Econ Grapher

Monetary Policy Week in Review - 30 July 2011

2011-07-29T21:27:00.000-07:00

The week in monetary policy saw 8 central banks announcing interest rate decisions. Of those that changed rates were: India +50bps to 8.00%, Nigeria +75bps to 8.75%, and Colombia +25bps to 4.50%. Meanwhile those that held monetary policy interest rates unchanged were: Israel 3.25%, Hungary 6.00%, New Zealand 2.50%, Kenya 6.25%, and the Philippines 4.50%. Other than interest rates, the Philippines raised its required reserve ratio by 100 basis points to 21%, and Turkey dropped its required reserve ratios by 100-200bps to add extra liquidity to the market.

In terms of themes, the week was very much dominated by emerging market central bank activity. India surprised the market by raising rates more than expected in response to a persistent inflation threat against the backdrop of still relatively strong economic growth. Indeed the message was that emerging markets are still facing elevated price levels and inflationary impulse, and many of them are still recording relatively high rates of growth, particularly as compared to developed markets.

A selection of key quotes from the monetary policy statements and media releases are listed below:

Bank of Israel (held rate at 3.25%): "Forecasters' inflation expectations for the next twelve months remained steady at slightly below the upper limit of the target range. Forecasters' inflation expectations and those derived from the capital market go together with the assessment that the Bank of Israel will continue to increase the interest rate, but at a slower pace than in the first half of the year."
Reserve Bank of India (increased 50bps to 8.00%): "Considering the overall growth and inflation scenario, there is a need to persevere with the anti-inflationary stance,".
Central Bank of Nigeria (increased 75bps to 8.75%): "The inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum products," and that there is "the need for pursuing policies to foster macro- economic stability, economic diversification as well as encouraging foreign capital inflows".
Reserve Bank of New Zealand (held rate at 2.50%): "Provided current global financial risks recede and the economy continues to recover, the Bank sees little need for the March 2011 'insurance' cut to remain in place much longer. The current very high value of the New Zealand dollar is acting as a drag on the New Zealand economy. If this persists, it is likely to reduce the need for further OCR increases in the short term."
Philippine Central Bank (held rate at 4.50%): "bank lending has been growing at double-digit rates since January 2011, supported by the strong momentum of domestic economic activity and stable financial conditions... The Monetary Board is of the view that sustained foreign exchange inflows, driven by upbeat market sentiment over the brighter prospects for the Philippine economy, could fuel a further acceleration of domestic liquidity growth which could pose risks to future inflation."
Central Bank of Colombia (raised rate 25bps to 4.50%): "Since March, the average measures of core inflation has been a slight upward trend in June and reached a level close to the midpoint of the target range (3% + / - 1 percentage point). Inflation expectations at various horizons are also within that range."

Looking to the central bank calendar, next week is set to be dominated by developed market or advanced economy central bank activity (note, the US also meets early in the following week). So it will be an interesting week in terms of how these banks react to whatever happens with the US debt situation...

AUD - Australia (Reserve Bank of Australia) - expected to hold at 4.75% on the 2nd of August
GBP - UK (Bank of England) - expected to hold at 0.50% on the 4th of August
CZK - Czech Republic (Czech National Bank) - expected to hold at 0.75% on the 4th of August
EUR - Eurozone (European Central Bank) - expected to hold at 1.50% on the 4th of August
JPY - Japan (Bank of Japan) - expected to hold at 0.10% on the 5th of August

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/07/monetary-policy-week-in-review-30-july.html

Top 5 Graphs of the Week - 24 Jul 2011

2011-07-23T19:48:00.000-07:00

This week we check in on the current inflation and monetary policy situation for the key developed economies and emerging markets, with a particular focus on the outlook for inflation and interest rates, and the likely consequent outlook for developed vs emerging market equities. Overall it's looking like the monetary policy outlook may become more friendly to emerging markets than developed markets, but of course that could all change if certain key risks materialize...

1. BRIC Inflation

Inflation has been a key issue in emerging markets this year, creating a unique set of risks e.g. policy tightening, overheating and hyperinflation, social unrest, exported inflation, etc. These risks have only expressed to a limited extent so far. Within the BRIC economies the most recent data (Brazil 6.71%, Russia 9.4%, India 8.72%, China 6.4%) has shown some hope of a peak in inflation or a tapering off, but the risk of further inflation remains as the BRIC economies remain relatively strong, and with commodity prices easing only somewhat. So the key focus for inflation risks is whether the recent string of monetary policy tightening moves is enough...

2. BRIC Interest Rates

Looking at the BRIC central banks, focusing on interest rates, total interest rate moves since policy rates bottomed out are as follows: Brazil +375 basis points, Russia +50bps, China +125bps, India +325bps. Each of the banks are playing a delicate and fraught balancing act with the risks of further inflation on the one hand and the risks of scuttling growth or even hard landing on the other hand. For now the balance is probably about right, but we're approaching territory where any further upside impetus on the inflation front is likely to force the central banks' hands to more aggressive tightening. Of course this will be bad for equities, with emerging market equities being held firmly back by this monetary policy tightening, but on the other hand, if inflation shows signs of peaking or even turning then emerging market equities should start to factor in an end to monetary policy tightening.

3. Developed Market Inflation

While developed markets have not been growing as fast as emerging markets, thanks in part to rising commodity prices, general price normalization, and demand normalization, inflation has clearly recovered in developed markets. Since their lowest figures in 2009 to the most recent readings inflation has increased as follows US +570bps, EU +340bps, Japan +290bps, UK +310bps. However each of those economies still remain at least 100bps away from the peak inflation figures of 2008. That will most likely not last. In fact, without a significant drop in commodity prices or a return to recession (a non-zero probability given some of the recent weaker readings and the Euro and US debt risks), inflation will almost certainly return to pre-crisis levels, and policy makers could easily miss the boat.

4. Developed Market Interest Rates

With the exception of the ECB, the monetary policy response to rising inflation has been to ignore it and focus on the growth side of things. This stance probably makes sense for the period of about 2-years after the crisis due to the depth and severity of it all. But abnormally low rates are not sustainable, low rates lead to greater risk appetites and ultimately higher inflation. The only saving grace is that governments like the US, UK and Japan all seriously need to do some decent fiscal tightening to get their government finances in order; this may (or may not) contain some aspects of inflation, but ultimately these banks need to start on a slow progression back to normality. So on balance the monetary policy outlook for developed markets is likely more bearish for equities than the outlook in emerging markets.

5. Monetary Policy Week in Review

Diving back down to the detail in the here and now, the past week in monetary policy saw the Banco Central do Brasil increase its Selic rate by 25 basis points to 12.50%. Meanwhile those that held rates unchanged were: Canada at 1.00%, South Africa at 5.50%, Turkey at 6.25%, and Egypt at 8.25%. Common themes in the media releases were a pretty keen focus on the risks coming from the EU and US debt situations, and Brazil possibly signaled an end to its tightening cycle. Next week there's a few interesting monetary policy decisions due; Israel, India, New Zealand and the Philippines are among those reviewing policy settings, with India the only one expected to move, with consensus seeing another +25bps.

Summary

So we saw inflation tracking along in emerging markets, showing a brief history of accelerating inflation, and although upside inflation risks remain, there are some signs that inflation may be peaking in at least some of the BRIC economies. Accordingly the monetary policy outlook for emerging markets could well become more accomodative, or at least no more tighter, and this could possibly brighten the outlook for emerging market equities.

Over to developed markets, flirtations with deflation were quite short-lived as the past year or so has seen significant reinflation, and unless fiscal tightening is particularly onerous, and as long as another slowdown is avoided, the inflation outlook for developed economies might be for further upside. Accordingly, the monetary policy outlook for developed economies is, or at least should be, for tightening and higher interest rates, which may take some of the shine of developed market equities.

So for the emerging market vs developed market equity allocation, a keen eye should be fixed on the developing inflation and monetary policy outlook, for today; this is a macro-driven market.

Graph Sources:

1. Trading Economics www.tradingeconomics.com

2. Central Bank News www.centralbanknews.info

3. OECD Statistics stats.oecd.org

4. Central Bank websites

5. Central Bank News www.centralbanknews.info

Article Source: http://econgrapher.blogspot.com/2011/07/top-5-graphs-of-week-24-jul-2011.html

Monetary Policy Week in Review - 23 July 2011 (guest post)

2011-07-22T17:14:00.000-07:00

The past week in monetary policy was relatively quiet, with just five central banks announcing interest rate decisions. The only central bank to adjust rates was the Banco Central do Brasil, which increased its Selic rate by 25 basis points to 12.50%. The other banks that held rates unchanged were: Canada at 1.00%, South Africa at 5.50%, Turkey at 6.25%, and Egypt at 8.25%. Elsewhere in central banking, Taiwan's central bank increased commercial bank minimum liquidity requirements as part of an ongoing program to strengthen risk management in the banking system.

So for the central banks that reviewed monetary policy settings it was very much a case of wait and see, with the banks largely viewing current settings as appropriate. Indeed if holding rates steady was the theme, the BRIC economy Brazil was consistent with this even though it increased rates, in that the Brazilian central bank slightly altered the tone of its statement; perhaps hinting that it is near the end of its tightening cycle. Another theme within this was strong vigilance of risks, particularly those emanating from the Euro area, with still high levels of uncertainty as to how the crisis will unfold.

Listed below are some of the key quotes from central bank monetary policy statements and media releases from the week ending 23 July 2011:

Bank of Canada (held interest rate at 1.00%): "To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2.0 percent inflation target. Such reduction would need to be carefully considered".
Banco Central do Brasil (increased rate +25bps to 12.50%): "evaluating the prospective scenario and the balance of risks for inflation, the Copom decided, unanimously, at this moment, to raise the Selic rate to 12.50% p.a., with a neutral bias."
South African Reserve Bank (held interest rate at 5.50%): "The MPC is not complacent and will remain vigilant and continue to monitor closely any indications of second-round effects on inflation emanating from these cost pressures as well as the changing risk profile of the inflation outlook."... "The view of the MPC continues to be that the underlying inflation pressures are mainly of a cost push nature, notwithstanding signs of a possible moderate increase in underlying inflation."
Central Bank of Turkey (held interest rate at 6.25%): "it would be appropriate to narrow the interest corridor gradually should the sovereign debt problems regarding some European economies and the concerns on global growth continue to have adverse impact on the risk appetite. The Committee has also stated that all policy instruments may be eased should global economic problems intensify and lead to a contraction in domestic economic activity."
Central Bank of Egypt (held interest rate at 8.25%): "the slowdown in economic growth should limit upside risks to the inflation outlook. Given the balance of risks on the inflation and GDP outlooks and the increased uncertainty at this juncture, the MPC judges that the current key CBE rates are appropriate."

Next week is set to be relatively busy in terms of monetary policy decisions, with at least 8 central banks scheduled to review policy settings. Many of the banks are in emerging market countries so it will be timely to get an update on what they are thinking about and concerned about:

ILS - Israel (Bank of Israel) - expected to hold at 3.25% on the 25th of July
HUF - Hungary (Magyar Nemzeti Bank) - expected to hold at 6.00% on the 26th of July
INR - India (Reserve Bank of India) - may increase rate 25bps to 7.75% on the 26th of July
NGN - Nigeria (Central Bank of Nigeria) - may increase rate 50bps to 8.50% on the 26th of July
KES - Kenya (Central Bank of Kenya) - expected to hold at 6.25% on the 27th of July
NZD - New Zealand (RBNZ) - expected to hold at 2.50% on the 28th of July
PHP - Philippines (Bankgo Sentral ng Pilipinas) - expected to hold at 4.50% on the 28th of July
PKR - Pakistan (State Bank of Pakistan) - expected to hold at 14.00% on the 30th of July

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/07/monetary-policy-week-in-review-23-july.html

China Economic Check-up: Nope, no hard landing yet folks

2011-07-16T16:36:00.001-07:00

China just released its June numbers, with 3 separate official sources delivering banking and money stats, international trade stats, and the core economic data. The June GDP numbers were pretty strong in the scheme of things, and the rest of the data pointed to a high likelihood of persistence in economic strength, at least in the medium term. In this article we explore some of the key data points, and come to the conclusion that a hard landing/significant slow down is a not a 2011 story...

1. China GDP

China managed to show year on year GDP growth of 9.5% in the June quarter, which was slightly lower than the 9.7% it showed in the previous quarter and 10.3% in June 2010, and compares to a 10-year average of about 9.4%. So in the scheme of things GDP growth does not show a significant degree of slowing. However, if you redefined recession for China as passing below the long term average growth rate - rather than descending into the negatives, then China could dip just below that line later this year. So, in spite of a succession of tightening moves, e.g. the PBOC raised interest rates earlier this month, growth has not yet taken a hit, and it makes sense because the dual forces of strong underlying fundamentals as well as strong sources of manufactured growth e.g. social housing, persist - so sorry folks, no slow down or hard landing in 2011.

2. China inflation

But one area that persists as a weak-point or vulnerability is the surging inflation numbers. Inflation hit 6.4% in June (I was expecting about 6.5%), with most of that coming from food price inflation (14.4%), and non-food static around 3%. This remains a risk because if it gets out of control then it poses stability risks, but more importantly, persistently high and rising inflation will put pressure on policy makers to tighten the screws further on monetary policy - that could slow things down a bit more, and certainly put some headwinds in front of Chinese equities. But I'm seeing signs that this could be the peak - there are a few people out there that have been forever calling the peak - but things like a turn in the prices index part of the PMI, the tightening done to date, and market responses to high prices. The Yuan could be worked harder to achieve lower inflation outcomes, but it's no silver bullet either. I see inflation as a risk, but I can see a scenario where inflation starts to taper off.

3. PMI and Industrial Production

The industrial production figure was a slight surprise in that it broke from where the PMI suggested it should go. The figure came in at 15.1% y/y, up from 13.3% in May, 13.7% in June 2010. The official PMI dropped to 50.9 for June, from 52 in the previous month - this is one of the main areas that people have been pointing to for signs of a slowdown, and fair enough - new orders have trailed off , but still above the expansionary 50 point mark. So it's mixed signals from this one, July will tell if June was a quirk or a sign that the bottom has been hit on the slowing in industrial production growth - so watch this space.

4. International Trade

China reported another record month for exports, 162B for June, while imports trailed off some to 139.7B (high of 152B in March). So what are the messages from the trade results?, first off, net exports were positive for the quarter (about 47B vs 0 in the March quarter), so there was a decent positive GDP contribution from trade during June. So the upward trend in exports are a positive sign for China's economy, but also indicate a certain degree of strength in global demand, on the imports side, it almost sends a signal of lower import demand, some of this may be related to a tapering off in commodity prices, but it is something to keep an eye on.

5. New Loans

New loans in China has been the gasoline that has been fueling the heat in the property market, as well as wider influences such as inflation and general growth. There has been a range of moves designed to cap lending growth (including RRR hikes and tougher lending rules), but new loans are still going strong, YTD new loans are about 4 trillion yuan (about 5 trillion in H1 2010, and close to 8 trillion in H1 2009). It's no secret that this rapid expansion in lending is a risk area, and a lot of China bears have been pointing to this, as well as the local government debt issues. A lot of water needs to go under the bridge and a lot of info needs to come to light before the full view of what's really going on in China's property and lending markets come into full light, but for now, the still elevated rate of loan growth remains stimulatory for both the economy and property prices (also note on property prices, real income per capita rose about 7.6% in June y/y, compared to property prices about 5-6% y/y).

Summary

So, as always it was interesting to digest all the info in the June economic data reports from China. The high level view is that China's economy is still going strong, it is strong in many areas, and appears to have broad fundamental strength. Aside from fundamental strength China's economy is also boosted by expansionary policies such as the 10 million unit social housing project for this year - which will be loaded mostly in H2 in terms of construction starts. But aside from stimulatory polices and broad based strength, there are inevitably risk areas too, such as the overheating and inflation risks, the property market risks, and the local government debt risks. Evidence points to none of these coming squarely home to roost in 2011. If there's a slow down coming in China, it's a 2012 or 2013 story - so, no hard landing yet folks!

Sources

1. National Statistics Bureau www.stats.gov.cn

2. National Statistics Bureau www.stats.gov.cn

3. CFLP www.chinawuliu.com.cn & Markit/HSBC www.markiteconomics.com & National Bureau of Statistics www.stats.gov.cn

4. China Customs www.customs.gov.cn

5. People's Bank of China www.pbc.gov.cn

Article Source: http://econgrapher.blogspot.com/2011/07/china-economic-check-up-nope-no-hard_16.html

Monetary Policy Week in Review (Guest Post)

2011-07-16T16:19:00.000-07:00

The past week in monetary policy was dominated by Asian central banks, with the central banks of Japan, Indonesia, Thailand, and South Korea all announcing interest rate decisions. The only banks to adjust interest rates were Thailand +25bps to 3.25%, and Kenya, which dropped its discount window rate -175bps to 6.25%. Meanwhile those that held interest rates unchanged were: Japan 0.10%, Indonesia 6.75%, Latvia 3.50%, South Korea 3.25%, and Chile 5.25%. Elsewhere in monetary policy and central banking, Brazil's central bank announced further policy measures to curb speculation on its currency, the Real.

While inflation remained a threat for most of the central banks who reviewed monetary policy settings during the week, for many the focus was squarely on the downside risks to both domestic and global growth. Indeed a couple of the banks pointed specifically to the tail risks in the form of the European sovereign debt crisis. For those that held rates unchanged, for the most part the messaging was positive, with some viewing inflationary pressures as somewhat contained, while many presented a positive outlook on their domestic economy.

As per usual, following is a selection of key quotes from central bank monetary policy statements and media releases from the past week:

Bank of Japan (held interest rate at 0.10%): "Japan's economic activity is picking up with an easing of the supply-side constraints caused by the earthquake disaster. After declining sharply following the earthquake, production has recently shown clear signs of picking up with the easing of supply-side constraints."
Bank Indonesia (held interest rate at 6.75%): "Bank Indonesia views that the current BI Rate level is still in line with the effort to maintain stronger economic activities supported by stability, amid domestic excess liquidity and continued large capital inflows... Meanwhile, inflation is estimated to be under control and could be lower than earlier forecasted if there is no Government policies regarding energy prices while the supply and distribution of basic foods are well maintained."
Bank of Thailand (increased interest rate 25bps to 3.25%): "In light of the continued risks to inflation amid robust domestic demand, the MPC deemed it necessary to continue increasing the policy rate to maintain economic stability and anchor inflation expectations... Inflationary pressure remained high due to elevated energy prices and continued upward adjustments in the prices of prepared foods."
Bank of Korea (held interest rate at 3.25%): "The Committee expects the high level of inflation to continue in the coming months, driven largely by demand-side pressures resulting from the underlying uptrend in economic activity and by inflation expectations."
Banco Central de Chile (held interest rate at 5.25%): "Domestically, output, demand and labor market figures are progressing with strength, showing signs of moderation in line with the baseline scenario in the last Monetary Policy Report. Annual CPI inflation indicators have hovered around 3%, while measures of core inflation remain bounded. Private inflation expectations show a decline, although some of them remain above the target."

As for next week the Reserve Bank of Australia (19th of July), and the Bank of England (20th of July) will release the minutes from their most recent monetary policy meetings, meanwhile the following central banks are scheduled to review interest rates:

Canada (Bank of Canada) - expected to hold at 1.00% on the 19th of July
Brazil (Banco Central do Brasil) - expected to increase rate 25bps to 12.50% on the 20th of July
South Africa (South African Reserve Bank) - expected to hold at 5.50% on the 21st of July
Turkey (Central Bank of the Republic of Turkey) - expected to hold at 6.25% on the 21st of July

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/07/monetary-policy-week-in-review-16-july.html

Economic Calendar: China Data and Developed Market Inflation

2011-06-13T11:10:00.000-07:00

Here's the economic calendar for the week commencing the 12th of June 2011. This week the main event is China’s monthly data dump, where it will release CPI, PPI, retail sales, industrial production, new loans, money supply, and fixed asset investment figures. Speaking of inflation data, the US, UK, and EU all also have inflation data due out this week. Also, Japan, Switzerland, and India are among the central banks announcing interest rate decisions this week.

Date	GMT	Country/ Currency	Event	Forecast	Previous
SUN		CNY	Actual FDI (YoY)		15.20%
SUN		NZD	REINZ House Sales (YoY)		-4.20%
SUN		CNY	New Yuan Loans	650.0B	739.6B
SUN		CNY	Money Supply - M0 (YoY)		14.70%
SUN		CNY	Money Supply - M1 (YoY)	13.70%	12.90%
SUN		CNY	Money Supply - M2 (YoY)	15.50%	15.30%
SUN	23:50	JPY	Machine Orders (YoY)	4.90%	9.10%
MON	08:00	EUR	Italian Industrial Production n.s.a. (YoY)	2.00%	0.80%
MON		JPY	Bank of Japan Rate Decision	0.10%	0.10%
MON	00:01	CNY	China Manpower Survey		29.00%
MON	02:00	CNY	Producer Price Index (YoY)	6.50%	6.80%
MON	02:00	CNY	Consumer Price Index (YoY)	5.50%	5.30%
MON	02:00	CNY	Retail Sales (YoY)	17.00%	17.10%
MON	02:00	CNY	Retail Sales YTD YoY	16.90%	16.50%
MON	02:00	CNY	Industrial Production (YoY)	13.10%	13.40%
MON	02:00	CNY	Industrial Production YTD YoY	14.00%	14.20%
MON	02:00	CNY	Fixed Assets Inv Excl. Rural YTD YoY	25.20%	25.40%
TUE	04:30	JPY	Industrial Production (YoY)		-14.00%
TUE	08:30	GBP	Consumer Price Index (YoY)	4.50%	4.50%
TUE	08:30	GBP	Core Consumer Price Index (YoY)	3.50%	3.70%
TUE	08:30	GBP	Retail Price Index (YoY)	5.20%	5.20%
TUE	12:30	USD	Producer Price Index (YoY)	6.60%	6.80%
TUE	12:30	USD	Producer Price Index Ex Food & Energy (YoY)	2.10%	2.10%
TUE	12:30	USD	Advance Retail Sales	-0.40%	0.50%
TUE	12:30	USD	Retail Sales Less Autos	0.30%	0.60%
TUE	12:30	USD	Retail Sales Ex Auto & Gas	0.30%	0.20%
WED	05:30	EUR	French Consumer Price Index (YoY)	2.10%	2.10%
WED	07:15	CHF	Producer & Import Prices (YoY)	-0.10%	0.10%
WED	08:30	GBP	Jobless Claims Change	6.5K	12.4K
WED	09:00	EUR	Euro-Zone Industrial Production w.d.a. (YoY)	4.80%	5.60%
WED	12:30	USD	Consumer Price Index (YoY)	3.40%	3.20%
WED	12:30	USD	Consumer Price Index Ex Food & Energy (YoY)	1.40%	1.30%
WED	13:15	USD	Industrial Production	0.20%	0.00%
WED	13:15	USD	Capacity Utilization	77.00%	76.90%
WED	22:00	NZD	Westpac NZ Consumer Confidence		97.90
WED	02:00	CNY	China April Leading Economic Index
THU	07:15	CHF	Industrial Production (YoY)	5.60%	6.10%
THU	07:30	CHF	Swiss National Bank Rate Decision	0.25%	0.25%
THU	08:00	EUR	Italian Consumer Price Index (YoY)	3.00%	3.00%
THU	08:30	GBP	Retail Sales (YoY)	1.50%	2.80%
THU	08:30	GBP	Retail Sales w/Auto Fuel (YoY)	1.50%	2.80%
THU	09:00	EUR	Euro-Zone Consumer Price Index - Core (YoY)	1.60%	1.60%
THU	09:00	EUR	Euro-Zone Consumer Price Index (YoY)	2.70%
THU	09:00	EUR	Euro-Zone Employment (QoQ)		0.20%
THU	09:00	EUR	Euro-Zone Employment (YoY)		0.20%
THU	12:30	USD	Building Permits	552K	563K
THU	12:30	USD	Housing Starts	545K	523K
THU	12:30	USD	Current Account Balance	-$130.0B	-$113.3B
THU	23:50	JPY	BOJ Minutes of May 19-20 Board Meeting
FRI	09:00	EUR	Euro-Zone Construction Output w.d.a. (YoY)		-4.90%
FRI	13:55	USD	U. of Michigan Confidence	74.00	74.30

As noted the main event this week will be the China data, which is always good to check up on to gauge how the world’s second largest economy is tracking. One of the key indicators to watch will be inflation, i.e. CPI, which is expected to show a slightly higher year on year rate, about 5.8% as property expenses and food prices have been tracking upwards in May. The other data points; industrial production, retail sales, and fixed asset investment should come in more or less flat, but watch for any significant changes or extension of slowing in some of the points.

Another key data set will be the inflation numbers. The United States is expected to show a slight increase in both headline and core inflation, with year on year CPI inflation expected around 3.4%. The UK is expected to see a slight slowing of its core inflation rate and headline should stay around 4.5%. The Euro Zone will likely see headline inflation stick around 2.7% and core about 1.6%. So, not expecting anything dramatic, but a slight upward tick in inflation.

In the monetary policy space there’s the Bank of Japan on the 14^th of June (expected to hold at 0.10%), Central Bank of Chile on the 14^th of June (expected to raise 25bps from current 5.00%), Central Bank of Iceland on the 15^th of June (expected to hold at 4.25%), Central Bank of Philippines on the 16^th of June (expected to raise 25bps from current 4.50%), the Reserve Bank of India on the 16^th of June (expected to raise 25bps from current 7.25%), and The Swiss National bank also on the 16^th (expected to hold at 0.25%). Of course there is also a chance the People's Bank of China will do something when the inflation figures come out.

Elsewhere there’s some key US data points to watch: Producer prices are expected to show little change, retail sales are expected to decline – but post a small gain excluding autos, industrial production may show a small gain, while the UoM confidence index should stay around 74. Outside of the US, Japan has machine orders and industrial production figures, and the Euro Zone has some employment numbers.

So as always, have a great week, watch out for surprises, and stay tuned for updates...

Sources

· DailyFX

· Forex Pros

· Forex Factory

· Bloomberg

+various statistics websites and central bank websites for verificatio

China Property Update - Prices Still Chugging Along in May

2011-06-07T03:37:00.000-07:00

China's online real estate website, SouFun, recently released its monthly 100-city property price index, showing that property prices continued to rise in May. Property prices rose by 0.52% month on month in May to 8,819 Yuan per square meter, compared to an increase of 0.40% in April. This placed the annual percentage increase at about 5% (the index was first published in June last year). The data showed that prices rose in 76 cities, while 3 cities saw no change and 21 cities experienced lower prices in May.

http://seekingalpha.com/article/273650-china-property-update-prices-still-chugging-along-in-may

Top 5 Graphs: Aussie GDP, U.S. and China PMI, Monetary Policy

2011-06-06T10:06:00.000-07:00

This week we start by checking out a dismal Q1 GDP result for Australia. Then we examine the slight fall in China's manufacturing PMI (purchasing manager index), as well as the U.S. manufacturing PMI shocker. Following that is a quick check in on US consumer confidence and housing market. Finally a review of some monetary policy decisions over the past week is checked out, before the flurry of policy activity due next week.

http://seekingalpha.com/article/273464-top-5-graphs-aussie-gdp-u-s-and-china-pmi-monetary-policy

Economic Calendar: Monetary Policy, GDP, Inflation and China Trade Data

2011-06-06T03:07:00.000-07:00

Here's the economic calendar for the week commencing the 30th of May 2011. This week there’s a number of monetary policy decisions due from both emerging market and developed market central banks. There are also further revisions to Q1 GDP data due out from Japan and the eurozone. Among other data points due out this week is employment data from Canada and Australia, international trade flows for China, and some inflation metrics for Germany, the UK and US.

http://seekingalpha.com/article/273428-economic-calendar-monetary-policy-gdp-inflation-and-china-trade-data

Brits Get Rich in China

2011-05-30T10:52:00.000-07:00

While I was whittling my precious weekend hours away I stumbled on to a finance documentaries website and found a very interesting documentary on China. The film is called "Brits Get Rich in China" and follows three entrepreneurs as they go to China to make their fortunes. As any one familiar with China can imagine, anything like this makes for very interesting viewing!

I wont give too much away, but I would highly recommend it to anyone who's thinking about doing business in China, or with Chinese businesses - and that includes investing. Sure, it is only anecdotal evidence, but it just shows that when you go to do business (or invest) in a place like China it pays to know what you're doing, or at least to know someone who knows what they're doing.

Business is tough in China, Chinese are tough, they play a hard business game. If you go in expecting to do business like you would in likes of the US or UK, to some degree you're right, but a lot of aspects are accentuated so you need to sharpen up your act. You need to carry a healthy mistrust, you need to know at least some of the language and customs (more language skills are better) or have a very trustworthy partner who does.

But though business and investing in China can be fraught with risk and challenge, it doesn't mean it's not worth going. As you'll see the people in the documentary the rewards can certainly make it all worth it (and then some). But then that's what investing and business is all about isn't it? Taking risk and doing the hard yards to achieve your dreams.

Watch the documentary here: http://www.financedocumentaries.com/2011/05/brits-get-rich-in-china.html

Economic Calendar: Here Comes June and the PMIs

2011-05-30T10:46:00.000-07:00

Here's the economic calendar for the week commencing the 30th of May 2011. This week we say goodbye to May, as such there's the May PMI numbers due out, with China, the US, and most other major economies reporting. There's also more GDP data from Canada, Switzerland, and Australia. In the US there's nonfarm payrolls, S&P/Case-Shiller house price index, and consumer confidence. In terms of monetary policy, the central banks of Russia, Canada, and Thailand are due to announce rate decisions.

http://seekingalpha.com/article/272431-economic-calendar-here-comes-june-and-the-pmis

Top 5 Economics Graphs of the Week - 28 May 2011

2011-05-27T20:18:00.000-07:00

This week we look at some of the latest economic data coming out of Japan; noting a rare occurrence of positive inflation, and observing a further trade deficit in April. Then we look at some US data, first checking in on the US consumer sentiment index, and then a proxy for investor sentiment - long term mutual fund flows. Finally the latest monetary policy interest rate decisions are covered-off.

1. Japan Inflation
As noted Japan recorded a rare positive inflation figure in April as consumer prices rose 0.3% on an annual basis, having sat at 0% for most of this year, while April 2010 saw deflation of -1.2%. A certain degree of the positive inflation figure can be attributed to temporary shortages brought about by the earthquake, but inflation had been in a mild upward trajectory anyway. Like the rest of the world, Japan had seen some impact from rising commodity prices (as can be seen in the upward trend in imports on the next chart). Meanwhile aggregate demand has probably only had a marginal impact on inflation as the Japanese economy has been in its second recession after a brief period of growth.

2. Japan International Trade
Japan reported exports of JPY 5.2 trillion in the month of April, down -13% year on year and -12% month on month. Imports were JPY 5.6 trillion, up 9% from April last year and down -1% compared to March. The April figures add another month of trade deficit as rising import costs meet relatively stable exports. The April figures did see some impact from the earthquake as supply chain disruptions weighed on exports. Overall Japan is yet to see either its exports or imports reach pre-crisis levels, which shows the weakness of the Japanese economy, but also the slow rate of growth and economic recovery in its trading partners (not to mention a rising share of global exports for China and other emerging markets).

3. US Consumer Sentiment
The Reuters/University of Michigan US consumer sentiment survey showed some improvement in the final reading for May, with the index at 74.3 vs consensus 72.4, and the April reading of 69.8. Future expectations performed well, at 69.5 vs 61.6 in April, meanwhile current conditions was basically flat at 81.9 vs 82.5 in the previous month. So while the current conditions result was not inspiring, the trajectory of the future expectations part was promising, indeed if the trajectory continues it will be positive for the medium term outlook, which is consistent with other indicators and conditions.

4. US Mutual Fund Flows
US mutual fund flows remained in positive territory in total during April, with the majority of net inflows going to bond mutual funds, showing a possible pick up in momentum after flows into bond funds dried up at the start of the year. Domestic equity flows continued to languish, while foreign equity fund flows remained positive as investors looked elsewhere for better macro-economic fundamentals. It will pay to watch this chart through the year, especially as key events unfold such as the ending of quantitative easing, and a potential short-term correction in US equities. A final thought on the chart below is the large amount of funds that have flown into bond mutual funds, this aspect will be interesting for equities when/if bond returns begin to suffer as the monetary policy stance turns later this year.

5. Monetary Policy Review
The past week in monetary policy saw six emerging market central banks announce interest rate decisions. Those that altered interest rate levels included: Israel +25bps to 3.25%, and Nigeria +50bps to 8.00%, while those that held interest rates unchanged were: Pakistan 14.00%, Turkey 6.25%, Georgia 8.00%, and Mexico 4.50%. So it was very much a continuation of the theme were emerging markets begin to take more caution in balancing the growth vs inflation risks, but also as the inflation impulse begins to taper off as policy measures and stable commodity prices begin to take effect. But the rate hikes in Israel and Nigeria show that inflation pressures are not completely gone in emerging markets, indeed Vietnam is still a hotspot of inflation.

Summary

So we saw the emergence of inflation in Japan, after a long period of deflation, however short term factors were likely the main cause of this. Meanwhile Japan's international trade results showed stagnant growth and short term impact from the earthquake. In the US consumer sentiment improved again, heading in a promising trajectory. Also in the US long term mutual fund flows pointed to some interesting trends, and some key areas to watch in the stock and bond markets through the rest of the year. Finally, the week in monetary policy saw two emerging market economies tighten, while other emerging markets opted for caution in the growth risk vs inflation risk balancing act.

Sources
1. OECD Statistics stats.oecd.org
2. Trading Economics www.tradingeconomics.com
3. Reuters customers.reuters.com
4. Investment Company Institute www.ici.org
5. Central Bank News www.centralbanknews.info

Article Source: http://www.econgrapher.com/top5graphs28may11.html

Economic Calendar: GDP Revisions, Japan Data and U.S. Data

2011-05-23T10:23:00.000-07:00

Here's the Economic Calendar for the week commencing the 23rd of May 2011. This week there's more GDP results (revisions) for 1Q 2011 with Germany, the U.K., and the U.S. all due to report. In the U.S. there's new home sales, house price index, pending home sales, University of Michigan Consumer Sentiment, and Personal consumption expenditure data due out. In Japan there's international trade data, consumer price index (inflation) numbers and retail sales results, while China has industrial profits figures.

http://seekingalpha.com/article/271288-economic-calendar-gdp-revisions-japan-data-and-u-s-data

Top 5 Economics Graphs of the Week - 22 May 2011

2011-05-21T14:44:00.000-07:00

This week we take a look at some inflation numbers from the EU and UK, and while on the topic have a check in on commodity prices. Then we review the latest GDP numbers from Japan, before finishing up with a check in on global monetary policy.

1. EU Inflation
The EU saw a continued spike in inflation, with Euro Area annual inflation at 2.8%, vs 2.7% in March (1.5% in April 2010), while EU annual inflation rose to 3.2% vs 3.1% in March (2.0% in April 2010). Meanwhile Euro Area Core inflation was perhaps the most remarkable, rising to 1.6% in April, from 1.3% in March, and just 0.8% in April 2010. The highest rate of inflation was seen in Romania (8.4%), followed by Estonia (5.4%); while the lowest rate of inflation was recorded in Switzerland at just 0.1%, followed by Norway with 1.3%. While there is a degree of divergence in results, inflation is broadly creeping upwards in the Euro Zone and Core inflation is fast approaching the ECB inflation target.

2. UK Inflation
Over in the UK, a similar theme of rising inflation was seen with April annual consumer price inflation of 4.5%, up from 4.0% in March, and 4.0% in April 2010. The spike in inflation in the UK has caused some to speculate on a sharp rise in interest rates from the Bank of England, with inflation still well above its official inflation target. However the Bank of England, by and large, is not particularly set on aggressive tightening, particularly when the UK economy is still struggling along in recovery mode. The most likely policy path will be a steady path of rate increases, perhaps commencing later this year, depending on how the broader economy fares.

3. Commodities
On a rolling 12 month return basis, the latest data shows commodities were up 35.6% as measured by the Reuters/Jefferies commodity index. On a rolling monthly basis though the figure was -6.6% driven by a sell-off in a few commodities, particularly Silver. Commodity prices continue to be the key variable for 2011, as rising prices have catalyzed uprisings and social unrest, driven surging inflation in emerging markets, and have begun to have an increasing impact on inflation in developed markets. There's also the growth risks that high commodity prices present. But commodities are probably a good example of mean reversion in practice as high prices generally lead to a supply response, thus prices shouldn't be able to run up too high for too long unless structural changes have taken place in the global economy.

4. Japan GDP
Japan had a disappointing Q1 GDP figure, with GDP declining -0.9% on a quarterly basis (annualised -3.7%) , compared to -0.8% in Q4 2010, while Q1 2010 was 2.2%. On an annual basis this mean contraction of -0.7%, compared to 2.4% in Q4 2010, and 5.5% in Q1 2010. Much of the negative results can be explained by the impact of the earthquake as the disaster weighed heavily on private consumption and caused supply chain disruption impacting on net exports, and general uncertainty limiting capital spending. As with most large scale disasters the economic pattern is a short-term hit, but a medium term spike. So, provided the Japanese government can manage the process well, the rebuilding phase should help Japan's economy return to growth later this year, with 2012 likely to see much stronger economic activity levels.

5. Monetary Policy
The past week in monetary policy was relatively quiet with only 5 central banks announcing monetary policy decisions, and of those, only 1 adjusting its policy stance. Vietnam was the only bank to adjust monetary policy settings; increasing its reverse repurchase rate by 100 basis points to 15.00%. Meanwhile those that held their monetary policy interest rates unchanged were: Serbia (12.50%), Hungary (6.00%), Sri Lanka (7.00%), and Japan (0.10%). So there was somewhat of a theme of emerging markets beginning to ease off on aggressive policy tightening (with the exception of Vietnam, which is still seeing rampant inflation) as some inflation pressures begin to ease, if not peak, and as the growth outlook comes to fore in terms of policy risk. Monetary policy, and by extension inflation, remains one of the key factors for the growth and financial market outlook in emerging markets this year.

Summary

So we saw the pace of inflation beginning to show a more marked uptrend in the Euro Zone, which may well mean that the ECB's interest rate increase in April will likely be repeated in the near term. Meanwhile the UK also saw a continued high rate of inflation, but the Bank of England is still unlikely to budge as the UK economy is still on the go-slow. On a related topic, commodity prices saw surging 12-month returns in May, but with monthly returns diving into negative territory, perhaps heralding an easing in commodity prices over the medium term. In Japan, first quarter GDP results were disappointing, driven into negative territory by the disaster impact. On monetary policy, further signs of a peak in monetary policy tightening for emerging markets surfaced as the growth-inflation risk mix is becoming increasingly finely balanced.

Sources
1. EuroStat epp.eurostat.ec.europa.eu
2. National Statistics Office www.statistics.gov.uk
3. Jefferies www.jefferies.com
4. OECD Statistics stats.oecd.org
5. Central Bank News www.centralbanknews.info

Article Source: http://www.econgrapher.com/top5graphs22may11.html

The U.K. Consumer: An Important Barometer

2011-05-20T20:52:00.000-07:00

In most developed economies, the sector that hurt the most during the financial crisis and ensuing recession tended to be the consumer sector. Ironically, in the lead up to the crisis, it was the excesses of this sector that helped create the conditions that led to the crisis. But while the recession was largely a structural phenomenon, and has led many to call for a rebalancing of developed economies away from such a consumer-centric model, the fact remains that the consumer sector still matters.

http://seekingalpha.com/article/270912-the-u-k-consumer-an-important-barometer

Time to Go Long Vietnam With VNM?

2011-05-18T10:16:00.000-07:00

Vietnam briefly slipped into the headlines this week with yet another interest rate increase, bringing its refinancing rate to 15.00% (up 100bps). The move follows a series of 100 basis point increases in interest rates and is driven by a surge in prices, with annual inflation reaching 17.5% in April. These events rightfully bring into focus the merits of investing in this emerging (or frontier?) market, at least in the short term, but also in view of the longer term prospects...

http://seekingalpha.com/article/270596-time-to-go-long-vietnam-with-vnm

Should You Invest in Chile?

2011-05-15T10:11:00.000-07:00

The Banco Central de Chile just increased its monetary policy interest rate by 50 basis points to 5.00%. So what is going on in the Chilean economy? This report provides a brief insight into the monetary policy decision, the state of Chile's economy, and how investors can gain exposure to this market.

http://seekingalpha.com/article/270004-should-you-invest-in-chile

Economic Calendar: EU CPI, Japan GDP, U.S. Housing Market

2011-05-15T01:05:00.000-07:00

Here's the Economic Calendar for the week commencing the 15th of May 2011. This week brings more inflation results from the eurozone, the U.K., and Canada. There's also Q1 GDP from Japan, which also has industrial production figures out, and an interest rate decision due from the Bank of Japan. The U.S. has housing starts, building permits, and existing home sales data due this week. Elsewhere there's retail sales figures due from the U.K. and Canada, and foreign direct investment numbers from China.

http://seekingalpha.com/article/269963-economic-calendar-eu-cpi-japan-gdp-u-s-housing-market

Top 5 Economics Graphs of the Week - 14 May 2011

2011-05-13T21:05:00.000-07:00

This week we look at Euro Zone GDP and break out the economic growth results from Germany and France, and gauge how the Euro economies are progressing through the recovery. We also have a brief review of the inflation data from the US, and wrap up with a review of 12 monetary policy decisions of various central banks from around the world over the past week.

1. EU GDP
The euro area (EA17) reported Q1 GDP growth of 0.8% q/q, up from 0.3% in Q4 2010, bringing annual GDP growth to 2.5%, up from 2.0% in Q4 2010. Meanwhile the EU27 also recorded quarterly GDP growth of 0.8%, up from 0.2% in Q4 2010, bringing annual growth to 2.5%, up from 2.2% in Q4 last year. The worst performing economies on a quarterly basis were Portugal (-0.7%), Cyprus (0%), Italy (0.2%) and Latvia (0.2%). While the best performing economies on a quarterly basis were Lithuania (3.5%), Estonia (2.1%), and Germany (1.5%), with 1% growth rates in Belgium, France, Austria, and Slovakia. Thus for now, growth is relatively strong in the Euro region, in spite of the fiscal challenges on the fringe, but there are risks to the outlook.

2. German GDP
Germany reported Q1 GDP growth of 1.5% q/q, up from 0.4% in Q4 2010 (market consensus around 0.9%). On an annual basis the German economy expanded 4.8%, faster than the 3.8% recorded in Q4 last year (market consensus around 4.2%). Germany continues to prove its worth as a key growth engine in the EU, benefiting from a strong manufacturing and export base, as well as a sound financial system and strong government balances. Philipp Rosler, economics minister in Germany, said "Germany is the growth motor among the industrial nations - and not just in Europe".

3. France GDP
The French economy grew 1.0% in the first quarter of this year, faster than the 0.3% recorded in the previous quarter. On an annual basis GDP expanded 2.2%, up from 1.4% in Q4 2010. The French economy is slowly gathering pace, with the manufacturing and services sectors strong, yet much of the growth this quarter came from changes in inventories. Household spending and fixed capital formation also contributed positively, while net exports were a negative. French finance minister Christine Lagarde noted that Q2 GDP is likely to be weaker, but is still comfortable with a 2.0% growth target for 2011.

4. US Inflation
The US reported annual headline inflation of 3.2% in April, up from 2.7% in March as the CPI rose 0.4% m/m. Core inflation crept up to 1.3% in April from 1.2% the previous month, with core CPI up 0.2% m/m. Accelerating nflation around the world at the moment is larely a product of rising commodity prices - especially energy commodities. In the near term there may be some more moderation in commodities prices, but I don't see oil falling far and fast in the near term. What was a mild concern was the incidence of broader 'second round' inflation effects, with core inflation steadily rising. That said, while both headline and core inflation are rising, neither are accelerating at a historically excessive rate, core is still relatively low compared to the last 10 years.

5. Monetary Policy Review
The past week saw 12 monetary policy decisions. Those that increased interest rates were: Azerbaijan +25bps to 5.25% Poland +25bps to 4.25% Norway +25bps to 2.25% Peru +25bps to 4.25% and Chile +50bps to 5.00%. Meanwhile Ghana was the only country that eased policy, cutting rates 50bps to 13.00%. Those that held rates unchanged were: Indonesia 6.75% South Africa 5.50% Latvia 3.50% and South Korea 3.00%. Besides interest rate changes two economies lifted reserve requirements: Uruguay lifted its required reserve ratios 300bps to 15%, while China increase its RRR by 50 basis points to an average 21% for large banks.

Summary

A look at euro region GDP results showed the economic recovery is still strongly on track for the most part, but with due divergence and weakness at the periphery. While there remains downside risks to the outlook from economies like Portugal, Ireland and Greece, the outlook is still strong with the key economies like France, and especially Germany growing strongly. Elsewhere, the US saw an acceleration of inflation in April, but not yet at a worrying pace. On the monetary policy front the theme of emerging market tightening continued, and saw increasing involvement of developed economies in the monetary policy normalization process.

Sources:
1. EuroStat epp.eurostat.ec.europa.eu
2. EuroStat epp.eurostat.ec.europa.eu
3. EuroStat epp.eurostat.ec.europa.eu
4. Bureau of Labour Statistics www.bls.gov
5. CentralBankNews.info www.centralbanknews.info

Article Source: http://www.econgrapher.com/top5graphs14may11.html

Why Poland's Central Bank Increased Interest Rates

2011-05-12T09:50:00.001-07:00

The National Bank of Poland increased its reference rate by 25 basis points to 4.25% (and increased its other interest rates by 25bps: lombard rate 5.75%, deposit rate 2.75%, and rediscount rate 4.50%). The move marks the Bank's 3rd interest rate increase this year as the emerging East European economy faces rising inflation pressures.

http://seekingalpha.com/article/269545-why-poland-s-central-bank-increased-interest-rates

What's Happening With China's Economy?

2011-05-11T23:05:00.000-07:00

Here's a graphical rundown on some of the key economic indicators that China just put out for April. Included in the review is the inflation situation, consumer spending, the pace of loan growth, industrial production trends, and growth in the money supply. The data provide a timely insight into where China's economy is at, and perhaps more importantly, where it is going.

http://seekingalpha.com/article/269391-what-s-happening-with-china-s-economy

Is This China's Last Trade Surplus?

2011-05-10T09:46:00.000-07:00

China reported a trade surplus for the month of April at $11.4B, up from virtually 0 in March. Exports rose to a record $155.7B (up 2% m/m, 30% y/y) from $152.2B in March and $119.9B in April 2010. Imports slipped month-on-month to $144.3B (down 5% m/m, up 22% y/y), from $152B in March, and $118.2B in April 2010. The return to a monthly surplus will likely accentuate pressure from the US for China to alter its yuan policy, but there are other forces at work which will drive both upward and downward pressure on China's trade balance.

http://seekingalpha.com/article/268994-is-this-china-s-last-trade-surplus

A Brief Look at Yuan Valuations

2011-05-09T11:51:00.000-07:00

With China continuing to see high inflation and the PBOC implementing a series of monetary policy tightening moves, the Yuan (or particularly the Yuan-Dollar exchange rate) has been highlighted as a potential inflation fighting tool. To be sure, there is also the ongoing chorus from the US urging China to allow a more flexible exchange rate. They say the exchange rate is artificially kept high; granting China an advantage in trade. So with these points in mind, and noting the impending talks between China and the US, it is timely to take a look at some Yuan data, and perhaps developing an informed view.

http://seekingalpha.com/article/268830-a-brief-look-at-yuan-valuations

Economic Calendar: China Data, U.S. Inflation, and EU GDP

2011-05-09T10:07:00.000-07:00

Here's the Economic Calendar for the week commencing the 8th of May 2011. This week features China's monthly economic data release with PPI, CPI, industrial production, retail sales, fixed asset investment, and international trade stats due out from the world's second largest economy. Elsewhere there is an emphasis on inflation data with CPI due from Germany, France, Switzerland, and the US, there's also PPI data due from those countries. The other key data pieces will be eurozone GDP, and industrial production data from the eurozone, UK, Italy, France, and of course China.

http://seekingalpha.com/article/268736-economic-calendar-china-data-u-s-inflation-and-eu-gdp

China Property Update: Small Positives Today to Become Small Negatives Tomorrow?

2011-05-08T23:11:00.000-07:00

A quick check-in on the Chinese property market shows prices continued to rise in April, but apparently at an increasingly slower pace. According to SouFun/China Real Estate Index System, the average property price across 100 cities rose 0.40% in April to CNY 8,773 per square meter. The results compare to 0.59% in March where property prices rose to 8,738 per square meter. The average price per square meter six months ago was 8,418 Yuan, i.e. average prices are now 355 Yuan higher. For a 100 square meter place this would translate to about a 35,500 Yuan (US$5500) increase in the total purchase price.

http://seekingalpha.com/article/268630-china-property-update-small-positives-today-to-become-small-negatives-tomorrow