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Inflation leaps into the new year

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The Trump Twitter feed criticized China for taking wealth from the US. Basically, China has received Treasuries in exchange for goods. US wealth is not exactly being plundered by modern day Viking raiders. The economics of the tweets matter less than signs of ongoing tensions between the new US administration and its largest creditor.
  • Consumer price inflation is likely to be a theme for 2017, and the rise of Euro area inflation starts today. Oil base effects should be lost from the data, which will create a significant acceleration of inflation rates as underlying pressures are no longer disguised.
  • Today's inflation data will also show the strong local element to price changes. German inflation is expected to effortlessly clear the 1% yoy rate and come close to 1.5%, while French inflation is expected to remain below 1%. This reflects the different local labor market conditions.
  • The US offers the ISM opinion poll of manufacturing sentiment. Market excitement about this data is out of proportion to its value as an economic signal. Export measures supposedly show export volume, but correlate better with export value; dollar strength in early December may have undermined the value of exports.