Japan’s unemployment rate steady while retail sales rebound

Chris Scicluna

Markets react calmly to Archegos troubles; stocks mixed in Asia today as USTs fall further
While the fallout from the troubles at Archegos Capital Management weighed on financial stocks, Wall Street got off to an otherwise sedate start yesterday with the S&P500 closing down just 0.1% and the VIX edging only slightly higher. In the Treasury market, the yield on the 10Y and 30Y notes climbed 3bps apiece to 1.71% and 2.41% respectively, with investors perhaps looking ahead to the expected unveiling tomorrow of President Biden’s infrastructure package (reported by the Washington Post to carry a $4tn price tag, albeit largely funded by tax hikes). Meanwhile, the greenback firmed modestly, with Biden announcing a new “90/90” plan that would see 90% of Americans eligible for a Covid-19 vaccine shot as soon as 19 April with a vaccination site located within 5 miles of 90% of the population. USTs have continued to move lower today, with the 5Yyield up to 0.92%, the 10Y yield now up to 1.75% for the first time since January last year, and the 2Y-10Y curve the steepest since 2015.

Against that background, it has been a mixed day in Asian markets. Despite some better-than-expected labour market and retail sales data, Japan’s TOPIX fell 0.8% but JGB yields rose fractionally. In Australia the ASX200 fell a similar 0.9%, dragged lower by energy and materials stocks and as the yield on the 10Y AGCB rebounded 10bps to 1.78%. However, ahead of tomorrow’s official PMI readings, which are anticipated to be firmer, China’s CSI300 increased 0.7%, with little reaction to a Nikkei newspaper report suggesting that the US and Japan would include a passage on Taiwan in a joint statement to be issued at next month’s White House meeting between President Biden and PM Suga. Gains of slightly over 1% have also been seen in Hong Kong and South Korea.

Japan’s unemployment rate steady in February, while retail sales rebound strongly
The focus in Japan today was mainly on the labour market, with the MIC and MHLW releasing data for February. The MIC’s household-based survey continued to point to resilience in Japan’s labour market despite the pandemic-related trading restrictions that were in force during the month. Following a surprising 110k lift in January, household employment increased by a modest, but still welcome, 30k in February (less than 0.1%M/M). As a result, the annual decline in employment fell slightly to 460k or 0.7%Y/Y – a loss that is fully accounted for by decreased demand for labour in the hard-hit hospitality sector, with additional losses in the construction and manufacturing sectors offset by increased employment in education and health-related services. With the labour force stable in February, the unemployment rate remained at 2.9% – 0.1ppt below market expectations. According to the MHLW, the effective jobs-to-applicant ratio declined a modest 0.01ppt to 1.09x in February, which was in line with market expectations and still 0.05ppts above last year’s low-point. The total number of job applicants fell 0.3%M/M but was up 12.4%Y/Y. By contrast, the number of outstanding job offers fell 1.5%M/M in February and was down 15.4%Y/Y. Newly registered vacancies fell 2.8%M/M and 14.6%Y/Y.

In other surprisingly robust Japanese news, METI reported that retail spending rebounded 3.1%M/M in February following a 1.7%M/M contraction in January. So while spending was still down 1.5%Y/Y, this compared favourably with the prior month’s drop of 2.4%Y/Y and was only about half as large as Bloomberg’s poll of analysts had suggested. In the detail, after declining 11.2%M/M in January, spending on general merchandise rebounded 12.2%M/M in February. Spending on apparel and accessories increased just 1.5%M/M after slumping 16.8%M/M previously, but spending on household machines increased 7.2%M/M. At face value, today’s figures suggest that consumer spending may be holding up better than feared. However, the retail sales figures do not always correlate well with broader measures of consumer spending such as the BoJ’s Consumption Activity Index, which will next deliver its verdict on consumer activity on 7 April.

Flash German data to report a further marked jump in inflation in March on energy prices after Spanish figures surprise on the upside
Ahead of tomorrow’s equivalent data for the euro area, today brings the flash March inflation estimates from Germany. After jumping at the start of the year and remaining unchanged at a one-year high of 1.6%Y/Y in February, German HICP inflation is expected to rise 0.4ppt in March to 2.0%Y/Y, which would be the highest since November 2018. But the equivalent Spanish rate released earlier this morning surpassed expectations with a rise of 1.3ppts to a 23-month high of 0.2%Y/Y. However, with prices of electricity, fuels and oil the main driver, core Spanish inflation on the national measure remained 1ppt below the equivalent headline rate at 0.3%Y/Y. And fuel and energy prices seem bound to be the principal cause of the jump in German inflation too. Beyond the price data, the European Commission’s economic sentiment indices are highly likely to mirror the flash PMIs and suggest a firming of economic activity this month and expectations of a recovery ahead.

Conference Board consumer survey the main focus in the US today
As far as economic data are concerned, the focus in the US today is likely to be the Conference Board’s consumer survey for March. Daiwa America Chief Economist Mike Moran expects that the disbursement of another round of rebate checks and the expansion of supplemental unemployment benefits probably brightened consumers’ collective mood in March. That said, the expected reading of 96.0 – a lift of 4.7pts – is not especially impressive, as it trails other observations in the current cycle (e.g. 101.4 in October) and is far below the pre-pandemic high of 132.6 in February 2020. The only other economic reports today are the S&P CoreLogic and FHFA house price measures for January.

Australian consumer confidence reaches new post-pandemic high
The ANZ-Roy Morgan weekly consumer confidence index increased 1.7% last week to 112.3, thus surpassing the previous post-pandemic high reached in late January. Respondents were more content with both their current financial situation and the outlook for their finances over the next 12 months, which also translated into an increased inclination to buy a major household item. In other news, the ABS reported that the number of payroll jobs increased 0.2% over the past fortnight and were also up 0.2%Y/Y. Total wages paid increased 1.4%Y/Y.

Kiwi dwelling approvals sharply weaker in February
After rising for six consecutive months, the number of Kiwi dwelling approvals fell 18.2%M/M in February and so was down 2.0%Y/Y. House approvals, which typically make up more than half of all approvals, increased 1.8%M/M but were down 2.5%Y/Y. However, approvals for apartments, retirement units and townhouses – which are more volatile from month-to-month – fell from January’s high level, with approvals for apartments down almost 38%Y/Y. It is unclear how much of that decline reflects just normal volatility and how much might reflect uncertainty created by well signaled RBNZ and Government actions designed to slow the housing market, especially insofar as investor activity is concerned. While the value of residential approvals issued increased just 3.2%Y/Y, approvals for non-residential buildings increased more than 24%Y/Y.

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