Daily Market Digest: Japan trade, Australia unemployment, UK retail sales

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Market Summary

  • Japan posts trade surplus in July, but exports fall for 10th consecutive month
  • Australia unemployment rate falls to a 3-year low
  • Australia adds 26.2k jobs, but part-time jobs continue to drive the labor market
  • UK retail sales surges in July, 1.50% m/m
  • Eurozone current account surplus hits a 4-month low
  • Eurozone inflation rises, 0.20% in July as expected

Today’s Economic events

  • Japan Trade balance 0.32 trillion vs. 0.14 trillion
  • Australia employment change 26.2k vs. 10.2k
  • Australia unemployment rate 5.70% vs. 5.80%
  • UK retail sales m/m 1.40% vs. 0.0%; y/y 5.90% vs. 4.10%
  • UK core retail sales m/m 1.50% vs. 0.10%; y/y 5.40% vs. 3.60%
  • Eurozone current account s.a 28.2bn vs. 27.3bn
  • Eurozone CPI y/y 0.20% vs. 0.20%
  • Eurozone core CPI y/y 0.90% vs. 0.90%
  • ECB releases monetary policy meeting minutes
  • US jobless claims 262k vs. 266k
  • Philly Fed manufacturing index 2.0 vs. 1.4

Coming up:

  • (USD) CB leading index
  • (USD) FOMC Member Dudley speech

Australia unemployment rate falls to 5.70% in July

The unemployment rate in Australia fell to 5.70% on a seasonally adjusted basis, data from the Australian Bureau of statistics showed on Thursday. It was better than market forecasts of 5.80%, and at a 3-year low. During the month, the Australian economy added 26.2k beating estimates of 10.2k and following the 7.9k job gains from the previous month.

Australia Unemployment Rate: 5.70%, July 2016 (Source: ABS)
Australia Unemployment Rate: 5.70%, July 2016 (Source: ABS)

Full-time employment decreased by 45k while part-time employment increased by 71.6k. Part-time employment has been consistently growing over the past few months, outperforming full-time employment. The data showed that 72k new jobs were created in the 7-months of 2016, which was slightly lower than the 150k jobs that were created during the same period a year ago. Full-time employment continued to shed jobs by nearly 65k, compared to the 90k jobs during the previous year.

Jacqui Jones, program manager of ABS Labor and Income Branch, said, “The latest Labor Force release shows continued strength in part-time employment growth.” Savanth Sebastian from CommSec cautioned on the slowdown in new jobs being advertised earlier this year. He said that the uncertainty from the Australian federal election campaign had a dampening effect on hiring. He said, “The softer results across the labour market mirror other indicators across the economy, including retail sales. It’s pretty clear that the sluggish first half of 2016 resulted in employers managing their major cost base (employees) more carefully.”

The Australian dollar managed to reverse the declines from yesterday and was seen trading at $0.77 at the time of writing.

Japan posts trade surplus in July

Japan’s merchandise trade surplus was recorded at 513.51 billion yen in July, according to data released by the Ministry of Finance on Thursday. It was higher than the expectations of a surplus to 273.2 billion yen. June’s merchandise data was revised higher from the originally reported 692.835 billion yen to 693.1 billion yen.

Japan Trade Balance, July 2016
Japan Trade Balance, July 2016

Exports were down 14.0% on the year more than the forecasts of 13.80% and accelerated after sliding 7.40% in June. Across Japan’s major trading partners, exports to Asia were down 13.90% on the year while exports to China were down 12.70%. Exports to the United States fell 11.80% on the year, while exports to the EU were down 6.50%. Exports from Japan were down for the 10th consecutive month, marking the longest stretch since 2008.

Imports also declined at a stronger pace, down 24.70% on the year, this was more than the expected decline of 20.0%. In June, imports were down 18.80%. Imports from China were down 12.70% while imports from the US fell 15.2% on the year.

The UK retail sales shrug off Brexit blues

Consumers were unfazed by the UK’s referendum vote to leave the EU as retail spending by sales volumes rose 1.40% on a month over month basis in July. Data from the UK’s Office for National Statistics showed on Thursday that retail sales increased 5.90% on an annual basis in July 2016. Analysts were expecting to see an unchanged print in July while forecasts for the yearly retail sales were at 4.10%.

UK Retail sales, July 2016 (Source: ONS)
UK Retail sales, July 2016 (Source: ONS)

Excluding auto fuel, UK retail sales jumped 1.50% on a month over month basis in July, beating estimates of a 0.10% increase. July’s core retail sales also offset the 0.90% declines seen in June. On a yearly basis, the core retail sales surged 5.40%, beating estimates of 3.60% and up from 3.90% seen in June.

The ONS said, “In the latest month, growth continues to be driven by a broad-based increase in all 4 categories, but more notably in food and non-food stores, contributing 1.5 percentage points and 1.8 percentage points respectively to the 5.2pc growth in retail sales in July. Growth in non-food stores accounts for almost all of the increase in retail sales growth from the 3 months to June to the 3 months to July and has continuously increased in its contribution to overall retail sales growth since the 3 months to April 2016.”

The retail sales numbers cover one full month after the referendum period. ONS said that warm weather in July added to the higher volume of sales as clothing and footwear sales bounced back into positive growth, a first since November 2015. Overseas shoppers also pushed sales higher following the sharp depreciation of the British pound. Luxury goods stores also reported a jumped in sales as consumers increased spending, lured by the weaker exchange rate. The retail sales figures present a mixed picture in the aftermath of the referendum vote. While construction, manufacturing, and services PMI all fell following the vote, UK’s labor market data and retail sales remained upbeat. Nevertheless, the Bank of England is expected to maintain its easing bias. In August the central bank cut UK’s interest rate to record lows of 0.25%, while expanding the asset purchase program.

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