Equity Slide Gets Extended
February 17, 2023
After decelerating in many countries during the final months of 2022, inflationary pressures intensified last month, and it didn’t take long for U.S. monetary officials to ramp up the projected path of interest rate hikes during the first half of this year. Federal Reserve District Presidents Mester of Cleveland and Bullard of St. Louis each said a 50-basis point rate hike next month ought to receive strong consideration.
Share prices continue to react poorly, dropping today by 1.3% in Hong Kong, 1.0% in Sout Korea, 0.9% in Australia, 0.8% in China, 0.7% in Japan, and 0.5% in Taiwan, India, and Singapore. Stock markets are current down at least 0.5% in each of the four largest economies using the euro as well as in U.S. futures trading prior to today’s North American open. Oil prices also proved very sensitive to the hawkish tone of Fed official remarks, with the price of West Texas Intermediate crude dropping 3.4% so far today. Gold has fallen 0.9%, while Bitcoin tokens are 1.6% more expensive. Ten-year U.S. Treasury and German bund yields have risen two basis points.
French consumer prices in January increased 0.4% on month (most since October) and 6.0% on year (most since November). That’s unrevised from a preliminary estimate, but the food and energy components exhibited intensifying on-year growth of 13.3% and 16.3%.
German producer prices fell by a smaller-than-forecast 1.0% in January. The 12-month rate of increase dropped to 17.8%, which despite being the lowest in 16 months remains uncomfortably high.
Producer price inflation in Sri Lanka of 89.6% in December was a lot closer to the peak of 103.4% hit last August than to the 16.6% pace seen in December 2021.
Euroland posted the largest seasonally adjusted current account surplus (EUR 28.9 billion) in 15 months during December. However, last year’s deficit of EUR 93.1 billion (equivalent to -0.7% of GDP) represented a three-percentage point deterioration from the full-2021 surplus of EUR 288.7 billion, equal to +2.3% of nominal GDP that year.
Swiss industrial production rose 0.9% on quarter in both 3Q and 4Q of 2022. Output last quarter was 6.1% greater than a year earlier.
It came as a big surprise that GDP in Thailand contracted 1.5% last quarter and resulted in year-on-year growth of only 1.4%, down from 4.6% in 3Q and 2.0% in the final quarter of 2021.
One piece of better-than-forecast economic news this Friday involved British retail sales, which advanced 0.5% in January, marking only the second monthly increase in the past six months. Compared to a year earlier, however, overall retail sales dropped 5.1% in January and by 5.3% when excluding automotive fuel.
A stark contrast between the bout of inflation since 2021 and the elevation of prices during the 1970s has been the strength of the dollar, which was oftentimes besieged during the earlier episode. A strong dollar depresses U.S. import prices, which ought to make the Fed’s task of restoring price stability easier this time. Just in: U.S. import prices fell 0.2% on month in January, marking their seventh month-on-month decline in a row. On-year import price inflation of 0.8% last month was the lowest in 37 months and down from 3.0% in December, 13.0% last March and 10.8% in January 2021. U.S. export price inflation of 2.3% last month was down from 18.6% last May and June.
Canadian producer prices, which had recorded back-to-back declines of 0.5% in November and 0.9% in December, had been expected to dip marginally in January but instead went up 0.4%. Because of a 3.0% PPI leap in January 2022, however, the 12-month rate of Canadian PPI inflation continued to decelerate, reaching 5.4% last month from 7.7% in December and 18.1% last March.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British retail sales, Canadian PPI, Euroland current account, French CPI, German PPI, U.S. import prices
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