Highest British and German CPI Inflation in 357 and 354 months respectively
January 19, 2022
Inflation and Covid-19 infections remain elevated around the world. Investors at the moment are reacting mostly to the inflation numbers, believing that economic activity has become more insulated against the pandemic.
The expectation that central banks will continue tilting away from stimulus lifted ten-year sovereign debt yields overnight by five basis pints in the U.K., two basis points in Germany, France, Spain and Italy, one basis point in the United States but not at all in Japan, where yesterday’s Bank of Japan statement and press conference went out of the way to message that the timing to start lessening accommodation hasn’t even been discussed yet.
Japan’s Nikkei slumped 2.8% additionally today, and equities also fell at least 1% in Australia, New Zealand and India. But European stock markets have experienced a respite, with recoveries so far today of 0.7% in Spain, 0.6% in France, and 0.4% in Germany and the U.K.. U.S. futures are very modestly higher after yesterday’s tech-led rout.
The dollar is softer, with overnight losses of 0.4% against the Australian dollar, 0.3% relative to the loonie, kiwi, and Canadian dollar, and 0.1% versus the yen, euro and Swiss franc, as well as in the weighted DXY index.
The price of oil remains under upward pressures. West Texas Intermediate crude climbed 1.3% overnight and now has a handle of $86 compared to one of $65 at the start of last month. Gold firmed 0.3% overnight.
German consumer price inflation in December was confirmed at its preliminary estimate of 5.3%, most since mid-1992 and up from 3.9% in August and 1.0% last January. Energy and food posted year-on-year advances of 18.3% and 6.0%, while core CPI, which excludes those two items, went up 3.7%. In 2021 as a whole, Germany experienced average CPI inflation of 3.1% after 0.5% in 2020 and 1.4% in 2019. Energy, food, and service sector prices respectively recorded gains of 10.4%, 3.2%, and 2.1% in 2021 compared to 2020 averages.
British consumer prices last month rose by 0.2 percentage points more than forecast, climbing 0.5% versus November and 5.4% compared to December 2020. On-year CPI inflation had been only 0.6% in December 2020. British producer output price inflation settled back 0.1 percentage point to a 2-month low of 9.3% in October (and an underlying 8.7% 12-month rate of rise), while producer input prices dipped 0.2% on month and recorded a smaller 13.5% year-on-year advance in December.
Irish CPI inflation of 5.5% last month was the largest recorded 12-month rate of rise in 128 months.
Canadian consumer price inflation accelerated 0.1 percentage point to a 362-month high of 4.8% in December, marking an eight-fold increase from on-year CPI inflation of 0.7% at the end of 2020. One silver lining in today’s report was a 0.1% month-on-month dip in consumer prices, but a worrisome sign that inflation may be more broadly based was a 0.5 percentage point increase in non-energy inflation to 3.8%.
South African CPI inflation ended 2021 even higher at a 57-month peak of 5.9%. Core South African CPI inflation of 3.4% was the most in 14 months. South African retail sales data were also released today, showing a 1.9% monthly rebound in November following October’s 1.3% drop. The 3.5% on-year rise of sales was almost twice what analysts were expecting.
Construction output in the euro area remained soft last quarter. After a drop of 1.4% in the third quarter, construction rose 0.6% in October but fell 0.2% in November. In year-on-year terms, construction output growth slowed from 2.2% in September and 3.6% in October to just 0.5% in November.
Euroland’s seasonally adjusted current account surplus widened in November to a 4-month high of EUR 23.62 billion from EUR 19.36 billion in the prior month. The unadjusted surplus of EUR 26.0 billion was slightly smaller than EUR 27.5 billion in the year-earlier month. But from October 2020 through November 2021, the accrued surplus of EUR 323 billion (equivalent to 2.7% of GDP) was 61% wider than that during the previous 12-month period.
U.S. housing sector ended 2021 on a resilient footing, seemingly stimulated by a rush to lock in interest rates before such climb much higher. Housing starts rose 1.4% in December to a nine-month high on top of November’s 8.1% jump, and building permits leaped 9.1% on month to an 11-month peak. Housing market resilience more recently was reflected in a 2.3% rise last week of mortgage application even as the 30-year fixed mortgage rate climbed 12 basis further to 3.64%.
Among Covid-19 key trends in the United States, 1.178 million new cases were identified yesterday, and the 7-day average of new cases recorded a 38% rise compared to two weeks earlier. That was down from more than a 200% increase at the start of January. Not surprisingly since growth in hospitalizations and deaths lag that in cases, the latest 7-day averages in those metrics — respectively up 43% and 47% from two weeks earlier — have now overtaken that of cases. Even as Omicron begins to fade, the strain on the public health system has yet to crest.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British CPI, Euroland current account, German CPI, U.S. housing starts