Global Review: A Silver Lining To Global Releases

A Silver Lining To Global Releases 
Just in time for the holidays, the global economic data had something for everyone’s stocking.  On balance, signs of global economic slowdown abounded, but the markets shrugged it off, already anticipating as much, and there were even some pleasant upside surprises to report.

In Japan, the Ministry of Economy, Trade and Industry released the final reading on industrial production in October. The initially reported 1.8 percent decline was revised down to a 2.0 percent drop. Industrial production in Japan has been falling for six consecutive months as global inventory building subsides and a stronger yen and slowing China  weigh on manufacturing. Yet before doom and gloom could really catch fire in Japan, the Tankan report for December came in much stronger than anticipated and far better than forecasted back in September.

Back in September, the large manufacturing diffusion index was expected to fall into contraction in December, but the actual outturn ended up being a positive five. There was notable outperformance and strength in  chemicals, petroleum and coal, nonferrous metals, machinery, and motor vehicles.

Even large non-manufacturing business confidence remained at a positive one. Among service businesses, Japanese real estate, wholesaling, and communications businesses were far stronger than anticipated back in September. Even so, the outlook for Japanese manufacturing and service businesses remains one of
slowing activity. The forecast for March 2011 is a -2 for large manufacturers and a -1 for non-manufacturers. So, continued softer economic data are expected for Japan, but perhaps the landing won’t be as hard as some analysts anticipate.

On the other side of the world, Europe was reporting its own manufacturing performance pointing to slower but continued manufacturing growth ahead. Industrial production in the Eurozone rose 0.7 percent in October following a 0.7 percent decline in September.  This rebound in Eurozone manufacturing was somewhat weaker than expected, but the September data was revised higher by 0.2 percentage points.  The consumer durable sector was the weak spot, contracting another 0.1 percent on the month, after falling 2.5 percent the month before. The phasing out of car purchase incentives in several European countries has knocked the auto industry for a loop temporarily. German manufacturing continues to look  comparatively robust. Reuter’s
advance manufacturing PMI for Germany jumped to 60.9 for December from 58.1 the month before. France’s manufacturing
PMI softened a bit to 56.3 from 57.9.

Canada’s manufacturing report was unabashedly robust this week. Canada’s manufacturing shipments jumped a larger-than-expected 1.7 percent in October. Strong gains were reported in petroleum, primary metals, and motor vehicles. Future manufacturing growth in  Canada appears likely as new manufacturing orders increased  3.0 percent, following a 5.3 percent decline the month before.

Global Outlook

Canadian Retail Sales • Tuesday 
The recovery in Canada has been driven, at least in part, by strong growth in consumer spending. Although the year-over-year growth rate in retail spending has eased somewhat recently from earlier this year, the sequential rate of growth remains fairly buoyant. If, as the market consensus forecast anticipates, retail sales rose 0.5 percent in October relative to the previous month, then retail sales would be up more than 3 percent on a year-ago basis.

That said, the modest slowdown that appears to be under way in Canada has allowed the Bank of Canada to keep its main policy rate unchanged at 1.00 percent at its last two policy meetings. The benign rate of core CPI inflation—only 1.8 percent year-over-year in October—has afforded the Bank the luxury of patience. In that regard, CPI inflation data for November, which are also on the docket on Tuesday, should show that inflation remains in check.
Previous: o.6%  
Consensus: 0.5% (Month-over-Month)


Bank of England Minutes • Wednesday 
At its meeting on December 9, the Monetary Policy Committee (MPC) kept its main policy rate unchanged at 0.50 percent, where it has been maintained since March 2009, and it refrained from changing the size of its quantitative easing program from £200 billion. The minutes of that policy meeting, which are slated for release on Wednesday, will give investors more insights into the MPC’s current thinking and the outlook for monetary policy in the months ahead.

Final revisions to third quarter GDP growth data will be released on Wednesday, but a significant change from the 0.8 percent (not annualized) sequential growth rate that was originally reported is not likely. Data on consumer confidence and mortgage lending will also print next week.


French Business Confidence • Thursday 
The rebound in French business confidence since early 2009 is consistent with the economic recovery that has taken hold over that period. The index for December, which will be released on Thursday, will offer some insights into the current state of the French economy. The consensus forecast anticipates an increase in confidence, which, if realized,  would indicate that the French economy has ended the year on a rather strong note. Business confidence data for the overall Eurozone will also print on Thursday.

In general, growth in French consumption expenditures has trended higher over the course of the year. Data on French consumer spending that are on the docket on Thursday will indicate whether the trend remained intact in November.
Previous: 100
Consensus: 102 (Index)



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