Marking Time Ahead of U.S. Producer Price Release
February 16, 2024
The dollar is unchanged from Thursday closing levels against the euro, sterling, yuan, peso and Canadian dollar. The greenback has dipped 0.1% versus the Australian and New Zealand dollars but edged up 0.1% relative to the Swiss franc.
Chinese markets remain shut as they’ve been all week in observance of the start of the Year of the Dragon. Share prices elsewhere in the Pacific Rim closed up 2.5% in Hong Kong, 1.3% in South Korea, 0.9% in Japan and 0.7% in Australia and New Zealand. European equities are up so far as well, with gains ranging in Germany, France, and the U.K. from 0.6% to 1.1%. There’s been scant net movement in the SPX and DJIA futures, but the Nasdaq has risen 0.5% in pre-open futures trading.
Ten-year sovereign debt yields have climbed three basis points in the U.S., Germany and France, four basis points in the U.K. and two bps in Spain.
Prices for Bitcoin and gold have risen 0.6% and 0.2%, while oil has dipped 0.4%.
Investors await a bunch of U.S. data releases, headlined by the PPI and also including housing starts and the U. Michigan/Reuters consumer sentiment index. Treasury-compiled U.S. capital flows for December and 2023 reported yesterday showed an all-inclusive net inflow vis-a-vis the rest of the world of $139.8 billion for the month and $854.5 billion in all of 2023.
The volume of British retail sales leaped 3.4% in January, their biggest monthly jump in 33 months that resulted in the best on-year rise (albeit only 0.7%) in 22 months.
German wholesale prices edged 0.1% higher last month and were 2.7% lower than in January 2023. Such was the tenth consecutive on-year drop in a row and a sharp contrast with the record on-year increase of 23.8% in April 2022.
The monthly decline in French consumer prices last month was revised to -0.3% from -0.2% reported two weeks ago, but on-year French inflation held unrevised at a 2-year low of 3.1% versus the 453-month peak of 6.3% last February.
Sri Lankan producer price inflation remained sub zero for a seventh straight month in December at -3.9% versus +10.4% last May.
Swiss industrial production fell 0.8% on quarter and 0.4% on year in the Autumn of 2023. The year-on-year change compared to +6.1% in the final quarter of 2022.
Malaysia chalked up its weakest GDP growth performance last quarter since the third quarter of 2021 (-2.1%). Compared to a year earlier, GDP rose 3.3% in the final quarter of 2023 and 3.7% in the whole calendar year. Malaysia’s current account surplus of only MYR 253 million in 4Q of last year was the smallest quarterly surplus since 1999, and the full-2023 surplus was 59% smaller than in the previous year.
Accelerating inflation related to the Russian aggression against Ukraine had been associated with an eight and a half percentage point increase in the Central Bank of Russia‘s policy interest rate to 16.0% during the second half of 2023, but officials there kept the rate unchanged at this year’s first scheduled review. After spiking to 17.8% two months after the initial invasion of Ukraine, Russian CPI inflation had receded to 2.3% in April 2023 but then rose to 7.4% by the end of last year. While inflation stayed at 7.4% last month, officials relied upon a deceleration of the 3-month annualized pace of price rise to justify not increasing their interest rate further today. Note is made that the policy stance is now quite restrictive and that inflation should fall significantly in 2024. There is no intention of cutting the rate anytime soon, and directional risk in policy in the near term still appears upwardly tilted.
Domestic demand is still outstripping the capabilities to expand the production of goods and services. A judgement on the sustainable nature of emerging disinflationary trends would be premature.
Like U.S. consumer price and import prices figures released earlier this week, today’s January producer prices data showed an attention-getting greater inflationary pressure than forecasters were anticipating. Year-on-year core PPI inflation rose 0.3 percentage points to a 3-month high of 2.0%, ending a 5-month streak of deceleration and surpassing the street consensus forecast by nearly half a percentage point. Month-on-month increases in total PPI (0.6% after 0.2% in December) core PPI excluding food and energy (0.5% versus -0.1%) and PPI excluding food, energy and trade services (0.6% after 0.2%) were considerably greater than in the prior month. An extra concern lies in the contrast between the U.S. January PPI results and German the aforementioned German wholesale prices release that showed benign changes of +0.1% versus December and -2.7% compared to the same month a year earlier.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British retail sales, Central Bank of Russia, French CPI, German wholesale prices, U.S. PPI
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