US PPI rose 0.5% mom, 2.1% yoy in January, well above expectation of 0.2% mom, 1.4% yoy. PPI core rose 0.5% mom, 1.7% yoy, also well above expectation of 0.2% mom, 1.2% yoy.
Building permits rose 9.2% mom to 1.551m annualized rate, above expectation of 1.450m. Housing starts dropped -3.6% mom to 1.567m, above expectation of 1.390m.
UK CPI accelerated to 1.8% yoy in January, up from 1.3% yoy, beat expectation of 1.4% yoy. CPI Core also accelerated to 1.6% yoy, up from 1.4% yoy, beat expectation of 1.4% yoy. RPI accelerated to 2.7% yoy, up from 2.2% yoy, beat expectation of 2.4% yoy.
PPI input came in at 0.9% mom, 2.1% yoy versus expectation of -0.4% mom, 3.5% yoy. PPI output was at 0.3% mom, 1.1% yoy, versus expectation of -0.1% mom, 1.2% yoy. PPI output core was at 0.1% mom, 0.7% yoy versus expectation of 0.1% mom, 0.6% yoy.
Germany’s DIHK Chambers of Industry and Commerce said that the country’s economy would growth 0.7% in 2020, slightly higher than 0.6% in 2019. However, it also pointed out that around 0.5% of growth is due to “statistical effects” such as the overhang from the previous year and four additional working days this year. Hence, CEO Martin Wansleben said “that is why we currently see little real growth.”
He added: “It is worrying: A whole host of data, particularly from industry, suggest that structural challenges, such as e-mobility, digitization, the energy turnaround and further the shortage of skilled workers, are adding to the current economic downturn. Some regions are particularly affected.”
RBNZ Governor Adrian Orr told the Finance and Expenditure Committee today that it’s “pleasing how resilient the New Zealand economy has been”, during a “period of weakening global growth and heightened global uncertainty”. He added that monetary policy is “in a good position”, with inflation at the “mid-point of our inflation target”. Employment is also “at, or slightly above” maximum sustainable employment.
Orr also said, RBNZ is “well advanced on understanding how we would meet our monetary policy mandate should we approach zero interest rates.” The central bank will publish work on these alternative monetary policy approaches in the coming weeks, “even if we don’t expect to be using them”.
Dallas Fed President Robert Kaplan said yesterday that he expects US to have “solid” growth this year. And, “based on my base-case outlook for the U.S. economy, the current setting of the federal funds rate at 1.5 to 1.75 percent is roughly appropriate.”
Kaplan saw boosts to the economy from ratification of the USMCA, trade deal phase one with China, and clarity over Brexit. And, “these developments, combined with a strong U.S. consumer … should lead to solid growth in 2020.” Though, he added that he will continue to monitor risks, in particular from China’s coronavirus. But, “still too soon to predict with confidence the ultimate impact of this virus on the US and global economies.”
FOMC minutes will be featured today they’re unlikely to deliver any deviation from chair Jerome Powell’s press conference. The minutes will likely repeat the message that policy is in a good place and Fed is in wait-and-see mode, monitoring the effect of last year’s three rate cuts, as well as the play out of global risks.
WHO Director-General Tedros Adhanom Ghebreyesus warned yesterday that China’s Wuhan coronavirus, or COVID-19, is the “public enemy number one”. And, “viruses can have more powerful consequences than any terrorist action.” The first vaccine is estimated to be 18 month from now. AT this point, Tedros said there have been 92 cases of human-to-human transmission in 12 countries outside China. But the WHO had not seen sustained local transmission yet, except in specific cases like the Diamond Princess liner.
Some experts estimated that each infected person would transmit the virus to about 2.5 other people. That would result in an attack rate of 60-80%. Prof Gabriel Leung, the chair of public health medicine at Hong Kong University, said in London that “60% of the world’s population is an awfully big number.” He added: “We need to get a clear view of the contagion and plug the holes in our understanding of the disease to inform public health decisions that affect hundreds of millions of lives.”
According to China’s National Health Commission, on February 18, Wuhan coronavirus cases added 1749 to 74185. Death tolls added 136 to 2004.
Canada manufacturing sales dropped -0.7% mom in December, much worse than expectation of 0.8% mom. Sales were down in 11 of 21 industries, representing 42.6% of the manufacturing sector. The largest declines were in the motor vehicle assembly and aerospace product and parts industries. However, these decreases were partly offset by higher sales in the primary metal industry.
US Empire State manufacturing general business condition rose sharply to 12.9 in February, up from 4.8, beat expectation of 5.1. Looking at some details, new orders jumped from 6.6. to 22.1. However, number of employees dropped from 9.0 to 16.7. Prices paid dropped from 31.5 to 25.0. But prices received rose from 14.4 to 16.7. Six month expectations dropped from 23.6 to 22.9.
German ZEW Economic Sentiment dropped sharply to 8.7 in February, down from 26.7, missed expectation of 20.4. German Current Situation index dropped to -15.7, down from -9.5, missed expectation of -10.0. Eurozone ZEW Economic Sentiment dropped to 10.4, down form 25.6, missed expectation of 21.3. Eurozone Current Situation dropped -0.4 to -10.3.
ZEW President Achim Wambach said: “The feared negative effects of the Coronavirus epidemic in China on world trade have been causing a considerable decline of the ZEW Indicator of Economic Sentiment for Germany. Expectations regarding the development of the export-intensive sectors of the economy have dropped particularly sharply. Besides, the end of 2019 and the beginning of 2020 saw a worse-than-expected development of the German economy. Both the downward revision of the assessment of the economic situation and the downturn in expectations show clearly that economic development is rather fragile at the moment.”
UK unemployment rate was unchanged at 3.8% in the three months to December, matched expectations, staying at a four-decade low. A estimated 1.29m people were unemployed. Employment rate was estimated at record high of 76.5%, up 0.4% from the previous quarter.
Average weekly earnings (including bonus) slowed to 2.9% 3moy, down from 3.2%, missed expectation of 3.1%. Average weekly earnings (excluding bonus) slowed to 3.2% 3moy, down from 3.4%, missed expectation of 3.3%.
China’s Customs Tariff Commission of the State Council. announced today tariffs exemptions on 697 lines of US imports, as fulfilment of the US-China trade deal phase one. The products include farm and energy, such as pork, beef, soybeans, liquefied natural gas and crude oil. Dozens of types of medical equipment are also included.
Importers can apply for tariffs exemptions starting from march 2. Such exemptions would only be effective for one year, subject to an approval process. China said that these exemptions are “to support enterprises to import goods from the US based upon their business considerations.”
Moody’s Investors Service warned today that outbreak of China’s Wuhan coronavirus would pressure growth in Asia Pacific as a whole. “This shock comes on the back of a marked slowdown in 2019 as decelerating global trade hit the region,” The impact would be felt mainly through trade and tourism. Some sectors could also be hurt due to supply chain disruptions.
For China, Moody’s cut 2020 growth forecasts sharply from 5.8% to 5.2%. The downgrade reflects “a severe but short-lived economic impact, with knock-on effects for economies across the region.” Lower import demand is the primary reason for slowing growth.
In the minutes of February 4 RBA meeting, it’s reiterated that “it was reasonable to expect that an extended period of low interest rates” in Australia. The central bank would continue to “monitor developments carefully, including in the labour market”. It “remained prepared to ease monetary policy further if needed”. But for now, interest rate was held unchanged at 0.75% after balancing the cost and benefits of a rate cut.
RBA also noted that China’s Wuhan coronavirus outbreak “present a material near-term risk to the economic outlook for China and for international trade flows, and thereby the Australian economy.” “”Some commodity prices, notably for industrial metals, iron ore and oil, had fallen on concerns that the coronavirus outbreak would disrupt production in China and reduce Chinese commodity demand in the near term.”
To counter the risk, “lower interest rates could speed progress towards the bank’s goals and make it more assured in the face of the current uncertainties.” However, further rate cut could “encourage additional borrowing at a time when there was already a strong upswing in the housing market”. RBA is “aware of the risk of low interest rates encouraging too much borrowing and driving excessive asset valuations.”
According to China’s National Health Commission, on February 17, confirmed Wuhan coronavirus cases rose 1886 to 72436. Death tolls rose 98 to 1868. New suspected cases rose 1432 to 6242. Tedros Adhanom Ghebreyesus, WHO director-general, said on Monday that the data “appear to show a decline in new cases”. But he also cautioned that “it’s too early to tell if this reported decline will continue. Every scenario is still on the table”. He added “This trend must be interpreted very cautiously. Trends can change as new populations are affected.”
South Korea President Moon Jae-in used rather strong words in urging the cabinet to come up with special measures to counter the impact from the coronavirus outbreak. He said as a weekly cabinet meeting, “emergency situations require an emergency prescription. The current situation is much more serious than we thought.” “It is the time when special measures are absolutely necessary to use every possible means that the government can mobilize,” he added.
Moon also said the use of the government’s emergency funds should be just the “beginning”. “This is not enough,” he added. “In order to respond to the emergency economic situations, I want you to exert policy-related imagination that goes beyond expectations with no restrictions.”
Japanese Finance Minister Taro Aso also pledged today to ensure fiscal policy steps to respond to the outbreak. He noted that economic fundamentals are still holding steady, even though slowing global growth had an impact on the manufacturing sector.
Risk sentiments are taken a hit after Apple Inc’s warned that it’s unlikely to meet sales target due to production disruption and weakening demand in China. Operations in China halted after the Wuhan Coronavirus outbreak and resumption is slower than wished. Apple said in a statement “we are experiencing a slower return to normal conditions than we had anticipated.” Global iPhone support will be “temporarily constrained” and the shortages will temporarily affect revenues worldwide.”
Both Nikkei and Hong Kong HSI are trading down more than -1% at the time of writing. Yen and Swiss Franc are the strongest for today while commodity currencies are the weakest, led by New Zealand Dollar.
Gold rises notably today as rebound from 1547.49 extends on risk aversion. Technically, whole recovery from 1535.91 is displaying a corrective structure. We’re viewing at as the second leg of the corrective pattern from 1611.37. Hence, while a break of 1591.39 resistance cannot be ruled out, we’d expect strong resistance below 1611.37 high to limit upside, to start the third leg (down). Break of 1561.91 will target 1535.91 support and below.
Bundesbank said in the monthly report that for Q1, there are “no signs of a fundamental change in Germany’s economy”. Domestic demand and construction are expected to continue to support the economy as a whole. Manufacturing will remain a drag even though the contraction is starting to ease.
However, it warned that “with the appearance of the coronavirus in China at the beginning of 2020, a new layer of risk was added.” “A temporary decline in overall demand there could damp German export activity,” the report noted. “Moreover, some global value chains could be impaired by security measures put in place. Delivery bottlenecks in selected industries here would be one consequence.”
Shanghai’s American Chamber of Commerce (AmCham) Ker Gibbs said today that the biggest problem for American businesses in China is “a lack of workers as they are subjected to travel restrictions and quarantines” due to Wuhan Coronavirus outbreak. Hence, “most factories have a severe shortage of workers, even after they are allowed to open. This is going to have a severe impact on global supply chains that is only beginning to show up.”
109 members companies with manufacturing in Shanghai, Suzhou, Nanjing and the wider Yangtze River Delta participated in a mini survey between February 11-14. The survey found:
BoJ Haruhiko Kuroda told Sankei newspaper that the central bank “would need to consider monetary policy steps” if outbreak of China’s coronavirus “significantly affects Japan’s economy”. He said the outbreak is the “biggest uncertainty” for the domestic economy”. And, BoJ would take “additional easing steps without hesitation” if risks heighten.
But for now, even though Japan’s GDP contracted as the worst pace in six years in Q4, Kuroda didn’t expect global and Japan growth in 2020 to be significantly lower than last year. He expected China’s domestic production to bottom out to recover from April. But that would depend on when the outbreak peaks.
Singapore government downgraded growth forecasts for the year as China’s Wuhan coronavirus outbreak is weighing on the country’s economy. For 2020, the Ministry of Trade & Industry projected growth in range of -0.5% to 1.5%, lowered from prior estimate of 0.5% to 2.5%.
Gabriel Lim, permanent secretary at the ministry, said, “as the COVID-19 situation is still evolving, there is a significant degree of uncertainty over the length and severity of the outbreak, and hence its overall impact on the Singapore economy.”
Singapore has the second highest number of coronavirus cases (75) outside China, next to Japan. Finance minister Swee Keat might launch a strong stimulus package in the budget delivered tomorrow, to offset the economic impacts.
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Canada CPI rose to 2.4%, beat expectations
Canada CPI accelerated to 2.4% yoy in January, up from 2.2% yoy, beat expectation of 2.2% yoy. CPI common slowed to 1.8% yoy, down from 2.0% yoy, missed expectation of 2.0% yoy. CPI median was unchanged at 2.2% yoy, matched expectations. CPI trimmed was unchanged at 2.1% yoy, missed expectation of 2.2% yoy.
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