Signs Emerging that Inflationary Momentum May Be Flattening
June 9, 2021
Consumer prices in China recorded their third month-on-month drop in a row, slipping 0.2% in May after declines of 0.3% in April and 0.2% in March. That didn’t prevent another acceleration of on-year CPI inflation, which advanced to an 8-month high of 1.3%. Moreover, price pressure at the producer level rose sharply again from 6.8% in April to a 152-month high of 9.0% last month.
CPI inflation in Hungary remained unchanged in May at April’s 101-month high of 5.1%. Analysts had anticipated further acceleration in the latest figure.
A big focus this week of financial market participants has been tomorrow’s scheduled release of U.S. consumer prices. Forecasters are predicting additional rises of U.S. inflation to 4.7% overall and 3.4% in core CPI during May.
The other major theme of this week has been President Biden’s trip to Europe, where he will be attending the G7 annual summit, meeting with NATO officials, and holding face-to-face talks with Russian President Putin. Biden’s hopes for bipartisan legislation on infrastructure spending and other matters have been stymied by Republican solidarity to thwart him.
The dollar overnight fell 0.3% against the Mexican peso, Canadian dollar, and Turkish lira, 0.2% versus the Chinese yuan and 0.1% relative to the euro, sterling, Swiss franc, Australian dollar, New Zealand dollar, and weighed DXY currency index. Dollar/yen remained unchanged.
Ten-year sovereign debt yields continued to retreat overnight, dropping 3 basis points in the United States, two bps in Germany and Great Britain, and a single bp in Japan.
Asian stock markets closed mostly lower, with drops of 1.0% in South Korea, 0.6% in India, 0.4% in Singapore and Japan and 0.1% in Hong Kong. The German Dax and British Ftse show losses so far of 0.5% and 0.6%.
The price of WTI oil is up 0.2% and above the key $70 per barrel threshold for the first time since October 2018. Gold has dipped 0.1% and is slightly below $1900 per ounce.
GDP growth last quarter in South Korea was revised marginally to show a quarterly rise of 1.7% and an increase of 1.9% from a year earlier.
Germany’s current account surplus fell back from EUR 30 billion in March to a 2-month low of EUR 21.3 billion in April. Even so, the year-to-date surplus of EUR 87.8 billion was 21.4% larger than that in January-April of 2020. Monthly growth in seasonally adjusted exports of 0.3% was slower than forecast, and April’s trade surplus of EUR 15.9 billion was down from a first-quarter monthly average surplus of EUR 18.1 billion.
Portugal, Romania, Cyprus, and the Philippines reported trade deficits for the month of April. Danish data showed surpluses that month in the current account and trade balance.
Japanese machine tool orders recorded a record 140.7% year-0n-year increase in May, up from gains of 120.8% in April and 9.7% back in January. Japanese M2 money growth slowed to 7.9% in May year-on-year from 9.2% in April and 9.5% in the first quarter.
Australian building permits fell 8.6% on month in April following double-digit advances in both February and March. The Westpac measure of Australian consumer confidence dropped 5.2% to a 5-month low in June.
Indonesian consumer sentiment improved 2.9 index points to a 14-month high in May.
New Zealand business confidence see-sawed to -0.4 in June from +1.8 in May and -2.0 in April.
South Africa’s Sacci business confidence index improved to a 38-month high in May.
On the central banking front, the Central Bank of Chile by unanimous vote agreed to leave its policy interest rate unchanged at 0.5%. That’s been the level since a pair of cuts in March 2020 totaling 125 basis points. But a statement released by officials expresses optimism about personal consumption and other elements of private domestic demand that will make it necessary “to recalibrate the expansiveness of monetary policy going forward.”
There are scheduled reviews of Canadian and Polish monetary policies today.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Biden's trip to Euroope, China CPI, German current account