Sun, Feb 05, 2023 @ 17:09 GMT

EU officials give strong warnings to UK for clarity and purpose for Brexit extension

    The Brexit chaos in the UK drew some strong reactions from EU. Germany’s Europe Minister Michael Roth warned that “our patience as the European Union is being sorely tested at the moment.” He added “I can only call once again on our British partners in London to make concrete proposals at last on why they want an extension.”

    French EU affairs minister Nathalie Loiseau also complained that “this uncertainty is unacceptable”. She added: “We need an initiative, we need something new because if it’s an extension to remain in the same deadlock… How do we get out of this deadlock? – this is a question for the British authorities.” Also, “Grant an extension – what for? Time is not a solution, it’s a method. If there is an objective and a strategy and it has to come from London.”

    Separately, ITV political editor Robert Preston reported tat EU leaders are unlikely to grant a Brexit delay this week. Instead, they will request clarify from UK Prime Minister Theresa May on what the delay is for.

    New Zealand good imports jumped 25% yoy on petroleum, imports rose 7.7% yoy

      New Zealand goods exports rose 7.7% yoy to NZD 6.4B in June. Goods imports rose 25.0% yoy to NZD 7.1B. Trade balance came in at NZD -701m deficit, versus expectation of NZD 204m surplus.

      “Petroleum and products imports rose $795 million to reach a new high of $1.2 billion,” Stats NZ. “This rise lead the sharp increase in total imports for the month compared with June 2021.”

      US leads monthly export rise, up 22%. Exports to EU were up 28% and Japan up 24%. Exports to China were down -6% and to Australia down -12%.

      Import form all top partners rose, with China up 12%, EU up 11%, Australia up 6%, US up 30%, and Japan up 4.1%.

      Full release here.

      BoJ opinions: Important not to tighten prematurely

        In the Summary of Opinions of July 15-16 meeting, BoJ noted that it should “continue to support financing, mainly of firms, and maintain stability in financial markets by conducting monetary easing through the three measures”

        Even though core CPI is likely to increase on the back of rise in commodity prices, there is “a long way to go” to achieve target in a stable manner. Hence, it is “important not to tighten monetary policy prematurely”. Also, the “deflationary mindset is strongly entrenched in Japan”.

        Full Summary of Opinions here.

        Japan cabinet office: Exports increasing at a slower pace

          In the March monthly economic report, Japan’s Cabinet office maintained that the economy “shows weakness in some component” as it’s picking up in a “severe situation due to the pandemic. In particular, export assessment was downgraded from “increasing to “increasing at a slower pace recently”.

          Other assessments were generally unchanged, with private consumption in a “weak tone”, business investments “showing movements of picking up”, industrial production is “picking up, corporate profits are “picking up as a whole”, employment shows “steady movements” in some are but weakness remains. Consumer prices were flat.

          Provisional translation of the report here.

          ECB de Guindos: July rate hike is possible but not likely

            In an interview published on Sunday, ECB Vice President Luis de Guindos reiterated that ECB decided to end asset purchases in Q3. “In my opinion, there’s no reason why this shouldn’t happen in July,” he said.

            As for rate hike, “it could be months, weeks or days” after ending the asset purchases. “July is possible, but that’s not to say it’s likely,” he added.

            After the first hike, “we are driven by data, not by markets. Markets can sometimes be wrong. Within the Governing Council we haven’t discussed any predetermined path for rate rises.”

            Full interview here.

            BoC kept rate at ELB of 0.25%, expects strong Q2 rebound

              BoC left overnight rate at “effective lower bound” of 0.25% widely expected. Bank rate and deposit rate are held at 0.50% and 0.25% respectively. It will continue with the QE program with CAD 4B per week. BoC expects no rate hike until into 2023, while QE will continue until recovery is “well underway”.

              Globally BoC said “the arrival of effective vaccines combined with further fiscal and monetary policy support have boosted the medium-term outlook for growth”. Global GDP growth is projected to average just over 5% in 2021 and 2022, then slow to 4% in 2023.

              For Canadian, Growth in Q1 of 2021 is now “expected to be negative” due to resurgence of coronavirus infections and lockdowns. Though, BoC expects a “strong second-quarter rebound” assuming that restrictions are lifted later in Q1. It projects Canadian economy to growth 4% in 2021, almost 5% in 2022, and around 2.5% in 2023. Canada CPI is expected to rise temporarily to around 2% in H1 and return sustainably to 2% target in 2023.

              Full statement here.

              Fed Daly: Need to keep committed until actually seeing inflation down in data

                San Francisco Fed President Mary Daly said Fed is “nowhere near almost done”, with inflation. “We have made a good start and I feel really pleased with where we’ve gotten to at this point.”

                “It really would be premature to unwind all of that and say the job is done,” she said. “I also think that we’ve been with this high inflation for a while, and really getting too confident that we’ve already solved the problem,” Daly said, adding that the Fed needs to “keep committed until we actually see it in the data.”

                New Zealand ANZ business confidence improved to -32.0

                  New Zealand ANZ Business Confidence rose to -32.0 in May, up from -37.5. But all sectors remained deeply negative, with agriculture confidence worst at -63.9. Activity Outlook also improved to 8.5, up from 7.1. Manufacturing scored best in activity at 21.5.

                  ANZ noted that “how quickly the economy will bounce back is a key question. If the forward indicators start to suggest that the Reserve Bank’s relatively sharp V-shaped recovery is overly optimistic, it will be game on for further OCR cuts this year.”

                  Full release here.

                  BoJ Adachi: We should not forget strong yen led to two lost decades

                    BoJ board member Seiji Adachi said, “with the impact of the pandemic continuing, shifting to tighter monetary policy now would inflict huge damage to business and household activity… It’s premature to move toward tighter policy.”

                    “If the bank uses monetary policy to respond to short-term fluctuations (in exchange rates) before achieving its goal for underlying inflation, it would bring negative effects on the Japanese economy,” he said.

                    “We should not forget that a strong yen was among factors that led to Japan’s prolonged deflation and two ‘lost’ decades” of economic stagnation, he added.

                    Eurozone retail sales dropped -1.3% mom in Apr, EU down -1.3% mom

                      Eurozone retail sales dropped -1.3% mom in Apr, much worse than expectation of 0.3% mom rise. Volume of retail trade decreased by -2.6% for food, drinks and tobacco and by -0.7% for non-food products, while it increased by 1.9% for automotive fuels.

                      EU retail sales dropped -1.3% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Slovenia (-7.7%), Germany (-5.4%) and Latvia (-3.9%). The highest increases were observed in Spain (+5.3%), Luxembourg (+3.7%) and Ireland (+1.9%).

                      Full release here.

                      Fed Williams: Moderation of asset purchase pace may soon be warranted

                        New York Fed President John Williams said, “assuming the economy continues to improve as I anticipate, a moderation in the pace of asset purchases may soon be warranted.”

                        Williams expected the economy to grow between 5.5% to 6% this year. Inflation will drop back to 2% next year.

                        “There is still a long way to go before reaching maximum employment,” Williams said. “And over time it should become clearer whether we have reached 2 percent inflation on a sustained basis.”


                        BoJ Kuroda expects economy to recover as pandemic impact subsides

                          BoJ Governor Haruhiko Kuroda said Japan’s economy is expected to recover ahead as the impact of the pandemic gradually subsides. BoJ is closely watching the coronavirus impact. He pledged again that it “won’t hesitate to ease policy further if necessary”.

                          Kuroda also said that core CPI is expected to linger around 0% for the near term, but it would “pick up pace gradually”. Also, the financial system remains stable and financial conditions are accommodative overall.

                          Fed Evans: On basis of inflation alone, a couple of rate cuts could be needed

                            Chicago Fed President Charles Evans, probably most dovish FOMC member, said “on the basis of inflation alone, I could feel confident in arguing for a couple of rate cuts before the end of the year.”

                            He said in a CNBC interview yesterday that “in order to get inflation up to 2.25% over the next three years, I need 50 basis points of more accommodation.” And, “maybe that’s not quite enough”.

                            Though, he also acknowledged that the economy is “doing well” and “we are ten years into an expansion.” But after missing the inflation target for a decade, “two and a quarter or a little bit more would be about appropriate.”

                            Eurozone Sentix investor confidence rose to -30.9, concerns of catastrophic gas shortage fading

                              Eurozone Sentix Investor Confidence rose from -38.3 to -30.9 in November, above expectation of -35. Current situation index rose from -35.5 to -29.5. Expectations index rose from -41.0 to -32.3, highest since June this year.

                              Sentix said: “At the beginning of November, the sentix economic indices in Euroland surprise on the positive side. The overall index rises by 7.4 points to -30.9, which is still not a trend reversal signal. But the rise in situation and expectation values shows how sensitively investors react in their economic expectations to signals from the energy market.

                              “For this is the cause of the hopeful changes. October showed higher temperatures than usual and this means that gas storage facilities in Germany, for example, are full to the brim, more than expected for November. Spot market gas prices collapsed in response. Concerns about a catastrophic gas shortage are fading.”

                              Full released here.

                              Japan PMI manufacturing finalized at 48.9, slipped further into contraction

                                Japan PMI Manufacturing was finalized at 48.9 in December, down from November’s 49.0. That’s the lowest level since October 2020. S&P Global noted there were strong reductions in output volumes and order books. Input buying was cut at strongest rate since September 2020. Supply pressures were the least widespread since February 2021.

                                Laura Den man, Economist at S&P Global Market Intelligence, said: “December PMI data saw the Japanese manufacturing sector slip further into contraction territory in the final month of 2022. The downturn was largely centred around the current demand environment which is weak both internationally and domestically….

                                “At the same time, forward looking indicators are increasingly painting a gloomier picture for Japan’s manufacturing sector in the future. Companies have cut back input buying sharply, and business sentiment waned to a seven-month low.”

                                Full release here.

                                Germany PMI composite finalized at record 62.4, rising costs look to remain a feature

                                  Germany PMI Services was finalized at 61.8, up from June’s 57.5, surpassing previous record high set some 15 years ago. PMI Composite rose to record high of 62.4, up from 60.1. Markit said there was record expansion in activity as COVID-19 restrictions eased. Rate of job creation hit new record. Inflationary pressures remained elevated.

                                  Andrew Harker, Economics Director at IHS Markit said: “The recent surge in activity in the German service sector continued in July, with growth hitting the highest in more than 24 years of data collection as companies feel the benefit of the reopening of the economy following the lifting of COVID-19 restrictions. The ramping up of activity is also proving to be good news for workers, with companies taking on extra staff at an unprecedented rate.

                                  “Inflationary pressures remain elevated, however, and companies will take little solace from the fact that costs rose at a slightly weaker pace than in June. With the sector running hot and severe pressure on capacity signalled, rising costs look set to remain a feature in the near-term at least.”

                                  Full release here.

                                  Australia employment dropped -30.6k, but not clear JobKeeper impact

                                    Australia employment dropped -30.6k in April worse than expectation of 15k rise. Full-time jobs rose 33.8k while part-time jobs dropped -64.4k. Total employment was 45.9k, or 0.4%, higher than March 2020 level. But unemployment rate dropped to 5.5%, down from 5.7%, better than expectation of 5.5%. Participation rate dropped -0.3% to 66.0%.

                                    “We have not seen large changes in the indicators that would suggest a clear JobKeeper impact, such as an increase in people working reduced or zero hours for economic reasons or because they were leaving their job. We also haven’t seen large net flows out of employment across many population groups,” Bjorn Jarvis, head of labour statistics at the ABS said.

                                    Full release here.

                                    Fed Evans: We’re at a good point for sort of pausing rate hikes

                                      Chicago Fed President Charles Evans said “I’m not worried about inflation getting out of hand” and Fed is “at a good point for sort of pausing” rate hikes. Though, he “wouldn’t be surprised if at the end of the year we have a funds rate that’s a little bit higher than where we are now.” But, “that would be associated with a better economy and inflation moving up.”

                                      Evans also noted risk from uncertainties including slowdown in Europe and China, trade war. On government shutdown, he warned “the longer it goes on, I think it becomes a little bit more of a challenge, and the uncertainties mean that people are going to delay making certain types of investments, and that’s not good for the outlook either.”

                                      Germany Gfk consumer sentiment unchanged at -0.3, slowing vaccinations limit improvement

                                        Germany Gfk consumer sentiment for August was unchanged at -0.3. In July, economic expectations dropped from 58.4 to 54.6. Income expectations dropped from 34.1 to 29.0. Propensity to buy rose from 13.4 to 14.8. .

                                        Rolf Bürkl, a GfK consumer expert commented on this observation: “The phase where the decrease of COVID-19 incidence of infection has come to an end and those figures are again on the rise. In addition, the momentum for vaccination has recently slowed down considerably, despite there being sufficient quantities of the vaccine available. This is currently preventing any further significant increase as it pertains to consumer sentiment.”

                                        Full release here.

                                        Fed Evans: We have to be patient and bolder on inflation

                                          Chicago Fed President Charles Evans said, “we are going to have to go months and months into the higher inflation experience before I’m going to even have an opinion on whether or not this is sustainable or not, and that’s going to be uncomfortable.”

                                          “We really have to be patient and be willing to be bolder than most conservative central bankers would choose to be if we are going to actually get inflation expectations to move up in a sustainable fashion,” he added.