Recent Updates
- Kazakhstan: Deposits of Individuals, Bank Loans by Type (Mar); Slovenia: Confidence Indicators (Apr)
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Economy in Brief
PMIs Stabilize or Creep Higher After Drop-Off
In the EMU, both the services and manufacturing sectors took a substantial step down one month ago...
FIBER: Industrial Commodity Prices Strengthen Selectively
The FIBER Industrial Materials Price Index increased 0.4% during the last four weeks...
German PPI Accelerates
The German year-on-year PPI has generally been decelerating since early 2017...
U.S. Leading Economic Indicators Signal Continued Expansion
The Conference Board's Composite Index of Leading Economic Indicators increased 0.3% during March...
Philadelphia Fed Factory Conditions Improve; Prices Jump
The Philadelphia Fed reported that its General Factory Sector Business Conditions Index rose to 23.2 during April...
by Robert Brusca March 31, 2009
Fat Chance…
The EMU FLASH HICP is at an all time low skinny 0.6% gain
Yr/Yr. If it were human we’d say it is anorexic. Italy also got on the
board with a weak HICP, posting the lowest reading since ‘Ed Sullivan’
and ‘Leave it to Beaver’ were first run shows. (roughly 1968).
Gooey Good News
Despite al this gooey good news the pace of inflation’s drop
actually is slowing, not speeding up. The Yr/Yr at 0.6% is higher than
the six month pace of -1.4% but then over three-months the pace
flattens at 0%. Core inflation is still stepping down. But we know what
is going on and what is driving these trends. Headline inflation is
driven by food and energy and in this cycle energy has taken the wheel,
not some deity. Spot oil prices had collapsed but the have climbed back
to the vicinity of $50.bbl. It is hard to tell where oil goes short
term, but prices are the up from their lowest, meaning headline
inflation will perform that same magic trick.
Peak oil not an issue now…
In broader terms inflation is clearly under control. When the
world economy grows again there will once again be all those questions
about peak oil or not. China is a new factor underpinning demand. But
we can put those questions off for a while.
Reality bites and the OECD worries
For now, and for some time to come, inflation seems to be
under control. The big news on our plate is the G-20 meeting and how
policy will respond to the current diverse challenges. The OECD
introduced a series of forecasts ahead of this meeting that have gotten
even glummer. The OECD is urging more stimulus as a result. All this is
going to put more pressure on the ECB to move rates lower, especially
with Euro-stimulus policy in the shape it’s in. The summit seems to be
a done deal as euro-stubbornness has won out. In addition French
intransigence is trying to make headway as France has threatened to
boycott if the regulation proposals are not enacted. Summit policy is
always pre-determined but it isn’t always this clear.
Policy options are alive…but not well…not even good
All in all it is not really surprising with such economic
weakness to find inflation is under control. That development puts more
leeway in the hands of policymakers. But what happens when they refuse
to take up the opportunity? Europe admits its 200bln euro plan will not
have much impact until 2010. That was Junker’s contribution to the
discussion today as the OECD ramped up the bad news. The US seems to be
living in a different world where action is required while Europe sits
back to watch. Some of this is that Europe already has a better social
safety net than the US. But that is ‘cushion’ and what the world needs
now is ‘stimulus,’ sweet stimulus. But it’s not happening in London.
London 2009 will make the same mistake as London 1977. It will reject a
chance for more stimulus and stretch out the pain. If London 1977 is a
learning experience, it launched Bonn 1978 and the result was that too
much stimulus was enacted too late. I hope that is not our true path.
On the other hand part of me says, ‘Fat chance’.
Trends in EMU HICP: Flash Index | |||||||
---|---|---|---|---|---|---|---|
% mo/mo | % SAAR | ||||||
Mar-09 | Feb-09 | Jan-09 | 3-Mo | 6-Mo | 12-Mo | Yr Ago | |
EMU-13 | -0.1% | 0.3% | -0.2% | 0.0% | -1.4% | 0.6% | 3.6% |
Core | #N/A | 0.2% | -0.2% | 0.6% | 1.1% | 1.7% | 2.4% |
Goods | #N/A | 0.3% | -1.2% | -6.3% | -3.2% | 0.3% | 3.8% |
Services | #N/A | 0.5% | -0.4% | 3.9% | 0.6% | 2.4% | 2.5% |
HICP | |||||||
Germany | -0.2% | 0.3% | 0.0% | 0.4% | -1.3% | 0.4% | 3.3% |
France | #N/A | 0.3% | -0.1% | -0.3% | -1.0% | 1.0% | 3.2% |
Italy | 0.0% | 0.4% | -0.6% | -0.7% | -0.9% | 1.0% | 3.5% |
Spain | #N/A | 0.2% | -0.4% | -2.4% | -2.7% | 0.7% | 4.4% |
Core excl Food Energy & Alcohol | |||||||
Germany | #N/A | 0.4% | -0.1% | 1.5% | 0.8% | 1.2% | 2.2% |
Italy | #N/A | 0.5% | -0.6% | 0.4% | 1.1% | 2.2% | 2.4% |
Spain | #N/A | -0.2% | -0.2% | -1.3% | -0.1% | 1.6% | 3.3% |
Blue shaded area data trail by one month |