BOJ’s Kuroda: State of emergency measures may dampen Japan’s economic recovery

Remarks by BOJ governor, Haruhiko Kuroda

  • Japan has been affected by the coronavirus significantly
  • Virus resurgence, state of emergency may weaken economic recovery
  • Most important policy is to avoid unemployment and corporate failures
  • Both fiscal, monetary policies have been successful in preventing that
Some token remarks by Kuroda really. But this reaffirms that they are not going to be moving away from their current policy stance for quite some time – likely only being able to consider doing so after the Fed has made their move (and even then, maybe not).

Eurozone Services PMI January 45.0 vs 44.5 expected

Markit 22 Jan

  • Manufacturing PMI 54.7 vs 54.4 expected
  • Composite PMI 47.5 vs 47.6 expected
Another divergence between manufacturing and services which makes sense as the social (services sector) is more vulnerable to COVID-19 transmission. EURUSD unfazed on this and the coming vaccine will mean all this will be looked through in the big picture.

US December housing starts 1669K vs 1560K expected

December US housing starts

  • Prior was 1547K
  • Building permits 1709K vs 1608K exp
  • Prior permits 1635K
  • Permits +4.5% m/m vs -1.7% exp

  • Single family starts +12.0% vs +0.4% prior
  • Multifamily -15.0% vs +4.0% prior
  • Single family permits +7.8% vs +1.3% prior

Starts are up 27% y/y. It’s a boom.

ECB statement reveals slight compromise to the hawks but nothing more

ECB adds one small part to its statement this month

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.”

That’s pretty much the only thing that stands out in my view from the statement. It’s a slight concession but also comes with a caveat that the envelope could also be recalibrated to help deal with any negative inflation developments.
This isn’t anything new despite it being new to the statement, as it is merely a reiteration of the stance of the collective minds at the central bank since December.
Lagarde’s press conference will be up next at 1330 GMT and you can watch that here:

Germany January ZEW survey current situation -66.4 vs -68.3 expected

Latest data released by ZEW – 19 January 2021

  • Prior -66.5
  • Expectations 61.8 vs 59.4 expected
  • Prior 55.0
  • Eurozone expectations 58.3
  • Prior 54.4

The continued jump in the expectations component remains the standout in the report as vaccine optimism and hopes of a stronger economic reopening later in the year is fueling more positive sentiment to start the new year.

This reflects the more optimistic investor sentiment as well but we’ll see how well this will hold up in light of restrictions set to be prolonged further to April in all likelihood.

China’s Q1 2020 GDP drop was -19.4%, not the officially reported -6.8%

The veracity of China’s economic data is an ongoing topic.

Here’s a paper from four researchers at universities in the US and … China.
Their paper, based on traffic flow data, finds that GDP in Q1 of 2020, when China imposed severe restrictions in response to the COVID-19 outbreak, declined by -19.4%, not by the official figure of -6.8%.

WSJ report on China’s economy to reach parity with the US by 2028

That’s is the expectation of some economist according to the Wall Street Journal (link here (may be gated) )

2028 is five years earlier than pre-covid forecasts and comes in the light of China’s economy bouncing back (albeit in a patchy fashion, the consumer is still very weak) and the US’ relatively languishing under the weight of the mishandling of the crisis.
And the gap will widen thereafter:
That's is the expectation of some economist according to the Wall Street Journal (link here (may be gated) )

US January Empire Fed +3.5 vs +6.0 expected

New York area manufacturing survey

  • Prior was +4.9
  • New orders +6.6 vs +3.4 prior
  • Prices paid +45.5 vs +37.1 prior
  • Six month conditions +31.9 vs +36.3 prior
  • Employment +11.2 vs +14.2 prior
  • Full report
If you’re a pessimist, you can start to see the makings of a crest in this report and a continued build-up in inflationary pressures.

US Dec advance retail sales -1.4% vs 0.0% expected

December advance retail sales

US retail sales
  • Prior was -1.1% (revised to -1.4%)
  • retail sales ex auto -1.4% vs. -0.2% estimate
  • retail sales ex auto and gas -2.1% vs. -0.3% estimate
  • retail sales control group -1.9% vs. +0.1% estimate
This is a poor report and the November numbers were revised significantly lower as well.
  • November retail sales ex auto revised to -1.3% from -1.1%
  • November retail sales ex auto and gas revised to -1.3% from -0.8%
  • November retail sales control group revised to -1.1% from -0.5%
So much for that strong Target same-store sales report.
The market might forgive this because of the huge stimulus packages that are in the pipeline but it’s also a reminder that the economy is a long way from a self-sustaining recovery.
Areas that were particularly weak were ‘food & beverage’ -1.4% m/m, department stores -3.8%, non-store retailers (online) -5.8%, eating/drinking -4.5%, and general merchandise -1.2%. The only positive surprises were building materials +0.9% and clothing +2.4%