The Japanese yen has gained ground in the Monday session. In North American trade, USD/JPY is trading at 112.93, down 0.40% on the day. It’s a quiet start to the week, with no Japanese events. In the U.S., the Empire State Manufacturing Index dropped sharply to 10.9, down from 23.3 points. This was well short of the estimate of 20.1 points. On Tuesday, the U.S. releases housing starts and building permits. Japan releases trade balance.
The global trade war continues to weigh on the Japanese economy. Japanese Final GDP in Q3 declined 0.6%, the second decline in three quarters. The well-respected Japanese Tankan Manufacturing index remained steady at 19 points in the third quarter. However, recent manufacturing indicators have pointed downwards, pointing to slower activity in the manufacturing sector. This is attributable to slower global economic conditions, which has taken a bite out of Japanese exports and manufacturing. With Japanese exports to the U.S. and China facing higher tariffs, it’s not surprising that recent manufacturing reports have been soft.
As expected, U.S. retail sales were down sharply in November. Core retail sales dropped from 0.7% to 0.2%, while retail sales declined to 0.2%, down from 0.8%. Still, retail sales managed to beat the estimate of 0.1%. Lower oil prices have boosted consumer spending, which is expected to look strong in the fourth quarter. Inflation has dipped of late, CPI dropped to 0.0% in November, down from 0.3% a month earlier. This marked the lowest level since May. Core CPI remained pegged at 0.2 percent. The weak readings can be attributed to falling oil prices, which has led to a sharp decline in gasoline prices. On an annualized basis, inflation gained 2.2 percent in November, down from 2.5 percent in October.
