Awaiting the FOMC Decision and Digesting Other Developments

March 16, 2016

Trump and Clinton were big winners in Tuesday’s primary elections, winning North Carolina, Florida, Illinois and each leading narrowly in Missouri votes that remain too close to call.  Ohio was captured by Clinton and Kasich. Trump may skip the next Republican debate and predicts violence at the Salt Lake City convention if Republican establishment attempts to deny him the  people’s mandate.

The annual British budget delivered by Chancellor of the Exchequer Osborne revised projected GDP growth next fiscal year down 0.4 percentage points to 2.0% and projects CPI inflation of only 0.7%, then 1.6% in 2017.  The five-year plan shows a declining deficit transformed into surplus and debt shrinking as a percent of GDP.  Growth averages 2.1% over the next five years.

Reported U.S. data produced some surprises this morning.

  • Core consumer price inflation rose 0.3% on month for a second straight time in February, lifting the 12-month advance to 2.3% from 2.2% in January and 1.9% in December.  A 6.0% plunge in energy depressed total inflation to 1.0% from 1.4%.
  • Housing starts jumped 5.7% on month to a 5-month high and were 30.9% higher in February than a year earlier.  Building permits slipped 3.1% to a 4-month low, however.
  • Industrial production contracted 0.5% on month in February, more than was forecast, and capacity usage slipped to 76.7% from 77.1%.
  • Mortgage applications last week fell 3.3%, as the 30-year fixed mortgage rate rose 13 basis points to 3.94%.
  • Treasury-compiled capital flow figures released late Tuesday showed a $12.0 billion net long-term capital outflow in January but a $118.4 billion total net inflow, including short-term movements.

It’s being reported that President Obama will nominate Merrick Garland to fill the Scalia vacancy on the Supreme Court, but Republicans remain resolute in considering any nomination from the president.

Today’s big event is the FOMC statement and forecasts due at 18:00 GMT followed by Janet Yellen’s press conference a half hour later.  The Fed is not expected to raise interest rates and will probably indicate a scaled-back number of likely rate hikes in 2016.

Chinese Premier Li announced a 5-year average growth target of 6.5% per year.

Bank of Japan governor Kuroda said the overnight target interest rate could, if needed, go as low as -0.50% in theory.

The Bank of Iceland’s seven-day collateralized lending rate was retained at 6.5% but with a continuing bias toward eventual additional increases.

WTI crude oil boomeranged 2.9% to $37.38 per barrel after dropping steeply on Monday-Tuesday.

Comex gold is flat following two days of heavy losses.

The dollar has risen 0.5% relative to sterling and the yen, 0.4% against the euro and Swiss franc, 0.3% vis-a-vis the Australian dollar, 0.2% versus the kiwi and 0.1% against the yuan.  The loonie is 0.1% firmer.

Construction output in the eurozone leaped 3.6% on month in January, lifting the 12-month rate of rise to 6.0% from just 0.4% recorded in the year to December.

Britain’s claimant unemployment count contracted 18K in February, about twice as much as predicted after a slide of 28.4K the month before.  On-year growth in wages accelerated to 2.1% in January (and 2.2% for regular pay only) from 1.9% (and 2.0%) the month before.  The ILO-basis jobless rate in November-January stayed at 5.1%.

The U.K. index of leading economic indicators went up 0.2% in January, down from upticks of 0.3% in December and 0.4% in November.  The index of coincident economic indicators was 0.3% higher.

The on-year drop of Japanese machine tool orders in February was revised to 22.5% from 22.6%.  Even so, that’s much bigger than a slide of 17.2% posted in January.

New Zealand posted a wider NZD 1.948 billion current account deficit last quarter.  But as a 3.1% share of GDP, such was smaller than the third-quarter imbalance that had equaled 3.3%.

Canadian manufacturing sales jumped 2.3% to a record high in January.  Orders increased 6.8% on month but fell 9.1% on year.  The ratio of inventories to sales slid to 1.36 from 1.39.

In the year to February, producer prices fell 4.0% in the Czech Republic and 2.9% in Portugal.

South African retail sales growth slowed to a 12-month rate of 3.1% in January from 4.1% in December.

European Union car registrations last month exceeded the year earlier total by 4.3%.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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