Great Relief When U.S. CPI Fails to Exceed Expectations

March 14, 2023

The U.S. consumer price report for February was actually not entirely encouraging. But after a strong of worse-than-expected price news, the 6.0% year-on-year rise of total consumer prices matched expectations and represented the eighth decline in a rose from 6.4% in January and 9.1% last June.

That was enough to send U.S. stock futures up around 1.0% some as of 15 minutes prior to the opening bell. The German DAX, Paris CAC and British FTSE gains were 1.4%, 1.2% and 0.5%. This represents a significant, albeit partial, respite from what had been a difficult March that had extended into the Pacific Rim earlier today where stock markets closed down 2.6% in South Korea, 2.3% in Hong Kong,2.2% in Japan, 2.1% in Indonesia and 1.4% in Australia.

Although the 6.0% 12-month increase in the U.S. CPI was the lowest in 17 months, core CPI, which excludes the 9.5% rise in food and 5.2% increase in energy, only dipped 0.1 percentage point and, at 5.5%, was only about a percentage point less than its peak in September. Led by shelter, core consumer prices went up 0.5% on month, more than January’s 0.4% monthly advance.

Ten-year sovereign debt yields climbed 13 basis points today in Germany, 12 bps in Great Britain and 10 bps in Spain and France. The ten-year Japanese government bond yield, in contrast, fell another 13 basis points to lower than the old daily cap of 0.25%. The 10-year U.S. Treasury yield rose just 2 bps, and the 2-year Treasury, which had plunged yesterday from 4.60% to as low as 4.06% just briefly, has ricocheted to 4.33%.

Relieved by U.S. government support for depositors in troubled small banks, the price of Bitcoin tokens soared 9% overnight. The price of WTI oil, on the other hand, fell back 2.0%.

The dollar (up 0.1% on a weighted basis) and gold (-0.1%) have been oases of stability on this volatile day.

In other price news this Tuesday,

  • Indian wholesale price inflation slowed to a 25-month low of 3.85% in February from 4.73% in January and 15.88% last May, which constituted a 282-month high.
  • The combined Swiss producer price and import price index dipped 0.2% last month, depressing its 12-month rate of increase by an additional 0.6 percentage points to a 22-month low of 2.7% from 3.3% in January and 6.9% in June 2022. Import price inflation of 2.3% was down from 12.1% in mid-2022.
  • A 1.0% monthly advance in Dutch consumer prices last month resulted in a 2-month year-on-year high of 8.0% following January’s 11-month low of 7.6%.
  • Spanish CPI inflation in February has been revised downward by 0.1 percentage point to 6.0%. A 38-year high of 10.8% was touched last July.
  • Finnish CPI inflation rebounded to a 2-month high of  8.8% in February from 8.4% in January and thus remained not far below the 40-year 9.1% high seen last October and November.

On-year growth British average weekly wage earnings slowed to a six-month low of 5.7% in December-February. Other elements of today’s released labor market data included a jobless rate of 3.7% for a fourth straight month, just 0.2 percentage points from last August’s record low, a third straight drop in jobless claims (-11.2k), and a larger-than-anticipated 3-month rise in employment of 65k. All in all, Britain’s labor market remains tight.

Officials at the Central Bank of Armenia retained a record high policy interest rate of 10.75%. In 2021 and 2022, the rate was raised by 275 basis points and then an additional three percentage points to its current level. CPI inflation of 8.1% is currently twice its targeted level.

Small business sentiment in the United States improved to a 3-month high in February.

Industrial production in Italy was weaker than thought in January, falling for the fourth time in five months but posting a 12-month advance (1.4%) for the first time since August.

In Hong Kong, industrial production was 0.1% lower last quarter than a year earlier.

Factory output in South Africa rose 1.1% on month in January but was still 3.7% lower than a year earlier.

Led by oil and coal, manufacturing sales in Canada increased 4.1% on month and 15.3% on year in Janaury.

Consumer confidence in Australia was unchanged in March from February and, at 78.5, not far above last November’s 31-month trough. Australian business conditions settled back slightly in February, but a bigger deterioration occurred in business confidence, which swung from a reading of +6 in January to -4.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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