Search Results: 605
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.
Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at: email@example.com.
605 matches for " food":
Rapidly increasing food inflation is creating all sorts of dilemmas for policymakers in Asia's giants.
Japan's CPI inflation jumped to 1.0% in December from 0.6% in November, driven by food prices.
One of the main reasons we expect the Reserve Bank of India to roll back at least one of this year's rate cuts before the end of the year is the likely further rise in food inflation.
Japanese CPI inflation jumped to 0.7% in August from 0.4% in July. The ris e in prices over the last year, however, was mainly driven by food and energy.
The headline April CPI, due today, will be boosted slightly by rising gasoline prices.
The Monetary Policy Committee of the Reserve Bank of India voted unanimously on Friday to cut interest rates at a fifth straight meeting, as expected.
Inflation pressures in the Eurozone nudged higher last month. Friday's final CPI report showed that inflation rose to 0.6% year-over-year in November, from 0.5% in October, in line with the initial estimate. The food, alcohol and tobacco component was the key driver of the increase.
On the face of it, the December core retail sales numbers were something of a damp squib. The headline numbers were lifted by an incentive-driven jump in auto sales and the rise in gas prices, but our measure of core sales--stripping out autos, gas and food--was dead flat. One soft month doesn't prove anything, and core sales rose at a 3.9% annualized rate in the fourth quarter as a whole.
The German inflation rate soared at the start of 2017, but it likely will fall in the next few months. Final February data yesterday showed that inflation rose to 2.2% in February, from 1.9% in January, consistent with the initial estimate. Since December, headline inflation in Germany, and in the EZ as a whole, has been lifted by two factors. Base effects from the 2016 crash in oil prices have pushed energy inflation higher, and a supply shock in fresh produce--due to heavy snowfall in southern Europe--has lifted food inflation.
The jump in CPI inflation to 2.7% in April, from 2.3% in March, was only partly to a temporary boost from the later timing of Easter this year. Indeed, inflation likely will rise further over the coming months as food, energy and core goods prices all continue to pick up in response to last year's depreciation of sterling.
Inflation pressures in Brazil are still easing rapidly. The mid-May unadjusted IPCA- 15 index rose just 0.2% month-to-month, much less than the 0.6% historical average for the month. Base effects pushed the year-over-year rate down to 3.8% from 4.1% in April. Food prices, healthcare and personal costs were the main drivers of the modest month-to-month increase.
Colombia's disinflation since mid-2016 has been driven by easing pressures on food prices, weak demand, and the better performance of the COP. But higher regulated prices at the start of the second quarter have triggered a pause in the downward trend.
PPI deflation should soon trough. Chinese food inflation takes off. Japan's tertiary index points to strong Q3 GDP growth.
Mexico's inflation has started to edge higher due mainly to an unfavorable base effect and pressures on food prices. The bi-weekly headline CPI for the first half of February edged up to 2.9% year-over-year and up from 2.7% in January and the record low of 2.3% in December.
No matter how you choose to slice-and-dice the recent retail sales numbers, the core data for the past couple of months have been disappointing. Our favorite measure--total sales less autos, gasoline, food and building materials--rose by just 0.1% month-to- month in May but then reversed this minimal gain in June.
October likely was the peak in Japanese CPI inflation, at 1.4%, up from 1.2% in September. The uptick was driven by the non-core elements, primarily food.
CPI inflation remained at 0.3% in February, below the consensus, 0.4%, and our own expectation, 0.5%. All the unexpected weakness, however, was in food and core goods prices, and past movements in commodity and import prices suggest that this will be fleeting
January CPI data in Colombia, released on Saturday, confirmed that inflation pressures eased last month, but the details weren't as good as the headline. Inflation fell to 5.5% year-over-year, from 5.8% in December, as a result of falling food inflation-- helped mainly by a favourable base effect--and lower clothing prices.
Another day, another solid economic report in the Eurozone. Data yesterday showed that industrial production in France jumped 2.2% month-to-month in November, pushing the year-over-year rate up to +1.8%, from -1.8% in October. The 2.3% jump in manufacturing output was the key story, offsetting a 0.3% decline in construction activity. Production of food and beverages rebounded from weakness in October, and oil refining also accelerated.
Mexican inflation pressures eased towards the start of Q2. Inflation fell to 2.5% year-over-year in April from 2.6% in March, due to a sharp fall in energy inflation--as a result of the introduction of new electricity tariffs in the warm season--and a fall in the rate of increase of fresh food prices. Depressed energy prices will continue to constrain inflation in coming months, but base effects will reduce the drag later this year.
The Eurozone is back in headline deflation, increasing the pressure on the ECB to deliver further easing when it meets next week. Inflation fell to -0.2% in February, from +0.3% in January, depressed by energy and food prices.
Disappointing inflation data remain a critical dark spot in the context of otherwise solid evidence of a firming cyclical recovery. Advance data indicate that inflation was unchanged at a mere 0.2% year-over-year in December, with falling food inflation and a dip in services inflation offsetting easing deflation in energy prices. Headline inflation likely will be volatile in coming months. Base effects will push up the year-over-year rate in energy price inflation further in Q1, but we are wary that continued declines in food inflation could offset this effect.
Inflation is falling quickly in Colombia, despite the VAT increase in Q1, so we expect more BanRep rate cuts over the next few months. Consumer prices rose 0.5% month-to-month unadjusted in March, pushing the inflation rate down to 4.7% year-over-year, from 5.2% in February. This is the lowest rate in almost two years, thanks to a favourable base effect and fading pressures from food prices.
Inflation pressures are falling rapidly in Brazil, suggesting that the Copom will continue to ease aggressively in the near term. January's CPI report,released Wednesday, showed that inflation plunged to 5.4% year-over-year, from 6.3% in December, chiefly as a result of continued disinflation in key components, such as food, housing prices--including utilities--and transportation.
Chief U.K. Economist Samuel Tombs on U.K. Inflation
Economists' forecasts are changing almost as quickly as market prices these days, and not for the better.
Friday's inflation data in Brazil confirmed that the ripples from the truckers' strike in May were still being felt at the start of the third quarter.
We expect the Mexican economy to continue growing close to 2% year-over-year in 2019, driven mainly by consumption, but constrained by weak investment, due to prolonged uncertainty related to trade.
The drop in the flash composite PMI in March will be one for the record books, unfortunately. We look for an unprecedented drop to 43.0, from 53.3 in February, which would undershoot the 45.0 consensus and signal clearly that a deep recession is underway.
Japan's CPI inflation was unchanged in June, at 0.7%, despite strong upward pressure from energy inflation.
The rate of growth of new coronavirus infections across Europe slowed yesterday, in some cases quite markedly. We can quibble about the reliability of the data in individual countries, given variations in testing regimes, but the picture is strikingly uniform.
The PBoC left its interest rate corridor, including the Medium-term Lending Facility rate, unchanged last Friday, but published the reformed Loan Prime Rate modestly lower, at 4.20% in September, down from 4.25% in August.
Brazil's central bank conformed to expectations on Wednesday, cutting the Selic rate by 75 basis points to 12.25%, without bias. Overall, the BCB recognises that the economic signals have been mixed in recent weeks, but the Copom echoed our view that the data are pointing to a gradual stabilisation and, ultimately, a recovery in GDP growth later this year.
We can't yet know how bad the spread of the coronavirus from the Chinese city of Wuhan will be.
Brazilian inflation is off to a bad start this year, but January's jump is not the start of an uptrend, and we think good news is coming.
Yesterday's PMI data in the Eurozone economy were a mixed bag.
CPI inflation was steadfast at 1.9% in March, undershooting the consensus and our forecast for it to rise to 2.0%.
CPI inflation rose only to 2.1% in April, from 1.9% in March, undershooting the 2.2% consensus and MPC forecasts, as well as our own 2.3% estimate.
French manufacturers recovered their optimism towards the end of Q3. The headline INSEE manufacturing sentiment index rose to 103 in September, from 101 in August, and the composite business confidence gauge also increased. A rebound in transport equipment firms' own production expectations was the key driver of the recovery.
Under normal circumstances, we would expect today's retail sales figures to reveal that volumes rebounded in February, following the 2.7% fall over the previous three months. But the continued weakness of spending surveys suggests that we should brace for another soft report.
GDP growth in Korea surprised to the upside in the fourth quarter, with the economy expanding by 1.2% quarter-on-quarter, three times as fast as in Q3, and the biggest increase in nine quarters.
The intensity of the pressure on households' finances was highlighted last week by December's retail sales report, which showed that volumes fell by 1.5% month-to-month, the most since June 2016.
Brazil's central bank kept the SELIC rate on hold on Wednesday at 14.25% for the eight consecutive meeting. The decision, which was widely expected, was unanimous, but the post-meeting statement was more detailed and informative than the central bank's June communiqué. We think the shift was intentional; the central bank's new board, headed by Mr. Ilan Goldfajn, is eager to strengthen the institution's credibility and transparency.
February's consumer price figures provided hard evidence that the import price shock, caused by sterling's depreciation last year, is filtering through faster than the MPC expected. We expect CPI inflation to continue to exceed the forecast set out in February's Inflation Report.
The BoJ kept its main policy settings unchanged yesterday, in another 7-to-2 split.
Brazil's inflation rate remained well under control over the first half of February.
Brazil's mid-April inflation report delivered more evidence that inflation is decelerating; it fell to 9.3% from 10.0% in March, reaching the slowest pace since July 2015. The unadjusted month-to-month increase surprised marginally to the upside, but the key story is of a declining year-over-year trend. Core inflation, which is a lagging indicator of the business cycle, slowed again, in line with the decline in services and market prices inflation.
The period of surprisingly low inflation following sterling's plunge when the UK left the Exchange Rate Mechanism in September 1992 appears to challenge our view that inflation will overshoot the MPC's 2% target over the next couple of years. As our first chart shows, CPI inflation averaged just 2.5% in 1993 and 2% in 1994, even though trade-weighted sterling plunged by 15% and import prices surged.
Brazil's recent political and economics news has shifted the near-term outlook from bad to worse. President Rousseff on Friday replaced hawkish Finance Minister Joaquim Levy, appointed just over a year ago, with a close partner, Planning Minister Nelson Barbosa. Mr. Levy resigned after continued conflicts with the government, including frustration by the Congress of his attempts to rein in the fiscal mess. Mr. Barbosa is known to be less market friendly, and will likely defend countercyclical measures, delaying any rapid fiscal consolidation. The appointment will deteriorate investors' confidence even further, placing the markets under enormous strain.
The PBoC's quarterly monetary policy report seemed relatively sanguine on the question of PPI deflation, attributing it mainly to base effects--not entirely fairly--and suggesting that inflation will soon return.
The slowdown in the EZ economy is well publicised.
Japan's flash PMI numbers for August were a mixed bag.
The beginning of the electoral campaign last week in Brazil bodes uncertain results and a very close competition for the presidential elections on October 7.
We suspect that under the calm surface of the BoJ, a major decision is being debated.
Inflation pressures in Brazil and Mexico are well under control, with the August mid-month readings falling more than expected, strengthening the case for the BCB and Banxico to cut interest rates in the near term.
Inflation in Brazil remained subdued at the start of the second quarter, strengthening the odds for an additional interest rate cut next month, and opening the door for further stimulus in June.
China's real GDP growth officially slowed to 6.5% year-over-year in Q3, from 6.7% in Q2.
Before this week's earthquake, the resilience of Mexico's economy in the face of a volatile and challenging global backdrop owed much to the strength of domestic demand, especially private consumption.
Japan's headline CPI inflation is set to edge down in coming months, thanks to non-core prices.
The Eurozone has come under the spotlight for its growing external surplus, but domestic households have been doing the heavy lifting for GDP growth in this business cycle. During the last four quarters, consumers' spending has boosted year-over-year GDP growth by an average of 1.0 percentage points, in contrast to a 0.4pp drag from net exports.
This week's key data releases in Mexico likely will reaffirm that growth remains below trend, while inflation continues to ease.
Rising inflation is pressuring some LatAm central banks to take a cautious stance at a time when growth is subpar, particularly in the two biggest economies of the region.
According to Brazil's mid-August inflation reading, which is a preview of the IPCA index, overall inflation pressures are easing. But some price stickiness remains, due to inertia and temporary shocks, despite the severity of the recession and the rapid deterioration of the labour market in recent months.
In our Webinar--see here--we laid out scenarios for Chinese GDP in Q1 and for this year.
French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.
Inflation in Mexico surprised to the downside in late Q3, supporting our core view that it will continue to fall gradually over the coming months.
Yesterday's State Council meeting significantly expanded support to the economy, through a number of channels.
Japan's CPI inflation was stable at 0.2% in October, despite the sales tax hike, thanks to a combination of offsetting measures from the government and a deepening of energy deflation.
Inflation in Brazil and Mexico is ending Q3 under control, allowing the central banks to keep easing monetary policy.
For a central bank already fighting for every decimal in its attempt to convince markets that underlying inflation is slowly edging higher, the recent shift in HICP methodology drives home an increasingly problematic issue.
Data released last week confirm that the Argentinian economy was resilient at the start of the year, but downside risks to growth have increased.
Hong Kong delivered a resounding landslide victory to pro-Democracy parties in district council elections over the weekend.
Mexican consumers started the third quarter strongly, supporting our relatively upbeat view for the economy in the near term. Private consumption represents about 70% of Mexico's GDP, one of the consumption shares in the EM world, so the strength of spending is hugely important.
Economic news in the Eurozone, and virtually everywhere else, has been mostly downbeat in the past few months, but French consumers are doing great.
It's always dangerous when risk assets rally strongly into an ECB meeting, but we doubt that investors have much to fear from today's session in Frankfurt. We think the central bank will leave its main refinancing and deposit rates at 0.00% and -0.4% respectively.
New BoE Governor Andrew Bailey will be reaching for his letter-writing pen soon, to explain to the Chancellor why CPI inflation is more than one percentage point below the 2% target.
The Covid-19 scare can be split into two stages, the initial outbreak in China, concentrated in Wuhan, and the now-worrying signs that clusters are forming in other parts of the world, primarily in South Korea, the Middle East and Italy.
This week's Mexican retail sales report for February offered more support to our view that domestic conditions improved at the end of Q1.
Inflation in the biggest economies in the region remains close to cyclical lows, allowing central banks to ease even further over the next few months.
Japan's CPI inflation was unchanged, at 0.2% in February.
Yesterday was a watershed moment for investors.
The coronavirus pandemic looks set to spread rapidly throughout LatAm.
Brazil's inflation rate remained well under control over the first half of February.
The Monetary Policy Board of the Bank of Korea is likely to keep its benchmark base rate unchanged, at 1.25%, at its meeting this week.
Japan's CPI inflation jumped to 1.3% in August, from 0.9% in July.
Japan's national CPI inflation has peaked, falling to 0.7% in May from 0.9% in April.
Yesterday's barrage of French business sentiment data was mixed.
China's 2018 property market boomlet let out more air last month.
February's retail sales figures highlighted that consumers' spending was flagging even before the Covid-19 outbreak.
The huge drop in the March Markit services PMI, reported yesterday, and the modest dip in the manufacturing index, are the first national business survey data to capture the impact of the Covid-19 outbreak.
LatAm governments and central banks have been busy implementing additional measures to contain the spread of the virus, and acting rapidly to ease the effect on the economy.
On Friday last week, the Chinese authorities suspended sales of domestic and international tours, in an effort to contain the spread of the coronavirus, which started in Wuhan.
The Reserve Bank of India was hit by another shock resignation yesterday, with Deputy Governor Viral Acharya confirming his early departure in late July, before the next meeting in August, and well before his term was scheduled to end at the close of this year.
Japan's headline inflation will be volatile for the rest of the year, thanks to movements in the noncore elements.
Brazil's monetary policy committee, the Copom, cut the Selic rate by 25bp to 14.0% in a unanimous decision, without bias, on Wednesday. This marks the start of the first easing cycle since 2012, and it arrives after 15 months with rates held at 14.25%.
The minutes of the Banxico's monetary policy meeting on February 7, when the board unanimously voted to keep the reference rate on hold at 8.25%, were consistent with the post-meeting statement.
Data released yesterday in Brazil helped to lay the ground for interest rate cuts over the coming months.
The minutes of this week's MPC meeting indicate that it won't waste any time to raise interest rates after MPs finally have signed off a Brexit deal.
Within the space of two months, investors have gone from wondering whether the slowdown in manufacturing would spill-over into the rest of the EZ economy, to the realisation that the crunch in services is now driving the overall story on the economy.
The duration and future scope of the current lockdown is the main uncertainty that U.K economic forecasters have to grapple with at present.
Inflation in the Eurozone stumbled at the end of Q3.
The People's Bank of China cut its seven-day reverse-repo rate yesterday, to 2.50% from 2.55%.
Italy's economy is still bumping along the bottom, after emerging from recession in the middle of last year.
February's consumer price figures, released tomorrow, likely will show that CPI inflation fell to 2.8%--one tenth below the MPC's forecast--from 3.0% in January.
Friday's data confirmed that inflation in the Eurozone slipped to a 14-month low of 1.1%, from 1.3% in January, 0.1 percentage points below the first estimate.
July's consumer price figures--published on August 15th, while we are on vacation--look set to show that June's drop in CPI inflation was just a blip. We think that CPI inflation ticked up to 2.7% in July, from 2.6% in June, on track to slightly exceed 3% toward the end of this year.
The key detail in Friday's barrage of economic data was the above-consensus increase in EZ inflation.
We'll cover Friday's barrage of EZ economic data later in this Monitor, but first things first. We regret to inform readers that the ECB is behind the curve. Last week, Ms. Lagarde downplayed the idea that the central bank will respond to the shock from the Covid-19 outbreak.
We expect the BoK to hike this month, believing that it's necessary to curtail household debt growth now, in order to prevent a sharper economic slowdown as the Fed hiking cycle continues, China slows, and trade risks unfold.
A few ECB governors has attempted to lean against dovish expectations in the past week.
Japan's labour data threw another January curve ball this year--last year it was wages--with a change in the standards for job openings.
China's official manufacturing PMI was unchanged at 50.2 in December, marking a weak end to the year. But it could have been worse; we had been worried that the return to above-50 territory in November had been boosted by temporary factors. December's print allays some of those fears.
Japan's jobless rate was unchanged, at 2.4% in October, as the market took a breather after September's job losses.
Data on EZ consumption were soft while we were enjoying our Christmas break. The advance EC consumer confidence index slipped to a three-year low of -8.1 in December, from -7.2 in November, breaking its recent tight range.
A lot of ink has been spilled over the relative significance of the supply and demand effects of Covid-19, but the short-term story is clear.
A slew of Asian price numbers are due this Friday, and they will all likely show that price gains softened further in January.
Our first impression of the proposed Brexit deal between the EU and the U.K. is that it is sufficiently opaque for both sides to claim that they have stuck to their guns, even if in reality, they have both made concessions.
A November interest rate rise is far from the done deal that markets still anticipate, even though CPI inflation rose to 3.0% in September from 2.9% in August.
September's consumer price figures helped to curb expectations that the MPC might raise Bank Rate again before the March Brexit deadline.
Argentinians are heading to the polls on Sunday October 27 and will likely turn their backs on the current president, Mauricio Macri.
October's colossal 1.9% month-to-month jump in retail sales volumes greatly exceeded the 0.5% consensus and even our own top-of-the- range 1.0% forecast.
While Brexit news will dominate the headlines again--see here for why the odds remain against Mrs. May winning the third "meaningful vote"--February's consumer prices report is the highlight in this week's congested economic data calendar.
China's investment slowdown went from worrying to frightening in October. Last week's fixed asset investment ex-rural numbers showed that year- to-date spending grew by 5.2% year-over-year in October, marking a further slowdown from 5.4% in the year to September.
Headline inflation in the EZ remained elevated in September, rising by 0.1 percentage point to 2.1%, while the core rate was unchanged at 0.9% in August; both numbers are in line with the initial estimates.
We expect today's consumer price figures to show that CPI inflation jumped to 0.9% in September, from 0.6% in August.
Yesterday's final CPI report confirmed that inflation in the euro area increased slightly last month. The headline rate rose to 1.5%, from 1.4% in October, lifted by a 1.7 percentage point increase in energy inflation to 4.9%.
India's industrial production data last week are the last set of key economic indicators for the fourth quarter, before next week's Q4 GDP report.
Slower growth in households' spending was the main reason why the economy lost momentum last year.
The PBoC reduced its 14-day reverse repo by 5bp to 2.65% in a routine operation yesterday.
CPI inflation held steady at 1.5% in November, marking the fourth consecutive below-target print, though it was a tenth above both the MPC's forecast and the consensus.
It is a truth universally acknowledged that the RPI is a terrible measure of inflation. The ONS describes it as "very poor" and discourages its use.
The Eurozone economy all but stalled at the start of Q4.
Inflation in the Eurozone eased at the start of Q3.
While we were on holiday, the data confirmed that inflation in Mexico is rapidly unwinding the increases posted earlier in the year; that the economy was under severe strain in late Q2 and early Q3; and that the near-term outlook has grown increasingly challenging.
Japan's retail sales data--due out on Thursday-- have been badly affected by the October tax hike.
This is the final report before we dial down for our Christmas break, and we are happy to report that the economic calendar will be almost empty in our absence.
Once again, Chinese January data released so far suggest that the Phase One trade deal was the dominant factor dictating activity for the first two- thirds of the month, with the virus becoming a real consideration only in the last third.
Yesterday's report on October private spending in Mexico was positive, suggesting that consumption remained relatively strong at the start of Q4. Retail sales jumped 1.6% month-to-month, following a modest 0.2% drop in September. October's rebound was the biggest gain since March this year, but note that wild swings are not unusual in these data. The headline year-over-year rate rose to 9.3%, from 8.1% in September, but survey data signal to a gradual slowdown in coming months to around 5%.
Chile's Q2 GDP report, released yesterday, confirmed that the economy gathered strength in the first half of the year, consolidating a strong recovery that started in Q3 2017.
On the official gauge, China's real GDP growth fell minimally to 6.8% year-on-year in Q3, from 6.9% in Q2. Growth edged down to 1.7% quarter-on-quarter from an upwardly revised 1.8% in Q2.
After soaring in the Spring, inflation has slipped back in the Summer. July's consumer prices report, released while we were away last week, showed that CPI inflation held steady at 2.6% in July, one -tenth below the consensus and three tenths below May's year-to-date peak.
With a no-deal Brexit still a potential outcome and just over five weeks to go until the U.K. is scheduled to leave, it's about time we put some numbers on how high inflation could get in this worst-case scenario.
On the face of it, June's retail sales figures suggest that households have splurged in Q2, re-energising GDP growth after its slowdown in Q1. Sales volumes rose by 0.6% month-to-month in June, completing a 1.5% quarter-on-quarter jump in Q2.
China reportedly has offered President Trump a $200B reduction in its annual trade surplus with the U.S., engineered by increasing imports of American products, among other steps.
April's consumer price figures, due on Wednesday, are set to show that CPI inflation has fallen, primarily due to the earlier timing of Easter this year than last. We
Japanese trade remained in the doldrums in October, keeping policymakers on their toes as they repeat the refrain of "resilient" domestic demand.
February's consumer price figures, released yesterday, put more pressure on the MPC to stick to its plans for an "ongoing" tightening of monetary policy, despite the uncertainty created by the Brexit chaos.
February's consumer price figures give the MPC reason to doubt the case for raising interest rates again as soon as May.
As promised, Mr. Trump retaliated earlier this week against China's weekend retaliation, after his refusal to back down on the initial tariffs on $50B-worth of imports of Chinese goods, on top of the steel and aluminium tariffs first announced back in March.
February's consumer price figures, released tomorrow, are likely to show that CPI inflation has picked up again, perhaps to 0.5%--the highest rate since December 2014--from 0.3% in January. This will give the Monetary Policy Committee more confidence in its judgement that CPI inflation will be back at the 2% target in two years' time.
The consensus view on the Monetary Policy Committee, that it will take two years for CPI inflation to return to the 2% target, looks complacent. Leading indicators suggest that price pressures will return faster than both policymakers and markets expect. Interest rates are therefore likely to rise in the first half of 2016, even if the recovery loses momentum.
Leading indicators are giving conflicting signals regarding the outlook for core goods CPI inflation.
Officially, China's real GDP growth was unchanged at 6.0% year-over-year in Q4; low by Chinese standards, but not overly worrying. Full-year growth was 6.1% within the 6.0-to-6.1% target down from 6.7% last year, also in keeping with the authorities' long-term poverty reduction goals.
Gasoline prices dropped sharply last month, but the 4½% seasonally adjusted fall we expect to see in the December CPI report today was rather smaller than the 9% collapse in December 2014, so the year-over-year rate of change of gas prices will rise, to -20% from -24% in November. This means headline inflation will rise too, though the extent of the increase also depends on what happens to the core rate.
Today's official figures likely will show that retail sales weakened a touch in December. Indeed, we think that the consensus forecast for a 0.1% month-to-month decline in sales volumes is too timid; we look for a 0.5% drop. Retail sales surged by 1.8% month-to-month in October and then rose by 0.2% in November, so a correction is overdue. Clothing sales, in particular, likely fell sharply in December.
Wednesday's State Council meeting implies that the authorities are starting to take more serious coordinated fiscal measures to counter the virus threat to the labour market and to banks.
The market-implied probability that the MPC will cut Bank Rate by June fell to 34%, from 38%, after the release of January's consumer price figures, though investors still see around an 80% chance of a cut by the end of this year.
Banxico cut its policy rate by 25bp to 7.25% yesterday, as was widely expected, following similar moves in August, September and November.
The BoJ held firm, for the most part, during this year's bout of central bank dovishness.
Surveys suggest that today's retail sales figures will show that sales volumes increased by around 1% month-to-month in June, significantly exceeding the consensus, 0.4%. But the pickup in June likely will be just a blip; the further intensification of the squeeze on real wages and a tightening of unsecured lending standards will keep retail sales on a flat path in the second half of 2017.
June's 0.5% month-to-month fall in retail sales volumes does little to change the picture of recent strength.
We expect April's consumer price figures, due on Wednesday, to show that CPI inflation leapt to 2.3%, from 1.9% in March, exceeding the MPC's 2.2% forecast in the latest Inflation Report.
Prospects for further rate cuts in Brazil, due to the sluggishness of the economic recovery and low inflation, have played against the BRL in recent weeks.
CPI inflation in India jumped to 4.6% in October, from 4.0% in September, marking a 16-month high and blasting through the RBI's target.
The national February inflation data are due this Friday, a couple of weeks after the Tokyo report, as usual.
China announced the appointment of key political and financial jobs yesterday.
May's consumer prices report contained few surprises. The fall in the headline rate of CPI inflation to 2.0%, from April's Easter-boosted 2.1%, matched the consensus, our forecast and the MPC's.
February's consumer price report, released tomorrow, likely will show that CPI inflation has breached the MPC's 2% target for the first time since November 2013. Indeed, we think the headline rate jumped to 2.2%, from 1.8% in January, exceeding the 2.1% rate expected by the MPC and the consensus.
PPI inflation in Korea slowed sharply in October, to a five-month low of 2.2%, from 2.7% in September.
The extent of shut downs within China is now reaching extreme levels, going far beyond services and threatening demand for commodities, as well as posing a severe risk to the nascent upturn in the tech cycle.
Chile's economy remains under pressure, at least temporarily. After signs of recovery in Q1, activity deteriorated in Q2 and at the start of the third quarter. The sluggish global economy--especially China, Chile's main trading partner--is exacerbating the domestic slowdown, hit by low business and consumer confidence.
Yesterday's EZ PMI data surprised to the downside. The composite PMI in the euro area dipped to 52.9 in August, from 53.2 in July, below the initial estimate 53.3. The headline was marred by weakness in the German services PMI, which crashed to a 40-month low of 51.7, from 54.4 in July.
The Brazilian central bank cut the benchmark Selic interest rate by 25bp, to 4.25%, on Wednesday night, as expected.
EZ consumers' spending slowed at the start of Q3. Retail sales slipped 0.3% month-to-month in July, pushing the year-over-year rate down to 2.6% from an upwardly revised 3.3% in June.
The services sector in China is notoriously difficult to track, with the major aggregate statistics published only on a quarterly or even annual basis.
Macroeconomic and financial conditions in Venezuela are deteriorating at an accelerating pace.
Inflation in Colombia right now is under control but risks are increasing rapidly, and the outlook for next year has deteriorated significantly.
Nobody knows the damage China's virus- containment efforts will have on GDP, and we probably never will, for sure, given the opacity of the statistics.
Our chief economist, Ian Shepherdson, set out our initial thoughts on the rising tensions between U.S. and Iran here.
The delay in the processing of personal income tax refunds this year appears not to have had any adverse impact on retail sales, so far. Indeed, the Redbook chainstore sales survey suggests that sales have accelerated over the past few weeks.
In his second confirmation hearing, Governor Kuroda continued his dance with markets, dialling down the exit talk.
Yesterday's economic reports in the Eurozone were mostly positive.
The Monetary Policy Committee of the Reserve Bank of India voted yesterday to cut the benchmark repo rate by a further 25 basis points, to 5.75%, a nine-year low.
April's GDP report, released on Monday, likely will add fuel to the fire of the re cent sharp decline in interest rate expectations.
The Imacec data released on Wednesday provided further evidence that the Chilean economy grew at a decent pace in the second quarter, following a very sluggish first quarter.
Japan's average year-over-year wage growth slowed sharply in May, but this mainly was a correction of the April spike.
German manufacturing data continues to offer a sobering counterbalance to strong services and consumers' spending data. New orders plunged 1.7% month-to-month in September, well below the consensus, pushing the year-over-year rate down to a 1.0% fall from a revised 1.7% increase in August. These data are very volatile, and revisions probably will lift the final number slightly next month, but the evidence points to clear risks of a further decline in the underlying trend of production.
The PBoC finally moved yesterday, cutting its one-year MLF rate by 5bp to 3.25%, whilst replacing around RMB 400B of maturing loans.
The CPI inflation rate for non-energy industrial goods--core goods, for short--has tracked past movements in trade-weighted sterling closely over the last ten years, because virtually all goods in this sector are imported.
Consumers' spending in the Eurozone slowed in the second half of 2017, providing a favourable base for growth in H1 2018.
We have consistently flagged the likelihood that Japan's government would boost spending after the consumption tax hike was implemented.
Brazil heads to the polls on Sunday, followed by an expected run-off on October 28.
Chile's unadjusted unemployment rate fell to 7.1% in July-to-September, from 7.3% in June-to-August, but it was up from 6.7% in September last year.
The Fed's unscheduled 50bp cut on Tuesday opens up some space for Asian central banks to follow suit.
China is facing a nasty mix of spiking CPI inflation and ongoing PPI deflation.
Consumers' spending in the Eurozone stalled at the start of Q4. Retail sales slid 1.1% month-to-month in October, pushing the year-over-year rate down to a four-year low of 0.4%, from an upwardly-revised 4.0% jump in September.
The slump in the Markit/CIPS services PMI in November to its lowest level since July 2016 provides the clearest indication yet that uncertainty about Brexit has driven the economy virtually to a stand-still.
The rapid escalation of Covid-19 cases in Korea in recent weeks has broadened the likely damage to the economy this quarter.
Yesterday's final PMI data for February confirmed the story from the advance reports.
Yesterday's minutes of the October 31 COPOM meeting, at which the Central Bank cut the Selic rate unanimously by 50bp at 5.00%, reaffirmed the committee's post-meeting communiqué, which signalled that rates will be cut by the "same magnitude" in December.
Eurozone consumers had a slow start to the second quarter. Retail sales increased a modest 0.1% month- to-month in April, but the March headline was revised up by 0.3 percentage points, and the year-over-year rate increased by 0.2pp to 1.7% due to base effects.
It's probably happening a decade too late, but the EU is now moving in leaps and bounds to restructure the continent's weakest banks. Yesterday, the Monte dei Paschi saga reached an interim conclusion when the Commission agreed to allow the Italian government to take a 70% stake in the ailing lender.
Korea's trade data for January provided the first real glimpse of the potential hit to international flows from the disruptions caused by the outbreak of the coronavirus.
Late last year, China said it would scrap residency restrictions for cities with populations less than three million, while the rules for those of three-to-five million will be relaxed.
India's PMIs for October were grim, indicating minimal carry-over of energy from the third quarter rebound.
Argentina's central bank likely will leave its main interest rate at 27.75% tomorrow at its biweekly monetary policy meeting.
The slew of EZ economic data on Friday supports our view that the economy ended 2016. The Commission's economic sentiment index jumped to 107.8 in December from a revised 106.6 in November. The headline strength was due to a big increase in "business climate indicator" and higher consumer sentiment. In individual countries, solid numbers for German construction and French services sentiment were the stand-out details.
Colombian inflation ended 2017 slightly above the central bank's 2-to-4% target range, after a year in which policymakers cut interest rates to boost economic growth.
The first round of trade talks between the U.S.and China kicked off in Beijing on Monday, marking the first face-to-face meeting between the two sides since Presidents Donald Trump and Xi Jinping struck a "truce" in December.
For the MXN, last year was especially harsh. The currency endured extreme volatility, plunging 17% against the USD. So far, this year is off to a rocky start too. The MXN fell close to 2.5% during the first week of 2017.
Mexico's economic outlook has dimmed recently, a point driven home by sentiment data released last week. Still, we think GDP growth will slow only marginally in Q4, to about 11⁄2% year-over-year. Consumers' spending likely will remain strong in the near term, thanks mainly to rising remittances from the U.S., driven by fear of policy changes under the Trump administration.
Data released on Friday showed that November inflation was in line with, or below, expectations in Brazil, Colombia and Chile.
In Friday's Monitor we analysed the draft Japanese budget, as reported by Bloomberg. We suggested that the GDP bang-for-government-expenditure- buck is likely to be less than that implied by the authorities' forecasts.
Andean inflation remains under control, due to subpar growth, modest pressures on prices for nontradeables, and broadly stable currencies.
The Mexican inflation rate soared at the start of 2017, but this is yesterday's story; the headline will stabilize soon and will decline slowly towards the year-end. May data yesterday showed that inflation rose to 6.2%, from 5.8% in April. Prices fell 0.1% month-to-month unadjusted in May, driven mainly by lower non-core prices, which dropped by 1.3%, as a result of lower seasonal electricity tariffs.
China's official, unadjusted trade data for October grabbed the headlines, as they look great at first glance.
Chile's inflation outlook remains benign, allowing policymakers to cut interest rates if the economic recovery falters.
Inflation in most economies in LatAm is well under control, allowing central banks to keep a dovish bias, and giving them room for further rate cuts.
News on Mr. Bolsonaro's economic plans and announcements on key names for his government this week are helping the currency and easing risks perception in Brazil.
Three of the big LatAm economies-- Brazil, Colombia and Chile--released October inflation last week; the data are still showing the pass-through effects of currency depreciation during the first half of the year into prices, though, at different degrees. LatAm currencies have been hit by the weakness in commodity prices and negative sentiment towards EM generally.
The Fed's 50bp rate cut last week, aiming to shield the U.S. economy against Covid-19, has opened the door for some central banks in LatAm to emulate the move.
We predict no major policy changes at the ECB today. We think the central bank will leave its main refinancing and deposit rates unchanged at 0.00% and -0.4%, respectively. We also expect the ECB will leave the pace of QE unchanged at €60 per month until December 2017, at least.
Colombia's economy has continued to slow, due mainly to lagged effect of the oil price shock since mid-2014, and stubbornly high inflation, which has triggered painful monetary tightening. Modest fiscal expansion and capital inflows have helped to avoid a hard landing, but the economy is still feeling the pain of weakening domestic demand. And the twin deficits--though improving--remain a threat.
Colombia and Chile faced similar broad trends through most of 2018.
Fears of a Chinese hard landing have roiled financial and commodity markets this past year and have constrained the economic recovery of major raw material exporters in LatAm.
The Brazilian central bank cut its benchmark Selic interest rate by 50bp, to 7.0%, on Thursday night and confirmed our view that the end of the easing cycle is not far off.
Industrial production in Germany stumbled at the end of Q4. Data yesterday showed that output fell 0.6 month-to-month in December, though this drop has to be seen in light of the downwardly-revised 3.1% jump in November.
Brazil's benchmark inflation index, the IPCA, fell 0.1% month-to-month unadjusted in August, below market expectations.
The jobless claims numbers today likely will mark the end of the calm before the storm effect, even though the data cover the week ended September 1, and Harvey hit on August 26.
The two major EZ economic reports released while we were away conformed to the consensus. Advance data suggest that real GDP in the euro area rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2, and the year-over-year rate was similarly unchanged at 1.6%.
Data while we were away have intensified fears that the global, and by extension EZ, economy is slipping into recession.
The trade war with the U.S. has taken its toll on the RMB.
Friday's final EZ inflation report of 2017 sent a dovish signal to bond markets.
The impending retirement of New York Fed president Dudley creates yet another vacancy on the FOMC.
Japan's average monthly labour earnings growth tumbled to 0.9% year-over-year in August, from 1.6% in July. This is not a disaster.
Brazil's improving economic and political situation allowed the BCB to cut the Selic rate by 100bp to 8.25% at its Wednesday meeting, matching expectations.
The RMB has been on a tear, as expectations for a "Phase One" trade deal have firmed.
Economic growth in Chile slowed in Q1, despite a relatively strong end to the quarter, and the chances of an accelerating recovery remains disappointingly low, due to both global and domestic headwinds.
The German economy's engine room continues to stutter.
Favourable inflation conditions in Mexico remain in place with June consumer prices increasing just 0.1% month-to-month, unadjusted, better than expected. A modest gain in core prices was largely offset by falling non-core prices, so year-over-year inflation edged down to 2.5% from 2.6% in May.
It will take months, and perhaps years, before markets have any clarity on the U.K.'s new relationship with the EU. In the U.K., the main parties remain shell-shocked. Both leading candidates for the Tory leadership, and, hence, the post of Prime Minister, have said that they would wait before triggering Article 50.
Yesterday's EZ consumers' spending data were mixed. Retail sales in the euro area fell by 0.3% month-to-month in May, extending the slide from a revised 0.1% dip in April.
CPI inflation looks set to remain below the 2% target this year, driven by sterling's recent appreciation and lower energy prices.
Korean trade ended the year strongly, salvaging what was shaping up as a dull fourth quarter for the economy.
The data in LatAm have been all over the map in recent weeks. Brazil's cyclical stabilization continues, while Mexican numbers confirm that the economy has come under pressure in recent months.
The official PMIs suggest that the January survey data have escaped the worst of the hit from the virus.
China's manufacturing PMIs put in a better performance in November, with the official gauge ticking up to 50.2 in November, from 49.3 in October, and the Caixin measure little changed, at 51.8, up from 51.7.
Market-based measures of uncertainty and volatility remain elevated, but if we look beyond the headlines, two overall assumptions still inform forecasters' analysis of the economy and Covid-19.
China's economic targets are AWOL this year, thanks to Covid-19 disruptions to the legislative calendar... and because policymakers seem unsure of what targets to set in such uncertain times.
Last week we made a big call and further downgraded our China GDP forecasts for Q1; daily data and survey evidence suggested that our initial take, though grim, had not been grim enough.
Yesterday's final manufacturing PMIs confirmed that all remained calm in the EZ industrial sector through February.
Data released on Friday show that the Chilean economy had a weak start to the second half of the year.
Japan is one of the countries most exposed to economic damage from the coronavirus.
Tokyo inflation surprised us on Friday, rising to 0.9% in July, from 0.6% in June.
Colombia's Central Bank is facing a short-term test. The recent fall in inflation was interrupted in August--data due on Thursday will show another increase in September--while economic growth, particularly consumption, is struggling, at least for now.
This week's main economic data from Korea--the last batch before the BoK meets on the 16th--missed consensus expectations, further fuelling speculation that it will cut rates for a second time, after pausing in August.
Colombia's sluggish growth and near-term economic outlook resembles that of most other LatAm economies. Domestic demand is weak, credit conditions are tight, and confidence is depressed. The medium term outlook, however, is perking up, slowly.
Modern Money Theory has come up at two consecutive BoJ press conferences.
Tokyo CPI inflation jumped to 1.5% in October, from 1.2% in September. That
Monetary policy usually is the first line of defence whenever a recession hits.
Brazil's economic prospects continue to deteriorate rapidly, due to a combination of rising political uncertainty, the failure of the new government to advance on reforms, and ongoing external threats.
CPI inflation last Friday gave Japanese policymakers a break from the run of bad data, jumping to 0.9% in April, from 0.5% in March.
China's abysmal industrial profits data for October underscore why the chances of less- timid monetary easing are rising rapidly.
As the situation with the coronavirus develops, and we gain more information on the authorities' response, it's becoming clear that the damage to Q1 GDP is going to be nasty.
The BoK surprised markets and commentators by keeping rates unchanged at 1.25% yesterday, rather than cutting to 1.0%.
Yesterday's ECB meeting painted a picture of a central bank in wait-and-see mode. The main refinancing and deposit rates were kept at 0.00% and -0.4% respectively, and the marginal lending facility rate also was unchanged at 0.25%.
The Mexican economy shrank by 0.2% quarter- on-quarter in Q2, according to the final GDP report, a tenth worse than the preliminary reading.
French consumers remained in great spirits midway through the fourth quarter. The headline INSEE consumer confidence index jumped to a 28-month high in November, from 104 in October, extending its v-shaped recovery from last year's plunge on the back of the yellow vest protests.
China's official real GDP growth slowed to 6.0% year-over-year in Q3, from 6.2% in Q2 and 6.4% in Q1. Consecutive 0.2 percentage points declines are significant in China.
Tokyo CPI inflation edged down to 0.4% in May, from 0.5% in April.
Headline money supply growth in the Eurozone accelerated further at the start of Q2.
Our analysis of the Q3 activity and GDP data in yesterday's Monitor strongly suggests that China's authorities will soon ready further stimulus.
Surveys released yesterday failed to support the MPC's view that the economy has bounced back in Q2.
Japan's inflation target came under heavy fire yesterday, as Finance Minister Taro Aso suggested that "things will go wrong if you focus too much on 2%."
As we go to press, it appears that politicians in Italy have agreed on a 2019 budget deficit of 2.4% of GDP.
The BoJ until last week had been in wait-and-see mode over China's slowdown, but they finally folded with Thursday's decision.
Japan returned the ruling LDP coalition to power in an upper house election over the weekend.
Industrial profits in China collapsed by 38.3% year- over-year in the first two months of 2020, making December's 6.3% fall look like a minor blip.
The economic calendar in Mexico was relatively quiet over Christmas, and broadly conformed to our expectations of resilient economic activity in Q4.
The Caixin manufacturing headline was unremarkable, but the input price index signals that PPI inflation is set to rise again in May, to 4.0%-plus, from 3.4% in April.
The key story in Brazil this year remains one of gradual recovery, but downside risks have increased sharply, due mainly to challenging external conditions.
Investors have revised down their expectations for interest rates since the November Inflation Report and now only a 50% chance of a 25bp hike in Bank Rate is priced-in by the end of this year.
The PBoC yesterday cut its 7-day and 14-day reverse repo rate by 10bp, to 2.40% and 2.55% respectively, while injecting RMB 1.2T through open market operations.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
Colombia's central bank has found a relatively sweet spot.
India's GDP report for the fourth quarter surprised to the upside, with the economy growing by 4.7% year-over-year, against the Bloomberg median forecast of 4.5%.
The downturn in global trade looks set to turn a corner, at least judging by the outlook for Korean exports, which are a key bellwether.
Brazil's key data flow started Q4 on a soft note, but we still believe that the economic recovery will gather strength over the next three-to-six months.
We've previously highlighted the pro-cyclical elements of the BoJ's framework, but it's worth repeating, when an economic shock comes along.
Colombia's BanRep stuck to the script on Thursday by leaving the policy rate on hold at 4.25%.
India's headline GDP print for the third quarter was damning, with growth slowing further, to 4.5% year- over-year, from 5.0% in Q2.
The Monetary Policy Committee of the Reserve Bank of India lowered the benchmark repurchase rate by another 25 basis points yesterday, to 6.00%, as widely expected.
Activity data from Colombia over the past quarter have been strong. Real GDP expanded by a relatively robust 2.8% year-over-year in Q2, and is on track to post a 3.2% increase in Q3.
Inflation pressures in the Eurozone edged higher last month, reversing weakness at the start of the year.
LatAm assets and currencies enjoyed a good start to the week, following the agreement between the U.S. and China to pause the trade war.
Japan's labour market is already tight, but last week's data suggest it is set to tighten further.
The upward trend in German inflation stalled temporarily in August, with an unchanged 0.4% year-over-year reading in August. A dip in core inflation likely offset a continued increase in energy price inflation. The detailed final report next month will give the full story, but state data suggest that the core rate was depressed by a dip in price increases of household appliances, restaurant services, as well as "other goods and services."
Data yesterday showed that German inflation roared higher at the start of the year, but the devil is in the detail.
The Bank of Korea's two main monthly economic surveys were very perky in January.
Yesterday's advance CPI data in Germany suggest that inflation fell slightly in August.
French consumer confidence and consumption have been among the main bright spots in the euro area economy so far this year.
Reporting on the German labour market has been like watching paint dry in this expansion, but yesterday's data were a stark exception to this rule.
Markets see a strong possibility, though not a probability, that the BoJ will cut rates on Thursday.
Japan's headline jobless rate edged up to 2.8% in December, from 2.7% in November, but the increase was negligible, with the rate moving to 2.76% from 2.74%.
Japan's June retail sales data add to the run of numbers suggesting a strong rebound in real GDP growth in Q2, after the 0.2% contraction in activity in Q1.
Implied volatility on the euro is now so low that we're compelled to write about it, mainly because we think the macroeconomic data are hinting where the euro goes next.
Data released yesterday confirm that Brazil's recovery has continued over the second half of the year, supported by steady capex growth and rebounding household consumption.
Korea's final GDP report for the third quarter confirmed the economy's growth slowdown to 0.4% quarter-on-quarter, following the 1.0% bounce-back in Q2.
Yesterday's economic reports added to the evidence the euro area economy as a whole is showing signs of resilience in the face of still-terrible conditions in manufacturing.
The Tankan survey--published on Monday--points to still buoyant sentiment, a further tightening of the labour market, and building inflation pressures.
A pair of closely-watched reports today will confirm that business and consumer confidence is tanking in the face of the coronavirus outbreak.
Banxico's quarterly inflation report, released last week, underscored concerns over growth as well as the weakness of the MXN and the risks p osed by the Fed's imminent tightening. Policymakers downgraded Mexico's GDP forecast for 2017 to 2.3-to-3.3% year-over-year, from 2.5-to-3.5%. Weaker-than-expected U.S. manufacturing activity is behind the downshift.
Venezuelan bond markets have been on a rollercoaster ride this year, with yields rising significantly in response to heightened political uncertainty and then declining when the government pays its obligations or when protests ease.
Banxico will meet tomorrow, and we expect Mexican policymakers to cut the main interest rate by 25bp, to 7.25%.
The overshoot in the November core PPI does not change the key story, which is that PPI inflation, headline and core, is set to fall sharply through the first half of next year, at least.
The outlook for the French economy is changing on a daily basis these days.
The sudden downshift in core inflation at the consumer level since March, clearly visible in the CPI and the PCE, and shown in our first chart, has been accompanied by a steady increase in core producer price inflation.
Data on Friday showed that German wage growth is firming. Nominal labour costs rose 2.5% year-overyear in Q3, accelerating from a revised 1.9% increase in Q2. The main driver was a strong rebound in gross earnings growth, which rebounded to 2.4% year-over-year from an oddly weak 1.2% in Q2.
China concludes its annual Central Economic Work Conference today, where the economic targets and the agenda for next year are set.
Friday's inflation report for Brazil confirmed that inflation is rapidly falling towards the BCB's target range, helping to make the case for stepping up the pace of monetary easing to 50bp at the Copom's January meeting.
In previous Monitors--see here--we've suggested that, thanks to the coronavirus, China simply will lose some of the spending that would have gone on during the holiday this year.
Chinese CPI inflation trends point to diminishing wage growth, as the services sector begins to struggle with the influx of labour displaced by the industrial productivity drive.
Brazilian political risk remains high but, as we have argued in previous Monitors, it is unlikely to deter policymakers from further near-term monetary easing. The political crisis, however, does suggest that the COPOM will act cautiously, waiting until the latest storm passes before acting more aggressively, despite ongoing good news on the inflation front.
China's money and credit data for February were reassuring, at least when compared with the doomsday scenario painted, so far, by other key indicators for last month.
Brazil's political situation is steadily improving, with the latest events proving a step in the right direction.
Yesterday's accounts from the June ECB meeting broadly confirmed markets' expectations of further easing between now and the end of the year.
January's consumer price figures, due on Tuesday, likely will show that CPI inflation held steady at December's 3.0% rate.
The Mexican industrial sector is struggling. December industrial output fell 0.4% month-to-month, the third consecutive drop, driven mainly by a similar decline in mining/oil output.
Brazil's benchmark inflation index, the IPCA, rose 0.5% unadjusted month-to-month in July, pushing the year-over-year rate down marginally to 8.7%, from 8.8% in June. Overall inflation pressures in Brazil are easing, especially in regulated prices, which have been the main driver of the disinflation trend this year. But market-set prices are still causing problems.
The PBoC will find itself between a rock and a hard place in the coming months, as CPI inflation creeps further up towards its 3% target but PPI deflation deepens.
China's PPI deflation deepened in August, with prices dropping 0.8% year-over-year, after a 0.3% decline in July.
The seasonally adjusted trade surplus in Germany slipped to €19.6B in July, from €21.2B in June, its lowest since April, and we are confident that it has peaked for this cycle.
The stagnation of GDP in August, following five consecutive month-to-month gains, confirms that the economy's momentum in prior months was simply weather-related.
Business investment in Japan took a nasty hit in the third quarter.
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
Yesterday's economic reports in the Eurozone were ugly.
Mexico's inflation nudged up to a fresh 16-year high in August, but the details of the report confirmed that underlying pressures are easing, in line with our core view.
Markets rightly interpreted yesterday's above consensus GDP report as having little impact on the outlook for monetary policy.
CPI inflation in China surged to a five-month high of 2.3% in March, from 1.5% in February.
Yesterday's detailed CPI data in Germany and France broadly confirmed the message from the advance data in the Eurozone as a whole.
Inflation in Brazil surprised to the upside this week, with a sharp rebound that looks alarming at face value.
Chinese PPI inflation dropped again in March to 3.1%, from February's 3.7%. Commodities were the driver, but base effects should mean the headline rate won't fall further in coming months; it is more likely to rise in Q2.
We fully expect to learn today that import prices rose in March for the first time since June last year. Our forecast for a 1% increase is in line with the consensus, but the margin of error is probably about plus or minus half a percent, and an increase of more than 1.2% would be the biggest in a single month in four years. Most, if not all, of the jump will be due to the rebound in oil prices.
CPI inflation held steady at 2.3% in March, as we and the consensus had expected. Nonetheless, the consumer price figures boosted sterling and bond yields, as the details of the report made it clear that inflation is on a very steep upward path.
The Fed paved the way with a 50bp emergency rate cut on March 3, with more to come.
Yesterday marked President AMLO's first 100 days in office, with skyrocketing approval ratings and improving consumer confidence.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
Thursday's CPI report in Mexico showed that inflation is edging lower. We are confident that it will continue to fall consistently during Q1, thanks chiefly to the subpar economic recovery, low inertia and the effect of the recent MXN rebound.
China's GDP report for the fourth quarter, due on Friday, is likely to show that economic growth has stabilised, on the surface.
December's consumer prices report looks set to show that CPI inflation was stable at 1.5%--in line with the consensus--though the risks are skewed to the downside.
Japan's money and credit data have shown signs of life in recent months, but that's all set to change quickly, due to the disruptions caused by the outbreak of the coronavirus.
Consumers' spending in Brazil weakened at the end of Q4, but we think households will support GDP growth in the first quarter.
The French manufacturing data delivered another upside surprise last week, following the solid numbers in Germany; see here. French industrial production rose slightly in November, by 0.3% month-to-month, extending the gains from an upwardly-revised 0.5% rise in October.
The euro area economy continues to defy rising political uncertainty. Data yesterday showed that industrial production, ex-construction, in the Eurozone jumped 1.5% month-to-month in November, pushing the year-over-year rate up to 3.2% from a revised 0.8% in October. Output rose in all the major economies, but the headline was flattered by a 16.3% month-to-month leap in Ireland. This was due to a production jump in Ireland's "modern sector" which includes the country's large multinational technology sector.
The effects of Covid-19--both negative and positive--on Korea's labour market certainly were felt in February.
Yesterday's ECB meeting was a tragedy in two acts. Markets were initially underwhelmed by the concrete measures unveiled, and they were then shell-shocked by Ms. Lagarde's performance in the press conference.
In her inaugural Monitor, our Chief Asia Economist Freya Beamish plots three scenarios for the Chinese economy. The best-case scenario is that China makes a smooth transition to consumer-led growth.
May's consumer price figures, released today, will provide the first clean inflation read for three months, following the distortions created by this year's late Easter. Consensus forecasts and the MPC have underestimated CPI inflation regularly since the middle of last year, when the impact of sterling's depreciation began to push into the data.
December's retail sales numbers are the most important of the year for retailers, but they don't necessarily tell us anything about the future prospects for consumers' spending or the broad economy. The December 2016 numbers, however, might be different, because they capture consumers' behavior in the first full month after the election.
Manufacturing in the Eurozone rebounded midway through the second quarter.
The pick-up in CPI inflation to 3.1% in November--its highest rate since March 2012-- from 3.0% in October, shouldn't alarm the MPC at this week's meeting.
The ECB and Ms. Lagarde played it safe yesterday.
The upward trend in CPI inflation likely reasserted itself in August, following a hiatus in the last two months due to the decline in oil prices.
The Mexican government last week unveiled its 2017 fiscal budget proposal. The plan makes clear that the shocks which have battered the economy and public finances since 2015 will linger in to next year. Mexico's government has been eager to cut spending in recent years.
Chinese PPI inflation surprised analysts with a sharp rebound to 6.3% in August, from 5.5% in July, above the consensus, 5.7%.
Data released yesterday support our view that the Brazilian retail sector has gathered strength in recent months, following a weak Q2, when activity was hit by the truckers' strike.
Brazil's April CPI data this week showed that inflation pressures remain weak, supporting the BCB's focus on the downside risks to economic activity. Wednesday's report revealed that the benchmark IPCA inflation index rose 0.1% unadjusted month-to-month in April, marginally below market expectations.
We have downgraded our 2019 and 2020 China GDP forecasts on previous occasions because monetary conditions have been surprisingly unresponsive to lower short-term rates.
The Bank kept interest rates unchanged at 1.50% yesterday, but downgraded its inflation forecast for 2018 to 1.6% from 1.7%
We expect July's consumer prices report, due on Wednesday, to reveal that CPI inflation dropped to 1.8% in July, from 2.0% in June.
Next week is so crammed full of data releases that we need to preview November's consumer price data early, in the eye of the storm of the general election.
We've been consistent in saying that Japanese capex would roll over this year, after strength in the first three quarters was seen by the authorities and many commentators as a sign of resilience.
The Brazilian central bank cut its benchmark Selic interest rate by 50bp to 4.50% on Wednesday night.
A sluggish GDP headline, a further increase in inflation, and poor German manufacturing data were the primary euro area highlights in our absence.
Data on Friday confirmed that headline inflation in the Eurozone rose a bit last month, to 1.5% from 1.4% in January, but also that the core rate dipped by 0.1 percentage points, to 1.0%.
October's consumer prices report, released on Wednesday, likely will show that CPI inflation has continued to drift further below the 2% target
The apparent thaw in the U.S.-China trade dispute is great news for LatAm, particularly for the Andean economies, which are highly dependent on commodity prices and the health of the world's two largest economies
China's January trade data were scheduled for release on Friday, but instead, the customs authority delayed the publication, saying it would publish the numbers with the February data
Inflation data in Brazil, Mexico and Chile last week reinforced our view that interest rates will remain on hold, or be cut, over the coming meetings. The recent fall in oil prices, and the weakness of domestic demand, will offset recent volatility caused by the FX sell-off, driven mostly by the coronavirus story.
With the exception of Mexico, November inflation was or below expectations in LatAm. Mexico's overshoot increases the likelihood that Banxico will hike its reference rate at the next board meeting on December 20.
Recent inflation and activity data in Mexico were dovish.
China's CPI inflation rose to 2.1% in July, from 1.9% in June.
Japan's GDP growth was revised up, to 0.4% quarter-on-quarter in Q3, from 0.1% in the preliminary reading.
Colombia's January inflation rate easily exceeded BanRep's 2-to-4% target range yet again, jumping to 7.5% from 6.8% in October, the fastest increase since December 2008. This is putting pressure on BanRep to continue tightening, following 150bp rate hikes, to 6.0%, since September.
The year-long surge in CPI inflation in China will soon end.
Most countries in LatAm are now fighting a complex global environment; a viral outbreak of biblical proportions and plunging oil prices, after last week's OPEC fiasco.
In this Monitor we'll let the data be, and try to make some sense of the recent market volatility from a Eurozone perspective, with an eye to the implications for the economy and policymakers' actions.
China's trade balance flipped to an unadjusted deficit of $7.1B in the first two months of the year, from a $47.2B surplus in December.
LatAm's growth outlook is deteriorating, despite decent domestic fundamentals and political transitions toward more market-oriented governments in some of the region's main economies.
Yesterday's CPI report in Mexico showed that inflation remains high, but we are confident that it will start to fall consistently during Q1, thanks chiefly to a favourable base effect.
Inflation pressures are gradually easing in Mexico, opening the door for rate cuts as early as next month. The June CPI report, released yesterday, showed that prices rose 0.1% month-to-month unadjusted in June, in line with market expectations.
Brazilian inflation hit its lowest rate in almost seven years in March, while Mexico's rate is the highest since July 2009. Yet we expect Mexico to tighten policy only modestly in the near term, while Brazil will ease rapidly.
The BoJ kept policy unchanged, as expected, at its meeting yesterday.
The underlying U.S. consumer story, hidden behind a good deal of recent noise, is that the rate of growth of spending is reverting to the trend in place before last year's tax cuts temporarily boosted people's cashflow.
Inflation in the euro area edged higher in November, but our prediction of a rebound in the core proved to be wrong. Headline inflation increased to 1.5% in November, from 1.4% in October.
Japan's unemployment rate returned unexpectedly to its 26-year low of 2.3% in February, falling from 2.5% in January.
Yesterday's March labour market data in Germany were surprisingly strong
The European financial sector was in the news again on Friday, propelled by further weakness in Deutsche Bank's share price. In our Monitor of September 27, we said that worries of a European "Lehman Moment" were overblown.
We have written a good deal recently about the likely impact of the sudden explosion of U.S. soybean exports on third quarter GDP growth.
Economy-wide confidence deteriorated in November, highlighting that Britain continues to struggle to shake off its malaise.
House purchase mortgage approvals by the main street banks jumped to 40.1K in January, from 36.1K in December, fully reversing the 4K fall of the previous two months, according to trade body U.K. Finance.
The more headline hard data we see in the Eurozone, the more we are getting the impression that 2019 is the year of stabilisation, rather than a precursor to recession.
The ECB will be satisfied, and a bit relieved, with yesterday's economic data in the Eurozone.
The BoJ yesterday kept the policy balance rate at -0.1%, and the 10-year yield target at "around zero", in line with the consensus.
Yesterday's money supply data in the Eurozone were alarmingly poor.
Yesterday's advance CPI data for the major EZ economies suggest that today's report for the euro area as a whole will undershoot the consensus slightly.
We're now starting to see clear signs in unofficial data that households are slashing their expenditure on discretionary services, in order to minimise their chances of catching the coronavirus.
The stakes are raised ahead of today's ECB meeting after the central bank's pledge in January to "review and reassess" its policy stance. Since then, survey data have weakened, inflation has fallen and volatility in financial markets has increased. The ECB likely will act accordingly and deliver a boost to monetary stimulus today.
Mexico's inflation rate ended 2018 in line with market expectations, strengthening the case for interest rates to remain on hold in the near term.
Yesterday's price data for China showed continued declines in both CPI and PPI inflation.
Brazil's consumer recession finally eased in November. Retail sales jumped 2.0% month-to- month, following an upwardly-revised 0.3% drop in October, and the year-over-year rate rose to -3.5% from -8.1%. November's astonishing performance probably reflects seasonal adjustment problems related to Black Friday discounting. Sales have climbed in the last four Novembers, suggesting that consumers' pre-Christmas spending patterns have shifted permanently.
Last week's events highlighted the seriously challenging global environment for LatAm equities and currencies. Trading in Chinese shares was stopped twice early last week, after falls greater than 7% of the CSI 300 index reverberated around the world. Markets were calmer on Friday but the volatility nevertheless reminded investors that LatAm's economies are floating in rough waters and their resilience will be put to the test again this year. The Fed's policy normalization, the unwinding of the leverage in EM, the continued slowdown of the Chinese economy, low commodity prices and currency depreciation are all real threats across the continent.
Banxico's monetary policy meeting on Thursday was the first to be attended by the two new deputy governors, Jonathan Heath and Gerardo Esquivel, economists appointed by AMLO.
Analysts' forecasts for January's consumer prices report, released on Wednesday, are unusually dispersed.
Economic data in the euro area are still slipping and sliding.
France is solidifying its position as one of the Eurozone's best-performing economies.
This week's data confirmed Mexico's strong economic performance over the first few months of this year.
China's October foreign trade headlines beat expectations, but the year-over-year numbers remain grim, with imports falling 6.4%, only a modest improvement from the 8.5% tumble in September.
It's still unclear how exactly Covid-19 will impact the euro area as a whole, but little doubt now remains that Italy's economy is in for a rough ride.
Collapsing oil prices add fresh deflationary pressure on China.
Inflation is under control in most LatAm economies, and we expect headline rates to remain close to current levels in the very near term.
The border security agreement between the U.S. and Mexico has strengthened hopes that the Sino- U.S. trade war will end soon.
The clear threat to demand posed by the coronavirus and China's efforts at containment have sent a shock wave through commodities markets.
The recent FX depreciation and falling oil prices are driving the dynamics of inflation across the Andean economies.
Yesterday's CPI report in Mexico confirmed that headline inflation edged higher, to 5.0% in September from 4.9% in August, as the mid-month inflation index suggested.
Data released in recent days have supported our base case for further interest rate cuts in Mexico over the coming meetings.
Inflation in Mexico fell significantly in September. Data yesterday showed that the CPI rose just 0.3% month-to-month, pushing the year-over-year rate down to 6.4% from 6.7% in August, its highest level in 16 years.
The Central Bank of Argentina surprised markets on Tuesday, raising its main interest rate by 100bp to 28.75% to cap inflation expectations and push core inflation down at a faster pace.
China's money and credit numbers for April were a mixed bag. M2 growth merely inched down, to 8.5% year-over-year, from 8.6% in March, keeping its gradual uptrend intact.
Some commentators have asserted that the Monetary Policy Committee won't raise interest rates until all its members agree and investors have fully priced in an increase, arguing that an earlier move would create excessive market turmoil and muddy the Committee's message. But a look back to previous turning points in the interest rate cycle suggests that the Monetary Policy Committee--MPC--hasn't paid much heed to those considerations before.
Japan's labour cash earnings rose by 1.5% year-over- year in July, a strong result in the Japanese context, if it hadn't been preceded by the 3.6% leap in June.
Brazil's March report reinforced recent evidence indicating that inflation is decelerating. The headline CPI surprised to the downside again, slowing to a nine-month low of 9.4% year-over-year from 10.4% in February. The index rose 2.6% quarter-to-quarter in Q1, well below the 3.8% increase in the same period last year.
China's November money and credit data were a little less grim, with only M2 growth slipping, due to unfavourable base effects.
The next few months, perhaps the whole of the first quarter, are likely to see a clear split in the U.S. economic data, with numbers from the consumer side of the economy looking much better than the industrial numbers.
Recent retail surveys have indicated that consumers are not suffering yet from Brexit blues. The BRC reported that year-over-year growth in total sales values picked up to 1.9% in July, from 0.2% in June. After adjusting for falling prices, this measure suggests that year-over-year growth in official retail sales volumes held steady at about 4% last month.
Inflation pressures in Brazil are now well- contained, with the headline rate falling to a decade low in July. We think inflation is now close to bottoming out, but the current benign rate strengthens our base case forecast for a 100bp rate cut at the next policy meeting, in September.
Data released yesterday reinforced our forecast of a further rate cut in Brazil next month.
Data over the weekend revealed a further slowdown in China's CPI inflation, to 1.5% in February, from 1.7% in January.
Japan's GDP growth came roaring back in Q2, thanks to a strong rebound in private consumption, and an acceleration in business capex.
Last week's hard data in Colombia were upbeat, confirming that economic growth accelerated in the first half. Retail sales rose 5.9% year-over-year in May, overshooting consensus.
Brazilian inflation has been well under control in the past few months, still laying the ground for rates to remain on hold for the foreseeable future.
The most important retail sales report of the year, for December, won't be published today, unless some overnight miracle means that the government has re-opened.
Inflation pressures in France eased across the board at the end of last year.
Inflation pressure remained relatively high in Argentina last year, due mostly to the legacy of the Kirchner era. But we think inflation will ease this year, given the lagged effects of the recession and the fiscal consolidation.
December's consumer price figures, released tomorrow, likely will reveal that CPI inflation rose to 1.4%--its highest rate since August 2014--from 1.2% in November. Inflation will take even bigger upward steps over the coming months as the anniversary of sharp falls in commodity prices is reached and retailers pass on hefty increases in import prices to consumers.
We expect June's consumer prices report, released on Wednesday, to show that CPI inflation increased to 2.7%, from 2.4% in May, above the consensus, 2.6%, and the Bank of England's forecast, 2.5%.
We expect June's consumer prices report, due on Wednesday, to show that CPI inflation fell to 1.9%, from 2.0% in May.
We are sticking to our view that the Eurozone's trade surplus will fall in the next six months, despite yesterday's upbeat report. The seasonally adjusted trade surplus leapt to a record high of €25.0B in September from revised €21.0B in August, lifted by an increase in exports and a decline in imports.
China's official real GDP growth likely slowed to 6.0% year-over-year in Q3, from 6.2% in Q2.
October's consumer price figures, to be released tomorrow, look set to show CPI inflation easing to -0.2%, from -0.1%, below the no-change consensus and the lowest rate since March 1960. No doubt this will spark more hyperbolic headlines about the U.K.'s descent into pernicious deflation; ignore them. October's print will almost certainly represent the nadir and we think it will take only a year for CPI inflation to return to the MPC's 2% target.
The MPC predicted in last week's Inflation Report that CPI inflation eased to 0.3% in April, thereby fully reversing its increase in March to 0.5%. We think, however, the Committee is underestimating the strength of inflation pressures across the economy.
Chinese April retail sales growth slowed sharply in value terms, to 9.4% year-over-year, from 10.1% in March.
Yesterday's data in the EZ provided a little more evidence on what happened in Q1.
The market-implied probability that the MPC will cut Bank Rate at its meeting on January 30 jumped to 63%, from 44%, following the release of December's consumer prices report.
The BoJ is likely to be thankful next week for a relatively benign environment in which to conduct its monetary policy meeting.
Friday's economic data confirmed that inflation in Germany rebounded last month, and leading indicators suggest that it is headed higher in coming months.
July's retail sales figures--the first official data for Q3--provided a reassuring signal that consumers can be counted on to drive the economy as the Brexit deadline nears.
March's consumer prices figures, released on Wednesday, are even more important than usual, as they are the last to be published before the MPC's next meeting on May 10.
We are not concerned by the slowdown in retail sales over the past few months.
Today's retail sales figures for August likely will rebut the widespread view that spendthrift consumers will prevent a sharp economic slowdown. We look for a 1% month-to-month decline in retail sales volumes in August, well below the -0.4% consensus forecast.
Momentum in new EZ car sales improved slightly in the middle of Q3. New registrations in the euro area rose 6.8% year-over-year in August, accelerating marginally from a 5.3% increase in July.
July's retail sales report signalled a good start to the third quarter but also implied that second quarter spending was stronger than previously thought. The upward revisions--totalling 0.5% for total sales and 0.4% for non-auto sales--were the biggest for some time, but we were not unduly surprised.
CPI inflation is on track to fall back to 2.0% in the winter and below the MPC's target thereafter, despite rising to 2.5% in July, from 2.4% in June.
Markets greatly cheered the Conservatives' landslide victory on Friday, but remained cautious on the potential for the MPC to return to the tightening cycle it started in 2017.
The new Argentinian president, Alberto Fernández, will have to make a quick start on the titanic task of cleaning up the economic and social mess left by his predecessor, Mauricio Macri.
ate last week, China and the U.S. reached an agreement, averting the planned U.S. tariff hikes on Chinese consumer goods that were slated to be imposed on December 15.
The account of BanRep's July meeting revealed a significant tug-of-war between the doves and hawks. The majority argued strongly that Colombia's central bank should hike the main interest rate again, by 25bp. Others judged that the benefits of further tightening did not outweigh the costs.
Yesterday's wave of data suggested that a good part of the strength in final demand in the second quarter was sustained into the first month of this quarter, and perhaps the second too.
Yesterday's final inflation data in France for September were misleadingly soft.
September's consumer price figures likely will surprise to the downside, prompting markets to reassess their view that the MPC will almost certainly raise interest rates next month.
The February activity report in Colombia showed a modest pick-up in manufacturing activity and strength in the retail sales numbers.
The BoJ is likely to stay on hold this week for all its main policy settings.
We expect August's consumer price figures, released on Wednesday, to show that CPI inflation declined to 2.4%, from 2.5% in July, matching the consensus and the Bank of England's forecast.
The case for the MPC to hold back from implementing more stimulus was bolstered by September's consumer prices figures.
The beleaguered EZ car sector finally enjoyed some relief at the end of Q3, though base effects were the major driver of yesterday's strong headline.
The Monetary Policy Board of the Bank of Korea voted yesterday to lower its policy base rate to 1.25%, from 1.50%.
Our forecast that CPI inflation will return to the 2% target by the end of 2018 sets us apart from the MPC and consensus, which expect a more modest decline, to 2.4%.
CPI inflation has undershot the consensus forecast six times this year, but surprised to the upside only twice.
The chainstore sales numbers have been hard to read over the past year.
We expect May's consumer prices report, released on Wednesday, to show that CPI inflation fell to 2.0% in May, from 2.1% in April.
The Eurozone inflation data have been relatively calm in the past six months. The headline rate has been stable at about 1.5%, and the core rate has fluctuated closely around 1%.
December's consumer prices figures, released tomorrow, look set to show CPI inflation ticked up to 0.2% from 0.1% in November, despite the renewed collapse in oil prices. The further fall in energy prices this year means that the inflation print won't reach 1% until May's figures are published in June. But Governor Carney has emphasised that core price pressures will motivate the first rate hike--a focus he likely will reiterate in a speech on Tuesday-- meaning that a May lift-off is still on the table.
We've continuously warned that Japan's national accounts weren't sitting easily with the underlying signals from survey data, and monetary conditions, through last year.
We became more confident last week in our call that GDP growth will hold up better than widely feared in the first half of 2019, following signs that consumers have maintained their happy-go-lucky mentality, despite the ongoing political crisis.
Yesterday's CPI report in the Eurozone confirmed that inflation pressures remain subdued, even as GDP growth is accelerating.
The upturn in core CPI inflation this year has passed by almost unnoticed in the markets and media. In the year to September, the core CPI rose 1.9%, up from a low of 1.6% in January. But that's still a very low rate, and with core PCE inflation unchanged at only 1.3% over the same period, it's easy to see why investors have remained relaxed. In our view, though, things are about to change, because a combination of very adverse base effects and gradually increasing momentum in the monthly numbers, is set to lift both core inflation measures substantially over the next few months.
China's activity data outperformed expectations in November.
Data on air quality in China provide some useful insights into the economic disruptions--or lack thereof--caused by the outbreak of the coronavirus from Wuhan and the government's aggressive containment measures.
Incoming activity data from Colombia over the past quarter have been surprisingly strong, despite many domestic and external threats.
China's property market looks to be turning the corner, going by the stronger-than-expected March report.
The softness of the headline September retail sales numbers hid a decent 0.5% increase in the "control" measure, which is the best guide to consumers' spending on non-durable goods.
Japan's tertiary index edged up 0.1% month-on-month in July, after the 0.1% decrease in June.
CPI inflation surprises look set to trigger larger- than-usual market reactions over the coming months, given that the MPC emphasised last month that it wants to see domestically-generated inflation rebound swiftly, after falling suddenly late last year, in order to justify keeping Bank Rate on hold.
Today's official retail sales figures look set to show that consumers tightened their purse strings at the start of this year, following last year's spending spree. We think that retail sales volumes rose by just 1.0% month-to-month in January; that would be a poor result after December's 1.9% plunge. Surveys of retailers have been weak across the board. The reported sales balance of the CBI's Distributive Trade Survey collapsed to -8 in January, from +35 in December. The balance is notoriously volatile, but the 43-point drop is the largest since the survey began in 1983.
Fed Chair Powell's semi-annual Monetary Policy Testimony today will likely re-affirm that policymakers still think "gradual" rate hikes are appropriate and that the risks to the economy remain "roughly balanced".
We were not hugely surprised to see stocks tank again yesterday.
Economists are divided evenly on whether Tuesday's consumer price figures will show that CPI inflation held steady at 2.9% or edged down to 2.8% in June.
Japan's PPI inflation likely has peaked, with commodities still in the driving seat. Manufactured goods price inflation will soon start to slow, following the downshift in China's numbers.
To avoid rocking the 2020 boat, the Phase One trade deal needed to be sufficiently vague, so that neither side, and particularly Mr. Trump, would have much cause to kick up a fuss around missed targets.
Brexit talks will dominate the headlines this week, with the focal point set to be a meeting of the European Council on Wednesday, where E.U. leaders might give the green light for an extraordinary summit next month to formalise the Withdrawal Agreement.
We can see no hard evidence, yet, that the expanding trade war with China and other U.S. trading partners is hitting business investment.
Inflation in Brazil Ended 2019 Above the BCB's Target; 2020 will be Fine
In a busy week in Brazil, ongoing signals of feeble economic activity have strengthened our forecast for GDP growth of just 1.0% this year, below the 1.3% consensus forecast.
Industrial production in India turned around sharply in November, rising by 1.8% year-over-year, following October's 4.0% plunge and beating the consensus forecast for a trivial 0.3% uptick.
Investors concluded too hastily yesterday that November's GDP report boosted the chances that the MPC will cut Bank Rate at its upcoming meeting on January 30.
All eyes in the Eurozone will be on the second estimate of Q4 GDP today, and the report likely will confirm that growth accelerated in Q4. We think real GDP rose 0.5% quarter-on-quarter, up from a 0.3% increase in Q3, in line with the first estimate. If this forecast is correct, the year-over-year rate will be unchanged at 1.8%. Risks to the headline, however, are tilted to the downside.
Our base case is that the core CPI rose 0.2% in December, but the net risk probably is to the upside. We see scope for significant increases in sectors as diverse as used autos, apparel, healthcare, and rent, but nothing is guaranteed.
Data released last week in Brazil reinforced our view of a modest, final, interest rate cut this week, despite the recent strength of the USD and volatility in global markets.
Data on Friday showed that the upturn in French manufacturing petered out at the end of Q1.
Today's CPI report from India should raise the pressure on the RBI to abandon its aggressive easing, which has resulted in 135 basis points worth of rate cuts since February.
Hard data for Brazil and Mexico, released last week, support the case for further interest rate cuts.
Friday's data added further colour to the September CPI data for the Eurozone.
Volatility and risk will remain high in L atAm for the foreseeable future. President-elect Donald Trump's uncertain foreign policies could have a considerable impact on LatAm economies in the months and years ahead.
The fall in CPI inflation to just 1.5% in October-- its lowest rate since November 2016--from 1.7% in September, isn't a game-changer for the monetary policy outlook.
Japan's PPI data yesterday confirmed that October was a turning point for prices--due to the consumption tax hike--despite the surprising stability of CPI inflation in Tokyo for the same month.
Japan's GDP likely dropped by a huge 0.9% quarter-on-quarter in Q4, after the 0.5% increase in Q3, with risks skewed firmly to the downside.
We've already raised a red flag for today's second Q4 GDP estimate in the Eurozone, but for good measure, we repeat the argument here.
August's consumer price figures, released today, likely will show that households' spending power is being increasingly eroded by rising inflation. We think CPI inflation picked up to 0.8%, from 0.6% in July, exceeding the consensus, 0.7%, for the third consecutive month.
Japan's Q2 GDP was driven by the twin pillars of private consumption and capex.
PPI inflation has finally started to soften, after having increased steadily from 2.0% in April, and holding steady at 3.0% in Q3.
We agree with the consensus and the MPC that October's consumer prices report, released on Wednesday, will show that CPI inflation edged up to 2.5% in October, from 2.4% in September.
PM Abe last week asked the cabinet to put together a package of measures in a 15-month budget aimed at bolstering GDP growth through productivity enhancement, in addition to the shorter-term goal of disaster recovery.
October's consumer price figures, released Tuesday, likely will show that CPI inflation increased to 3.1%, from 3.0% in September.
Japanese domestic demand probably strengthened in Q2, with both private consumption and fixed investment accelerating. Trade and inventories are the key swing components for GDP growth.
November's consumer prices figures, released tomorrow, look set to show that the U.K.'s spell of negative inflation has ended. CPI inflation is set to pick-up decisively over the coming months, even if oil prices continue to drift down. In fact, fuel prices likely will contribute to the pick-up in inflation from October's -0.1% rate. November's 1.5% fall in prices at the pump was smaller than the 2.3% drop in the same month last year, so the year-over-year rate will rise. Fuel's contribution to CPI inflation therefore will pick up, albeit very marginally, to -0.47pp from -0.50pp in October.
The Fed will raise rates by 25bp today, but we expect no change in the median expectation-the dotplot-for two rate hikes both next year and in 2018. We fully appreciate that fiscal easing on the scale proposed by President-elect Trump, or indeed anything like it, very likely would propel inflation to a pace requiring much bigger increases in rates.
It was no surprise that Banxico cut its policy rate by 25bp to 7.00% yesterday, following similar moves in August, September, November and December.
We argued earlier this week that the data on the consumer economy are likely to be rather stronger than the industrial numbers.
China's September imports missed expectations, but commentators and markets tend to focus on the year-over-year numbers.
Brazil's consumer recession seems never-ending. Retail sales fell 0.8% month-to-month in October, pushing the headline year-over-year rate down to -8.2% in October, from -5.7% in September. Recent financial market volatility, credit restrictions and the ongoing deterioration of the labour market continue to hurt consumers.
We were right about the below-consensus inflation numbers for June, but wrong about the explanation. We thought the core would be constrained by a drop in used car prices, while apparel and medical costs would rebound after their July declines.
Inflation in Brazil ended 2018 under control, despite slightly overshooting expectations.
Following Chinese retaliation against new U.S. tariffs last week, the U.S. responded last night, as promised, setting in train the process to slap tariffs on the remaining approximately $300B of imports from China.
The gap between the official measure of the rate of growth of core retail sales and the Redbook chainstore sales numbers remains bafflingly huge, but we have no specific reason to expect it to narrow substantially with the release of the April report today.
Yesterday's final CPI estimate in Germany confirmed that inflation fell to a 15-month low of 1.4% year-over-year in February, down from 1.6% in January.
This week's wave of data starts today, but most of the attention will fall on just one report, February retail sales. We expect weak-looking numbers, thanks to the plunge in gas prices, which likely will subtract some 0.6% from the non-auto sales number.
German inflation eased in May, but the underlying upward pressure on the core is increasing. Yesterday's data showed that inflation fell to 1.5% year-over-year in May, from 2.0% in April, as the boost from the late Easter reversed. Inflation in leisure and entertainment services was driven down to +0.8%, from +3.3% in April, as a result of sharply lower inflation in package holidays and airfares.
The trend in retail sales no longer looks quite so flat, following yesterday's May report. The level of sales volumes in April was revised up by 0.3%.
October's 0.1% month-to-month fall in retail sales volumes was disappointing, following substantial improvements in the CBI, BRC and BDO survey measures.
China's main activity data for October disappointed across the board, strengthening our conviction that the PBoC probably isn't quite done with easing this year.
We expect September's consumer prices report, released on Wednesday, to show that CPI inflation held steady at 1.7%, below the 1.8% consensus.
Few Eurozone investors are going blindly to accept the rosy premise of last week's relief rally in equities that both a Brexit and a U.S-China trade deal are now, suddenly, and miraculously, within touching distance. But they're allowed to hope, nonetheless.
We expect today's consumer price figures to show that CPI inflation remained at 1.0% in October, after jumping in September from 0.6% in August.
CPI inflation held steady at 2.4% in October, undershooting the 2.5% consensus expectation and the MPC's forecast in this month's Inflation Report.
Our view on the trade data last week was that U.S. tariff hikes have caused minimal damage, so far. China's tariff increases on imports to date have resulted in stockpiling, with little evidence in the CPI of any inflationary pressure.
Politics remain centre-stage in Brazil, despite positive news on the economic front. President Michel Temer's government continues to advance pension reform, despite the tight calendar and concerns about his political capital. But volatility is on the rise.
When the dust settles after today's wave of data, we expect to have learned that core retail sales continued to rise in June, core inflation nudged back up to its cycle high, and manufacturing output rebounded after an auto-led drop in May. None of these reports will be enough to push the Fed into early action, but they will add to the picture of a reasonably solid domestic economy ahead of the U.K. Brexit referendum.
Yesterday's second Q3 GDP estimate confirmed that the EZ economy expanded by 0.2% quarter-on- quarter in Q3, the same pace as in Q2, leaving the year-over-year rate unchanged at 1.2%.
January's CPI inflation of 1.8%, up from 1.6% in December, was one-tenth lower than anticipated by the consensus, the Bank of England and ourselves. The undershoot, however, was entirely due to a pull-back in clothing inflation which is unlikely to be sustained. Price pressures across the rest of the economy have continued to intensify, suggesting that CPI inflation still is on course greatly to exceed the 2% target later this year.
Yesterday's second estimate of Q4 Eurozone GDP confirmed the upbeat story from the advance report, despite the dip in headline growth.
January's consumer price data, released tomorrow, look set to reveal a third consecutive rise in CPI inflation, dampening speculation that the U.K. is stuck in a deflationary funk. Indeed, we think CPI inflation picked up to 0.4%, from 0.2% in December, above the consensus, 0.3%.
The first wave of domestic third quarter data crashes ashore this morning.
Economists are evenly split on December's consumer prices report, due on Wednesday, with half expecting CPI inflation to fall to 2.1%, from 2.3% in November, and the other half expecting a 2.2% print.
Yesterday's second EZ Q2 GDP report was slightly more upbeat than the advance estimate.
We expect the run of downbeat news on the U.K. economy to be punctuated today by January's retail sales figures.
July's consumer price figures, due tomorrow, likely will bring early evidence that sterling's Brexit-driven depreciation already is pushing up inflation. We think that CPI inflation picked up to 0.6% in July from 0.5% in June, exceeding the consensus forecast for an unchanged reading. Experience of past depreciations suggests that July's figures likely won't be the last time the consensus is surprised by the speed of the rise in inflation.
February's COPOM meeting minutes again signalled that Brazil's central bank will stick with its cautious approach to monetary policy.
Members of the Monetary Policy Committee have signalled that January's flash Markit/CIPS composite PMI, released on Friday 24, will have a major bearing on their policy decision the following week.
Inflation in the Andean economies ended 2019 well within central banks' objectives, despite many domestic and external challenges.
The weekly jobless claims numbers are due Thursday, as usual, but in the wake of a flood of emails from readers, all asking a variant of the same question-- should we be worried about the rise in continuing jobless claims?--we want to address the issue now.
China's trade surplus jumped to a six-month high of $46.8B in December, from $37.6B in November, on the back of a strong increase in exports.
Japanese services price inflation edged down in May as the twin upside drivers of commodity price inflation and yen weakness began to lose steam. We expect wage costs to begin edging up in the second half but this will provide only a partial counterbalance.
Detailed German inflation data today likely will confirm that inflation fell to 0.3% year-over-year in December from 0.4% in November, mainly due to falling food inflation. Preliminary data suggest that food inflation declined sharply to 1.4% from 2.3% in November, offsetting slower energy price deflation, due to base effects. Food and energy prices are wild cards in the next three-to-six months, and could weigh on the headline, given the renewed weakness in oil prices, and lower fresh food prices. Core inflation, however, is a lagging indicator, and will continue to increase this year.
Final October inflation data surprised to the upside yesterday, consistent with our view that inflation will rise faster than the market and ECB expect in coming months. Inflation rose to 0.1% year-over-year in from -0.1% in September, lifted mainly by higher food inflation due to surging prices for fruits and vegetables. This won't last, but base effects will push the year-over-year rate in energy prices sharply higher into the first quarter, and core inflation is climbing too. Core inflation rose to 1.1% in October from 0.9% in September, higher than the consensus forecast, 1.0%.
Final inflation for February in the Eurozone likely will be confirmed today at -0.3% year-over-year, up from -0.6% in January. This bounce was mainly driven by a reduced drag from falling oil and food prices, but it is too early to call a trough in headline inflation.
Inflation pressures are slowly, but surely, rising in the Eurozone. Advance data indicate that inflation in Germany rose to 0.7% year-over-year in May, up from 0.5% in April. Reduced drag from the non-core components is the main driver, with energy prices rebounding, and food prices now rising steadily at 1.4% year-over-year.
Last week's import price data, showing prices excluding fuels and food fell in January for the fourth month, support our view that the goods component of the CPI is set to drop sharply this year.
Final inflation data yesterday confirmed Eurozone inflation pressures are still low. Inflation rose to 0.2% year-over-year in December from 0.1% in November, lifted by easing deflation in energy prices. Base effects likely will lift energy price inflation in January and February, but the year-over-year rate will dip in Q2, if the oil price remains depressed. Food inflation fell in December due to a decline in unprocessed food prices, and we see further downside in Q1. Core inflation was unchanged, with the key surprise that services inflation fell to 1.1% from 1.2% in November. We think this dip will be temporary, however, and our first chart shows that risks to services inflation are tilted to the upside.
Venezuela is on the brink o f economic and social collapse. Looting, food scarcity, power rationing, and other problems have become rampant. This week, Venezuela's government allowed citizens to flock across the Colombian border to shop for food and medicine, for the second time this month. Last year, Venezuela's President Maduro shut the border in a bid to crack down on smuggling of subsidized products.
Collapsing energy prices continue to weigh on the headline inflation rate in the Eurozone's largest economy. Final September CPI data in Germany confirmed that inflation fell to 0.0% year-over-year from 0.2%, due to a 9.3% plunge in energy prices -- down from a 7.6% fall in August--mainly a result of a collapse in petrol price inflation. This comfortably offset an increase in food inflation to 1.1% from 0.8%, due to surging vegetable and fruit prices.
Friday's detailed euro area CPI report for December confirmed that inflation pushed higher at the end of last year. Headline inflation increased to 1.3% year-over- year, from 1.0% in November, lifted primarily by higher energy inflation, rising by 3.4pp, to +0.2%. Inflation in food, alcohol and tobacco also rose, albeit marginally, to 2.1%, from 2.0% in November.
The Eurozone limped out of headline deflation in October, with inflation rising to 0.0% from -0.1% in September, helped by higher core and food inflation. Energy prices fell 8.7% year-over-year, up trivially after a 8.9% drop in September, but base effects will push up the year-over-rate significantly in coming months. Core inflation edged higher to 1.0% from 0.9% in September, due to 0.1 percentage point increases in both non-energy goods and services inflation.
Advance data suggest German inflation pressures eased towards the end of last year. Inflation fell to 0.3% year-over-year in December from 0.4% in November, likely due to a fall in food inflation--mean reversion in fruit and vegetables inflation--and a sharp fall in the annual price increase of clothing and shoes. State data indicate that deflation in household utilities persisted, but that inflation of fuel and transportation is slowly recovering. Assuming a stable oil price in coming months, base effects should push up energy price inflation in the first quarter, though it should then fall again slightly in the second quarter. Overall, though, we expect energy price inflation gradually to stabilise and recover this year.
Advance data indicate German inflation rose to 0.4% year-over-year in November, up from 0.3% in October, lifted by higher food and energy price inflation. The upward trend in food prices won't last, but base effects in energy prices will persist, boosting headline inflation significantly in coming months. The details show that services inflation was stable at 1.2% last month, despite state data indicating a fall in volatile leisure and entertainment inflation, while net rent inflation was also stable, at 1.1%.
Inflation data in the Eurozone came in broadly as we expected. Weakness in food and energy prices dampened the headline, but core inflation rose. Inflation was unchanged at 0.2% year-over-year in July, with core inflation rising to 1.0% year-over-year, a 15-month high, up from 0.8% in June.
August inflation surprised to the downside across most of LatAm, as food price surges proved transitory, and the lagged effect of the FX depreciations last year faded. Brazil appeared to be the exception last month, but the underlying trend in inflation is downwards.
Inflation in the Eurozone rose modestly last month. Yesterday's advance CPI report showed the headline rate rising to 0.6% year-over-year in November, from 0.5% in October, mainly because of a jump in fresh food inflation. Energy prices fell 1.1% year-over-year, slightly more than the 0.9% decline in October, but we expect a sharp increase over the next six months.
The latest IPCA inflation data in Brazil show the year-over-year rate fell to 8.8% in June from 9.3% in May. This is the slowest pace since May 2015, with inflation pulled lower by declines across all major components, except food. Indeed, food prices were the main driver of the modest 0.4% unadjusted monthto-month increase, rising by 0.7%, following a 0.8% jump in May. The year-over-year rate rose to 12.8% in June from 12.4%.
Brazil's benchmark inflation index, the IPCA, rose 0.7% month-to-month in May, above market expectations. The stickiness of some components explains the surprise upshift; food prices in particular rose by 1.4% in May, after a 1% increase in April. Housing also rose at a faster rate than we had expected, due mainly to a 2.8% jump in the electricity component, the largest single contributor to May's headline increase.
Take at look at the chart below, which shows core retail sales on a month-to-month and year-over-year basis. What's most striking about the chart is not the latest data, showing robust 0.8% gains in core sales--we exclude autos, gasoline and food--in both October and November, but the solidity of the trend since the winter.
Final data today will likely confirm that German inflation was unchanged at 0.2% year-over-year in August. The increased drag from falling energy prices was likely offset by higher food prices, mostly fresh vegetables. Core inflation was likely stable at 0.9% year-over-year, with a marginal rise in consumer services inflation offset by a fall in net rent. Rents could fall further this year due to the implementation of caps in major cities, but we s till only have little evidence on how individual states will implement the new legislation.
CPI data today in France and Germany will confirm that current inflation rates remain very low in the euro area. Inflation in Germany likely rose to 0.3% year-over-year from 0.0% in September, in line with the consensus and initial estimate. State data indicate that the rise was driven by surging fresh food prices and slightly higher services inflation, principally due to a jump in the volatile recreation and culture sector. Looking ahead, food prices will drop back, but energy inflation will rise rapidly as last year's plunge drops out of the year-over-year comparison, while upward core pressure is now emerging too.
China: Manuf. Green Shoots; Household Pain...Japan's Fiscal Package Faces Capacity Constraints...Korea's Q4 GDP Bump Is Iffy, But The Recovery Is On...Food Inflation In India Isn't Just About Onions
In one line: Rising food inflation offset plunge in energy inflation; core stable.
In one line: Supported by higher food inflation, and a firm core rate.
Further weakness to come for Japan's manufacturing PMI. First services hit from the coronavirus is damning. Japan's all-industry activity index suggests the 2019 tax hike was as bad as 2014. A drop in food inflation was enough to offset lagged oil pressures in Japan's January CPI. Ignore the headline; the coronavirus is now hurting Korean exports.
In one line: Hit by slower inflation in energy and food; the core rate rose, but the details were soft.
In one line: Lifted by higher core and food inflation.
In one line: Underlying pressures are modest, and food prices are starting to stabilise.
In one line: Underlying pressures will remain low, despite the food-related shock.
In one line: Coming in hot; lifted by higher food and core inflation.
Producer prices in Germany rose 0.4% month-to-month in May, stronger than the consensus expectation of a 0.3% gain, and we think further upside surprises are likely in coming months. The headline was boosted by a 0.7% jump in energy prices, but food and manufacturing goods prices also rose.
China's PPI back in deflation until fall. China's February CPI inflation was a battle between food and services. M2 growth in Japan was due a further uptick, given the perkier trends at the margin. Favourable base effects flattered Japanese machine tool orders in February.
Mexico's CPI rose just 0.1% in the first half of March, due to higher core prices. The increase was broadbased within this component, with goods prices increasing by 0.2% and core services 0.4%. Core services prices were driven by temporary factors, including vacation packages and higher airfare tickets. Non-core prices, meanwhile, fell 0.5%, due mainly to falling fresh food prices.
Mexico's private spending stumbled at the start of the second quarter. Retail sales fell 0.3% month-to-month in April after three consecutive increases, hit by an unexpected 1.6% drop in both supermarket and apparel sales, and a surprising 1.2% fall in food sales. In year-over-year terms, total sales rose 4.6% in April, down from 5.6% in March.
Here's something we didn't expect to write: The CPI measure of goods prices, excluding food and energy, rose in the three months to January, compared to the previous three months. OK, the increase was marginal, a mere 0.3%, but conventional wisdom has assumed for some time that the strong dollar would push goods prices down indefinitely.
Colombia's annual inflation rate closed last year at 3.7% year-over-year, unchanged from November, and within Banrep's target, 2%-to-4%. Core inflation, ex-food and fuel, advanced to 2.8% in December from 2.6% in November.
Data yesterday revealed that headline inflation in Germany was unchanged in March at 1.5%, thanks mainly to higher energy inflation, which offset a dip in food inflation.
Colombia's peso has been one of the most battered currencies in LatAm this year, due mainly to the sharp fall in oil prices, the country's primary export. The COP has dropped about 23% this year against the USD. At the same time, other temporary factors, most notably the impact of El Niño on food prices, have done a great deal of inflation damage too. October's food prices increased 1.4% month-to-month, pushing the year-over-year rate up to 8.8% from an average of 6.6% in the first half of the year. Overall inflation has jumped to 5.9% in October from 3.8% in January, forcing BanRep's board to act aggressively.
Renewed weakness in food and energy prices weighed on Eurozone inflation in July, but core inflation probably rose slightly. German inflation fell to 0.2% year-over-year in July, down from 0.3% in June. The hit came entirely from falling energy and food inflation, though, with the jump in services inflation suggesting rising core inflation.
Last week's final barrage of data showed that EZ headline inflation rose slightly last month, by 0.1 percentage points to 1.5%, driven mainly by increases in the unprocessed food energy components.
Advance data from Germany and Spain indicate that Eurozone inflation rebounded in October. We think inflation rose to 0.2% year-over-year from -0.2%, and German data suggest the main boost will come from both core and food inflation. Inflation in Germany rose to 0.3% year-over-year from 0.0% in September, lifted by an increase in inflation of leisure and entertainment, hotels and durable goods. Food inflation also rose to 1.6% from 1.1% in September, due to surging prices for fresh fruit and vegetables.
Miguel Chanco on India Inflation
pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research