Canadian housing starts excluding Quebec falls 20.4% in May -CMHC - Reuters

TORONTO, June 8 (Reuters) - Canadian housing starts excluding the province of Quebec fell 20.4% in May compared with the previous month as groundbreaking decreased on both multiple unit and single-detached urban homes, data from the national housing agency showed on Monday.

The seasonally adjusted annualized rate of housing starts excluding Quebec fell to 132,576 units from a revised 166,477 units in April, the Canadian Mortgage and Housing Corporation (CMHC) said. Economists had expected starts to fall to 155,000.

Including Quebec, starts rose to 193,453 units in May from 166,477 units in April. CMHC left Quebec out of the April survey after construction in the province was disrupted by measures to combat the coronavirus pandemic.

Euro zone investor morale improves but road to normality is long - Sentix - Reuters News

BERLIN, June 8 (Reuters) - Investor morale in the euro zone improved in June and an assessment of expectations rose to its highest level since November 2017 as the bloc "is waking up from its deep sleep", a survey showed on Monday.

Sentix's index for the euro zone rose to -24.8 from -41.8 in May. That compared with the Reuters consensus forecast for a reading of -22.5.

A current situation index rose to -61.5 from -73.0 in May. The expectations index rose to 21.8 from -3.0 in May, registering its third increase in a row and hitting its highest level since November 2017.

"The economy is waking up from its deep sleep. But the road to normality is long," said Sentix managing director Manfred Huebner. "For the euro zone, investors expect that within a year, just over 50% of the slump can be made up."

"This means that in a year's time we would still be noticeably below the pre-crisis level. And this despite all the stimulus measures, the fiscal packages and monetary easing," he added. "An upswing has begun, but a real trend reversal is not yet assured."

Sentix surveyed 1,173 investors between June 4 and June 6.

German industrial output posts record plunge, no quick recovery in sight - Reuters News

Industrial output down 17.9% month-on-month in April

Firms expect further declines in coming three months

Merkel's cabinet speeds up on stimulus package

By Michael Nienaber

BERLIN, June 8 (Reuters) - German industrial output posted a record plunge in April as the coronavirus pandemic forced manufacturers in Europe's largest economy to halt production, with firms expecting a bumpy road ahead despite a massive stimulus package.

Industrial output dropped by 17.9% on the month, figures released by the Statistics Office showed. A Reuters poll had pointed to a slightly smaller fall of 16.0%.

Manufacturers of capital goods recorded the steepest decline of -35.3%. Output in the energy sector dropped by 7.2% and construction was down 4.1%. (Full Story)

As measures to contain the spread of the coronavirus were implemented from mid-March, the restrictions took their toll on a full scale in April, the Economy Ministry said.

"The low point has been reached. With the gradual easing of protective measures and the resumption of production in the automotive industry, the economic recovery is beginning now."

The data strengthens expectations that the German economy will post its steepest decline since the end of World War Two in the second quarter.

"German gross domestic product is likely to shrink by more than 10% in the second quarter, a reading never measured before in peacetime," VP Bank Group economist Thomas Gitzel said.

For 2020 as a whole, the government forecasts GDP will shrink by 6.3%, based on the assumption that a 130 billion euro ($146.69 billion) fiscal stimulus package will help economic activity pick up again in the second half of the year.

German Chancellor Angela Merkel's cabinet plans a special meeting on Friday to start implementing large parts of the stimulus measures, three sources told Reuters on Monday.

The cabinet is expected to clear the way for the agreed temporary cut in value-added tax, cash handouts for parents and bigger incentives to buy electric cars, the sources said.

Despite the package, manufacturers expect production levels to decline further in the coming three months, but at a slower pace than previously, the Ifo economic institute said on Monday.

Ifo said its index for production expectations rose to -20.4 points in May from -51.0 points in April, marking the biggest monthly rise since German reunification three decades ago.

"But that only means that the nosedive is now becoming flatter," said Klaus Wohlrabe, head of the Ifo surveys.

In a further sign that the recovery is likely to be slow and prolonged, a Civey survey for Augsburger Allgemeine newspaper showed that two-thirds of German consumers are not planning to buy more goods despite Berlin's stimulus efforts.

Japan braces for worst postwar economic slump, pandemic tests policy response - Reuters News

Revised Q1 GDP annualised -2.2% vs preliminary -3.4%

Analysts take little comfort from upward revision

Data confirms Japan in recession, slump to worsen in Q2

Economy minister warns BOJ against deepening negative rate

Bank lending rises in May at fastest annual pace on record

By Kaori Kaneko and Leika Kihara

TOKYO, June 8 (Reuters) - Japan's economy braced for its worst postwar slump even as first-quarter GDP contracted less than initially thought, as the coronavirus crisis slams the brakes on global growth and raises pressure on Tokyo to cushion the blow to business and consumers.

Banks are doing their bit to help as lending rose at the fastest annual pace on record in May, a sign companies were tapping loans to meet immediate funding needs to survive slumping sales from the pandemic. (Full Story)

While U.S. and European policymakers have shifted from crisis-response to efforts to prop up growth, Japan is struggling to do so as it continues to focus on preventing a second wave of infection.

In an interview with Reuters, economy minister Yasutoshi Nishimura said Japan should primarily focus on back-stopping faltering businesses, suggesting the central bank should avoid pushing interest rates deeper into negative territory. (Full Story)

"We're not at a stage yet where we want to stimulate consumption and encourage people to travel a lot. Efforts to stimulate consumption should wait a bit more," he said, when asked whether the Bank of Japan should take steps to boost demand, such as deepening negative interest rates.

The world's third-largest economy shrank an annualised 2.2% in January-March, revised data showed on Monday, less than the 3.4% contraction indicated in a preliminary reading, as capital expenditure fared better than expected. Analysts had tipped a 2.1% contraction. (Full Story)

But few analysts were hopeful about the outlook for the year since capital spending data used to calculate the revised figures lacked enough responses - most struggling firms appear not to have participated in the survey - and will be updated in July.

On the whole, Monday's revised gross domestic product (GDP) estimate confirmed Japan had slipped into recession - defined as two straight quarters of contraction - for the first time in 4-1/2 years, even before lockdown steps to contain the virus was put in place in April.

"The upward revision to Q1 GDP displayed in the revised estimate is cold comfort given that output is plummeting this quarter," said Tom Learmouth, economist at Capital Economics.

 

'EXTREMELY CHALLENGING' OUTLOOK

Senior economist at Oxford Economics, Stefan Angrick, concurred: "With the bulk of the impact from the coronavirus pandemic to be felt in Q2, the outlook for 2020 thus remains extremely challenging."

A series of recent data including exports, factory output and jobs figures suggested Japan is facing its worst postwar slump in the current quarter, a period when Prime Minister Shinzo Abe announced a state of emergency requesting citizens to stay home and businesses to close. (Full Story)

Although the emergency was lifted in late May, the economy is expected to recover only moderately in coming months, underlining the pandemic's sweeping impact.

A Cabinet Office survey on Monday showed Japan's service sector sentiment improved last month, but the outbreak continued to weigh on firms' business confidence. (Full Story)

The surge in bank lending, shown in BOJ data also released on the day, suggests companies are being forced to hoard cash just to stay afloat - and that the worst is yet to come.

The head of Japan's ANA Holdings Inc said the airline will cut unprofitable international routes to cope with the hit from the pandemic, according to the Asahi newspaper. (Full Story)

Tokyo policymakers are moving fast to stop the bleeding.

Japan's parliament will begin deliberating on Monday a second supplementary budget to fund part of a fresh $1.1 trillion stimulus package that includes loan schemes and a framework to inject capital into struggling firms.

The BOJ eased monetary policy for two straight months in April, focusing on steps to ease corporate funding strains.

The central bank will scrutinise at its rate review next week whether additional steps are needed. But it is seen maintaining its projection of a moderate economic recovery in the latter half of this year, sources said. (Full Story)

A surprise calm in markets could offer Japanese policymakers some breathing space before considering bolder steps.

Japanese shares climbed to a 3-1/2-month high on Monday after an unexpected increase in U.S. employment gave investors further confidence of a swift global recovery. (Full Story)

"If you look at the Japanese stock market, it certainly suggests that additional monetary easing is not necessary," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"The BOJ has already done a lot to respond to the immediate crisis.”