This week we review inflation data from the US and the EU. Also examined is Japan's influential Tankan business sentiment survey, and a check in on US housing starts. Finally we sum up with a look at some of the many monetary policy decisions from the past week.
1. US Inflation
The US recorded a 1.1% y/y headline rate of inflation in November (vs 1.2% in October), and core inflation of 0.7% (vs 0.6% in October). So overall a pretty ho-hum result, inflation at the consumer level is still quite subdued despite inflation pressure beginning to rise at the producer level; particularly in commodities. So the case remains that the Fed still has its work cut out in terms of spurring up inflation - but the question is, when will the new worry of inflation rather than deflation come about? this is one to watch carefully.
2. EU Inflation
Over in the EU, inflation rates were unchanged between October and November, with the EU rate at 2.3%, and the Euro-Area headline rate at 1.9% and the Euro-Area core rate was 1.1%. The same old story of significant diversity across the region applied with the highest rate of 7.7% recorded in Romania, and the lowest rate -0.8% in Ireland. And so the Euro experiment continues, inflation will likely gradually pick up over the next year, provided that the economic recovery doesn't get derailed (and there are a few risks floating around).
3. Japan Tankan
The influential business sentiment survey, the Tankan all companies index had fell to -11 from -10. Large manufacturers declined to 5 from 8, and large non-manufacturers fell to 1 from 2. Small manufacturers improved to -12 from -14 and small non-manufacturers fell to -22 from -21. Thus overall the results were relatively negative, reflecting the challenging economic conditions in Japan. Companies are finding the dual effects of fading stimulus and a stronger Yen to be having a negative impact.
4. US Housing Starts
Housing starts in the US were basically flat again, recording 0.555m vs consensus 0.550m, and previous 0.519. So the results look kinda good, but in a time series (as in the chart below) it's clear the market is still just muddling along. The only real good news out of this piece is that at least it didn't get worse, i.e. there appears to be some stabilizing.
5. Monetary Policy Review
In the past week the central banks of Sri Lanka, US, Hong Kong, Norway, Namibia, Sweden, Botswana, Egypt, Switzerland, India, Poland, Turkey, Chile, Columbia all met to review monetary policy settings. There were a few movements in interest rates with those to tighten being: Sweden +25bps and Chile +25bps, while those that dropped rates were: Namibia -75bps, Botswana -50bps, and Turkey -50bps. While the rest held steady, and the US made no alterations to its quantitative easing program.
So we saw inflation basically flat-lining in the US for now, over in the EU inflation appears to be gradually picking up but risks remain. Japan saw less than exciting results in the Q4 reading of the Tankan survey, and the US saw flat housing starts as the housing market appears to be stabilizing somewhat. On the monetary policy front we saw a couple tighten, a few drop, and most hold steady as monetary policy becomes more de-synchronized as the global recovery also becomes more de-synchronized.
1. US Bureau of Labour Statistics www.bls.gov
2. Eurostat epp.eurostat.ec.europa.eu
3. Bank of Japan www.boj.or.jp
4. US Census Bureau www.census.gov
5. CentralBankNews.info www.centralbanknews.info