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Video for November 28th, 2008 (4 min): Japanese Data Shows Deepening Recession, Euro Slides on CPI

JPN Household Spending Down 3.8%, Retail Sales Fall 0.6%

There was slew of data released from Japan showing the economy slipping into deeper recession. Japanese households saw another weak month of spending. Spending was down 3.8% in real terms on the year in October. It's the eight month in a row that households have cut back on spending. Retail sales meanwhile, declined 0.6%, which was smaller than forecasts by economists. It's the second month in a row that the sales figure has been negative, and adds further evidence to the downside risks to the Japanese economy.

JPN Industrial Production Down 3.1%, Manufacturing PMI Slides to 36.7

Next, companies cut industrial production by 3.1% in October, preliminary data for the month showed. With domestic spending falling, and exports down 7.7% last month, Japanese firms are cutting their output in response. A second release showed the manufacturing PMI index fall to 36.7 for November, compared to 42.2 in October. It's the 8^th month in a row that the manufacturing sector has been in contraction.

JPN Consumer Prices Ease in October, as Oil and Commodity Prices Fall

Consumer prices cooled to an annual rate of 1.7% for the October period, from 2.1% in September. The main catalyst was a fall in oil and commodity prices, which helped beleaguered consumers facing recessionary conditions. CPI excluding fresh food was at 1.9%. In monthly terms prices fell 0.1%, and prices excluding food were down 0.2%.

JPN Unemployment Rate Surprises Forecasts and Falls to 3.7%

The unemployment rate surprised forecasts and fell to 3.7% for the October period, lower than the 4% seen in September. The labor force participation rate fell by 0.5% so that means more Japanese workers stopped looking for work, and were taken out of the headline level.

EUR Annual CPI Falls to 2.1%, Unemployment Rises to 7.7%

In the Euro-zone, the flash release of consumer prices for November saw annual prices plunging to 2.1% from 3.2% in October. That drop is the largest in almost 2 decades, larger than forecast, and reflects the change we are seeing in the major economies where lower commodity prices and weaker economic activity is pushing down prices that had been surging earlier in the year. The data gives the ECB more room to cut rates going forward as inflation eases. Also, the unemployment rate in the Euro-zone jumped to 7.7% in October, the highest level its been since January 2007. The data follows other reports showing economic confidence down to a 15-year low and retail sales figures the weakest in at least 5 years.

EUR/JPY - European Data Sinks Euro vs Yen

 

The Euro-Yen pair fell in today's trading as the data coming from the Euro-zone will pressure the ECB to lower rates in order to ease borrowing costs and spur the economy. With inflation easing as well, the ECB has more leeway to make bolder cuts if necessary. The pair fell 260 pips in favor of the Yen from the intra-day high near 123.40 and puts the pair back to its level where it started the week.

EUR/USD - Euro Slides 300 Points Following CPI

 

The Euro was also weaker against the Dollar, with the Euro-Dollar pair sliding 300 pips from its intra-day high near 1.2950 to support at 1.2640. Traders may be betting on stronger interest rate cuts for next week's ECB meeting than they had originally estimated.

UK CBI Retail Trade Survey Lowest in 25 Years

Turning to the UK, the retail sales index put out by the CBI plunged to a 25-year low in November as consumer cut back spending in the face of a recession, falling housing prices, and weak stocks. 46% more respondents said sales were lower compared to a year ago, than those that said sales were higher. Stores will be discounting heavily and the government is passing a plan to lower the sales tax to encourage people to go shop.

GBP/USD - Pound Down then Up in Relatively Calmer Session

 

The Pound-Dollar pair fell overnight in favor of the greenback but recovered in NY trading. Most pairs not involving the Euro were relatively quiet overnight, sticking to pre-defined ranges.

CAN PPI Unchanged for October

In Canada the Industrial Product Price Index remained unchanged from September as the strong decline of the Canadian dollar canceled out the negative effect of falling prices for refined petroleum products. However, the substantial decrease in prices for mineral fuels was a major factor for the 12.5% drop in the Raw Materials Price Index.

USD/CAD - Greenback Advances on Loonie But Hits Resistance

 

The US Dollar-Canadian Dollar pair rose slightly today to test the 1.2465 area, the third day of increases in this pair. However, today's high was a key level of resistance and the pair fell back towards its open.

Next Week's Releases

Next week starts with manufacturing and inflation data from Australia, retail sales from Germany, reports on manufacturing from the UK and the US, along with Canadian GDP. Monday night, the Reserve bank of Australia is expected to cut rates by 75 basis points to 4.50%.