Thursday, May 1, 2014

No Confidence In Abenomics (excerpt)

Abenomics had a very fleeting positive impact on consumer confidence in Japan. The index compiled by the Cabinet Office of Japan jumped from 39.9 at the end of 2012 to 45.7 during May of last year. By March of this year, it was down to 37.5, the lowest since August 2011. Abenomics has actually managed to depress consumer confidence!

Japanese consumers may be depressed that the weak yen has boosted price inflation, while wage gains remain slim and certainly aren’t enough to offset the April 1 sales tax hike. Not surprisingly, retail sales soared 11.0% y/y in March in advance of the tax increase. It’s the fastest gain since the government raised the sales tax in 1997. Undoubtedly, sales fell sharply during April.

Yesterday, Markit reported: “Japanese manufacturing firms saw a decline in output for the first time in 14 months in April. Alongside this fall in output was a deterioration in new orders which also decreased for the first time in 14 months. In both cases, firms linked the reductions to the rise in the sales tax. In contrast, April saw the highest rate of growth in payroll numbers since February 2007. Both prices charged and input prices rose in April, with selling prices increasing marginally following a decline in March.” The overall M-PMI dropped from 53.9 during March to 49.4 during April.

Today's Morning Briefing: Around the World. (1) On balance, global growth is slow. (2) Industrial commodity index is surprisingly strong. (3) What’s weighing on global growth? (4) US auto and housing recoveries stalling. (5) Euro is too strong. (6) Japanese consumers are depressed by tax hike. (7) China is polluted. (More for subscribers.)

No comments: