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By HaleStewart November 24, 2013 8:26 am
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International Week in Review: Modest Growth Continues But Deflationary Forces May Be Building

Last week, Markit released its monthly manufacturing reports for the EU region.  The composite reading was 51.5 which was the fifth month showing expansion.  However, the primary driver of the change was Germany, while other EU countries had readings slightly above 50 or just below.  In addition, the report provided further evidence that deflation may be taking root in the region. 

Several countries released inflation readings and all showed that central banks have plenty of room to keep rates accommodative for the foreseeable future.  South Korean PPI was -.4 M/M and -1.4% Y/Y; US CPI was 1.1% M/M and 1.7% Y/Y; German PPI was -.2% M/M and -.7% Y/Y and Canada’s CPI was .2% M/M and 1.2% Y/Y.

The Bank of Japan voted to maintain interest rates at .1% while also continuing their asset purchasing program.  The accompanying report that provided an overview of the Japanese economy noted modest expansion continues, but great uncertainly regarding the global situation clouds the future.  Finally, Japanese exports increased 18.6% Y/Y – obviously spurred higher by a cheaper yen.  But imports increased 26.1% Y/Y, further increasing the current account deficit.

Several pieces of economic information from Latin America were encouraging.  Brazil’s unemployment rate dropped from 5.4% to 5.2%.  Mexico also grew by 1.3 Y/Y, emerging from its one quarter of negative growth.  However, Mexican retail sales decreased .4% Y/Y for the second month in a row, showing the economy is still dealing with a potentially decreasing growth scenario.

Finally, we had two pieces of information from China: home prices increased 9.6% M/M and the HSBC manufacturing index printed at 50.4%. 

The general tenor of all the reports was one of modest expansion.  However, the global price situation – with weak price growth across the globe – should be concerning.  Part of the reason is a weak overall commodity picture caused by excess supply.  But with the exception of China, no major global economy is growing anywhere near potential, indicating there is clearly a dearth of demand. 


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