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New York, March 13, 2010 Currencies: Dollar Index Falls to Important Support The dollar, while unchanged versus the yen, was down on Friday and for the week against other major currencies. Reports of the appointment of Janet Yellen as Federal Reserve Vice Chairman reduced the risk of an early Fed monetary policy tightening; thus, pressuring the greenback. US retail sales unexpectedly rose in February despite severe East Coast snowstorms, suggesting US economic growth is stronger than previously thought. Meanwhile, US consumer confidence unexpectedly declined for a second month in March. Little changed on low volume, US stocks are at important resistance from January highs. The S&P 500 slipped 0.25 to 1,149.99. The yen was pressured by reports that the Bank of Japan is considering expanding quantitative easing measures and Prime Minister Yukio Hatoyama said the government needs “firm measures” to combat the yen’s strength. The euro advanced for a third day following reports that Germany and France may be considering a $55 billion rescue plan for Greece. Sterling rose. The Conservative opposition expands lead in UK polls, making a majority government possible. The Australian dollar gained modestly for a sixth straight day. The Canadian dollar rose to the highest level since July 2008 on Canada’s stronger-than-expected employment growth. See also other recent currency reports. US Macro: February US Retail Sales US retail sales unexpectedly grew 0.3% m/m to $355.5 billion in February, the fourth gain in five months, after a downwardly revised 0.1% m/m increase in January, data from the Commerce Department showed, pointing to sustainable US economic growth. See also other recent updates on US economic data and macroeconomic trends. Europe Macro: January Eurozone IP Eurozone seasonally adjusted industrial production rose a more-than-expected 1.7% m/m in January, an eighth consecutive month-on-month rise and the largest since records began in 1990, after an upwardly revised 0.6% m/m increase (vs. previously reported -1.7% m/m) in December, IP data from Eurostat showed. Asia Macro: Final January Japanese IP Japan’s seasonally adjusted industrial production grew 2.7% m/m in January (vs. preliminarily reported 2.5% m/m), an 11th straight month-on-month rise and the fastest since May 2009, after a 1.9% m/m increase in December, final January IP data from the Ministry of Economy, Trade and Industry showed, with the IP index increasing to 92.1 from December’s 89.7. Globicus US LEI Indicates US Economy Expanding with Employment Growth in 2010 The Globicus-qEcon US leading economic indexes may be peaking at high levels, suggesting the US economic recovery is steadily progressing in 2010. The overall leading economic index’ growth rate, a measure of future economic growth, was at 10.8 in January, near an 11.0 high in December. The short leading index' growth rate remained high at 11.0 in January, a tad below December’s 11.9 high. The long leading index' growth rate was at 10.7 in January, slightly below September’s 11.7 peak. Overall, the LEI numbers indicate the US economic expansion is intact for Q1-Q2 2010 and possibly for Q3 2010. Meanwhile, the coincident index' growth rate, a measure of current economic growth, has improved steadily and increased to -1.6 in December from -2.8 in November. US GDP expanded at a 5.7% annualized rate in Q4 2009, the second quarterly expansion and the fastest in six years, after growing at a 2.2% annualized pace in Q3, ending the longest stretch of declines since records began in 1947. The coincident number points to June 2009 as the trough of the great recession. 
US Recession Is Technically Over The worst US recession since the 1930s is technically over. However, it is difficult to determine the exact date of the end of the recession as economic indicators are mixed with personal income and employment data still weak. The Globicus coincident index, while indicating the recession ended in June or August, has still not bottomed in a clear way. Equities: Daily US Stocks The major indexes have broken their strong uptrends. The appreciating dollar increases the deflationary risk and can end the bull market in stock and the global recovery. Fixed Income: Credit Spreads Indicate Recovery Treasury interest rates have risen off their lows, credit spreads have narrowed and interbank rates have declined, indicating the financial panic is over and the economic outlook is improving. Commodities: Daily Commodities Commodities may be topping out as China tightens. December Globicus-qEcon Canadian LEI The Globicus-qEcon Canadian overall leading economic index’ growth rate increased to 8.0 in December from 7.4 in November. December Globicus-qEcon EMU LEI The Globicus-qEcon EMU overall leading economic index’ growth rate remained at a high 5.0 in December. December Globicus-qEcon German LEI The Globicus-qEcon German overall leading economic index’ growth rate eased to 8.0 in December from 8.7 in November. December Globicus-qEcon UK LEI The Globicus-qEcon UK overall leading economic index’ growth rate declined to 4.0 in December from 6.5 in November. December Globicus-qEcon Japanese LEI The Globicus-qEcon Japanese overall leading economic index’ growth rate held steady at 5.4 in December. December Globicus-qEcon Australian LEI The Globicus-qEcon Australian overall leading economic index’ growth rate rose to 2.3 in December from 1.3 in November. January Canadian LEI Canada’s leading economic indicators index, a measure of future economic activity, rose a slightly less than-expected 0.9% m/m to 231.1 in January, an eighth consecutive monthly rise, after a 1.5% m/m December gain that was the largest in almost 27 years, LEI data from Statistics Canada showed, pointing to continuing Canadian economic growth. Preliminary January Japanese LEI The Japanese leading economic indicators index, a measure of future economic activity, rose to a higher-than-expected 97.1 in January, an eleventh straight monthly rise, from 94.3 in December, according to preliminary January LEI data released by the Cabinet Office. November Australian Westpac-Melbourne Institute LEI The pace of the Australian economic recovery has progressed remarkably. The Australian Westpac-Melbourne Institute leading economic index, a measure of future economic activity, increased 1.0% m/m to 256.8 in November, with its annualized growth rate accelerating to 7.6%, the fastest pace since November 2007, from October’s 5.8%, Westpac Banking Corp. and the Melbourne Institute reported. A Primer on Deflation In the WWII period, low inflation did not induce fears of deflation because economists believed the institutions created by the Keynesian revolution had a bias toward inflation. After more than 50 years of absence, deflation has now reappeared on the agenda as something to worry about. So what is deflation? Deflation is defined as persistent declines in the general price level. |
