U.S. Consumer Spending Misses Forecasts as Inflation Eases
U.S. consumer spending in January was short of projections while inflation eased, an early read on the economy in the first quarter that may add to concerns about the outlook. Purchases, which account for about 70 percent of the economy, rose 0.1 percent from the prior month after a downwardly revised 0.6 percent drop, according to a Commerce Department report Friday. Personal income rose 0.2 percent in February, also less than forecast. The spending figures, which reflected weaker sales of new autos, signals first-quarter growth faces additional headwinds, though surveys show consumers remain generally upbeat despite projections for slower expansion. At the same time, tame inflation reinforces Fed projections for no interest-rate hikes this year. The Fed’s preferred price gauge — tied to consumption — fell 0.1 percent in January from the previous month and was up 1.4 percent from a year earlier, matching the annual projection with the slowest reading since late 2016. Excluding food and energy, so-called core prices rose 0.1 percent, less than estimated. The index was up 1.8 percent from January 2018, also below forecasts, after an upwardly revised 2 percent gain. A report Thursday showed the expansion decelerated to a 2.2 percent pace in the fourth quarter, and economists surveyed by Bloomberg project 1.5 percent this quarter, the slowest in two years. The spending data add to signs of weakness just ahead of the February retail sales report Monday. The update will be closely watched after December transactions plunged 1.6 percent, the most since 2009, before rebounding in January. The median forecasts in Bloomberg survey called for spending to advance 0.3 percent in January and incomes to increase 0.3 percent in February.
Canada Emerges From Slump With Best GDP Gain in Eight Months
Canada’s economy began 2019 with its largest output gain in eight months, an unexpected result that will ease worries the expansion has come to a halt. Gross domestic product grew by 0.3 percent in January, faster than the 0.1 percent forecast in a Bloomberg survey of economists. The gains were broad-based outside of the energy sector, and included the biggest one-month increase in construction activity in more than five years. Manufacturing output also surged. The numbers paint a much less bleak picture for an economy that came to a near halt at the end of last year, with January GDP now putting growth on pace for a stronger first quarter than most economists are anticipating. The gains should also bolster confidence among officials at the Bank of Canada that growth will bounce back. “Overall, a better than expected start to Q1 after a near zero growth rate in Q4, and reason enough for the Bank of Canada to hang on to its hopes that the growth stall late last year will prove temporary,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note to investors. Financial markets are betting the central bank is likely to cut interest rates because of the weak run of data until now. Canada’s economy stalled in the fourth quarter, including contractions of 0.1 percent in each of the final two months of 2018. Economists had been forecasting equally sluggish growth this quarter. The Canadian dollar jumped on the report, gaining 0.6 percent to C$1.3355 per U.S. dollar at 8:39 a.m. in Toronto trading. Yields on Canadian two-year bonds rose 5 basis points to 1.54 percent. The gains would have even been larger had the Alberta government not imposed mandatory oil production cuts in January to ease pipeline bottlenecks that have depressed prices for heavy Canadian crude. Oil-sands extraction was down 4.1 percent in January.
Japan’s Job Outlook Brightest in Decades. Pity About the Wages
Japan’s remarkably tight labor market just got even tighter. The jobless dipped again on Friday to around the lowest in almost three decades while the number of jobs available for each applicant has remained at a 44-year high since last year. Even in easy going sub-tropical Okinawa, which has traditionally lagged mainland Japan in economic development, the ratio is near a record high. With about two openings for every job-seeker, Tokyo and manufacturing-bastion Aichi prefecture are among the best places to look for work. Even the laggards at the far north and south of the country — Hokkaido and Okinawa — have very tight labor markets. Economists doubt the jobs market can get much tighter. That’s all welcome news for Prime Minister Shinzo Abe as he prepares for local and upper house elections this year. He can use the labor market to argue that a fundamental improvement in Japan’s economy through his Abenomics policies is still in place despite concerns from the slowdown in economies overseas. The remarkable tightness is helping increase pay — but not by a lot, mirroring a weak wage impulse seen across the developed world. Pay in Japan is estimated to have risen just 0.9 percent in February from a year earlier. That’s well short of the 3 percent economists say is needed to drive spending and prices toward the Bank of Japan’s 2 percent inflation goal. A breakdown of job openings shows more positions available in medical services than any other sector. The country’s aging population requires more care, and that demand is only going to increase as Japan’s baby boomers get into their mid-70s in the 2020s. More workers from abroad are needed to make up for a shrinking labor pool.
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