US Inflation Beats Estimates as Japan Growth Remains Stable
February 15, 2018 12:41 pm
Today, the Bureau of Labor Statistics (BLS) released its latest data on the country’s inflation. The data showed that the US inflation rose by 0.3%, beating the analysts’ consensus of 0.2%. The annualized CPI rose by 1.8% against the expected 1.7%.
As a result, the dollar rose against its main peers. The dollar index was up 30 basis points while the EUR/USD pair was up by about 25 basis points. They rose as investors anticipated for the fed to accelerate its normalization process. In response, the stock markets opened a bit lower ending the gaining streak that started on Friday.
Rising, but contained inflation is a good thing for the country. The Fed has put in place a target inflation rate growth at 2.0%.
It is a good thing because it shows that people have more spending power. Perhaps, the tax reform package signed by Trump had a thing to do with it. As you recall, before Christmas, Trump signed a tax reform package which led to companies offering higher salaries and one time bonuses.
Another reason for the high inflation rate was higher energy prices. Last month, the crude oil prices rose to the highest point in three years with the WTI rising to above $65. This month however, the prices have fallen from their highs as investors started worrying about the accelerated rate of production from the United States.
The rise in inflation was led by apparels which jumped most in three decades led by women apparel which rose by 3.4%.
On the other hand, higher inflation growth is often negative for stock investors. This is because they tend to remove their money from stocks and put it into bonds which yield better in times of high inflation. After the data was released, the treasury yields rose to 2.86%.
Elsewhere, in Japan, the statistics agency released GDP data that missed analysts’ estimates. According to the agency, the country’s GDP grew at 0.5%, which made it the eighth straight quarter of growth. While the data missed estimates, it was a welcome move in the investment community as it marked a sustained growth. The growth was facilitated by continued consumer spending coupled with increased capital spending. The country’s exports growth was offset by increased imports.
In Europe, Germany’s GDP held steady at an annualized rate of 2.3% which was in line with the analysts’ estimates. Equally, the quarterly data held steady at 0.6%. At the same time, EU’s annualized GDP was in line with analysts’ estimates of 2.7%. The euro fell against the dollar and the pound following all this data.
The sustained growth in Europe is likely what the ECB expects. As you recall, the bank promised to continue its accommodative policies until September or beyond. In this, they promised to continue buying assets, which includes bonds and mortgage backed securities. Still, the strengthening economy could put them under pressure to start the normalization process. They could this to prevent the economy from overheating, which could leave it exposed to minor shocks.
Today, the Bureau of Labor Statistics (BLS) released its latest data on the country’s inflation. The data showed that the US inflation rose by 0.3%, beating the analysts’ consensus of 0.2%. The annualized CPI rose by 1.8% against the expected 1.7%.
As a result, the dollar rose against its main peers. The dollar index was up 30 basis points while the EUR/USD pair was up by about 25 basis points. They rose as investors anticipated for the fed to accelerate its normalization process. In response, the stock markets opened a bit lower ending the gaining streak that started on Friday.
Rising, but contained inflation is a good thing for the country. The Fed has put in place a target inflation rate growth at 2.0%.
It is a good thing because it shows that people have more spending power. Perhaps, the tax reform package signed by Trump had a thing to do with it. As you recall, before Christmas, Trump signed a tax reform package which led to companies offering higher salaries and one time bonuses.
Another reason for the high inflation rate was higher energy prices. Last month, the crude oil prices rose to the highest point in three years with the WTI rising to above $65. This month however, the prices have fallen from their highs as investors started worrying about the accelerated rate of production from the United States.
The rise in inflation was led by apparels which jumped most in three decades led by women apparel which rose by 3.4%.
On the other hand, higher inflation growth is often negative for stock investors. This is because they tend to remove their money from stocks and put it into bonds which yield better in times of high inflation. After the data was released, the treasury yields rose to 2.86%.
Elsewhere, in Japan, the statistics agency released GDP data that missed analysts’ estimates. According to the agency, the country’s GDP grew at 0.5%, which made it the eighth straight quarter of growth. While the data missed estimates, it was a welcome move in the investment community as it marked a sustained growth. The growth was facilitated by continued consumer spending coupled with increased capital spending. The country’s exports growth was offset by increased imports.
In Europe, Germany’s GDP held steady at an annualized rate of 2.3% which was in line with the analysts’ estimates. Equally, the quarterly data held steady at 0.6%. At the same time, EU’s annualized GDP was in line with analysts’ estimates of 2.7%. The euro fell against the dollar and the pound following all this data.
The sustained growth in Europe is likely what the ECB expects. As you recall, the bank promised to continue its accommodative policies until September or beyond. In this, they promised to continue buying assets, which includes bonds and mortgage backed securities. Still, the strengthening economy could put them under pressure to start the normalization process. They could this to prevent the economy from overheating, which could leave it exposed to minor shocks.
Sources:
https://tradingeconomics.com/japan/gdp-growth
https://asia.nikkei.com/Politics-Economy/Economy/Japan-s-economic-growth-seen-on-track-despite-market-swings
https://www.ft.com/content/6800e2e6-116e-11e8-8cb6-b9ccc4c4dbbb
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