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’Dear Chancellor…
It’s letter writing time again at Threadneedle Street.
Following the announcement by the Office for National Statistics that CPI inflation in the 12 months to October was 3.2 per cent, the Bank will at 10.30am this morning publish a letter from the Governor to the Chancellor,
CPI preview
Yet another freaking economic indicator that you can file under “getting more attention than unusual because it’s the last one before QE2 blah blah fine great” is Friday’s consumer price inflation index for September
We’ll start with a couple of new graphs from the Cleveland Fed,
Behold, Google’s view on inflation
It was bound to happen.
According to the FT, Google is mid-way through the process of creating its very own consumer price index — based (understandably) on its ability to access real-time price data from across the web.
QE and exploding pensions, again
Citi is back with another take on low bond yields and pension accounting.
And before you fall asleep (wake up!) this is an update of Citi’s March 2009 note on quantitative easing and exploding pensions.
Inflation offers no excuses
The August consumer inflation numbers for the US have arrived, and they look a lot like July’s:
No surprises here. As we commented in August (and as IMF research has shown), this kind of disinflationary trend — scraping against the boundary of deflation but not quite plunging through it — is common after prolonged growth slumps.
Dear Chancellor…
Is more letter writing in prospect for the Bank of England governor Mervyn King? A glance at Tuesday’s CPI figures suggest he could soon be putting pen to paper.
August consumer price inflation was forecast to come in 2.9 per cent (year-on-year).
Charts du jour – FX edition
Parity for the Swiss franc:
Meanwhile, the US dollar has fallen to a 15-year low against the Yen:
And sterling has picked up in the wake of Tuesday’s stronger than expected inflation data:
Linkers in a cold climate
Oh, not more UK inflation-indexing shenanigans.
Courtesy of Barclays Capital, here’s a quick update on the RPI-to-CPI indexation imbroglio that’s broken out in the UK linker market lately.
Bidding RIP to RPI and shifting pension liabilities to CPI instead — as the government outlined in the June budget and is now consulting upon — has rather worried the market in UK RPI-linked bonds.
Dear George, again [updated]
July inflation data for the UK is in, and surprise, surprise: CPI is above 3 per cent — again — and Bank of England Governor Mervyn King has to write a letter to the Chancellor, George Osborne. Again.
Disinflation right on schedule
Looks like the inflationistas may have to continue laying low, at least for a while. A chart from the release of this morning’s CPI numbers:
As you can see, the year-on-year change in the core index has remained at a measly 0.9 per cent for the last four months,
Inflation indices – and bond markets – wheat themselves
It seems like the grain puns — and Russian export ban — only started yesterday, but the world’s month-long wheat price crisis is already starting to affect inflation indices.
And that means an impact on bond markets everywhere from European linkers to foreign holdings of emerging-market debt.
UBS ponders the UK’s quiet CPI calibration
Is Britain’s government quietly working on a(nother) CPI/RPI change?
Back in May, the new UK chancellor George Osborne suggested to Mervyn King that he would “welcome” the Bank of England governor’s views “on how we might accelerate the process of including housing costs in the [Consumer Prices Index] inflation target.”
New (inflation swap) derivatives in town
RIP RPI?
As part of its emergency Budget, the UK government wants to switch public sector pension pay-outs from being based on the Retail Prices Index (RPI), to the Consumer Prices Index (CPI). CPI has generally been lower than its RPI-cousin,
On the edge of a deflationary precipice…
The world should be discussing deflation, not inflation. The world should be dicussing buying 30-yr govts, not continually wondering like a stuck record where the first rate hike will appear.
Albert Edwards agrees with the depressionistas at RBS.
Towards a new UK inflation target
The UK’s ruling Lib-Con party published its final coalition agreement on Thursday morning, and a couple of things stand out.
Perhaps the most important concerns the Consumer Price Index, which is, of course,
US CPI – the good and bad news
Wednesday’s US inflation data is something of curate’s egg.
Here, via Reuters, are the headlines:
U.S. APRIL CPI -0.1 PCT -0.0689; CONSENSUS +0.1), EXFOOD/ENERGY UNCH (+0.0471; CONS +0.1 PCT)
U.S.
Dear George, about that inflation…
April inflation data for the UK is in, and it’s a bit of a bump on the head for the Bank of England: a 3.7 per cent rise in CPI year on year. From the Office of National Statistics release:
In the year to April,
UK inflation – still rising
The consensus among City economists is for UK consumer prices to fall to 1.8 per cent by the end of this year before staying in a 1.4-1.7 per cent range next year.
So, where do those forecasts lie after Tuesday’s strong than expected reading?
From Reuters:
UK inflation *fall*
UK inflation has fallen for the first time since September, according to figures released by the ONS on Tuesday.
But not by much…
…and it still remains above 3 per cent.
Sterling initially sold off following the weaker than expected data (the City consensus was for a 3.1 per cent year-on-year rise),
Overheating China – reaction
A bit more on the stronger than expected Chinese inflation data. Economists now expect further policy tightening measures and sooner rather than later.
Barclays Capital:
In view of the higher-than-expected inflation in February,
China tightening? Yeah right.
Here’s an oxymoron.
The world worries that rampant Chinese demand for commodities is pushing prices higher.
Except, according to Reuters, China’s deputy central bank governor, Su Ning, worries that global commodity prices will push Chinese prices higher,
China’s (un)real GDP
Here’s a chart showing China’s GDP growth rate in real and (un)real terms from Sean Corrigan at Diapason Commodities:
As Corrigan observes, while real GDP rose from a worthy 7.9 per cent year-on-year growth rate in June to a commendable 10.7 per cent by year end — the nominal rate shot up from an anaemic 4.0 per cent to a shocking 26.9 per cent in the same period.
What Google says about inflation
Alternative research shop Variant Perception is always good for an exciting nugget of eco-data.
In their latest monthly report their focus — as always — tips towards the inflationary view of things.
CPI inflation falls to 2.3%, RPI at record low
The UK’s consumer price index (CPI) measure of inflation fell to 2.3 per cent in April (year-on-year), versus 2.9 per cent in March, according to figures from the Office of National Statistics. While the number was lower than expected by the market,
Back to 1960
We were all much relieved in Britain at the end of March when a widely anticipated deflationary figure for RPI in February came in just above zero at 0.1 per cent.
Alas, such relief has proved short-lived.
Optimistically, pessimistic in the US
The Fed’s Beige book is out and it says the speed of the US economy’s contraction is fading amid scattered signs the recession could be nearing an end. So where’s the rally monkey reaction? The DJIA is up about 43 points to 7,963,
Deflation avoided, phew
Back to 1960!
Those expecting the first negative retail price index number in the UK since 1960, will be disappointed. The latest CPI/RPI figures from the Office of National Statistics show deflation has been successfully avoided in February. Here’s the Reuters table,
A deflationary dragon with excess capacity
China has slipped into deflation for the first time in six years. Given its conspicuous excess capacity in a world of falling consumer demand, that now puts the country at great risk of copying America’s position (as a surplus country) in the Great Depression of 1929.