A Valentine’s Day Full of Data and Other Developments

February 14, 2017

Market Movement: The dollar is higher against sterling but lower against the euro, Swissie, yen, and commodity-sensitive currencies. Oil and gold climbed 1.3% and 0.7% overnight. 10-year German bund and Japanese JGB yields rose a basis point, while the 10-year Treasury and British gilt slid a basis point. Japan’s Nikkei slumped 1.1%.

Central Bank News: Janet Yellen opens up her semi-annual Humphrey Hawkins testimony before the Senate Banking Committee. Outgoing Richmond Fed President Lacker would like to see the Federal funds rate significantly higher. Fed Governor Tarullo, who chairs the committee overseeing regulation and bank supervision, is resigning in April, some five years ahead of the end of his term. This gives President Trump a third opening to fill on the Federal Reserve Board. Central bank policy meetings today are being held in Chile and Romania.

Michael Flynn Leaves Trump Administration: The controversial National Security advisor resigned. He’d been under pressure for allegedly informing the Kremlin prior to the inauguration that a Trump administration would likely lift economic sanctions on Russia as part of a deal.

Further Signs that Global Inflation Is Reviving:

  • Chinese consumer prices jumped 1.0% in January, lifting the 12-month rate of increase to a 32-month high of 2.5%.
  • Chinese PPI inflation of 6.9% in January was the highest pace since 2011.
  • A 0.3% monthly increase in U.S. producer prices last month was twice as much as street analysts were forecasting, as energy leaped 4.7%.
  • British CPI inflation rose 0.2 percentage points (ppts) to a 31-month high of 1.8%. Retail price inflation rose 0.1 ppt to 2.6%, while core RPI of 2.9% was 0.2 ppts higher than in December.
  • British producer output price inflation climbed 0.7 ppts to 3.5% in January, and producer input prices inflation of 20.5% was athe most since August 2008. U.K. house price inflation of 7.2% in December was the most since July.
  • German CPI inflation rose 0.2 ppts in January to 1.9%, almost four times greater than the full-2016 average pace of 0.5%.
  • Swiss CPI inflation of 0.3% in July was above zero for the first time in 29 months. The Swiss PPI/import price index increased 0.4% last month, raising its 12-month change from zero in December to 0.8% in January.
  • Greek import price inflation more than doubled to 8.9% in December from 3.1% in November.
  • Wholesale price inflation in India jumped more than a full percentage point to 5.25% in January from 3.39%. The fuel component was nearly 20% higher than a year earlier.
  • Hungarian CPI inflation rose half a ppt to 2.3% in January.
  • Food prices in New Zealand climbed 2.8% on month in January.

Growth Statistics

  • In Euroland, real GDP rose 0.4% last quarter, the same as in 3Q, and by 1.7% from a year earlier. The growth rate quickened in Germany, France, Belgium and Austria but slowed in Italy, The Netherlands, Greece, Cyprus, and Finland.
  • Industrial production in the euro area sank 1.6% in December, cutting the 12-month rate of increase to 2.0%. Production fell 3.1% in Germany, 0.9% in France, 0.8% in Finland, 0.4% in Spain, and 0.2% in The Netherlands but rose 1.4% on month in Italy and 1.2% in Portugal.
  • Among Eastern European economies, on-quarter GDP growth in 4Q16 accelerated to 1.7% in Poland, 1.3% in Romania, and 0.4% in in Hungary but held steady at 0.2% in the Czech Republic.
  • Japanese industrial production was revised upward by 0.2 percentage points (ppts) to show December-over-November growth of 0.7%. Output fell 0.2% in 2016, however, after a 1.2% average slide in 2015. Capacity usage and capacity ended the year some 2.9% higher and 0.5% lower than their respective end-2015 levels.
  • Brazilian retail sales plunged 4.9% between December 2015 and a year later.

Reported Survey Evidence:

  • The resurgence in U.S. small business sentiment continued last month. Instead of settling back from December’s giant jump, such rose another 0.1 to a reading of 105.9 versus a recent low of 94.1 in September.
  • Investor sentiment toward Euroland fell back to 17.1 in February versus scores of 23.2 in January, 18.1 in December and 5.3 last September, according to the ZEW Institute. The expectations index for Germany likewise dropped to 10.4 in February from 16.6 in January and 13.8 in December.
  • National Australia Bank’s business conditions index for Australia printed at 16 in January, up five points and the best score in nearly a decade. Australian business confidence climbed four points to 10, highest since February 2014.

Chinese M2 money growth remained steady in January at an on-year rate of 11.3%. New lending surged to 2.03 trillion yuan.

South African unemployment fell 0.6 ppts to 25.5% in the fourth quarter.

Turkey’s current account deficit nearly doubled on month to $4.27 billion in December.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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