Higher oil means what, exactly?
- Oil has continued to creep higher. This may or may not last, but from an economic perspective any increase in oil raises questions about capital flows and about inflation. On the former, lower oil price led to producers repatriating capital – the moves so far are not likely to reverse that.
- For inflation, it is worth remembering that only around 20% to 50% of the decline in oil prices was passed to the consumer (depending on the country). However, with US core inflation above its 20 year average, reducing the oil illusion on CPI should show some of the underlying pressures.
- Sentiment data dominates the European calendar, with the PMI business sentiment figures for the Euro area, the ZEW survey of experts for the German economy, and the ifo German business sentiment numbers. The overall picture should be consistent with moderate expansion.
- The US has the Maarkit PMI (not normally a focus) and the Richmond Fed regional business sentiment data are due. However with more presidential votes and Republican Mitt Romney speaking, politics may overwhelm economics in the US today.