JAPAN DATA: PPI Close To Expectations, Import Prices Back Negative In Y/Y Terms
Japan's PPI for Feb was close to expectations. The m/m outcome was flat, versus a -0.1% forecast. The Jan read was +0.3%. In y/y terms, we printed at 4.0%, in line with forecasts, but just below the Jan 4.2% print. The chart below plots the PPI versus headline Japan CPI. The slight downtick in PPI momentum is not suggesting much headline CPI relief, although as we note below import price momentum has also cooled.
- The manufacturing PPI was +0.2%m/m, little changed from Jan. Most of the sub-categories rose in m/m terms, although utilities were down -3.8%m/m. Y/Y trends were broadly similar to Jan, although utilities eased.
- In terms of trade prices, export and import prices were both down in m/m terms. In y/y terms, import prices were -0.7%, ending a positive y/y run for the past two months (we were +2.3% in Jan). This is consistent with a stronger yen in recent months.
Fig 1: Japan PPI & Headline CPI Y/Y
Source: MNI - Market News/Bloomberg
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STIR: RBNZ Dated OIS Firmer Than Pre Q4 Labour Market Data Levels
RBNZ-dated OIS pricing is 2–10bps firmer than pre-Q4 Labour Market data levels from last Wednesday.
- The Q4 unemployment rate rose 0.3pp to 5.1%, aligning with both consensus expectations and the RBNZ’s forecast. This marks the highest level since the Covid-impacted Q3 2020. Employment declined 0.1% q/q, bringing the annual drop to 1.1% after a revised -0.6% in Q3. Wage growth continues to moderate, hovering around or below 3%.
- As the data largely matched the RBNZ’s November projections—which included a forecasted 50bp rate cut in Q1 2025—another 50bp cut on February 19 remains likely.
- Markets are pricing in 48bps of easing for February, with a total of 120bps expected by November 2025.
Figure 1: RBNZ Dated OIS Today vs. Pre-Data (%)
Source: MNI – Market News / Bloomberg
JAPAN DATA: Current A/C Aided By Trade Surplus, Local Investors Sell EU Debt
Japan's Dec current account in seasonally adjusted terms, printed ¥2731.6bn, close to market expectations and versus ¥3033.4bn prior. The trade balance, on a BoP basis was ¥62.3bn, below forecasts of ¥227.7bn (per the BBG consensus). In seasonally adjusted terms the trade balance was back in surplus though (¥214.1bn). This was the first such surplus since 2021.
- The current account balance sits just off cycle highs in Dec, which is plotted below against the trade balance (which in millions of yen, not billions).
- Other data showed a bias to sell offshore debt in December, particularly in terms of the EU. There was a record amount of Italian debt sold, while outflows were also noted from Germany and France. Fiscal concerns a likely driver of such outflows.
Fig 1: Japan Current Account & Trade Balance Trends (Yen)
Source: MNI - Market News/Bloomberg
UK DATA: KPMG/REC Report on Jobs Paints Another Gloomy Picture for UK Labour Mkt
The KPMG/REC Report on Jobs for January pointed to another downbeat assessment of the UK labour market.
- Most notable is probably that permanent salary growth eased to the "slowest in the current sequence of inflation" and was "well below the historical trend."
- Permanent placements continued to fall (at a relatively similar pace albeit slightly slower than in December). But perhaps more significantly, temporary placements fell at their fastest pace since mid-2020.
- Vacancies fell with the press release noting for permanent workers "the rate of contraction accelerating for the fifth successive month to a near four-and-a-half-year peak."
- Data was collected 9-27 January.
- In terms of implications for the MPC, this is a relatively closely watched release but we don't think it will be enough to really change any individual member's view. In many ways it just reinforces the signals seen in recent months. As we noted in our BOE Review, we think that we need one of Bailey, Breeden or Lombardelli to soften their stance if we are to see a March cut.
