Afternoon analysis 27.12.2016

Japanese households’ consumption expenditures fall for the ninth consecutive month. The Polish currency is slightly weaker on the first day of trading after Christmas.

Relatively weak data coming from the Japanese economy

Japanese Statistical Bureau said in a report published today that the consumption expenditures in November decreased by 1.5% YoY (-0.6% in comparison). That was the ninth month in a row that they have fallen. The biggest decrease was seen in expenditures on education (-10.9%), housing (-7.7%) and clothing & footwear (-5.2%). In contrast, households increased their consumption in November by the biggest margin on transportation and communication (+5.2%).

Although the November’s CPI inflation rose 0.5% YoY, it remained unchanged in relation to October. Additionally, excluding fresh food, the core CPI fell 0.4% YoY, against expectations of a 0.3% decrease. This is also the ninth month in a row of a negative core CPI inflation in the Japanese economy.

The fall in prices paid for fuels, light and water by 5.8% in November contributed the most to the fall in the overall index. However, the spike in the price of oil in the recent month by ca. 20% suggests that it could positively affect the December reading of CPI inflation. The Japanese yen depreciated against most of the currencies. The main pair, USD/JPY, rose to ca. 117.4. This is still very close to the highest level since the beginning of February (118.4) – since the resolution of the November’s US election, the yen depreciated over 11% in relation to the dollar.

Yet another failed attempt of falling below 4.40 on EUR/PLN

The Polish currency was still noticeably weaker in the second part of today’s holiday trading. The EUR/PLN pair tested the 4.40 level for the seventh day in a row, however, it failed to move lower for more than a brief period of time. After this attempt, the price of the euro increased by 1 gr. An inner weakness of the zloty was noticeable also in relation to the Hungarian forint, in relation to which it’s only slightly above the 70 level, close to 3-year lows. In relation to the pound, Swiss franc and dollar, the Polish currency was inside the fluctuation range observed in recent days of trading.

Tomorrow’s preview

The Japanese Ministry of Economy, Trade and Industry will publish tomorrow at 00.50 data regarding the industrial production in November. Since July, the monthly change in industrial production fluctuates around zero – it fell by 0.4% in July and rose in the following two months by 1.3% and 0.6% respectively while remaining unchanged in October. The median of expectations for November reading points to a 1.6% increase in November.

Together with the aforementioned data, the Ministry will also release a report regarding the retail sales in November. Retail sales have been falling for eight months now (in comparison to the previous year). Although there was a decrease by 0.1% in October, it was above of expected -1.2%; a month earlier there was a fall of 1.9%. A continuation of this positive trend is expected in November – the retail sales are expected to increase by 0.9%. Should the readings confirm a higher level of industrial production and retails sales, it could support the yen which depreciated recently. In relation to the dollar, it fell to the lowest levels since February.

At 16.00 The National Association of Realtors in the U.S. will publish a report regarding the change in pending home sales. This data is quite volatile, yet in the absence of other vital data, this report could increase the volatility on the dollar. After a 2.5% fall in August, pending home sales picked up in the next two months. The index rose in September and October by 1.4% and 0.1% respectively. The market consensus points to a 0.5% increase in November.