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By HaleStewart February 1, 2014 8:28 am
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International Week In Review: Despite the EM Rout, Some Surprisingly Good Numbers Edition

Last week was a very busy week for economic news.  Let’s start with the US, where the biggest news was the growth rate of 4th quarter GDP.  The BEA reported:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.2 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.  In the third quarter, real GDP increased 4.1 percent.

This is the second consecutive quarter of strong GDP growth, adding credence to the argument the US economy is finally hitting a self-sustaining pace of growth.  Adding to that argument is the rise in consumer confidence from 77.5-80.5 (although this number is still very low by historical standards) and the increase in personal spending by .4%.  There were two pieces of negative news.  Pending home sales decreased 8.7% while durable goods orders dropped 4.3%.  The former was most likely impacted by the weather, although the continued bite of higher interest rates shouldn’t be ignored.  The durable goods number is also subject to a fair amount of month to month volatility.  Still the size and breadth of the drop deserves to be kept in mind.

Japan had more good news as well.  First, the consumer services price index increased 1.3% Y/Y while national core CPI increased at the same pace.  The good news here is the BOJ’s policy of doubling the monetary base to increase inflation appears to be working.  Here's a chart of core CPI to put it in perspective:


And the economy as a whole appears to be benefitting, with industrial production increasing 1.1% M/M and the unemployment rate decreasing to 3.7%.  Hopefully this low rate of unemployment will lead to an across-the-economy series of wage increases, upping the consumer’s buying power and adding to overall growth.

In contrast to Japan’s bullish inflation reports, the EU’s were less stellar as core CPI only increased at a .8% Y/Y in the latest reading.  This added to concerns the EU is getting closer to a deflationary experience much like Japans.  As this chart shows, this concern is warranted:

In addition, private loans decreased 2.3% Y/Y furthering the credit drought in the recovery.  On the plus side, economic sentiment increased .5% and Spain appears to be emerging from its long recession with a .3% Q/Q GDP print.

Finally, we had two more countries release solid GDP reports.  Canada reported a .2% M/M GDP increase – its fifth straight report.  While not growing at a “gangbusters” rate, the Canadian economy continues to move forward. 


Finally, the UK reported a 2.8% Y/Y GDP expansion, adding further fuel to the argument they are actually entering a higher period of growth.  This chart highlights the recent acceleration:


Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer


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