Europe Gets Better News on Inflation

February 27, 2015

Increasing domestic political rumbling in Greece sent share prices there down 4.1% and lifted the 10-year government bond yield by six basis points.  The parliament in Germany approved the recent agreement to extend the bailout aid timetable by four months.

The dollar is mostly softer, with overnight losses of 0.5% against the Swiss franc, 0.4% relative to the Canadian, New Zealand and Australian dollars, 0.2% against the euro and 0.1% vis-a-vis the yen.  The dollar firmed 0.2% against the yuan and sterling.

West Texas Intermediate oil recovered 0.8% to $49.00 per barrel.  Comex gold is 2.4% weaker at $1,207.70 per ounce.

Share prices in the Pacific Rim advanced by 1.7% in India, 0.3% in New Zealand and Australia, 0.1% in Japan and 0.2% in China.  Stocks fell 0.8% in Taiwan, 0.7% in Singapore, 0.4% in South Korea and 0.3% in Hong Kong.  In European bourses, the German Dax is unchanged, and equities are down by 0.4% in Switzerland, 0.3% in Spain and 0.1% in Great Britain.  Stocks have firmed 0.2% in Paris and 0.4% in Milan.

The 10-year British gilt yield rose four basis points, while the German bund and Japanese JGB yields are a basis point firmer.

In Germany, preliminary CPI data covering January from Saxony, Hesse, Bavaria and North Rhine Westphalia showed monthly advances between 0.8% and 1.0%, much more than forecast and enough to flip on-year inflation in those states back to positive territory.

Spain’s preliminary February CPI estimate also was higher than expected.  Such rose 0.2% on month and recorded a smaller 12-month decline of 1.1% (1.2% when harmonized).

Italian consumer prices increased 0.3% on month in February and recorded a smaller on-year dip of 0.2% than forecast.

Japan reported several economic statistics:

  • Core CPI in January fell 0.6% on month and decelerated to a 2.2% year-over-year increase (0.2% if the effect of last April’s consumption tax hike is also excluded).  Total consumer prices rose 2.4% on year.
  • Tokyo core CPI ticked up 0.1% on month in February.  On-year changes of 2.3% overall, 2.2% on core, and 1.7% excluding food and energy were unchanged from January Tokyo results.
  • Retail sales slumped 1.3% on month in January and were 2.0% lower than a year earlier.  Large-store retail sales were unchanged on year.
  • The unemployment rate rose 0.2 percentage points to 3.6% in January but was accompanied by a larger on-year 0.8% rise in jobs.  However, the job offers-to-seekers ratio suffered a setback, falling to 1.14 from 1.15.
  • Real household spending slid 0.4% on month and fell by a larger 5.1% on year.  Real disposable incomes were 2.5% lower in January than a year before.
  • Industrial production growth of 4.0% in January beat forecasts, but the 12-month comparison showed a 2.6% decline.  METI officials did not change their assessment, which is that output shows signs of increasing at a moderate pace.
  • Housing starts registered another double-digit on-year decline (13.0%) in January versus a drop of 14.7% in December.
  • Construction orders, in contrast, were 27.5% greater last month than in January 2014.
  • Motor vehicle output slid 0.7% between January 2014 and January 2015, which is better than the on-year declines of 2.5% in December and 12.2% in November.

British consumer confidence posted an unchanged and soft reading of +1 in February.

French consumer spending rose 0.6% in January, which was the third straight increase and better than street expectations.  The 12-month rise was 2.6%.

Several countries reported fourth-quarter GDP data, some revisions and other first estimates.

  • Swedish GDP increased 1.1% on quarter and 2.7% on year (versus 2.1% in 3Q).
  • Danish GDP advanced 0.4% on quarter, 1.3% between 4Q13 and 4Q14, and 1.0% in full-2014.
  • Czech GDP grew 0.4%, too, and 1.5% on year.  GDP in 2014 was 2.0% higher.
  • Polish GDP climbed 0.7% on quarter and 3.1% on year.
  • Greek GDP fell 0.4% between 3Q and 4Q.
  • Portuguese GDP posted a 0.5% rise from 3Q and a 0.9% on-year advance.

Switzerland’s index of leading economic indicators fell six points to a 90.1 reading in February.  January’s abrupt change in Swiss franc policy has been a big disruption.

Several countries’ producer price data for January got released.  Irish PPI went up 0.2% on month and 14.2% on year.  At the other extreme, Greek producer prices sank 4.0% on month and 9.6% on year.  French producer prices fell 0.9% on month and 2.5% on year.  In Cyprus, the PPI plunged 1.5% on month and 1.6% on year.  Hungarian producer prices fell 0.4% on month and 1.0% on year.  Sweden’s PPI rose 0.2% both on month and on year.  Malaysian producer prices fell 0.4% on month and 4.8% on year, and Singapore’s PPI was 2.9% lower than in December and a whopping 12.6% below its year-earlier level.

German import prices recorded a greater on-year decline of 4.4% in January.  Energy prices tumbled 34.6%, and all other import prices rose 1.3%, buoyed by the weak euro.

Greek retail sales fell 1.2% between end-2013 and end-2014.  Norwegian retail sales dropped 0.7% in January and decelerated to a 12-month 1.4% rate of increase.  Swedish retail sales increased by 1.2% on month and 4.0% on year in January. 

Australian M3 money and private-sector credit grew 7.3% and 6.2% in the year to January. 

New Zealand building permits fell 3.8% in January, but business sentiment there improved four percentage points to 34.4% in February.  New Zealand M3 money was 6.2% higher than a year before in January.

Turkey’s $4.3 billion trade deficit in January was half the size of December’s shortfall. 

Thailand posted a current account deficit of $9.8 billion last quarter versus just $0.5 billion in 3Q14.

Spain’s current account in December was in surplus by EUR 4.85 billion, 2.8 times wider than November’s surplus.

Revised U.S. GDP gets reported shortly.  Other schedule U.S. releases today are pending home sales, the U. Michigan consumer sentiment index, and regional PMIs for Chicago and Milwaukee.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

Tags: , , ,


Comments are closed.