Category Archives: Japan

NY Mfg survey, Home builder’s index, oil losses, Japan, China trade, euro trade

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A lot worse than expected and still deep in contraction:

Empire State Mfg Survey
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Highlights
For the seventh straight month, the Empire State report is signaling significant contraction for the manufacturing sector. The general business conditions index for February came in below low-end expectations, at minus 16.64 vs even deeper contraction of minus 19.37 in January. New orders, at minus 11.63, are in contraction for a ninth month in a row while employment, though improving to minus 0.99 from minus 13.00, is in contraction for an eighth month in a row.

Shipments are in contraction at minus 11.56 with unfilled orders at minus 6.93. The workweek is at minus 5.94. One reading in the plus column is the six-month outlook, up nearly 5 points to 14.48 which, however, is unusually low for this reading which usually tracks in the 30s and 40s. Price data show marginal improvement for inputs but contraction for finished goods.

This report is showing its weakest run by far of the recovery and, unfortunately, points to extended weakness for the nation’s factory which is getting hit by weak exports and weak energy markets at home.

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This is going the wrong way for what’s been promoted as the ‘driver’ of the economy for the year:

Housing Market Index
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Highlights
Optimism among home builders is cooling noticeably, based on the housing market index for February which is down 3 points to 58 for the lowest reading since May last year. But 58 is still well over breakeven 50 with the future sales component actually rising 1 point to 65. The current sales component, however, is down 3 points to 65 which points to expected slowing for tomorrow’s starts & permits data. The traffic component has been holding down this report throughout the whole recovery and continues to do so, down a steep 5 points to 39 and the lowest reading since also May last year. Weakness here reflects lack of first-time buyers and also perhaps the major snowstorm that hit the East Coast at mid-month.

Details show step backwards for all four regions with the West, a key region for the new home sector, down 5 points to a still standout composite score of 68. The South and Midwest are both at 57 with the Northeast continuing to trail far behind, down 2 points to 45.

Builders are citing scarcity of both labor and available lots as negatives right now. Momentum in the housing sector was bumpy last year and, based on this report, looks to remain so, at least through the early part of this year.

As previously discussed, not good for bank, either:

High risk of bankruptcy for one-third of oil firms: Deloitte

Feb 16 (Reuters) — Roughly a third of oil producers are at high risk of slipping into bankruptcy this year as low commodity prices crimp their access to cash and ability to cut debt, according to a study by Deloitte. The report is based on a review of more than 500 publicly traded oil and natural gas exploration and production companies across the globe. The roughly 175 companies at risk of bankruptcy have more than $150 billion in debt, with the slipping value of secondary stock offerings and asset sales further hindering their ability to generate cash, Deloitte said in the report.

Pro active currency depreciation tends to have these kinds of consequences:

Japan’s household spending falls 2.7% in 2015

Feb 16 (Kyodo) — Japan’s average monthly household spending in 2015 fell 2.7 percent in price-adjusted real terms from the previous year to 247,126 yen for the second straight year of decrease. The drop followed a demand surge in the January to March period in 2014 before the consumption tax increase in April as well as weak sales of clothing due to an unusually warm winter, according to an official of the Internal Affairs and Communications Ministry. The decline compares with a 3.2 percent drop in 2014. Household spending figures are a key indicator of private spending, which accounts for around 60 percent of the nation’s gross domestic product.

Two things. First, weak exports tend to reflect weak global demand. Second, reduced imports tend to reflect weak domestic demand.

And the ‘solid’ -;)- trade surplus is a fundamental force that works to support the currency:

China Trade Surplus Hits Fresh Record High in January

China trade surplus stood at USD63.29 billion in January of 2016, widening from USD60.03 billion reported a year earlier and beating market consensus. It is the largest trade surplus on record, as exports and imports fell far worse than expected. In January, exports plunged by 11.2 percent year-on-year to USD177.48 billion, following a 1.4 percent fall in December 2015.Imports tumbled by 18.8 percent year-on-year to USD114.19 billion, following a 7.6 percent decline in the preceding month, the 14th straight month of contraction, as a result of declining commodity prices and weak demand.
Same for the euro:

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Atlanta Fed, Japan GDP, Consumer comment. LA port traffic

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This is supported by increases in inventories that were already too high and likely to either be revised down or followed buy large declines for the rest of Q1. The retail sales number is also suspect and likely to revert to lower numbers:
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The Myth Of The Resilient Consumer

By Lakshman Achuthan

The premise of incomes powering a consumer-driven pickup in U.S. economic growth is demonstrably false. And for people renting their homes the squeeze is even greater.

One clue is the extent of the increase in health care spending in recent years. Renters’ expenditures on health care as a percentage of after-tax income – after hovering around 4¾% for over a quarter century through 2011 – rose to 6.1% in 2013 before easing a bit in 2014 (top line). Homeowners also saw an analogous rise in health care spending as a percentage of after-tax income (not shown).
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Similarly, spending on rent as a percentage of after-tax income – after staying fairly stable around 22% for over a quarter-century through 2012 – soared well above 25% in 2013 before slipping slightly (bottom line).

It follows that, on average in 2013-14, renters spent an extra 4½% of their after-tax incomes on rent and health care combined than in the previous quarter-century or so. Judging by the surge in consumer spending for health care, as well as the steady uptrend in rental inflation, renters’ share of spending on health care and rent would have risen even higher during 2015.

Rent and health care expenses are essentially non discretionary expenditures. Spending more on these items by an extra 5% or so of after-tax incomes puts a serious dent in discretionary spending budgets. This holds especially true given the double-digit declines in real average household income for the lion’s share of households since the turn of the century (USCO Essentials, October 2015).

In the context of this structural squeeze on family budgets, the current cyclical downturn in consumer spending growth is unwelcome news for anyone relying on the U.S. consumer to power economic growth in 2016.

In any event, it should be evident that the case for a full-blown Fed rate hike cycle cannot reasonably rest on the presumption of robust consumer spending, notwithstanding the decline in the unemployment rate to what the Fed considers “full employment.”

Looks like imports up and exports down- not good for GDP:
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Retail Sales, Import and Export prices, Business inventories, Consumer sentiment, Japan

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Retail Sales
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Highlights
Vehicles are back on top, helping to lift retail sales to a 0.2 percent gain in January. Excluding vehicles and pulled down by falling gas prices, sales inched only 0.1 percent higher. But retail sales excluding gasoline stations — which is a central reading given the price fall — are up 0.4 percent for a very respectable year-on-year gain of 4.5 percent. The reading excluding both autos and gasoline is also up 0.4 percent in the month for a year-on-year rate of plus 3.8 percent.

General merchandise sales, which have been soft reflecting price contraction for imports, rose a sharp 0.8 percent in January. Building materials rose 0.6 percent as did vehicles where the year-on-year rate is at plus 6.9 percent. Non-store retailers, reflecting building strength for e-commerce, are once again a standout, up 1.6 percent for a year-on-year 8.7 percent gain.

But there are soft spots in January including restaurants, down 0.5 percent but following a very strong run in prior months, and also furniture, also down 0.5 percent. Sporting goods, a discretionary but still small component, were also weak though the year-on-year rate is leading all the data at 9.1 percent.

A positive are upward revisions to December, now at plus 0.2 percent overall with ex-auto ex-gas now at plus 0.1 percent. Though many readings are modest, this report — especially the ex-gasoline reading — points to a healthy U.S. consumer and should lift confidence in first-quarter growth.

Doesn’t look all that strong to me. And there’s been an conspicuous flattening since July:
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Just an fyi on light weight truck sales- growth has been falling off:
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DOE gasoline output implied demand, year over year, 8 week moving average.

Growth rate has gone negative:
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Deflationary bias continues:

Import and Export Prices
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Highlights
Import price pressures are negative and severe but are increasingly centered in oil-based goods. Import prices fell 1.1 percent in January but fell only 0.2 percent when excluding petroleum imports. Year-on-year, total import prices are down 6.2 percent, which is steep but still an improvement from prior months. When excluding petroleum, import prices are down a year-on-year 3.1 percent (perhaps modest by comparison) which is also an improvement. But petroleum deflation is severe, with import prices down 13.4 percent in January for a year-on-year minus 35.3 percent.

Export prices fell 0.8 percent in January and reflect, in bad news for the farming sector, a 1.1 percent decline in prices of agricultural exports. Year-on-year, export prices are down 5.7 percent with agricultural products down 12.7 percent.

Price contraction for finished goods is easing though only incrementally. Import prices for both vehicles and consumer goods inched higher in the month with contraction in year-on-year rates narrowing, to only minus 0.3 percent for consumer goods. The export side also shows price improvement.

By countries, import prices with Canada, reflecting fuel prices, continue to fall severely, down 2.8 percent in the month for a year-on-year minus 12.6 percent. Latin America is next, down 1.2 percent and 7.8 percent on the year. Other regions are much narrower with China at minus 0.1 percent in the month and minus 1.6 percent on the year.

This report does fit in with FOMC expectations for an easing downward pull from import prices, at least excluding oil with prices for the latter, sooner or later as policy makers argue, certain to firm. An immediate plus is ongoing strength in the dollar which is pointing to easing import-price contraction for the February report.

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Inventories still too high and climbing as sales continue to fall short of expectations:

Business Inventories
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More softening of buying plans:

Consumer Sentiment
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Japan Finance Minister says will take necessary steps to deal with FX volatility

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Inventories, Payrolls, Trade

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This is getting out of control.

Sales are slowing faster than inventories are being sold.
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A weak print and year over year growth continues to decelerate as per the chart:

Employment Situation
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Highlights
Headline weakness masks an otherwise solid employment report for January. Nonfarm payrolls rose 151,000 vs expectations for 188,000. December was revised 30,000 lower to 262,000 but November was revised 28,000 higher to 280,000. Now the signs of strength as the unemployment rate fell 1 tenth to 4.9 percent while the participation rate rose 1 tenth to 62.7 percent. In another sign of strength, the average workweek rose to 34.6 hours to end a long run at 34.5 hours. Average hourly earnings rose a very sharp 0.5 percent though the monthly gain didn’t make for any change in the year-on-year rate which holds steady at a still moderate 2.5 percent.

Manufacturing stands out in the industry data pointing to a strong January for the sector. Manufacturing hours rose in the month while payrolls jumped 29,000 for the best showing since November 2014. Retail trade, up 58,000, also posted its best gain since November 2014. Transportation & warehousing, in a sign of strength for the supply chain, rose 45,000 for the strongest showing since December 2012. On the negative side are temporary help services, down 25,000 but following strong gains in prior months. Government payrolls fell 7,000 as did mining where employment, hit by the drop in oil and commodity prices, was in contraction throughout 2015.

The labor market may be backing off slightly so far this year but it continues to approach full employment, a factor underscored by the month’s jump in hourly earnings and which offers support for further Federal Reserve rate hikes. Note that the big snow storm that hit the East Coast during the month came after the sample week and was not a factor in the data.

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Yes, there was a monthly gain in the household survey, but on a year over year basis it decelerated from last month and the downtrend remains intact:
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Wage growth remains well below prior lows and is only back to where it peaked in 2014:
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The trade gap continues to widen even as the price of oil remains low, as exports weaken:

International Trade
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Highlights
The nation’s trade deficit widened in December to $43.4 billion from a revised $42.2 billion in November. Exports have been extremely weak and weakened further, down 0.3 percent to $181.5 billion in the month. Exports of civilian aircraft fell sharply with exports of industrial supplies and foods/feeds/beverages also down. Imports rose 0.3 percent to $224.9 billion led by autos and industrial supplies and offsetting a decline for non-auto consumer goods.

Country balances show a $3.4 billion narrowing with China to a $27.9 billion monthly gap and little change with the E.U. at $13.7 billion. The gap with Japan widened by $0.9 billion to $6.6 billion while the gap with Mexico narrowed by $0.7 billion to $4.6 billion. The gap with Canada widened sharply by $1.7 billion to $2.2 billion.

The decline in exports is the latest hard evidence of global effects made more severe for U.S. exporters by the strength of the dollar, but the rise in imports, despite the decline in consumer goods, offers a positive indication on domestic demand, strength underscored this morning by the January employment report.

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Mtg purchase apps, Car sales comments, ADP, ISM services, Exxon capex, BOJ comment

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Up last week now back down as this sector remains in prolonged depression:

MBA Mortgage Applications
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Highlights
The purchase index has been posting outsized gains this year but not in the January 29 week, falling 7.0 percent. The refinance index, however, did post a gain in the week, up 0.3 percent. Low interest rates have triggered strong demand for mortgage applications. The average 30-year fixed loan for conforming mortgages ($417,000 or less) fell 5 basis points and is back under 4.00 percent for the first time since October, at 3.97 percent.
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Winter Weather Dings U.S. Auto Sales

Feb 2 (WSJ) — Overall, auto sales were flat for the month, declining less than 1% to 1.15 million vehicles, according to researcher Autodata Corp. January’s selling pace was an annualized 17.58 million compared with 17.34 million in December. Incentive spending jumped 13% last month to $2,932 a vehicle, according to TrueCar Inc.WardsAuto, which the U.S. government uses for economic analysis, said the annualized rate was 17.46 million and that monthly sales fell 0.4 percent from a year ago. WardsAuto said U.S. sales hit a record 17.39 million vehicles in 2015.

This is a forecast for Friday’s payroll number:

ADP Employment Report
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So with manufacturing having gone negative, which is about 15% of the economy, stands to reason some of those people are probably customers of the service sector? Skip to the charts which clearly indicate the direction it’s all going.

ISM Non-Mfg Index
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Highlights
Monthly growth is slowing noticeably in ISM’s non-manufacturing sample. The composite index for January fell a sharp 2.3 points to 53.5 from December’s revised 55.8 which is 2 points below the Econoday consensus. Slowing is most apparent in output (as measured by the business activity component) with employment growth also slowing sharply, to 52.1 for a 4.2 point dip. However new orders, at 56.5, remain solidly above breakeven 50 though here to there is slowing, from December’s 58.9. Supplier deliveries, the fourth component of the composite, slowed in the month in a sign of congestion in the supply chain in what is an offsetting positive for the month.

Other readings include a solid 52.0 for backlog orders which are extending a long string of monthly expansion that contrasts sharply with a long string of contraction in the rival PMI services report. Inventories in ISM’s sample continue to rise but at only a marginal pace. Weakness is signaled by both contraction in import orders, which points to business caution among U.S. businesses, and also for export orders, the result of weak foreign markets and the negative effects of the strong dollar. Input prices, which have been subdued, fell in the month.

A negative in the report is narrow breadth among industries with 10 reporting composite growth in the month vs 8 reporting contraction, with the latter led by continued weakness for mining. Strength is led by both finance and real estate and includes construction.

Through much of last year, this report was among the most resilient, consistently pointing to steady strength that for the most part proved correct. Today’s declines, along with the dip in the PMI services report released earlier this morning, unfortunately hint at soft growth for the first quarter while this report’s employment index, hitting its lowest point since January last year, points to modest disappointment for Friday’s employment report.

Still looks to me like it’s been falling back ever since the July spike:
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This is the ISM non manufacturing employment index for the last year:
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Exxon slashes spending after smallest profit in years

Feb 2 (Reuters) — Exxon said it will cut 2016 spending by one-quarter and suspend share repurchases. Exxon forecast capital spending at around $23.2 billion this year, a 25 percent drop from 2015. Exxon suspended its share buyback plan meant to return cash to investors in the first quarter. Exxon reported that fourth-quarter profit tumbled to $2.78 billion, or 67 cents per share, from $6.57 billion, or $1.56 per share, in the same period a year earlier. Exxon said its oil and gas output rose 4.8 percent in the fourth quarter as it pumped more crude oil.

To again quote the carpenter with his piece of wood- “no matter how much I cut off it’s still too short”:

BOJ Kuroda says ready to use more policy options to boost inflation

Feb 2 (Reuters) — “If we judge that existing measures in the toolkit are not enough to achieve (our) goal, what we have to do is to devise new tools,” BOJ Governor Haruhiko Kuroda said in a speech. “I am convinced that there is no limit to measures for monetary easing,” he said. Kuroda countered criticism that the BOJ was running out of ammunition to accelerate inflation, saying negative rates won’t hamper the bank’s efforts to gobble up government bonds. “If judged necessary, it is possible to further cut the interest rate from the current level of minus 0.1 percent,” he said.

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Japan, China, Fed comment, Capex cutbacks, South Korea

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This is the yen yield curve after over 20 years of a 0 rate policy, massive QE, and now negative overnight rates. Maybe now the economy will finally respond.
:(

(And how good can the BOJ think the economy is?)
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The western educated kids/monetarists who’ve taken control don’t seem to be doing all that well, as China begins to look like the other countries they’ve taken over, like the EU, US, etc. etc. etc. What they learned is that it’s about balancing the federal budget and using monetary policy to support growth and employment as needed, allowing ‘free markets’ to ‘clear’ as per their general equilibrium models that earned them advanced degrees. Unfortunately they fail to recognize the currency itself is a (simple) public monopoly which obviates all those ‘market clearing’ assumptions in their models:

China official PMI misses in January, Caixin PMI shows contraction

Jan 31 (CNBC) — China’s factory activity skidded to a three-year low point in January, adding to further gloom about the state of the world’s second-largest economy.

The government-compiled January manufacturing purchasing manager’s index (PMI) came in at 49.4, slightly missing Reuters consensus estimates for a 49.6 reading and ticking down from December’s 49.7 figure. It was the weakest result since 2012 and marked the sixth straight month in contraction territory.

The mood was worsened by a private survey by Caixin and Markit that showed January manufacturing activity shrinking for the eleventh straight month. Caixin’s survey, which tracks smaller firms than the official indicator, came in at 48.4, compared to December’s reading of 48.2.

Does this read like an executive who’s organization has a $200 million per year research budget?

They just hiked rates in December with every chart I’ve seen having been heading south for a year or so?

And GDP was right on forecast.

Seems to me this ‘kind of tells him’ the fundamental assumptions behind his models needs a rethink?

Fed’s Williams says sees ‘smidgen’ slower rate hikes

Jan 29 (Reuters) — “Standard monetary policy strategy says a little less inflation, maybe a little less growth … argue for just a smidgen slower process of normalizing rates,” San Francisco Fed President John Williams said. “We got a little stronger dollar, some mixed data on the economy, some weakness in Q4 GDP, all of those coming together kind of tell me that we probably need a little bit more monetary accommodation this year than I was thinking in the middle of December.” Williams said his “modal” forecast, remains fundamentally unchanged for 2016 and 2017. “The thing that has changed is that commodity prices keep coming down,” he said.

The hits keep on coming with no replacement spending in sight:

Chevron Posts Loss, Readies More Layoffs

Jan 29 (WSJ) — Chevron is slashing its capital spending by more than $9 billion this year. Chevron plans to sell up to $10 billion in oil fields and other assets through 2017. A $26.6 billion spending plan detailed in December will have to be reduced given how much oil-market conditions have since deteriorated, he company said. Chevron reported a loss of $588 million, or 31 cents a share, in the fourth quarter, down from a profit of $3.47 billion, or $1.85 a share, in the year-earlier period. Revenue tumbled 37% to $29.25 billion. In Chevron’s refining division profits were cut nearly in half, falling to $496 million.

For Mining Chiefs, Doomsday Scenarios Could Become Reality

Jan 29 (WSJ) — Refined-copper supply jumped 36% to 22.5 million tons from 2005 to 2014, according to ICSG data. Over that same period, annual copper consumption increased 38% to 22.9 million tons. Total Chinese copper imports fell to 8.6 million tons in 2015, down 2.2% from the year before. Global refined supply rose 1.8% over the same period, largely because of a 4% increase in refined production from China. China imports of unfinished copper and products in December rose 26% in annual terms to 530,000 tons. More than 600,000 tons of copper supply have been taken out of the market over the past 12 months, according to Morgan Stanley.

Not the worst indicator for global growth:

South Korean Exports Fall at Fastest Pace Since Financial Crisis

Jan 31 (WSJ) — Korean exports, the first shipments data released each month in Asia, slid 18.5% to $36.74 billion in January, the steepest fall since August 2009. The decline extended a run of monthly falls into a 13th month. Imports plunged 20.1% from a year earlier to $31.42 billion in January. For all of 2015, Korean shipments overseas contracted 8%—the steepest fall in six years and the first 12-month contraction in three years, the government said. The Nikkei PMI reading for January came in at 49.5, down from 50.7 in December.

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GDP, Saudi oil production, KC Fed, Chicago PMI, Shale Italy and Japan comments

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As expected, the deceleration continues, and over the next couple of years it wouldn’t surprise me if the entire year gets revised down substantially:

GDP
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Highlights
Consumer spending is the central driver of the economy but is slowing, at least it was during the fourth quarter when GDP rose only at a 0.7 percent annualized rate. Final demand rose 1.2 percent, which is the weakest since first quarter last year but is still 5 tenths above GDP.

Spending on services, adding 0.9 percentage points, was a leading contributor to the quarter as was spending on goods, at plus 0.5. Residential investment, another measure of consumer health, rose very solidly once again, contributing 0.3 percentage points. Government purchases added modestly to growth.

The negatives are on the business side especially those facing foreign markets. Net exports pulled down GDP by 0.5 percentage points. Non-residential investment pulled down GDP by more than 0.2 percentage points. Reduction in inventory investment, which the FOMC warned about on Wednesday, pulled the quarter down by 0.5 percentage points.

Price data are not accelerating, at plus 0.8 percent for the GDP price index which is the lowest reading since plus 0.1 in the first quarter last year. The core price reading is only slightly higher, at plus 1.1 percent which is also the weakest reading in a year.

There are definitely points of concern in this report, especially the weakness in exports and business investment, but it’s the resilience in the consumer, despite a soft holiday season, that headlines this report and should help confirm faith in the domestic strength of the economy.

And this from JPM:

Consumer spending slowed to a 2.2% pace of advance, while business fixed investment spending contracted at a 1.8% rate, the first decline since 2012. A slowing in inventory investment subtracted 0.5%-point from growth last quarter. Even so, the pace of stockbuilding—a $69 billion annual rate—is still faster than is sustainable and poses an ongoing headwind to producers early in 2016. As such, after today’s report we see some more downside risk to our 2.0% projection for Q1 GDP growth.

The consumer looks to be going down hill to me, and this includes increases in total health care premiums due to the newly insured under Obamacare. This chart is not adjusted for inflation, which shows the growth of nominal spending has slowed dramatically. Fortunately the ‘deflator’ indicates that with prices down real purchases have been sustained. But consumers on average tend to spend most all of their incomes, which means fortunately for them prices didn’t rise as fast or they would have bought fewer real goods and services.

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Here’s the last year of GDP year over year growth, after oil capex collapsed:
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This is nominal GDP, not adjusted for inflation:
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Note the relation between export collapses and recessions:
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The increase in premium expenditures for the newly insured is a ‘one time’ event that offered support last year and won’t be repeated this year.
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Interesting how even at the dramatically lowered prices due to increased discounts the Saudis appear to be selling less oil. Patiently waiting for March pricing to be released:
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Yet another bad one:

Kansas City Fed Manufacturing Index
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Highlights
Kansas City manufacturing, along with that of Dallas, are suffering the worst of any regions in the nation’s factory contraction. Kansas City came in at minus 9 for the ninth contraction in 10 months.

Minus signs sweep nearly all readings including new orders and backlogs which are in extremely deep contraction, at minus 27 and minus 36 respectively. Production is at minus 8 with shipments at minus 7. Employment is at minus 7 with price readings moving deeper into contraction, at minus 14 for raw materials and, ominously for inflation expectations, at minus 15 for finished products.

One of the few pluses in the report, ironically, is the index for new export orders which came in at a very modest plus 1. But it’s not only exports that have been pulling down the factory sector but also energy equipment, the latter which is especially sinking the nation’s energy patch.

Chicago PMI: Jan Chicago Business Barometer Jumps 12.7 Points to 55.6

The Chicago Business Barometer bounced back sharply in January, increasing 12.7 points to 55.6 from 42.9 in December, the highest pace of growth in a year.

Chief Economist of MNI Indicators Philip Uglow said, “While the surge in activity in January marks a positive start to the year, it follows significant weakness in the previous two months, with the latest rise not sufficient to offset the previous falls in output and orders. Previously, surges of such magnitude have not been maintained so we would expect to see some easing in February. Still, even if activity does moderate somewhat next month, the latest increase supports the view that GDP will bounce back in Q1 following the expected slowdown in Q4.”

“At current prices U.S. shale producers are losing more than $2 billion a week, according to consulting firm AlixPartners LLP.”

” Italian gross domestic product per capita has hardly changed in 20 years.”

And all they needed was a fiscal adjustment sufficient to get aggregate demand to appropriate levels:

Amari’s fall leaves Abenomics in lurch

Jan 29 (Nikkei) — “I bear responsibility for appointing him,” a visibly pained Abe told reporters Thursday following the resignation of Akira Amari, who also served as his right-hand man in the Trans-Pacific Partnership trade negotiations. Amari devised the basis for Abenomics. He helped alter LDP economic policy’s traditional bias toward public works, shifting the emphasis to a pro-growth strategy of making Japanese companies more competitive and innovative. After Abe led the LDP back to power in 2012, he put Amari in charge of the government’s new industrial competitiveness council and the reconstituted Council on Economic and Fiscal Policy.

Nor will this work, negative rates are just another tax:

BOJ adopts negative interest rates

Jan 29 (Nikkei) — The Bank of Japan decided to adopt negative interest rates at its policy meeting on Friday, voting 5-4 to apply an interest rate of -0.1 percent on current accounts that financial institutions hold at the central bank. At the same time, the BOJ revised its inflation forecast for fiscal 2016 down to 0.8% from a previous level of 1.4%. In a statement, the BOJ said it adopted the negative interest rate policy in order to achieve its price stability target of 2% at the earliest possible time, and signalled that it will “cut the interest rate further into negative territory if judged necessary.”

This might have had something to do with their decision:

Japan’s industrial output falls 1.4% in December, down for 2nd month

Jan 29 (Kyodo) — Japan’s industrial output in December fell a seasonally adjusted 1.4 percent from the previous month, in sharp contrast with a rise of 0.9 percent the government had projected based on hearings with manufacturers last month. The government said the trend of output is fluctuating without clear direction, maintaining its basic assessment of production from the previous month. For 2015, the industrial output index fell 0.8 percent from the previous year. The production index increased 2.1 percent in 2014. Polled manufacturers said they expect output to rise 7.6 percent in January and then fall by 4.1 percent in February.

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Trade, Capex, Japan tax hike, Redbook retail sales, Saudi spending cuts

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Not good for Q4 GDP. Remember, lower oil prices were supposed to reduce our trade deficit…
;)

International Trade in Goods
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Highlights
November’s international trade goods deficit narrowed to $60.5 billion from the revised $63.0 billion in October. October’s estimate previously was minus $58.4 billion. Expectations were for a deficit of $60.9 billion. Both exports and imports continued to decline on the month. Goods exports were down 2.0 percent while imports were 1.8 percent lower. Weak categories for imports were industrial supplies & materials and capital goods excluding auto. Export categories showing weakness include foods/feeds/beverages, industrial supplies and consumer goods excluding autos.

This is from Morgan Stanley. Capital expenditures are generally a large source of agents spending more than their incomes, offsetting those spending less than their incomes. This is not good- orders back to 2008 types of levels:
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As before ‘the beating will continue until morale improves’:

Opposition to Japan’s sales tax hike falls below 50%

Dec 28 (Nikkei) — Public opposition to an April 2017 consumption tax increase has declined after the ruling coalition agreed on a food exemption backed by a majority of eligible voters, the latest Nikkei Inc./TV Tokyo poll shows. At 47%, fewer than half of respondents to the weekend poll opposed the tax increase, down 9 percentage points from October. Support for raising the tax gained 6 points to 42%. The tax hike will take the rate to 10%. Prime Minister Shinzo Abe’s Liberal Democratic Party and coalition partner Komeito seek to keep the tax on food, excluding alcohol and restaurant meals, at the current 8%.

Sales growth improving some from depressed levels:
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Lots of similar cuts for next year, as oil related spending reductions continue:

Saudis Plan Unprecedented Subsidy Cuts to Counter Oil Plunge

Dec 28 (Bloomberg) — Saudi Arabia reduced energy subsidies and allocated the biggest part of government spending in next year’s budget to defense and security. Authorities announced increases to the prices of fuel, electricity and water as part of a plan to restructure subsidies within five years. The government intends to cut spending next year and gradually privatize some state-owned entities and introduce value-added taxation as well as a levy on tobacco. The government recorded a budget deficit of 367 billion riyals ($98 billion) in 2015. That’s about 16 percent of gross domestic product.

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Dallas Fed, Japan restarting nukes

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From bad to worse:

Dallas Fed Mfg Survey
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Highlights
Texas factory activity increased for a third month in a row in December. The production index, a key measure of state manufacturing conditions, rose from 5.2 to 13.4, indicating stronger growth in output. Some other indexes of current manufacturing activity also reflected growth in December, but the survey’s demand measures showed continued weakness.

New orders, an indicator of incoming demand, declined at a faster pace. The index has been below zero for five months and fell to minus 8.9 in December. The growth rate of orders index has been negative for more than a year and dipped 7 points to minus 14.3 this month. Meanwhile, the capacity utilization and shipments indexes posted their fourth positive readings in a row and inched up to 7.8 and 7.6, respectively.

Perceptions of broader business conditions weakened markedly in December. The general business activity index has been negative throughout 2015 and plunged to minus 20.1 this month. After pushing just above zero last month, the company outlook index fell 10 points in December to minus 9.7, its lowest level since August.

The survey’s price measures pushed further negative in December. The raw materials prices index declined to minus 8.6, suggesting a slightly steeper drop in input costs than last month. The finished goods prices index was negative all year and moved down to minus 15.9. Meanwhile, the wages and benefits index moved up to plus 20.4, indicating stronger wage growth.

Expectations regarding future business conditions were mixed in December. The index of future general business activity fell 9 points to minus 1.4, while the index measuring future company outlook fell but remained positive at 6.6. Indexes for future manufacturing activity declined but remained strongly positive.

Japan restarting a nuke, this will move trade towards surplus and eventually add support for the yen:

Japan court rules to restart Takahama nuclear reactors

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Unemployment claims, NYC apts, Japan spending, interview in Truth-Out

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Claims readings could be distorted because a smaller share of those potentially eligible for benefits are applying. The share of recently unemployed workers seeking benefits has fallen this year to just above 50%, according to the National Employment Law Project, a group that advocates for the unemployed.

The rate is down from record high of almost 80% just after the recession ended.

The application rate typically declines as expansions age, but the current pace is the lowest in 15 years. NELP Policy Analyst Claire McKenna said the low rate reflects a vastly different labor market for those who recently lost their jobs versus the long-term unemployed.

The unemployment rate for those out of work for five weeks or less fell below prerecession levels this year. The rate for those out of work for six months or more is well down from 2009, but it remains about double the rate recorded in mid-2007.

“This late into a very slow recovery you have a sizable population of unemployed people that are less likely to establish eligibility for benefits,” Ms. McKenna said. In past cycles, even those workers who didn’t find long-term jobs would have landed shorter-term work that subsequently allowed them to again seek for benefits.

Must be a consequence of income reductions for people getting oil related revenues…

;)

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Spending is the measure of ‘policy success’ for the households:

Japan : Household Spending
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December 1 chart. Can you spot the hike in the consumption tax?
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Economist Warren Mosler: If the EU Doesn’t Loosen Its Deficit Limits, Greece Should Leave the Euro

Six years into Greece’s economic crisis and following successive “bailouts,” there still seems to be no light at the end of the tunnel. Greece’s economy continues to shrink and unemployment remains at record high levels while the Syriza-led government coalition has reneged on its promises of radical change and ending austerity. The troika, in turn, continues to insist that strict austerity measures, including budget cuts and mass privatizations, be enforced in Greece.

In this interview, economist Warren Mosler, a leading figure in the field of modern monetary theory and the cofounder of the Center for Full Employment and Price Stability at the University of Missouri-Kansas City, discusses money, debt and the role of the European Union’s deficit limits in perpetuating the crisis, and shares the proposals he believes could help lead Greece out of its crisis.

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