18
02/11
Data watch
UK
UK inflation is just as likely to be above or below target in two years if interest rates rise as markets expect, the Bank of England said on Wednesday, opening the door to tighter monetary policy. But BoE Governor Mervyn King insisted that no decision about when to raise rates had been taken.
UK price inflation hit 4 per cent in January, in line with economists’ expectations but double the Bank of England’s target of 2 per cent. The latest reading will trigger yet another round of letters between Mervyn King, the Bank’s governor and George Osborne, the chancellor, with Mr King forced to explain why prices are rising so quickly and what the Bank intends to do about it.
Activity in the UK’s dominant services sector expanded at its fastest pace in eight months in January as business recovered after December’s snow disruption, a survey showed, which may bolster the case for higher rates. Thursday’s purchasing managers’ survey from Markit/CIPS also showed a record jump in input cost inflation in the services sector. The headline services PMI activity index rose to 54.5 in January from a 20-month low of 49.7 in December, the highest since last May and well above forecasts for a reading of 51.4.
British construction activity returned to growth in January, helped by better weather and a rise in new business, the monthly Markit/CIPS purchasing managers index showed on Wednesday. The figures indicate the sector made a strong start to 2011, and come a day after an equivalent survey of manufacturers showed activity growth hit a record high, suggesting the economy is rebounding from a shock 0.5 per cent fall at the end of 2010.
British mortgage approvals for house purchases fell more than expected in December to their lowest since March 2009, in a sign the housing market is set to continue to weaken, official data showed on Tuesday. The Bank of England said mortgage approvals totalled 42,563 in December, down from 47,287 in November and the lowest since March 2009 when Britain was stuck in recession. Analysts had forecast a reading of 47,000.
Europe
Russia’s producer price index rose 2.1 per cent month-on-month in January after rising 1 per cent in December, the Federal Statistics Service said on Thursday. Analysts had forecast a month-on-month rise of 1.0 per cent
Swedish headline inflation figures for January came in largely as expected, while unemployment jumped much more than economists had predicted, data showed on Thursday. Consumer prices fell 0.5 per cent in the month and were up 2.5 per cent from a year earlier. The January unemployment rate spiked to 8.2 per cent from 7.4 per cent in the prior month.
Continental Europe’s economic recovery weakened late in 2010 when bitter winter weather hit activity, with both Germany and France reporting slower-than-expected fourth quarter growth. The eurozone’s two largest economies reported only a modest pace of expansion in gross domestic product in the final three months of 2010 compared with the previous quarter.
A sharp fall in construction activity caused by severe winter weather hit Germany’s economic recovery late last year, official figures have shown. Construction activity contracted in December by 24.1 per cent compared with the previous month as building projects were brought to a halt, according to the economics ministry in Berlin. That was the largest monthly drop in construction since January 1987 and the second-largest in the past 40 years.
Asia
Taiwan said on Thursday that fourth quarter economic growth was stronger than earlier estimates, with gross domestic product expanding by 6.9 per cent from the same period the year before.
India’s food price index rose 11.05 per cent and the fuel price index climbed 11.92 per cent in the year to Feb. 5, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 13.07 per cent and 11.61 per cent.
Chinese inflation continued to rise in January, surpassing government targets and increasing pressure on policymakers to dial back the huge monetary stimulus of the last several years. The consumer price index rose 4.9 per cent last month, up from 4.6 per cent in December. Although the headline inflation number was lower than expected, it remains above the government’s target of 4 per cent inflation, and may have been effected by a reweighting of the basket from which CPI is calculated.
Japan’s economy contracted in the last quarter of 2010 amid slowing exports and weak domestic demand, according to preliminary data released on Monday. However, the 0.3 per cent quarter-on-quarter decline in real gross domestic product is unlikely to undermine growing confidence that Japan’s recovery will resume in the current quarter.
China’s trade surplus fell in January because of soaring import demand, easing pressure on Beijing ahead of the G20 summit in Paris later this week. The trade surplus fell from $13.1bn in December to $6.5bn last month, the lowest surplus in nine months, as a result of stronger-than-expected imports.
Middle East and Africa
South Africa’s retail sales grew by 8.3 per cent year-on-year in December at constant prices, compared with an upwardly revised 8.0 percent increase in November, Statistics South Africa said on Wednesday. Stats S.A. said retail sales grew by 7.7 percent in the three months to December, compared with the same period a year ago, also at constant prices.
US and Canada
US core producer prices in January rose to their highest rate in more than two years, hinting at a build-up in inflation pressures as the recovery gathers pace, a potentially troubling development for the Federal Reserve. A separate report from the Fed showed industrial production fell unexpectedly in January, largely because of a drop in utilities output as temperatures returned to normal following an unusually cold December.
The US economy added a tepid 36,000 jobs in January, as severe winter weather slowed the pace of job creation, labour department figures showed on Friday. The increase in non-farm payrolls was much smaller than the 146,000 that economists had projected and marked a sharp decline from the previous month, when the US added 121,000 workers, according to revised figures. In spite of the small rise in payrolls, the unemployment rate fell, declining from 9.4 per cent to 9 per cent in December.
US private employers added more jobs than expected in January, underscoring views the employment picture is slowly improving. The private sector added 187,000 jobs in January compared with a downwardly revised gain of 247,000 jobs in December, a report by payrolls processor ADP Employer Services showed on Wednesday. The December figure was originally reported as a gain of 297,000 jobs.
The US manufacturing sector grew at its fastest pace in nearly seven years in January, and prices paid jumped more than expected in the latest sign the economic recovery is gaining traction. The Institute for Supply Management’s manufacturing index climbed to 60.8 in January, the highest reading since May 2004 and well above analysts expectations. A reading above 50 indicates expansion.
Americas
Chilean consumer prices rose 0.3 per cent month-on-month in January and 2.7 per cent on an annualised basis, spurred by rising fuel and tobacco prices. The rise, in line with market forecasts, underlined expectations of a rise in the benchmark interest rate, now at 3.25 per cent, at its next policy meeting on February 17.
Chile’s economy grew 5.7 per cent in December 2010 compared with December 2009 according to the central bank – a healthy result but well below the average 7 per cent rate forecast by the market. The bank said on Monday that the monthly activity index, or Imacec, which is considered a proxy for growth performance because it includes 90 per cent of the gross domestic product components, registered growth in retail, transport and communications while mining output fell.
Industrial production in Brazil unexpectedly fell in December from the previous month, ending the year on a sour note as manufacturers struggle with a strong real and a flood of cheap imports. The surprise contraction could signal a slowdown in Latin America’s largest economy and help ease pressure on the central bank to increase interest rates to cool growth and inflation. Industrial output fell 0.7 per cent in December from November, while November figures were revised lower to a 0.2 per cent decline from a drop of 0.1 percent, statistics agency IBGE said on Wednesday.
Consumer prices in Sao Paulo, Brazil’s largest metropolitan area, rose slightly less than expected in January, led by a surge in education and transportation costs, data showed on Wednesday. The IPC-FIPE index rose 1.15 per cent last month, compared with an increase of 0.54 per cent in December, according to the FIPE economic research institute.
Consumer prices in Peru rose 0.39 per cent in January, racing ahead at their fastest pace in more than two years, official data showed on Tuesday to reinforce expectations the central bank will raise interest rates again this month. Inflation rose twice as fast as 0.18 per cent in December