Spotlight on the United States

April 13, 2021

U.S. consumer prices rose 0.6% last month, which was marginally more than forecast and the largest month-on-month increase in 103 months. The 2.6% 12-month increase in the CPI was 0.9 percentage points more than in February and constitutes a 31-month  high. The energy component advanced 5.0% on month and 13.2% on year, but non-energy service sector costs also accelerated, resulting in a a 3-month high 1.6% core rate of inflation.

Markets at least initially did not react dramatically to the CPI report. Nominal average hourly earning dipped 0.1% in March, more than halving their year-on-year advance to 1.5%. Real earnings were 0.8% lower than in the prior month.

U.S. racial tensions are also being watched closely in the wake of a second incident in which a person of color was shot dead in Minnesota by a cop following a minor infraction. This happened as the trial of Derek Chauvin moves closer to jury deliberation.

A third U.S. development commanding market attention has been the FDA’s temporary suspension of the roll-out of the J&J vaccine due to a possible blood clotting issue.

Just prior to the U.S. CPI release, the dollar was showing a net overnight uptick of 0.1% against the euro and on a weighted basis but no change relative to the yen.

In stock market action today, share prices rose 1.4% in India, 1.1% in South Korea, and 0.7% in Japan but fell 0.5% in China, 0.4% in Indonesia, and 0.2% in Taiwan. European markets hadn’t changed much. U.S. equities opened lower.

Ten-year German bund and British gilt yields rose 2 and 1 basis points, but the 10-year Treasury yield had dipped a basis point and was 10 basis points below last month’s high.

WTI oil continues to trade near $60 per barrel.

A separate U.S. data release revealed a 4-month high in small business sentiment last month.

Several British data reports came out today.

  • Industrial production rose 1.0% in February, twice as much as forecast but still 3.5% below the pre-pandemic level a year earlier. Factory output went up 1.3% on month, cutting its on-year decline to 4.2%.
  • Construction output went up 1.6%, resulting in the smallest 12-month decrease (4.3%) in 13 months.
  • Monthly real GDP growth of 0.4% was less than forecast. Compared to February 2020, GDP fell 7.8%, and average GDP in December-February dropped 1.6% versus the prior 3-month period.
  • A goods and services trade deficit of GBP 7.123 billion in February was the largest shortfall in 23 months and was associated with a 30.6% widening of the goods only trade deficit to GBP 16.444 billion.

China’s trade surplus dropped sharply to $13.8 billion last month following a combined surplus of $103.25 billion in the first two months of 2021. March’s surplus was only about a fourth as large as analysts were anticipating, and the reason was an explosion of import growth to a 4-year high of 38.1% on-year.

Retail sales in Brazil went up 0.6% in February, ending a 3-month streak of monthly declines. Sales were still 3.8% below their year-earlier level.

Investor sentiment toward the euro area according to the monthly ZEW Institute index fell back to a 3-month low of 66.3 on concerns that the roll-out of vaccines there is going too slowly. But perceived current conditions were less negative for a second straight time. Likewise, the ZEW expectations index for Germany slipped to a 3-month low of 70.7 in April from 76.6 in March, but the index for current conditions rose from -61.0 in March to -48.8 in April.

Other countries are also reporting higher inflation concentrated in energy. For example, German wholesale prices posted consecutive month-on-month advances of 2.1% in January, 1.4% in February and 1.7% in March. This resulted in March showing the greatest 12-month increase (4.4%) in four years. Half a year ago, on-year WPI inflation was minus 1.8%.

Portuguese consumer prices leaped 1.4% on month in March, their first increase of any size since October, and the 0.5% 12-month rate of increase matched February’s 13-month high.

Czech and Romanian consumer prices in March were respectively 2.3% and 3.1% above their year-earlier levels.

Italian industrial production under-performed expectations in February, rising just 0.2% on month and posting a 12-month decline (0.6%) for a 24th consecutive month.

Turkish industrial production edged only 0.% higher in February, resulting in the smallest 12-month increase (8.8%) since an 8.1% on-year advance last September. Turkish retail sales rose 3.4% on month and 4.6% compared with the pre-pandemic level in February 2020.

As expected, officials at the National Bank of Serbia left their repo rate unchanged at 1.0%. The most recent cut of 25 basis points in December culminated 125 basis points of reduction that was engineered during 2020. According to a released statement, “For the eighth year in a row, even in conditions of a pandemic, the NBS continues to deliver on its primary objective – keeping inflation low and stable…. The Executive Board took into account that the global economy and its growth prospects remain under the impact of the pandemic, but also the encouraging fact that projections are being revised upward…. Monetary policy will continue to prioritize price and financial stability, while supporting further growth of our economy and employment, as well as further growth in exports and favorable investment environment.”

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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