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Abenomics Helps Japan’s Exports to Beat Estimates

Japan’s exports rose more than forecast in May as a weaker yen boosted the value of overseas sales, underscoring the profit boon for manufacturers from Prime Minister Shinzo Abe’s reflation campaign.

The value of shipments abroad increased 10 percent in May from a year earlier, the most since 2010 and exceeding the 6.4 percent median estimate in a Bloomberg News survey of economists, a Finance Ministry report showed in Tokyo. At the same time, export volumedropped 4.8 percent.

Today’s data reflect an almost 12 percent slide in the yen against the dollar in the past six months that stoked criticism from trade partners including South Korea that Japan’s monetary stimulus is distorting commerce. The key for Abe is that exporters from Nintendo Co. (7974) to Mazda Motor Corp. (7261) use profit gains to boost wages and investment at home.

“The yen’s exchange rate, even though it has been adjusted a bit recently, is still weaker than last year’s level and giving a lot of impetus for Japan’s export drive,” said Long Hanhua Wang, an economist at Royal Bank of Scotland Group Plc in Tokyo. “The volume of exports is still unimpressive as the economic growth of China is stagnating and Europe’s expansion remains weak.”

The nation’s 11th straight monthly trade deficit was 993.9 billion yen ($10.4 billion) as imports gained 10 percent, today’s report showed. The shortfall was the third largest on record, and the largest ever in May. The yen’s decline boosted the costs of imports, while nuclear-plant shutdowns added to energy demand…..”

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CPI Ticks a Tenth Higher and 1.4% YoY

“WASHINGTON (AP) — U.S. consumer prices rose slightly in May as higher energy costs were partly offset by cheaper food. The small increase comes after two straight declines, underscoring that American consumers are benefiting from mild inflation.

The consumer price index ticked up a seasonally adjusted 0.1 percent last month, only the second increase in seven months, the Labor Department said Tuesday. Consumer prices fell 0.4 percent in April, the largest decline in four years. In the past 12 months, prices have increased just 1.4 percent. That’s up from a 1.1 percent annual pace in April, which was the smallest in 2 ½ years.

Slow economic growth and high unemployment have kept wages from rising quickly. That’s made it harder for retailers and other firms to raise prices.

Still, tame inflation has helped consumers increase spending this year, despite slow income growth and higher Social Security taxes. It also makes it easier for the Federal Reserve to continue its extraordinary efforts to boost the economy.

And while inflation is low, economists say it isn’t low enough to alarm Fed policymakers. Tuesday’s report “won’t prevent the Fed from beginning to reduce its monthly asset purchases, probably beginning in September,” said Paul Ashworth, an economist at Capital Economics….”

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Car Sales Hit a 20 Year Low in Europe

“European car sales fell to a 20-year low in May as record joblessness caused by a recession in the euro area reduced demand at PSA Peugeot Citroen (UG)Renault SA (RNO)Fiat SpA (F)and General Motors Co. (GM)

Registrations dropped 5.9 percent to 1.08 million vehicles from 1.15 million a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. The figure was the lowest for the month since 1993, said Quynh-Nhu Huynh, the group’s economics director. The ACEA compiles data for the 27-nation EU plus Switzerland, Norway and Iceland….”

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Industrial Output Gains as Manufacturing Falls in the U.K.

“June 11 (Bloomberg) — U.K. industrial production unexpectedly rose in April, boosted by increased output at oil and water companies. Manufacturing fell after gains in February and March.

Output at factories, utilities and mines rose 0.1 percent from March, the Office for National Statistics said today in LondonThe median forecast of 28 economists in a Bloomberg News survey was for no change. Manufacturing dropped 0.2 percent after gains averaging 0.9 percent in the previous two months.

Industrial output posted its strongest quarterly performance in almost three years through April, adding to signs the economy is gaining momentum after returning to growth in the first quarter. Surveys by Markit Economics published this month showed services and manufacturing were at the highest in 14 months in May. The euro area, Britain’s largest trading partner, is also showing signs of improvement, with European Central Bank President Mario Draghi saying last week the region’s economy will return to growth by the end of the year.

“The U.K. economy can and will get better,” said Rob Wood, an economist at Berenberg Bank in London. “Today’s industrial production data suggest the sector will contribute positively to growth in the second quarter.”

The pound fell after the data were published, and traded at $1.5553 at 10:43 a.m. in London, down 0.1 percent from yesterday.

Quarterly Growth

In the three months through April, industrial production gained 0.8 percent, the largest increase since July 2010, the ONS said. Manufacturing rose 0.5 percent, the most since September last year. From a year earlier, manufacturing fell 0.5 percent and industrial production declined 0.6 percent.

Out of 13 categories in manufacturing, 10 declined in April, while three increased. The fall on the month was led by transport equipment. There were also declines in the output of wood and paper products and basic metals and metal goods. The declines were largely offset by a 14 percent jump in pharmaceuticals production….”

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Italy’s GDP Contracts More Than Expected

“Italy’s economy shrank more than initially reported in the first quarter and French industrial confidence stalled in May, as the euro area struggled to emerge from a record-long recession.

Italian gross domestic product fell 0.6 percent from the previous three months, the Rome-based National Statistics Institute, said today, after a May 15 estimate of a 0.5 percent drop. A French index of sentiment among factory managers was unchanged at 94, while an index of service companies fell to 88 from 89, according to the Bank of France….”

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Cars Sales Rise at a Slower Pace in China Confirming Waning Confidence

China’s passenger-vehicle sales rose at a slower pace in May as consumer confidence waned amid signs that momentum for economic growth is slowing.

Wholesale deliveries of cars, multipurpose and sport utility vehicles increased 9 percent to 1.4 million units in May, according to the state-backed China Association of Automobile Manufacturers yesterday. That compares with growth of 13 percent in April and 13.3 percent in March.

The slowing auto-sales growth follows data showing average inventory levels at dealerships rose in April. Government reports yesterday showed trade, inflation and lending in May all trailed estimates, signaling weaker domestic demand that adds pressure on Premier Li Keqiang to shore up economic growth.

“Strong inventory building in the first four months of 2013 and a softer GDP in 2Q13 lead us to expect gradually slower sales growth for the rest of the year,” Ole Hui, a Hong Kong-based analyst with Mizuho Financial Group Inc. (8411), wrote in a research note on June 6.

Total sales of vehicles, including buses and trucks, gained 9.8 percent to 1.76 million units last month, the association said. Growth in motor vehicle output slowed to 15.7 percent year-on-year in May from 18.3 percent in April, National Bureau of Statistics data released yesterday showed.

Vehicle sales for the first half are expected to be between 10 million and 11 million units, CAAM Secretary General Dong Yang said at a briefing yesterday. He said there’s no overcapacity in China’s auto industry.

Three Decades…”

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Industrial Production Expands 9.2% in China, Factory Gate Prices Fall for a 15th Month

China’s new leaders face a test of their resolve to forgo short-term stimulus for slower, more-sustainable growth after May trade, inflation and lending data trailed estimates, signaling weaker global and domestic demand.

Industrial production rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, National Bureau of Statistics data showed yesterday in Beijing. Export gains were at a 10-month low and imports dropped after a crackdown on fake trade invoices while fixed-asset investment growth moderated and new yuan loans declined….”

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Japan’s GDP Expands 4.1%

Japan’s economy grew more than the government initially estimated in the first quarter, helping Prime Minister Shinzo Abe to sustain confidence in his campaign to defeat deflation.

Gross domestic product expanded an annualized 4.1 percent, compared with a preliminary calculation of 3.5 percent, the Cabinet Office said in Tokyo today. Nominal GDP, which is unadjusted for changes in prices, rose 0.6 percent from the previous three months, leaving the economy 7 percent smaller than in the same period in 1997. Consumer confidence in May was at its highest level since 2007, a Cabinet Office survey showed….”

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German Industrial Production Rises the Most in Two Years

“German industrial production (GRIPIMOM) surged the most in more than a year in April as construction activity surged after an unusually long winter damped output.

Production jumped 1.8 percent percent from March, when it gained 1.2 percent, the Economy Ministry in Berlin said today. That’s the third consecutive increase and the strongest gain since March last year. Economists forecast no change, according to the median of 38 estimates in aBloomberg News survey. From a year earlier, production rose 1 percent when adjusted for working days.

The Bundesbank downgraded its outlook for the German economy today, while pointing to a gradual recovery in the course of the year. Exports in April rose more than forecast, supporting the central bank’s view that trade with faster-growing markets in Asia and the U.S. will help offset the effects of six quarters of recession in the 17-nation euro area.

“The German economy is gradually exiting the weak phase that it had around the turn of the year,” Mario Gruppe, an economist at NordLB in Hanover, said before the release. “It is however a growth path that has a few potholes in it. It will be a recovery that now and again has setbacks.”

After the European Central Bank left interest rates at a record low of 0.5 percent yesterday, President Mario Draghi reiterated his view that the region’s economy will still return to growth this year.

Stocks Fall…”

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U.K. Trade Gap Narrows More Than Expected

“Britain’s trade deficit narrowed more than economists forecast in April as imports declined faster than exports.

The goods trade gap was at 8.2 billion pounds ($12.8 billion) compared with 9.2 billion pounds in March, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 19 economists was for 8.8 billion pounds. Exports fell 1.4 percent and imports declined 3.8 percent.

While data this week show the economy is gaining momentum, today’s figures underline the risks to the recovery from a recession-stricken euro zone, Britain’s biggest trading partner. Exports to the bloc fell 2.3 percent to their lowest level since February 2011. Net trade acted as a drag on economic growth in the first quarter.

“It seems unlikely that net trade can significantly help the U.K. economy in the near term given current ongoing weak domestic demand in the euro zone and moderate and stuttering global growth,” said Howard Archer, an economist at IHS Global Insight in London. “The hope is that the overall marked weakening of the pound earlier in 2013 will increasingly feed through to boost exports and the beneficial impact of this is reinforced by global growth gradually improving.”

Exports to the European Union as a whole fell 3 percent. The decline was partially offset by a 0.2 percent rise in shipments to countries outside the bloc.

The surplus on trade in services narrowed to 5.6 billion pounds in April, leaving the overall trade deficit at 2.6 billion pounds compared with a gap of 3.2 billion pounds a month earlier, the ONS said….”

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German Factory Orders Fall More Than Expected

“German factory orders (GRIORTMM) fell more than economists predicted in April as Europe’s largest economy struggled to gain strength.

Orders, adjusted for seasonal swings and inflation, decreased 2.3 percent from March, when they increased a revised 2.3 percent, the Economy Ministry in Berlin said today. Economists forecast a 1 percent drop, according to the median of 39 estimates in a Bloomberg News survey. In the year, workday-adjusted orders fell 0.4 percent.

The European Central Bank is expected by economists to lower its economic outlook when it meets in Frankfurt today, a month after cutting interest rates to help the euro region out of its longest-ever recession. At the same time, German business confidence rose in May for the first time since February, and consumers’ optimism is set to climb to the highest since 2007 in June, as higher wages boost spending power.

“A decline was to be expected after significant increases in the previous months,” said Gerd Hassel, an economist at BHF-Bank AG in Frankfurt. “Therefore, it’s not a sign of an economic slump but rather of the usual volatility. German growth should pick up in the second quarter.”

The German economy grew only 0.1 percent in the first three months of the year, less than economists anticipated. The Bundesbank will release new forecasts tomorrow. In December, the Frankfurt-based central bank predicted growth of 0.4 percent this year and 1.9 percent for 2014.

Orders Slump…”

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Fed Survey YAWN: Economy Expands at ‘Modest to Moderate’ Pace

“A Federal Reserve survey says economic growth increased throughout the United States from April through mid-May, fueled by home construction, consumer spending and steady hiring.

Eleven of the Fed’s banking districts reported “modest to moderate” economic growth, according to the Beige Book survey released Wednesday. The 12th, in Dallas, reported strong growth.

The survey is based on anecdotal reports. The mostly favorable results of the latest survey suggest that the economy and the job market are improving despite tax increases and government spending cuts that took effect this year.

But the modest or moderate improvement reported for most regions appears to fall short of the strong and sustained growth that several Fed members have said is needed before the Fed starts tapering its bond purchases. Those purchases have helped keep interest rates at record lows.

The Fed has been assessing the job market’s health in considering when to start scaling back its support for the economy, including $85-billion-a-month in Treasury and mortgage bond purchases. The information from the latest Beige Book will discussed along with other economic data at the Fed’s next policy meeting on June 18-19.

Investors are paying closer attention to the Fed after minutes of the past meeting showed that several members favored reducing the bond purchases if the economy demonstrates strong and sustained growth. And Chairman Ben Bernanke told a congressional panel last month that the Fed could slow the pace of the bond purchases over the next few meetings, if the job market shows “real and sustainable progress.” ….”

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U.K. Service Growth Beats Estimates


“U.K. services growth accelerated more than economists forecast last month as signs mount that the recovery may strengthen, adding to the case for Bank of England policy makers to refrain from further stimulus.

A gauge of activity rose to 54.9, the highest in 14 months, from 52.9 in April, Markit Economics and the Chartered Institute of Purchasing and Supply said today in London. Economists had forecast 53.1, according to the median of 33 estimates in a Bloomberg News survey. Readings above 50 indicate expansion. The pound advanced.

Britain’s economy may be gaining traction after Markit’s reports this week on manufacturing and construction both showed growth. Bank of England officials start their two-day policy meeting today, and economists predict that they will probably keep their quantitative-easing target on hold. The meeting is the last for Governor Mervyn King before he retires and is succeeded by Mark Carney of the Bank of Canada.

The industry surveys “bode well for economic activity in the months ahead,” said James Knightley, an economist at ING Bank in London. “As such, there is little prospect of any BOE action tomorrow and it diminishes the likelihood of any shift in policy under Mark Carney in the next few months.”

The pound extended its advance against the dollar after the index. It was trading at $1.5351 as of 11.23 a.m. London time, up 0.3 percent from yesterday. Sterling strengthened to a two-week high against the euro.

Growth Accelerating…”

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Australia’s GDP Growth Comes in at the Slowest Pace in Two Years, Data Misses Estimates

Australia’s economy expanded at the slowest annual pace in almost two years as manufacturers and builders detracted from growth, sending the nation’s currency lower as traders increased bets on further interest-rate cuts.

Gross domestic product expanded 2.5 percent in the first quarter from a year earlier, the weakest reading since the second quarter of 2011, a Bureau of Statistics report released in Sydney today showed. Economists predicted a 2.7 percent gain.

The Reserve Bank of Australia has slashed borrowing costs to 2.75 percent to combat currency strength that prompted Ford Motor Co. to cease operations and eliminate 1,200 jobs. Today’s report showed some of the nation’s most employment-intensive industries that the central bank has sought to stoke with record-low interest rates remain subdued.

“You’ve got a much lower reading coming out of what you might call the guts of the economy than you’ve got coming out of the total economy,” National Australia Bank Ltd. Chief EconomistAlan Oster said. “I still think they’ve got one more rate cut.”

The local dollar declined to 95.61 U.S. cents at 5:06 p.m. in Sydney, from 96.35 cents before the release. Overnight index swaps show a 63 percent chance the RBA rate will be 2.5 percent or lower after the board meets Aug. 6, up from 49 percent odds shown at 11 a.m. in Sydney.

Growth advanced 0.6 percent from the previous three months, when it expanded at the same pace, today’s report showed. The result compared with the median of 25 estimates in a Bloomberg News survey for a 0.7 percent gain.

Manufacturing Drag…”

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ISM Data Hits the Skids

“ISM’s monthly manufacturing report is out.

The headline index unexpectedly fell to 49.0 from 50.7 last month, marking the lowest reading since June 2009.

Economists were looking for an increase to 51.0.

Any reading below 50 on the index indicates contraction. Today’s ISM release suggests that the American manufacturing sector entered into contraction for the first time since November 2012….”

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U.S. PMI Beats Expectations

“UPDATE: Markit’s PMI survey results for the month of May are out.

The headline index rose to 52.3 from the flash estimate of 51.9 published earlier this month.

The consensus estimate was for a smaller tick up to 52.0….”

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The Euro Jumps on Better Than Expected Manufacturing Output

“The euro held a gain from last week versus the dollar after a report showed manufacturing in the 17-nation currency bloc contracted at a slower pace than initially estimated in May.

Europe’s shared currency pared an intraday advance after Federal Reserve Bank of San Francisco President John Williams said the central bank’s asset-purchase program has the potential to end this year. Norway’s krone, Sweden’s krona and South Africa’s rand rallied on data showing manufacturing in the three nations expanded last month. Turkey’s lira slid following a weekend of violent protests.

“The surprise in the euro-region data is lending support to the euro,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S (DANSKE) in Copenhagen. “At the moment it only takes little news to send the euro higher against the dollar because the market is very long dollars.” A long position is a bet that an asset will rise in price.

The euro was little changed at $1.30 at 7:34 a.m. New York time. It reached $1.3061 on May 30, the strongest level since May 9. Europe’s shared currency gained 0.4 percent to 1.2464 Swiss francs and was little changed at 130.53 yen. Japan’s currency traded at 100.50 per dollar.

The euro will trade at about $1.30 for the next three months, before dropping to $1.27 by the end of the year, Kirkegaard predicted.

Manufacturing Gauge…”

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