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162 matches for " healthcare":
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
In the wake of April's 0.2% increase in real consumers' spending, and the upward revisions to the first quarter numbers, we now think that second quarter spending is on course to rise at an annualized rate of about 3.5%.
The shortfall in nominal wage growth, relative to measures of labor market tightness, remains the single biggest mystery of this business cycle.
Having panicked at the January hourly earnings numbers, markets now seem to have decided that higher inflation might not be such a bad thing after all, and stocks rallied after both Wednesday's core CPI overshoot and yesterday's repeat performance in the PPI.
Our comments on the inflation outlook over the last few months have focused mostly on the risk of continued mean-reversion in some of the components crushed by Covid, and the surge in used car prices, both of which remain real threats.
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.
Since January 2015, Core CPI inflation has risen to 2.3% from 1.6%, propelled by a combination of accelerating rents, a substantial rebound in the rate of increase of healthcare costs, and a modest-- though unexpected--upturn in core goods prices. It's always risky, though, simply to extrapolate recent trends and assume you now have a clear guide to the future.
The failure of House Republicans to support Speaker Ryan's healthcare bill has laid bare the splits within the Republican party. The fissures weren't hard to see even before last week's debacle but the equity market has appeared determined since November to believe that all the earnings-friendly elements of Mr. Trump's and Mr. Ryan's agendas would be implemented with the minimum of fuss.
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.
Yesterday's advance EZ PMI data for September conformed to our expectations.
The Prime Minister's refusal last week to reaffirm her party's 2015 election pledge not to raise income tax, National Insurance or VAT has fuelled speculation that taxes will rise if the Conservatives are re-elected on June 8. Admittedly, Mrs. May asserted that her party "believes in lower taxes", and the tax pledge s till might appear in the Conservatives' manifesto, which won't be published for a few weeks.
While we were out last week, market nervousness over the Covid-19 outbreak intensified, though most key indicators of the spread of the infection continued to improve.
Policymakers and governments are gradually deploying major fiscal and monetary policy measures to ease the hit from Covid-19 and the related financial crisis.
Hot on the heels of yesterday's grim-looking-- temporarily--existing home sales numbers for May, we see upside risk for today's new sales data.
We are currently operating with a very simply rule-of- thumb for interpreting the PMIs.
New Covid-19 cases in Mexico have continued to fall steadily over this month, with deaths peaking two weeks ago, as shown in our first chart.
Data released yesterday in Brazil helped to lay the ground for interest rate cuts over the coming months.
U.K. equities are falling ever further out of favour.
In a relatively light week in terms of economic indicators in Brazil, the inflation numbers and the potential effect of the recent BRL sell-off garnered all the attention.
The spread of the Covid-19 virus remains the key issue for markets, which were deeply unhappy yesterday at reports of new cases in Austria, Spain and Switzerland, all of which appear to be connected to the cluster in northern Italy.
The extent to which the Covid wave in the South and West--plus a few states in other regions--will constrain the recovery is unknowable at this point.
A decade of public deficit reduction was fully reversed in April, as the coronavirus tore through the economy.
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.
August's public finances figures, released last week, were an unwelcome but manageable setback for the Chancellor.
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.
The weaker is the economy over the next few months, the more likely it is that Mr. Trump blinks and removes some--perhaps even all--the tariffs on Chinese imports.
Yesterday's stock market bloodbath stands in contrast to the U.S. economic data, most of which so far show no impact from the Covid-19 outbreak.
In recent client meetings the first and last topic of conversation has been the market implications of the possible departure of President Trump from office.
We're reasonably happy with the idea that business sentiment is stabilizing, albeit at a low level, but that does not mean that all the downside risk to economic growth is over.
The number of Covid-19 cases is increasing at a faster rate, though 89% of the new cases reported Saturday were in China, South Korea, Italy and Iran.
The dreadful September ISM manufacturing survey reinforces our view that the sector will be in recession for the foreseeable future, and that both business capex and exports are on the verge of a serious downturn.
The duration and future scope of the current lockdown is the main uncertainty that U.K economic forecasters have to grapple with at present.
The Fed's strategic view of the economy and policy has not changed since last December, when it first said that "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.
We keep hearing that the surge in Covid-19 infections in the South is not a big deal, because the number of cases and the subsequent hospitalizations are still very low when compared to the nightmare suffered in New York and other states, which had thousands of deaths.
The uncertainty over the strength and speed of the economic rebound is still a concern for investors in terms of putting money to work.
At the October FOMC meeting, policymakers softened their view on the threat posed by the summer's market turmoil and the slowdown in China, dropping September's stark warning that "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term." Instead, the October statement merely said that the committee is "monitoring global economic and financial developments."
The recent sell-off in Treasuries has not yet reached significant proportions.
The biggest surprise in the recent inflation numbers has been the surge in the PCE measure of hospital services costs, where the year-over-year rate has jumped to 3.8% in February, an eight-year high, from just 1.3% in September.
This is the final U.S. Economic Monitor of 2017, a year which has seen the economy strengthen, the labor market tighten substantially, and the Fed raise rates three times, with zero deleterious effect on growth.
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.
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.
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 closer we look at the data, the less concerned we are at the painfully slow decline in the number of new daily confirmed Covid-19 cases.
Argentina's inflation ended 2019 badly, and it is still too early to bet on a protracted downtrend, even after the renewed economic slowdown.
Under normal circumstances, the boost to consumption from the astonishing collapse in oil prices would act as a substantial--though not complete--offset to the hit to capital spending in the shale business.
Brazil's mid-June inflation reading surprised to the downside, falling to 9.0% from 9.6% in May. The reading essentially confirmed that May's rebound was a pause in the downward trend rather than a resurgence of inflationary pressures. A 1.3% increase in housing prices, including services, was the main driver of mid-June's modest unadjusted 0.4% month-to-month rise in the IPCA-15.
The Fed will soon have to step in to try to put a firebreak in the stock market.
We think today's February payroll number will be reported at about 140K, undershooting the 175K consensus.
Inflation in Colombia right now is under control but risks are increasing rapidly, and the outlook for next year has deteriorated significantly.
The sell-off in equity markets and increases in volatility have put EM assets under pressure. EM equities and bonds, however, have been outperforming their U.S. and global market counterparts.
August's GDP report, released on Friday, looks set to reinforce the downward pressure on gilt yields by making it even more likely that the MPC will extend its QE programme later this year.
Wednesday's industrial production report in Brazil was terrible, despite overshooting market expectations.
Our Chief Eurozone Economist, Claus Vistesen, is covering the Italian situation in detail in his daily Monitor but it's worth summarizing the key points for U.S. investors here.
The biggest surprise in the revisions to first quarter GDP growth, released yesterday, was in the core PCE deflator.
We look for a 150K increase in September payrolls, rather better than the August 130K headline number, which was flattered by a 28K increase in federal government jobs, likely due to hiring for the 2020 Census.
The short answer to the question posed by our title is: We don't know. But that's the point, because we shouldn't be needing to ask the question at all.
The government will have no choice but to introduce fresh nationwide curbs on economic activity before long, if the current steep upward trend in Covid-19 infections is sustained.
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
The coronavirus outbreak has pushed inflation lower in the Andean economies as the shock drives them into the deepest recession on record.
Today brings only the preliminary Michigan consumer sentiment data for January so we want to take some time to look at how recent changes to Medicare Part B premiums, which cover doctors' fees, are likely to affect inflation over the next few months.
Headline inflation in Brazil remained low in October, and even breached the lower bound of the BCB's target range.
The rate of increase of Covid-19 new cases in the Andes is still rapid, but it seems to have peaked in recent days in most countries.
Hard data in the Eurozone continue to tell a story of a relatively bright pre-Covid-19 world.
Colombia was the fastest growing LatAm economy in 2019, due mostly to strong domestic demand, offsetting a sharp fall in key exports.
A pair of closely-watched reports today will confirm that business and consumer confidence is tanking in the face of the coronavirus outbreak.
The only significant surprise in the terrible second quarter GDP numbers was the 2.7% increase in government spending, led by near-40% leap in the federal nondefense component.
Fourth quarter GDP growth is likely to be revised down today.
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.
We expect to learn today that first quarter GDP fell at a 4.3% annualized rate, but the margin of error here is bigger than usual. Under normal circumstances we're disappointed if our quarterly GDP estimate is out by more than a few tenths, but this time around, the uncertainties are huge. Anywhere between -2% and -6% wouldn't be a big surprise.
Data released yesterday confirmed that economic activity is improving in Brazil.
Today's wave of data will bring new information on the industrial sector, consumers, the labor market, and housing, as well as revisions to the third quarter GDP numbers.
The rate of growth of Covid-19 cases outside China appears to have peaked, for now, but we can't yet have any confidence that this represents a definitive shift in the progress of the epidemic.
Data released on Friday in Brazil and recent political events helped to open the door further to a final rate cut in August. The IPCA-15--which previews the full CPI-- rose 0.3% month-to-month in July, well below market expectations, 0.5%.
India's government imposed a three-week nationwide lockdown on March 25 to combat the increasingly rapid spread of Covid-19.
The stock market did not like the renewed closure of bars in Texas and Florida, announced Friday morning.
Yesterday's data don't significantly change our view that first quarter GDP growth will be reported at only about 1%, but the foreign trade and consumer confidence numbers support our contention that the underlying trend in growth is rather stronger than that.
The U.S. coronavirus outbreak is not slowing. The curve is not bending much, if at all. Confirmed cases continue to increase at a steady rate, averaging 23% per day over the past three days.
The November ADP employment report today likely will show private payrolls rose by about 180K. We have no reason to think that the trend in payroll growth has changed much in recent months, though the official data do appear to be biased to the upside in the fourth quarter, probably as a result of seasonal adjustment problems triggered by the crash of 2008. We can't detect any clear seasonal fourth quarter bias in the ADP numbers.
The release of pent-up Japanese consumer demand in June was emphatic, with retail sales values jumping by 13.1% month-on-month.
We have argued recently that the year-over-year rates of core CPI and core PCE inflation could cross over the next year, with core PCE rising more quickly for the first time since 2010.
We're expecting a hefty increase in private payrolls in today's August ADP employment report. ADP's number is generated by a model which incorporates macroeconomic statistics and lagged official payroll data, as well as information collected from firms which use ADP's payroll processing services.
Our base case forecast has core PCE inflation at 1.9% from November 2018 through July this year.
Markets remain convinced that the U.S. faces no meaningful inflation risk for the foreseeable future.
We were terrified by the plunge in the ISM manufacturing export orders index in August and September, which appeared to point to a 2008-style meltdown in trade flows.
Yesterday's final inflation data in France for September were misleadingly soft.
In the wake of the surprise 0.6% July surge in the core CPI, the biggest increase since January 1991--most forecasters look for mean reversion to 0.2% in today's August report.
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
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.
We'd be surprised to see a repeat today of August's very modest 0.08% increase in the core CPI.
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
It's just not possible to forecast the reaction of businesses and consumers to the coronavirus outbreak.
Today brings the April PPI data, which likely will show core inflation creeping higher, with upward pressure in both good and services. The upside risk in the goods component is clear enough, as our first chart shows.
Outside the battered energy sector, the most consistently disconcerting economic numbers last year, in the eyes of the markets, were the monthly retail sales data. Non-auto sales undershot consensus forecasts in nine of the 12 months in 2015, with a median shortfall of 0.3%.
A strong December didn't change the story of another year of Eurozone equity underperformance in 2016. The total return of the MSCI EU, ex-UK, last year was a paltry 3.5%, compared to 11.6% and 10.6% for the S&P 500 and MSCI EM respectively. In principle, the conditions are in place for a reversal in this sluggish performance are present. Equities in the euro area do best when excess liquidity--defined as M1 growth less GDP growth and inflation--is rising.
Higher gasoline prices will lift today's headline October CPI, which should rise by 0.3%. Unfavorable rounding could easily push it to 0.4%, though, and year-over-year headline inflation should rise to 1.6% or 1.7%, from 1.5% in September and just 0.2% a year ago.
In March, CPI rents--the weighted average of primary and owners' equivalents rents--rose by 0.35% month- to-month.
We have drawn attention over the past couple of weeks in our daily Coronavirus Update to the rising trend in new cases in some states, mostly in the South.
Monthly core CPI prints of 0.3% are unusual; June's was the first since January 2018, so it requires investigation.
Brazil's political situation is steadily improving, with the latest events proving a step in the right direction.
The announcement, late Tuesday, that the administration plans to impose 10% tariffs on some $200B-worth of imports from China raises the prospect of a substantial hit to the CPI.
Yesterday's accounts from the June ECB meeting broadly confirmed markets' expectations of further easing between now and the end of the year.
We already know that the key labor market numbers in today's May NFIB survey are strong.
Retail sales ex-autos have undershot consensus forecasts in eight of the 11 reports released so far this year, prompting interest rate doves to argue that consumers have not spent their windfall from falling gas prices. But this ignores the impact of falling prices--for gasoline, electronics, furniture, and clothing--on the sales numbers, which are presented in nominal terms.
The Fed will do nothing today, but the FOMC's statement will re-affirm the intention to continue its "gradual" tightening.
The obsession of markets and the media with the industrial sector means that today's ISM manufacturing survey will be scrutinized far more closely than is justified by its real importance.
It's probably too soon to expect to see a meaningful reaction in the NFIB small business survey to the drop in stock prices, but it likely is coming, and a hit in today's March report can't be ruled out entirely.
In the absence of an unexpected surge in auto sales or a sudden burst of unseasonably cold weather, lifting spending on utilities, fourth quarter consumption is going to struggle to rise much more quickly than the 2.1% annualized third quarter increase.
All eyes today will be on the core PCE deflator for January, following the unexpectedly large 0.3% increase in the core CPI.
Headline inflation in the Eurozone eased at the start of the year, but leading indicators suggest that the dip will be short-lived.
At next Wednesday's Budget, the Chancellor will have the rare pleasure of announcing lower-than- anticipated near-term borrowing forecasts. But hopes that he will prevent the fiscal tightening from intensifying when the new financial year begins in April look set to be dashed, just as they were at the Autumn Statement in November.
The first of this week's two July inflation reports, the PPI, will be released today. With energy prices dipping slightly between the June and July survey dates, the headline should undercut the 0.2% increase we expect for the core by a tenth or so.
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
We're expecting to see another dip in initial claims for regular state unemployment benefits today, to about 850K, but that's only part of the story.
We see clear upside risk to the inflation data due before the FOMC announcement, from three main sources.
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.
We were happy to see initial jobless claims fall to a 15-week low of 1,314K yesterday, but the labor market is still in a terrible state.
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.
We expect May's GDP report, released on Tuesday, to provide an early blow to hopes that the economy will embark on a V-shaped recovery this year.
The April CPI report today will be watched even more closely than usual, after the surprise 0.12% month-to-month fall in the March core index. The biggest single driver of the dip was a record 7.0% plunge in cellphone service plan prices, reflecting Verizon's decision to offer an unlimited data option.
For the past six years, the PCE measure of core inflation has undershot the CPI version. The average spread between the two year-over-year rates since January 2011 has been 0.3 percentage points, and as far as we can tell most observers expect it to be little changed for the foreseeable future.
The return of the virus in the Eurozone isn't what the economy needed, but we continue to think it differs from the first shock, for three key reasons.
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.
Chinese PPI inflation surprised analysts with a sharp rebound to 6.3% in August, from 5.5% in July, above the consensus, 5.7%.
Our current base-case forecast for the second quarter is a 30% annualized drop in GDP, based on our assessment of the hit to discretionary spending by both businesses and consumers.
Inflation data in Germany remain up in the air following recent revisions and restatements of the underlying indices.
Mexican policymakers stuck to the script yesterday and voted unanimously to cut the main rate by 50bp to 5.50%, its lowest level in more than three years.
It's hard for a central bank presiding over an ageing economy to achieve a core inflation target of close to 2%. In yesterday's Monitor, we showed that German core inflation has averaged a modest 1.3% in this business cycle, despite solid GDP growth. The picture isn't much better for the ECB if we look at France.
The House passage of a stimulus bill last Friday, seeking to ameliorate some of the damage done by the coronavirus outbreak, will not be nearly enough.
We have not been expecting the Fed to raise rates next week, and yesterday's data made a hike even less likely. The September Philly Fed and Empire State surveys were alarmingly weak everywhere except the headline level, and the official August production data were grim.
Incoming activity data from Colombia over the past quarter have been surprisingly strong, despite many domestic and external threats.
The strong dollar is pushing down goods prices, but not very quickly. As a result, the sustained upward pressure on rents is gradually nudging core CPI inflation higher. It now stands at 1.9%, up from a low of 1.6% in January, and even relatively modest gains over the third quarter will push the rate above 2% by year-end. We can't rule out core CPI inflation ending the year at a startling 2.3%.
Yesterday's detailed French CPI data for September added to evidence of softening core inflation in the Eurozone.
Inflation pressures in France eased in February, in contrast to the story in the rest of the EZ. Yesterday's report confirmed the initial estimate that inflation fell to 1.2% year-over-year in February, from 1.3% in January. The headline was hit by a crash in the core rate to a two-year low of 0.2%, from 0.7% in January.
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.
The surge in Covid-19 case and hospitalizations-- and, in due course, deaths--in some southern states since they began to reopen probably is not a sign of what is likely to happen as the populous states in the Northeast and Midwest reopen too.
Yesterday's data provided further evidence of the EZ economy's response to the Covid-19 shock, though we recommend that investors take the numbers with a pinch of salt. In Germany, the final CPI report for April showed that headline inflation slipped to 0.9% year-over-year, from 1.4% in March, trivially above the first estimate, 0.8%.
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.
We argued a couple of weeks ago that the stock market could suffer a relapse, on the grounds that valuations hadn't fallen far enough from their peak to reflect the extent of the hit to the economy; that hopes for an early re-opening were likely to prove forlorn; and that investors were likely to be spooked by the incoming coronavirus data.
The measures to support the economy through the coronavirus crisis, unveiled by policymakers on Budget day, exceeded expectations.
LatAm governments and policymakers are bracing for a more dramatic and longer virus-led downturn than initially expected.
Today's November retail sales numbers are something of a wild card, given the absence of reliable indicators of the strength of sales over the Thanksgiving weekend, and the difficulty of seasonally adjusting the data for a holiday which falls on a different date this year.
Japan's second wave of Covid-19 is in its early phase, though the virus appears to be spreading rapidly.
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.
German inflation data are more noise than signal at the moment.
Data yesterday showed that industrial production in the Eurozone stumbled in May. Production fell 1.2% month-to-month, driven by weakness in all major economies and falling output in all sub-industries. The poor headline follows an upwardly revised 1.4% jump in April, which means that production rose marginally in the first two months of the second quarter.
Treasury Secretary Mnuchin's five-line letter to House Speaker Pelosi on last Friday--copied to other Congressional leaders--which said that "there is a scenario in which we run out of cash in early September, before Congress reconvenes", introduces a new element of uncertainty to the debt ceiling story.
The costs of the government's failure to lock down quickly in response to the Covid-19 pandemic, ultimately necessitating long-lasting restrictions, were visible in May's GDP figures.
GDP data for July, released on Friday, showed that the economic recovery following the Covid-19 lockdown still does not look V-shaped, even though virtually all restrictions on economic activity had been lifted.
Yesterday's final CPI report in Germany confirmed the initial estimate that inflation was unchanged at 0.4% year-over-year in August. Deflation in energy prices eased further, but the headline was pegged back by a small fall in the core rate to 1.2% year-over- year, from 1.3% in July.
The overarching theme in the September CPI numbers is that there is no overarching theme.
The minutes of the September 19/20 FOMC meeting record that "...it was noted that the National Federation of Independent Business reported that greater optimism among small businesses had contributed to a sharp increase in the proportion of small firms planning increases in their capital expenditures."
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
German data yesterday indicate that inflation pressures have, so far, been resilient in the face of the recent collapse in oil prices. Inflation rose to 0.5% year-over-year in January from 0.3% in December, partly due to base effects pushing up the year-over-year rate in energy prices, but core inflation rose too. The detailed state data indicate that almost all key components of the core index contributed positively, lead by leisure and recreation and healthcare.
December's payroll numbers were unexciting, exactly matching the 175K consensus when the 19K upward revision to November is taken into account. Some of the details were a bit odd, though, notably the 63K jump in healthcare jobs, well above the 40K trend, and the 19K drop in temporary workers, compared to the typical 15K monthly gain.
Barring a gigantic shock from the Fed this week--we expect a 25bp hike--Eurozone equities will end the year with a solid return for investors, who have been overweight. Total return of the MSCI EU ex-UK should come in around 10%, which compares to a likely flat return for the MSCI World, reflecting the boost from the ECB's QE driving out performance. Our first chart shows the index has been mainly lifted by consumer sector, healthcare and IT stocks, comfortably making up for weakness in materials and energy. The year has been a story of two halves, however, and global headwinds have intensified since the summer, partly offsetting the surge in the Q1 as markets celebrated the arrival of QE and negative interest rates.
The headline ISM non-manufacturing index is not, in our view, a leading indicator of anything much. The survey covers a broad array of non manufacturing activity, including mining, healthcare, and financial services, but most of the time it tends to follow the track of real core retail sales, as our first chart shows.
In one line: The labor market has stalled; PPI boosted by autos and healthcare services.
In one line: Healthcare inflation is accelerating; will it be sustained?
In one line: Rents and healthcare lift the core; they are the key risks for 2020
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