Many Competing Stories but a Unifying Theme is Better Growth in Europe by a Slower Trend Elsewhere

April 15, 2015

ECB President Draghi is wrapping up his press conference.  Policy wasn’t changed further.  Focus is currently on full implementation of policy initiatives taken recently.  Draghi finds the favorable impact of quantitative easing to be impressive: real interest rates have fallen as expected inflation is rising.  An important new sentence in the released statement explains what officials mean by a sustained adjustment in the pahth of inflation: “When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation, looking through unexpected outcomes in measured inflation in either direction if judged to be transient and to have no implication for the medium-term outlook for price stability.”  Draghi said growth risks are more balanced now and stressed the need for structural government reforms.

U.S. industrial production fell 0.4% in January, ticked 0.1% higher in February and then slumped another 0.6% last month, underlining weak growth last quarter.  The Empire State manufacturing index fell 8.1 points, swinging to -1.19 this month from a reading of +6.90 in March.

Chinese data were also weak.

  • On-year GDP growth slowed to 7.0% last quarter from 7.3% in the second half of 4014.
  • Industrial output grew 5.6% on year in March, versus expectations of 7% and down from 7.9% in December-February. 
  • Retail sales growth slowed to 10.2% from 11.9% in December-February.
  • Fixed asset investment advanced 13.5% on year last quarter versus 15.7% in 2014.
  • On-year M2 money growtrh slowed to 11.6% in March from 12.5% in February.  M1 and M0 also slowed, but yuan lending surpassed CNY 1.0 billion for a third straight month.

Japanese industrial production was revised to a 3.1% monthly decline in February from 3.4% reported initially.  Capacity usage fell by 3.2% on month and 2.7% on year.  Capacity was unchanged on month and down 0.4% on year.

German consumer prices rose 0.5% last month, thanks to a 1.4% rebound in energy, and 0.3% on year.  French consumer prices rose 0.7% in March but posted a 12-month 0.1% decline.

West Texas Intermediate oil prices increased 1.5% overnight to $54.09, and Comex gold is barely changed and still below the $1200 threshold at $1,193.30 per ounce.

The Central Bank of Sri Lanka cut its interest rates by 50 basis points.  The lending rate (reverse repo) is 7.5%.  There were earlier reductions of that amount in December 2012, August 2013, and October 2013.

Euroland’s trade surplus on a seasonally adjusted basis widened 800 million euros to EUR 22.0 billion.

Indian wholesale prices sank 2.3% on year and have posted a 12-month drop since October.

Share prices fell 2.7% in Greece.  The Dow and Dax are 0.5% and 0.4% higher, but the Nikkei fell by 0.2%.

The dollar is 0.6% stronger against the euro but little changed versus the yen.

The 10-year British gilt climbed four basis points, but its U.S., Japanese and German counterparts are little changed.

Manufacturing sales in Canada fell 1.7% for a second straight month in February.

Euro area home prices dipped 0.1% on quarter in 1Q15 but were 1.1% above their year-earlier level.

Still to come: Bank of Canada policy statement and Monetary Policy Report.

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

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