US slowing on schedule, monetary trends reassuring

A post in September noted that six-month growth in US real narrow money growth had fallen sharply, suggesting a loss of economic momentum in early 2015. This scenario seems to be playing out: Citigroup’s US economic surprise index turned negative … Read More

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ECB reaction: QE expansion may prove poorly timed

The ECB is embarking on a large-scale sovereign QE programme against a backdrop of accelerating monetary growth, significant exchange rate weakness, fading fiscal restraint and a major terms of trade boost from the lower oil price. ECB policy was consistently … Read More

Posted in Economy, European Central Bank | Leave a comment

Is the ECB repeating the Fed’s 1986 mistake?

A recent post noted that the oil price has fallen by more than 30% over six months on five previous occasions since World War Two. The global economy was stronger a year after these drops: the six-month increase in industrial … Read More

Posted in Quantitative Easing and Extraordinary Monetary Measures | Leave a comment

Swiss currency shock wrecks promising economic outlook

Yesterday’s shock decision by the Swiss National Bank (SNB) to abandon the 1.20 floor for the euro / franc rate was strange in several respects. Fixed currency arrangements usually break down because the effort to maintain them has produced excessively … Read More

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Commodities / sterling obscure 2%+ UK domestic inflation

UK annual consumer price inflation fell from 1.0% in November to 0.5% in December (0.55% before rounding). The decline was entirely due to a faster rate of decline of energy prices – down an annual 5.8% in December versus 0.2% … Read More

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Eurozone core inflation stable / Germany at full employment

The annual change in Eurozone consumer prices dropped to -0.2% in December from 0.3% in November, with the negative reading reflecting falls in energy and unprocessed food prices. Excluding these categories, prices rose by an annual 0.7%, unchanged from November. … Read More

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Should target UK inflation include housing acquisition costs?

A major weakness of the official consumer prices index (CPI) is its omission of owner occupiers’ housing costs. The Office for National Statistics (ONS) publishes a companion measure, CPIH, incorporating such costs using the “rental equivalence” method, which imputes rents … Read More

Posted in House Prices, Inflation | Leave a comment

UK GDP revisions dash MPC productivity optimism

UK GDP and services output figures released today suggest that the economy continues to grow robustly, contradicting widespread expectations of a second-half slowdown – see previous post. Downward revisions to earlier data, however, imply that productivity performance has been even … Read More

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Fed 2015 / ECB 2011 comparison flawed

Paul Krugman recently drew a parallel between the Federal Reserve’s plans to raise interest rates in 2015 and the ECB’s ill-fated 2011 policy tightening, which was swiftly followed by a recession. The monetary context is different, however, casting serious doubt … Read More

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Eurozone surveys firming on schedule

Eurozone business surveys are starting to confirm the improved economic outlook signalled by monetary trends and leading indicators – see previous post. The Eurozone manufacturing purchasing managers’ new orders index rose back above the breakeven 50 level in December after … Read More

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