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By HaleStewart November 16, 2013 3:26 pm
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International Week in Review: Concerning Numbers from Japan and the EU

The two most important pieces of data last week were the GDP releases for Japan and the EU, both of which raise concerns.  While Japan grew at a 3.8% annualized pace in the second quarter, GDP decelerated to an annualized 1.9% in the third quarter.  Household consumption – which had been performing well, dropped as did exports.  This report does not bode well for the future of “Abenomics.”  GDP data was also released for the EU, which saw a .1% growth rate for the third quarter, down from .3% in the second.  This low data point provides a good reason why the EU cut rates at its latest meeting, most likely fearing that the growth rebound was slowing.

Additional data from the EU raises additional concerns about the strength of the region’s nascent recovery.  Annual inflation printed at a .7% in October, adding further concern that deflation may be taking hold in the region.  In addition, industrial production dropped .5% from September to October, indicating that overall coincident economic activity may be slowing.

India received two pieces of concerning data last week.  The first was an increase in the trade deficit, rising to $10.7 billion in October.  While this number is still down year over year, the increase from the previous month could mean that attempts to curtail large gold imports may be proving ineffective.  In addition, inflation rose to 10.1%, adding further pressure to the central bank's tenuous position trying to balance slow growth with rising imports.  While industrial production did increase 2% month over month, the underlying problems of the economy still appear to be front and center.

The UK received several additional pieces of good news this week.  Inflation droped from 2.7% in September to 2.2% in October.  Inflation has been stubbornly high, meaning the drop should provide the central bank with some breathing room.  In addition, unemployment ticked down from 7.7% to 7.6% for the third quarter.  While retail sales did decrease .7% month over month, there were still up 1.8% year over year.  As the chart in the report indicates, overall retail sales have plateaued over the last few months.

As highlighted above, the overall slowdown in Japanese and EU GDP growth are very concerning developments; both of these economies are only recently emerging from periods of contraction.  A slowdown could indicate the recovery has not taken hold.  The real winner this week (again) was the UK, which continues to print very resiliant numbers.  India continues to print very weak numbers, and ones that should increase concern for the economy's overall health.



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