Today was very much a day to be surprised of the data released, or the way the data was weighted and traded.
Here’s a good opening into my own analysis style and ideas, so sit down and enjoy this in the cold December weather. First order of business, what was the released data?
- Japanese Current Account for October: 833 billion yen vs. expectations of 366 billion yen, but lower than the September data.
- Japanese bank lending: up 2.8% in November in YoY terms, up from 2.4% in October (which also set the expectations). Bank lending is accelerating, and this is the highest increase in bank lending since early 2009! (And that data has serious base effects thanks to the financial crisis.)
- On the Japanese GDP side, there was a mixed bag. GDP proved to be rather static to the initial estimate, even though investment and capex had shot higher, and external demand and private consumption were higher than expectations.
- Chinese trade balance data came in at US$54.5 billion, which I count as a major disappointment thanks to import numbers that were not as good as I would have expected.
In Japan, it is very much now a question of whether fast-moving indicators and leading indicators are going in the right direction, and how rough it will be to fight against static forces or lagging indicators. The current account blowout will probably happen in December’s data, and I was wrong for “jumping the gun” on this, when we still have November data to look forwards to. This data should provide more money in the Japanese economy than is otherwise expected, and the analyst expectation of 366 billion yen proves that there is a lot more money to go around.
Still, money in Japan has never, really been the issue. The issue has been people piling the money into mattresses or the even worse idea of putting it in the bank for no interest, or companies simply stacking bills or government bonds on top of each other. Bank lending data for November accelerating 0.4% more than in October indicates that lending really got underway in November. If we count the 2.4% level as a baseline (reasonable assumption given that prior months of data have fallen around here) and that the 0.4% gain is attributable to November alone, we get some really interesting interpretations. Let’s just round it to easy numbers since these changes are small enough. 2.4%/12 = 0.2%. The baseline MoM growth in lending is slightly, slightly lower than 0.2%. However, if we have eleven months of 0.2% growth, and then one month that tops everything up to a total of 2.8%, then that month must have been having growth of more than 0.57%, or an annualized growth in excess of 7%! Bank lending in Japan probably won’t grow that fast in the future (one can dream) but the overall style of reporting the numbers masks a rather massive shift, going from 2.4% to 2.8% in this calculation rather than from 2.4% to 7%!
I have still not gotten a good idea of why the GDP numbers came in so incredibly low given other factors, but these numbers are troubling.
For the day’s really big reporting SNAFU on financial wires there’s the Chinese trade balance data, so please see my take on this data, the analysis surrounding it, and my forecast, after the jump.