Focus on Lessening Inflation
October 22, 2014
The latest monthly economic assessment from Japan’s government downgraded its view on consumer prices from “rising moderately” to “rising at a slower tempo recently.” The overall view of the economy also was downgraded to “is on a moderate recovery, while weakness can be seen recently.”
Australian third-quarter consumer price data revealed the smallest quarter-on-quarter rise (0.5%) in five quarters and the lowest on-year pace (2.3% after 3.0% in 2Q) since 3Q13. Australia compiles two measures of core inflation: one eased to 2.5% from 2.9%, and the other fell to 2.6% from 2.7%.
South African CPI inflation slowed more than forecast in September to 5.9% from 6.4%. Core inflation slowed to 5.6% from 6.4%.
Published minutes of the Bank of England’s October MPC meeting, which left policy settings unchanged, revealed a majority of 7 against 2 that felt there exists insufficient proof of inflationary pressure, considering the facts that labor costs are falling, wages are very subdued, and consumers expect lessening inflation. The two dissents that favored a 25-basis point rate hike came from Weale (who’d cast the same vote at the August and September meetings) and McCafferty, who joined Weale in September. They put stock in the continuing strong downward path of unemployment that suggests fast-diminishing economic slack and the knowledge that monetary policy works with a lag and therefore must be changed in a pre-emptive manner.
The latest U.S. monthly consumer price data for September will be published by the Labor Department today. A rising dollar curbs import price inflation and exerts a like effect upon other price data. In the year August, total consumer prices rose 1.7%, down from a 12-month increase of 2.0% in July, and there was a drop of 0.2% in the index between July and August. Core CPI inflation eased to a 5-month low of 1.7% from 1.9%.
The dollar climbed 0.5% overnight against sterling but is otherwise narrowly mixed with gains of 0.2% versus the loonie, euro and Swiss franc and drops of 0.1% relative to the Australian and New Zealand dollars as well as the Chinese yuan. The yen is steady.
Share prices in the Pacific Rim mostly climbed with gains of 2.6% in Japan, 1.4% in Hong Kong, 1.1% in Australia, 0.9% in New Zealand and Indonesia, 0.8% in India, and 0.7% in Singapore. But China’s market fell by 0.6%, and stocks in Europe have settled back by 0.3% in Paris and Madrid, 0.2% in London and 0.1% in Frankfurt. There is a rumor that more than 10 banks failed the ECB stress test. The results will be reported on October 26.
The 10-year British gilt yield is a basis point softer, and Treasury futures point to a lower yield as well. The German bund and Japanese JGB are steady.
Comex gold weakened 0.5% to $1,246.10 per troy ounce overnight. WTI oil firmed 0.2% to $82.67 per barrel.
Japan’s customs trade deficit in September — 1.07 trillion yen seasonally adjusted and 958 billion yen unadjusted — were larger than forecast and bigger than prior period results. A stronger 6.9% on-year advance in exports was a bright spot, but import growth of 6.2% almost kept pace. Despite an 8.8% increase in exports to China, the overall trade balance vis-a-vis Asia was marginally in deficit ($40 million). There was also a small deficit in trade with the EU, but a 541 billion yen surplus versus the United States.
Spain’s indices of leading economic indicators and coincident economic indicators respectively fell 0.2% and was unchanged in August according to the Conference Board.
The Conference Board also reported a 0.2% downtick in Australia’s index of leading economic indicators, together with a 0.2% rise in the coincident index. Westpac’s index of Australian economic indicators slid 0.1% in September, revealing sub-trend growth for an eighth straight time.
Icelandic wage inflation was 6.2% in the year to September versus 6.3% in August. Danish retail sales rose 0.5% last month but were still 0.9% lower than a year earlier.
Besides the aforementioned U.S. CPI, North American data due today include Canadian and Mexican retail sales. More importantly, the Bank of Canada penultimate interest rate announcement of 2014 arrives, as does the Central Bank’s latest Monetary Policy Report.
Copyright 2014, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England minutes, Japanese trade balance, U.S. CPI
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