Price and Industrial Production Data, Fed Chair Powell Speaking, and More of the Trump Trial

February 10, 2021

The dollar is unchanged today on a trade-weighted basis and remains near a 2-week low. Equities closed up 1.9% in Hong Kong and 1.4% in China but only +0.2% in Japan. Share prices are pretty flat so far today in the U.K., France, Germany, and U.S. futures trading.

Prices for WTI oil and Comex gold are up 0.6% and 0.2%. Ten-year sovereign debt yields show gains this Wednesday of 3 basis points in the U.K., 2 bps in Germany and a single basis point in both Japan and the United States.

Consumer price data were reported today for the United States, China, Germany and also Denmark, Portugal, and Norway.

  • The U.S. CPI inflation rate was 1.4% in January for a second straight time and the third time in the past five months. That’s down from a pre-pandemic 2.3% last February. Core CPI inflation, also 1.4%, was 0.2 percentage points lower than in December and below street expectations.
  • Chinese on-year CPI inflation swung back from +0.2% in December to -0.3% last month, just 0.2 percentage points away from November’s 134-month low of negative 0.5%.
  • The removal of a temporary cut in value added tax imposed during the second half of 2020 and higher energy costs lifted German CPI inflation to a 7-month high of 1.0% in January. Core inflation rose to 1.4%.
  • Norwegian CPI inflation accelerated to a 20-month high of 2.5% last month in spite of a 0.3 percentage point slowing of its core element to a 10-month low of 2.7%.
  • Portuguese CPI inflation was positive for the first time in 11 months but only at 0.3% last month.

Three countries reported on producer price inflation:

  • Domestic PPI inflation in Japan was negative for an eleventh straight month in January, this time by 1.6%, and complemented by an 8.2% on-year drop in import prices.
  • Chinese producer price inflation turned positive for the first time in a year, printing at a 19-month high of 0.3% last month.
  • Norwegian PPI inflation swung from -5.7% in December to +0.6% in January, its first time above zero percent since May 2019.

French industrial production unexpectedly recorded a second straight monthly decline in December, falling 0.8% that month after a drop in November of 0.7%. Output was 3.0% lower than a year earlier and 4.9% below its pre-pandemic level last February.

Dutch industrial production declined 0.3% in November, its first drop in a half year, and was 1.7% weaker than a year earlier. Finnish and Belgian industrial production dropped both on a monthly basis and compared to year-earlier levels in December, Finnish output was down 0.9% on month and 2.5% on year, while Belgian production fell 1.9% on month and 4.6% on year.

Consumer confidence in Australia rose 1.9% in February and 37.2% on net over the past six months, according to the index compiled by Westpac. Australian building permits increased for a fourth consecutive month in January, rising 10.9% and slightly over 36% over that four-month streak.

South Korea’s 5.4% unemployment rate in January was at its highest level in 255 months and compared to 4.6% in January 2020.

Portugal’s jobless rate eased back only slightly from the third quarter’s ten-quarter high of 7.8% to 7.1% in the fourth quarter.

Brazilian retail sales in December recorded the largest monthly decline (6.1%) since April. On-year growth in sales of 1.2% was down from 3.6% in November and 8.4% in October.

These activity data reflect the world’s intensifying pandemic during autumn and early winter. There were more U.S. cases yesterday (96.5k) than on Sunday or Monday, and deaths surpassed 3.6k.

The other non-economic piece of news being watched closely by investors is the Trump impeachment trial in the U.S. senate, which by a vote of 56-44 decided yesterday that holding an impeachment trial in the senate is constitutional and therefore required. Trump is not expected to be convicted, however.

In central banking news, the Swedish Riksbank Executive Board held its first monetary policy review of 2021, agreeing to keep the bank’s repo rate at zero percent and to continue quantitative stimulus. The rate has been at zero percent since a pair of 25-basis point hikes in January 2019 and December 2019. It previously was in negative territory since February 2015. According to a released statement, officials believe “that the envelope for asset purchases will be fully utilised by the end of 2021 and that the size of the holdings will be maintained on this level at least during 2022. The Executive Board has also decided to hold the repo rate at zero per cent and it is expected to remain at this level in the years to come.” CPI inflation last year was only 0.5% compared to a 2.0% target, and the Board’s latest forecast projects sub-target inflation even in 2023 of 1.8% overall and 1.7% core.

Fed Chairman Powell will be speaking publicly later today.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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