mortgages approved in the UK fell in July, marking the lowest level in a year signaling that the housing market cooled after the Brexit vote.

Data from the Bank of England showed that the number of new loans approved by banks fell to 60,912 in July. This was lesser than the 64k approvals in June and was the lowest since January this year. Demand for mortgages fell after a new tax hike on investment properties went into effect since April and pointed to a further weakening in the housing markets.

UK approval of loans July 2016: 116,631 (prev. 119,718)
UK approval of loans July 2016: 116,631 (prev. 119,718)

Lending to consumers fell to 3.8 billion GBP during the month due to declines in mortgage lending and unsecured borrowing. It was down from 5.1 billion in June. However, business lending increased as nonfinancial firms were seen borrowing 2.2 billion GBP from the banks in July, higher than 1.1 billion in June. Tuesday’s data continues to paint a mixed picture on the UK’s economy after Britons voted to leave the EU on June 23. While some surveys pointed to weakness, other indicators such as retail sales and employment remained robust.

The data showed a slowdown in borrowing and spending which sent consumer credit to an annual growth rate of more than 10%.

Germany flash CPI unchanged on the year in August

Preliminary inflation estimates from Germany for August showed that consumer prices remained unchanged at an annual rate of 0.40%.

It was the same pace of increase seen in June, according to data from the statistics office, Destatis. On a month over month basis, Germany’s CPI was unchanged at zero percent, missing estimates of a 0.10% increase.

Germany HICP, July 2016: 0.40% (Flash estimates: 0.30%, August 2016)
Germany HICP, July 2016: 0.40% (Flash estimates: 0.30%, August 2016)

The HICP which is the harmonized European index of consumer prices and one which is often used by the ECB dropped to 0.30% on a year over year basis compared to 0.40% in July. Energy prices were the main driver of the headline inflation on higher oil prices which increased since March.

The data comes ahead of next week’s ECB meeting. Although expectations are likely to see the ECB stand pat on policy the weak pace of inflation could trigger some form of reaction from the European central bank.

In an earlier release, economic sentiment in the eurozone fell slightly in August to 103.5 from 104.6 in July. The sentiment in the region soured as industrial sentiment indicator fell to -4.4 in August from -2.6 in July indicating a strong decline in sentiment in the sector. The consumer sentiment in the region also fell to -8.5 matching estimates and down from 7.9 in July.

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