Good, Bad and Ugly

September 14, 2021

Start with the ugly. New Covid cases in the United States spiked to more than 172.4k yesterday, and deaths topped 1800. Even as almost half the whole population remains unvaccinated, there is confusion over who is eligible for boosters and when children under age 12 will be allowed to get vaccinated. As Covid goes, so goes economic activity, mental well-being, and the peaceful coexistence of society.

Turning to less dire but nonetheless persistent concerns, Tuesday saw the release of a variety of wage and price data. Fear of catching Covid and unaffordable childcare are fueling labor shortages and sustaining supply-side bottlenecks.

Indian wholesales price inflation rose 0.2 percentage points to 11.4% in August, not far from May’s twenty-plus-year high of 12.9%.

The combined Swiss PPI and import price index jumped 1.1 percentage points in August to 4.4%, a 131-month high. Import prices were 7.6% above year-earlier levels, and domestic producer prices rose 2.9%.

Swedish consumer price inflation accelerated 50% from 1.4% in July to 2.1% in August. Core CPI was even higher at 2.4%.

South Korean import price inflation increased to a 152-month high of 21.5%. Export prices accelerated to 18.6%, highest in 150 months.

Spanish CPI inflation of 3.3% in July confirmed the preliminary estimate, which is its highest since late 2012.

British average wage earnings growth of 8.3% in the three months to July was almost double the pace of 4.3% in the three months to March.

Australian house prices leaped 6.7% on quarter and 16.8% between 2Q 2020 and 2Q 2021.

U.S. consumer price inflation of 5.3% in August was just 0.1 percentage point below June and July’s 13-year high of 5.4%.  The prices of used cars and trucks was about 32% above their cost in August 2020, and energy recorded a rise of 25%.

Among other released data this Tuesday,

  • Japanese industrial production dropped 1.5% in July. Capacity utilization and capacity were 3.4% and 0.1% below June levels.
  • Australia’s business confidence rebounded just 2 points to -5 in August above July’s 1-year low and remained well under +23 in April. Business conditions were also improved from July but, with a reading of +14 well below 37 in May.
  • Brazilian business confidence sank to a 5-month low in September.
  • U.S. small business sentiment recovered 0.4 points to a 2-month high in August.
  • Romanian industrial production fell 1.0% in July after a downwardly revised 0.3% rise in June.
  • Canadian manufacturing sales and orders respectively dropped in July by 1.5% and 2.6%, and the inventories:sales ratio climbed unexpectedly to 1.58 from 1.51 as a result.

The silver lining of today’s U.S. consumer price report lies in the month-on-month comparisons. Rises of 0.3% overall and 0.1% in core CPI relative to July levels were the smallest such gains in 7 and 6 months, respectively. The total CPI had previously posted monthly advances of 0.5% in July and averaging a tad more than 0.7% in March-June.

America’s culture war is spotlighted today in California, where a petitioned recall election of Governor Newsom is being held. As last November’s presidential election showed, there is a significant majority of Californian voters standing with the Democratic Party’s principles, but gerrymandering and other quirks of the political system leave today’s vote somewhat uncertain.

In market action, the more stable U.S. monthly inflation rate lent equities only fleeting support, and major indices now show net losses on the day. In the Pacific Rim, stocks closed down 1.4% in China, 1.2% in Hong Kong, and 0.6% in New Zealand but up 0.7% in Japan. European share prices are in the red.

The dollar is down 0.1% versus the euro and 0.2% against the yen and DXY weighted index. Ten-year U.S. and Canadian sovereign debt yields dropped four basis points, and the 10-year German bund yield is off one basis point. Commodity prices are up marginally.

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



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