Revised U.S. and British GDP Figures, Record High PPI Reports, and a Big Czech Central Bank Rate Hike
December 22, 2021
Market activity so far this Wednesday has been less volatile than in recent days.
The weighted DXY dollar index settled back 0.2% and was around overnight lows at the time of the U.S. stock market opening. The dollar has fallen 0.5% against the Australian dollar, Turkish lira and sterling but just 0.2% relative to the euro and Swiss franc. Dollar/yen is unchanged. and so is the price of WTI oil.
Net movement in equity markets around the world have been pretty confined for the most part. Japan’s Nikkei and the German Dax are up 0.2% and 0.1%, and the S&P is flat.
A basis point drop in the 10-year U.S. Treasury yield contrasts with rises of 4, 3, and 2 bps in comparable Italian, French and German yields. The price of gold has ticked 0.3% higher.
Regarding pandemic news, identified cases of Covid continue to crest and are becoming more skewed toward the Omicron variant, but at least one study suggests that hospitalizations from Omicron are substantially fewer than for other strains of the virus.
U.S. third-quarter GDP growth was revised up 0.2 percentage points to 2.3% versus 2Q when expressed as an annualized rate and to 4.9% on a year-on-year basis. A stronger rise in personal consumption mainly accounts for the revision. At 2.3%, most of the growth last quarter came from inventories, which augmented GDP growth by 2.2 percentage points. Net exports exerted a 1.25 percentage point drag in a quarter that saw the current account deficit surge to a 15-year high and to 3.7% of GDP. Inflation according to the PCE price deflator accelerated to 4.3% year-on-year (3.6% excluding food and energy).
British GDP last quarter was revised lower to 1.1% (not annualized) from an earlier estimate of 1.1%. That’s down from 5.4% in the second quarter and resulted in a smaller 6.8% on-year growth rate versus a record-high 24.2% booked in the second quarter. A big surprise was a much larger third-quarter current account deficit of GBP 24.444 billion, most in three quarters and equivalent to 4.2% of GDP versus an average deficit in 2018-2020 of 3.4%. Business investment in the U.K. contracted by 2.5% last quarter.
Record high producer price inflation was reported today in Spain of 33.1%, Sweden of 18.1%, and France of 17.4%. On-year PPI inflation last December had been negative in all three instances. In Ireland, where wholesale prices had tumbled 14.3% between December 2019 and December 2020, the WPI swung into the black for the first time in 31 months, albeit to just +0.2%.
The Czech National Bank‘s two-week repo rate has been lifted by another full percentage point to 3.75%, its highest level since before a rate cut in August 2008. Today’s action was the fifth hike (totaling altogether 350 basis points) since June. Czech CPI inflation has accelerated from 2.8% in June to 6.0% as of November, its highest point since October 2008.
At the Bank of Thailand‘s last scheduled review of monetary policy in 2021, by contrast, the Monetary Policy Committee voted unanimously to maintain the policy rate at 0.50 percent. Officials seek an accommodative stance to promote recovery and expect GDP to expand only 0.9% this year but then 3.4% in 2022 and 4.7% in 2023. Regarding inflation, which at the consumer level is projected to remain less than 2% in both 2022 and 2023, the committee promises to “monitor developments of global inflation and cost pass-through” but also is concerned about the possible effects of the Omicron variant.
Among today’s other data highlights,
- U.S. existing home sales climbed 1.9% in November.
- Swedish retail sales strengthened 0.9% on month and 6.0% on year in November, beating analyst expectations.
- Taiwanese unemployment of 3.7% last month was at a 7-month low and down from June’s 136-month high of 3.27%.
- Brazil’s current account deficit of $6.52 billion current account deficit last month was 2.6 times greater than in November 2020.
- Construction output in Italy was 13.5% greater in October than a year earlier.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Thailand, British GDP and current account, Czech National Bank, Omicron, U.S. GDP
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