Search Results: 169
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: firstname.lastname@example.org.
169 matches for " food 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 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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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
Data released yesterday in Brazil helped to lay the ground for interest rate cuts over the coming months.
Inflation in Brazil and Mexico is ending Q3 under control, allowing the central banks to keep easing monetary policy.
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.
The coronavirus pandemic looks set to spread rapidly throughout LatAm.
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.
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 the biggest economies in the region remains close to cyclical lows, allowing central banks to ease even further over the next few months.
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 CPI inflation jumped to 1.3% in August, from 0.9% in July.
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.
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.
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.
Brazil's inflation rate remained well under control over the first half of February.
Japan's jobless rate was unchanged, at 2.4% in October, as the market took a breather after September's job losses.
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.
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.
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.
A slew of Asian price numbers are due this Friday, and they will all likely show that price gains softened further in January.
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.
Yesterday's CPI report in the Eurozone confirmed that inflation pressures remain subdued, even as GDP growth is accelerating.
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%.
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.
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.
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.
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.
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.
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 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.
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.
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.
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%.
China's real GDP growth officially slowed to 6.5% year-over-year in Q3, from 6.7% in Q2.
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.
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.
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.
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.
Colombia and Chile faced similar broad trends through most of 2018.
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.
Brazil's benchmark inflation index, the IPCA, fell 0.1% month-to-month unadjusted in August, below market expectations.
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.
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.
In his second confirmation hearing, Governor Kuroda continued his dance with markets, dialling down the exit talk.
Data released on Friday showed that November inflation was in line with, or below, expectations in Brazil, Colombia and Chile.
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.
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.
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.
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.
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.
The Brazilian central bank cut the benchmark Selic interest rate by 25bp, to 4.25%, on Wednesday night, as expected.
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.
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.
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.
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."
Japan returned the ruling LDP coalition to power in an upper house election over the weekend.
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 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.
Tokyo inflation surprised us on Friday, rising to 0.9% in July, from 0.6% in June.
Japan's labour market is already tight, but last week's data suggest it is set to tighten further.
Colombia's central bank has found a relatively sweet spot.
We have consistently flagged the likelihood that Japan's government would boost spending after the consumption tax hike was implemented.
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.
The services sector in China is notoriously difficult to track, with the major aggregate statistics published only on a quarterly or even annual basis.
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.
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.
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.
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.
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.
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.
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.
Yesterday's price data for China showed continued declines in both CPI and PPI inflation.
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.
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.
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.
The clear threat to demand posed by the coronavirus and China's efforts at containment have sent a shock wave through commodities markets.
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.
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.
This week's data confirmed Mexico's strong economic performance over the first few months of this year.
CPI inflation in China surged to a five-month high of 2.3% in March, from 1.5% in February.
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.
Inflation in Brazil surprised to the upside this week, with a sharp rebound that looks alarming at face value.
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.
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
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
The recent FX depreciation and falling oil prices are driving the dynamics of inflation across the Andean economies.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Data released yesterday reinforced our forecast of a further rate cut in Brazil next month.
Data released in recent days have supported our base case for further interest rate cuts in Mexico over the coming meetings.
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.
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.
The headline April CPI, due today, will be boosted slightly by rising gasoline prices.
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.
Collapsing oil prices add fresh deflationary pressure on China.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Inflation in the Andean economies ended 2019 well within central banks' objectives, despite many domestic and external challenges.
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%.
Yesterday's second estimate of Q4 Eurozone GDP confirmed the upbeat story from the advance report, despite the dip in headline growth.
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.
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.
Chinese PPI inflation surprised analysts with a sharp rebound to 6.3% in August, from 5.5% in July, above the consensus, 5.7%.
The Bank kept interest rates unchanged at 1.50% yesterday, but downgraded its inflation forecast for 2018 to 1.6% from 1.7%
Brazil's political situation is steadily improving, with the latest events proving a step in the right direction.
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.
Japan's Q2 GDP was driven by the twin pillars of private consumption and capex.
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.
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.
Yesterday marked President AMLO's first 100 days in office, with skyrocketing approval ratings and improving consumer confidence.
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.
October's consumer price figures, released Tuesday, likely will show that CPI inflation increased to 3.1%, from 3.0% in September.
Data over the weekend revealed a further slowdown in China's CPI inflation, to 1.5% in February, from 1.7% in January.
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.
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.
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.
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.
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.
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.
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.
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 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%.
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 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.
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.
In one line: Underlying pressures are modest, and food prices are starting to stabilise.
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.
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.
Japan's CPI inflation jumped to 1.0% in December from 0.6% in November, driven by food prices.
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.
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.
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.
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.
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