G7 Meetings, ECB Press Conference, and Released CPI and Industrial Production Share Spotlight

June 10, 2021

Climate change and challenges from China and Russia headline the agenda of this year’s Group of Seven summit in Cornwall, U.K.. This is U.S. President Biden’s first summit.

The Governing Council of the European Central Bank, as expected, did not modify its accommodative monetary stance nor forward guidance regarding future policy. Key interest rates (a zero percent refinancing rate flanked by a -0.50% deposit rate and a 0.25% marginal loan facility rate) as well a 1.85 trillion euro limit through March 2022 on the pandemic emergency program remain as before, and officials stressed that their approach continues to be flexible.

Central banks in Serbia, Canada, and Poland also left policy interest rates unchanged. At the National Bank of Serbia, the interest rate benchmark was cut last year four times by a total of 125 basis points and has been 1.0% since December. The Governing Council of the Bank of Canada implemented a trio of 50 basis point reductions of its overnight rate target in March 2020, and such remains at 0.25%. At the National Bank of Poland, the policy interest rate has been 0.10% since reductions totaling 140 basis points in March, April and May of 2020.

The 14% policy interest rate since September 2020 at the Central Bank of Uzbekistan was once again not reduced. CPI inflation there of 10.9% is well above target, and indicators of expected inflation are worrisome, too.

Prior to the U.S. consumer price release today, several other countries reported price data:

  • In Japan, domestic producer price inflation accelerated to a 152-month high of 4.9% in May from 3.8% in April, 1.2% in March and -0.6% in February. Import prices were 25.4% greater than in May 2020.
  • Greek consumer price inflation topped zero percent in May for the first time since the pre-pandemic month of February 2020, but such remained very subdued at +0.1%.
  • Swedish CPI inflation unexpectedly fell back below 2% in May to a 2-month low of 1.8%.
  • Norwegian CPI inflation dropped 0.3 percentage points to a 4-month low in May of 2.7%, and prices fell 0.1% last month compared to April levels. At the producer price level, however, inflation jumped almost 7 percentage points in Norway to a 152-month high of 29.4% in May.
  • Czech CPI inflation decelerated 0.2 percentage points from April’s 7-month high to a 2-month low in May of 2.9%.
  • Irish CPI inflation climbed from -0.4% in February to 1.1% in April and a 27-month high of 1.7% last month.
  • Dutch CPI inflation rose 0.2 percentage points to a 17-month high in May of 2.1%.

Many countries reported industrial production data today.

  • In Italy, a 1.8% month-on-month jump in April factory output was the most in 8 months and resulted in a record 79.5% increase compared with the year-earlier level.
  • Despite a 0.1% monthly dip, French industrial production also recorded its largest year-on-year increase, which was 43.9% in April.
  • Dutch factory output in April was 12.7% above its year-earlier level, marking the biggest such advance since at least 2005.
  • South African factory output fell 1.2% in April but was a record 87.9% greater than a year earlier.
  • Greek industrial production likewise rose 4.4% on month and by a record 22.5% compared to April 2020.
  • A 7.4% jump in Belgian industrial production doubled the on-year increase to a 11-month high of 3.6% in April.

Just In: U.S. CPI inflation again surpassed expectations in May, but the acceleration again can be traced to special factors. A monthly rise of 0.6% followed advances of 0.4% in February, 0.6% in March and 0.8% in April, and such resulted in a 153-month year-on-year high of 5.0%. The shortage of computer chips that has hobbled auto production caused used car prices to leap 7.3% on month (29.7% on year) after April’s 10.6% surges. Energy prices actually seem to have plateaued. After a monthly dip of 0.1% in that component in April, such held steady on month in May. Nonetheless, consumer price inflation excluding food and energy costs accelerated further to 3.8% in May from 3.0% in April and 1.6% in March.

A second U.S. data release of great interest to market participants revealed a 64-week low in new U.S. jobless insurance claims, which at 376k was a tad higher than analyst expectations.

In overnight market action prior to these U.S. data reports, the dollar had essentially marked time, with no changes against the euro, Swiss franc, sterling, loonie, and Mexican peso, downticks of 0.1% against the yen and kiwi and upticks of 0.1% versus the yuan and Australian dollar. Ten-year sovereign debt yields had ticked a basis point high in Germany, the U.K., and U.S. futures, but dipped a basis point in Japan. Share prices closed up 0.7% in India, 0.5% in China and 0.3% in Japan but were down 0.4% in Italy and 0.2% in France. Among commodity prices, gold had dropped 0.8%, while WTI oil had firmed 0.2%. U.S. stock futures are narrowly mixed, with a drop in the Nasdaq balancing rises in the S&P an DJIA.

Among other data reports overnight, the house price balance compiled by the Royal Institute of British Chartered Surveyors jumped unexpectedly to a 401-month high in May.

Indonesian retail sales leaped 17.3% on month in April, lifting the 12-month increase to a 58-month high of 15.6.

South Africa’s current account surplus swelled 35% to ZAR 267 billion, not far below the third quarter’s record high. Also from South Africa came news of a 26-quarter high in business confidence this past quarter.

New home sales in Australia rebounded 15.2% last month.

Unemployment in Turkey climbed to a 9-month high of 13.9% in April.

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

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