German industrial production beats expectations

Chris Scicluna
Emily Nicol

Japanese consumption indicators indicate steady growth despite soft wages
The BoJ’s consumption activity index jumped 4.3%M/M in October, the most since June 2020 as the lifting of the state of emergency and sharp decline in coronavirus cases allowed for greater spending opportunities. This left the index almost 4½% above the Q3 average but still more than 4% below the pre-pandemic level. Consumption of services surged 8%M/M, but was still more than 9% below the pre-pandemic level, while spending on durables rose 7.7%M/M, partly reversing the 12½%M/M decline previously. Similarly, the MIC’s household spending survey reported a second successive month of solid growth in October (+3.4%M/M). Unlike the BoJ index, this rose back above the pre-pandemic level, with a notable boost to spending on transport, communications and recreation.

Japan’s latest labour earnings data came in weaker than expected, with growth unchanged at just 0.2%Y/Y in October. The increase was thanks to firmer overtime (+1.8%Y/Y) and special earnings (+14.9%Y/Y). In contrast, regular wage growth slipped back into negative territory (-0.2%Y/Y) for the first time since December, while total real wage growth fell to -0.7%Y/Y.

China’s trade surplus narrows more than expected on stronger imports
China’s trade surplus narrowed more than expected in November, dropping $12.8bn from the prior month’s series high to $71.7bn. Imports in USD terms jumped to a new high, rising 31.7%Y/Y, about 10ppts above expectations and up 11ppts from October. There was significant growth in shipments from energy and commodity producers (e.g. Australia, Canada and Russia) and associated items as China addressed its power supply challenges. Consistent with the better PMIs for last month, exports also slightly beat expectations, up 22.0%Y/Y in USD terms also to a record high, but still down about 5ppts from October. Growth in shipments of exports was stronger to regional neighbours, particularly of high-tech and mechanical/electrical products, suggesting recovery of regional supply chains.

German industrial production jumps in October as auto output rebounds
German IP rose 2.8%M/M in October, the most in a year, to be 1.2% above the Q3 average but still 6.5% below the pre-pandemic level. Growth was in line with yesterday’s turnover data, but well ahead of the BBG consensus forecast (1.0%M/M). The rise was led by output of autos, which rebounded 12.6%M/M as bottlenecks eased a little, but was still one third below the pre-pandemic level. So, output of capital goods was up 8.2%M/M. But production of intermediate items (-0.4%M/M) and consumer goods (0.1%M/M) remained subdued. Beyond manufacturing, energy output rose 0.9%M/M to be back above the pre-pandemic level and construction rose for a second month and by 1.2%M/M to be just 0.8% below the pre-pandemic level.

ZEW investor survey and breakdown of euro area Q3 GDP data to come
The German ZEW investor sentiment survey for December is due this morning. Expect something similar to yesterday’s Sentix survey, which posted a big drop in the current assessment balance, by more than 10pts to a six-month low of 13.3, as the rising number of coronavirus cases and tighter restrictions in Germany and neighboring countries weighed on sentiment. Admittedly, investors thought this current weakness will prove short-lived, with the expectations balance for six months ahead having edged slightly higher, by 0.5pt to 13.8, a four-month high. Also later today, the full euro area national accounts numbers for Q3 will provide the first official expenditure breakdown and will be published alongside revised Q3 employment figures. GDP growth of 2.2%Q/Q is expected to have been more than fully accounted for by an acceleration in household spending on services as pandemic-related restrictions were relaxed.

UK surveys report stronger spending amid Black Friday deals and supply shortage concerns
The BRC retail sales monitor pointed to robust spending in November as consumers snapped up Black Friday deals and brought forward spending amid concerns about supply shortages and prices. The survey measure of like-for-like sales rose 1.8%Y/Y, the most since July, with total sales up 5.0%Y/Y. While growth may have been flattered slightly by tighter restrictions last year, total sales were 4.1% higher than November 2019. This tallied with the latest Barclaycard spending numbers – spending in November was up 16% compared with November 2019, with spending on non-essentials (17.7%) the highest since before the pandemic as the pre-festive period saw boosts to retail, hospitality and leisure.

US trade and consumer credit data due today
While the services surplus is expected to have narrowed further, US trade numbers are expected to show a further notable improvement in the deficit, by $14.4bn to $66.5bn, the second-best this year, following the sizable narrowing of almost $15bn in the goods deficit. Consumer credit numbers and revised Q3 productivity figures are also due. 

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