Japan's overseas visitors rebound, but euro car registrations slump

Emily Nicol
Chris Scicluna
Overview:
While US stocks had a weaker day yesterday (the S&P500 closed down 0.3%) and Donald Trump once more threatened to increase tariffs on a wider range of imports from China, the main Asian markets were relatively uneventful today in the absence of significant local economic news. So, for example, Japan’s Topix and China’s CSI300 closed just 0.1% lower on the day.
But fixed income markets were more interesting. After Jay Powell remained dovish in a speech at a Bank of France event yesterday evening, again emphasising uncertainties about the global outlook and repeating that the Fed “will act as appropriate to sustain the expansion”, UST yields fully reversed the spike seen after yesterday’s stronger-than-expected retail sales numbers (10Y yields now back down close to 2.09% having peaked near 2.14% after those US data). While JGBs were little changed, euro area govvies have followed USTs in opening higher today, a move consistent with this morning’s weak EU car registration data.
FX markets, meanwhile, have been relatively uneventful, with DXY only marginally weaker and cable broadly stable after dropping to a two-year low yesterday as Boris Johnson appeared to reduce further the scope for a Brexit deal with the EU once he becomes Prime Minister next week. Today’s main economics focus will be inflation, with updates from the euro area and UK due.
Japan:
In Japan, overseas visitor numbers increased to 2.88mn in June, leaving them 6½% higher compared with a year earlier. Visitors from China (up a robust 15.7%Y/Y) continued to account for the largest share in June, followed closely by South Korea (up a very modest 0.9%Y/Y). So, this left the number of tourists in the first half of the year up a healthy 4.6%Y/Y at 16.6mn and the number of visitors in Q2 at a record high 8.6mn. And with Chinese tourists typically among the biggest spenders, there was also a notable increase in the average amount spent by overseas visitors last quarter too, up 7.8%Y/Y. As such, total tourist spending accelerated markedly, by 14%Y/Y in Q2, compared with a rise of just 1%Y/Y in Q1, suggesting that services exports should provide modest support to GDP growth last quarter.
Euro area:
This morning brought news on spending in the euro area at the end of Q2 with the latest car registrations figures for June coming in disappointingly weak. In particular, registrations in the euro area were down 6.2%Y/Y, the steepest drop since December, with notable declines in each of the large member states – Germany (-4.7%Y/Y), France (-8.4%Y/Y), Italy (-2.1%Y/Y) and Spain (-8.3%Y/Y). To some extent, the falls can be attributed to fewer working days in June this year compared to last. But total registrations were still down during the first half of the year compared with H118 and by more than 3%Y/Y. Nevertheless, on a seasonally adjusted basis, given growth in April and May, registrations are still likely to have risen on a quarterly basis in Q2. But that rate seems bound to be significantly softer than the increase of 7½%Q/Q in Q1, which marked a rebound from the sharp drop in Q4 related to the revised EU emissions standards.
With an eye on next week’s ECB meeting, today’s focus will be on the euro area’s final inflation figures for June. Like in France and Spain, yesterday’s figures from Italy aligned with the flash estimates, which showed the headline harmonised CPI rate edging down 0.1ppt to 0.8%Y/Y. Nevertheless, given the upside surprise to Germany’s final inflation release – with the harmonised measure up 0.2ppt from the flash to 1.5%Y/Y – the euro area’s headline CPI rate should be nudged up from the flash estimate of 1.2%Y/Y, which was unchanged from May. Risks to the preliminary core inflation rate – which increased 0.3ppt to 1.1%Y/Y – are also skewed to the upside.
This morning will also bring construction output data for May, which might well report the third consecutive monthly decline. Indeed, despite a pickup in France that month (1.9%M/M), Germany reported another steep drop (-2.4%M/M). In the markets, finally, Germany will sell 30Y Bunds.
UK:
After yesterday’s labour market report indicated a pickup in wage growth to the strongest pace since mid-2008 despite a slowdown in employment growth, focus in the UK today will be firmly on June’s inflation figures, which are expected to show the headline and core CPI rates moving sideways in June at 2.0%Y/Y and 1.7%Y/Y respectively. This morning will also bring the ONS’s latest house price index for May, as well as the BoE’s latest quarterly credit conditions survey.
US:
It should be a quieter day in the US for top-tier releases, with the release of housing starts figures for June, which, despite a favourable interest rate environment, are likely to show a further fall at the end of the second quarter. This afternoon will also bring the Fed’s Beige Book.

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