Higher Inflation and Disappointing Industrial Production Headline Friday’s Global Economic News

December 10, 2021

The dollar is unchanged compared to late Thursday against the yen, loonie, peso, sterling and measured by the weighted DXY index. The dollar strengthened 0.4% versus the Turkish lira but dipped 0.2% relative to the Swiss franc and o.1% versus the euro and peso.

Ten-year U.S. Treasury and British gilt yields have slid four and three basis points, respectively.

Prices for WTI oil and Comex gold are up  by 0.5 and 0.2%. Equities closed down 1.1% in Hong  Kong, 1.0% in Japan, 0.6% in South Korea and 0.2% in China. The DOW and German Dax thus far are up 0.3% and 0.2%, respectively.

More evidence arrived today attesting to the highest inflation in a very long time.

  • Japanese domestic producer price inflation of 9.0% in November was up from 8.3% in October and -2.4% in November 2020. The 12-month change  in import prices swung from a plunge of 10.6% in November 2020 to a surge of +44.3% last month.
  • Brazilian consumer prices rose 1.0% on month and recorded their largest on-year advance (10.74%) in eighteen years.
  • Although German consumer prices only rose 0.3% between July and November, the 12-month inflation rate last month of 5.2% was 0.7 percentage points higher than in October and at a 353-month peak. Energy and food price inflation accelerated to 22.1% and 4.5%, respectively.
  • Norwegian CPI inflation of 5.1% last  month was up from 3.5% in October 2.7% in May. Norwegian producer prices, which dropped 5.7% in the year through December 2020, set a record pace of +60.8% in October and only backed down to 58.6% in November.
  • Czech and Danish CPI inflation in November of 6.0% and 3.4%, respectively, constitute 157-month highs. Denmark’s pace had risen from 0.5% at the end of 2020, and Czech inflation back in February had been only 2.1%.
  • Greek CPI inflation swelled from minus 2.3% last December to +2.2% by September and a 130-month high of 4.8% in November.
  • The most eagerly awaited price data release today had been the U.S. November CPI, which elicited a sanguine initial reaction simply because the results were close to expectations rather than much worse. That said, consumer prices jumped another 0.8% on month and by the most since mid-1982 (6.8%) when compared to the same month a year earlier. Food and energy price inflation both intensified to 6.1% and 33.3%. Core inflation rose 0.3 percentage points further to 4.9%.

In a coming week full of scheduled monetary policy reviews, investors were already anticipating that the Federal Reserve will announce a more rapid tapering of bond purchases, and the U.S. CPI report today seemingly strengthens that likelihood. A slew of other monetary authorities around the world have already lifted their key interest rates. Late yesterday, for instance, came word that the Central Reserve Bank of Peru‘s benchmark interest rate is being increased to 2.5% from 2.0%. This was the fifth straight tightening from 0.25% prior to August.

Several countries also reported weaker-than-presumed industrial production figures today. British industrial production, for example, unexpectedly fell for a second straight month in October. Analysts were predicting a 0.1% uptick, but IP instead fell by 0.6%, which depressed the 12-month rate of increase to 1.4%, the smallest such gain in a sequence of eight months that included a 30% advance in the year through April. Factory output was unchanged on month and just 1.3% greater than in October 2020. Other British data reported this  morning included a 1.8% monthly slide in construction output associated with the smallest 12-month rate of increase in eight months. Monthly GDP compiled from the supply side ticked only 0.1% higher in October. That also undershot expectations. Lastly, the U.K. goods and services trade deficit narrowed to GBP 2.027 billion in October from an 8-month high set in September. The merchandise trade deficit remained highly elevated, however, at GBP 13.93 billion in the latest month.

In  India, industrial production recorded the smallest year-on-year rise (3.2%) in eight months during October. Last April had seen a 133.5% leap.

Italian industrial production fell 0.6% on month, cutting the 12-month rate of increase to 2.0% in October from 4.5% in September.

Belgian industrial production ticked up just 0.1% in October, producing the smallest on-year advance (10.9%) in eight months.

The 0.7% year-on-year increase in Mexican industrial production in October was about half of what had been expected and slashed the on-year rate of rise to 0.7% from 1.5% in September and 35.1% last April.

Spanish industrial  production fell 0.4% on month and 0.9% on year, marking the first 12-month decline in eight months.

Austrian industrial production also dropped on month during October (-0.3%) cutting its 12-month increase to an eight month low of 3.3%.

In the above sea of disappointment, Greek industrial production leaped 2.7% on month and was 16.5% greater than in October 2020, which constitutes the largest such advance in six months.

The U.Michigan/Reuters monthly consumer sentiment index bounced to a 2-month high of 70.4, which is still well below levels prior to the Delta Variant wave. From March through July, the index had ranged from 81.2 to 88.3.

New Zealand’s manufacturing purchasing managers index rebounded to a 4-month high of 54.3 in November.

Canadian capacity utilization slipped back to a two-quarter low of 81.4% in 3Q 2021. That’s up from 71.9% in the second quarter of 2020 when the Covid pandemic was a novelty resulting in drastic lockdowns but still below 84.3% in the third quarter of 2019.

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

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