US retail sales were down in September, but underlying consumer demand appears relatively resilient. Reuters reports:
Overall retail sales posted a fall of 0.4 percent in September, the Commerce Department said, but when a record 9.3 percent drop in gasoline sales was stripped out, they showed a healthy rise of 0.6 percent, helped by strong clothing and department store purchases...
Meanwhile, the University of Michigan said its index that gauges consumer sentiment jumped to 92.3 in October, higher than the reading of 86.5 economists had predicted in a Reuters poll and up from September's result.
Meanwhile, inflation looks likely to moderate further in the near future.
The University of Michigan data also showed inflation expectations for the next year were lower, though they were slightly higher for the next five years.
A report from the Labor Department showed U.S. import prices dropped by a more-than-expected 2.1 percent in September, the largest decline in almost 3-1/2 years, due largely to the big fall in petroleum prices.
It was the first fall in overall import prices since March and was led by a 10.3 percent fall in petroleum prices while the cost of non-petroleum imports inched up 0.1 percent.
Inflation has already fallen in Germany:
The inflation rate in Germany, Europe's largest economy, dropped to the lowest in more than two years in September after oil prices retreated from a record.
Consumer prices rose 1 percent from a year earlier after gaining 1.8 percent in August, according to the harmonized European Union method, the Federal Statistics Office in Wiesbaden said today. The inflation rate, revised down from a preliminary estimate of 1.1 percent, is the lowest since February 2004. From August, consumer prices fell 0.5 percent.
...and in France:
French inflation eased in September to the slowest pace in more than four years as energy prices fell.
The inflation rate fell to 1.5 percent from 2.1 percent in August, the Paris-based national statistics office said today, using a harmonized European Union method. The rate was below the 1.7 percent expected by economists in a Bloomberg News survey and was the lowest since June 2002, when it also was 1.5 percent. From a month earlier, prices fell 0.2 percent.
And the Bank of Japan looks sanguine enough about inflation to leave interest rates unchanged yesterday, although it left the door open to a rate rise later this year.
Bank of Japan governor Toshihiko Fukui said there was still a chance of another interest rate rise this year after the central bank held fire for a third straight month...
The Bank of Japan's nine-member policy board unanimously agreed earlier to leave the central bank's benchmark lending rate unchanged at 0.25 percent, as expected at the close of a two-day meeting Friday
"If I am asked whether or not there is any chance for another rate hike before the end of this year, I would say I do not rule this out," Fukui told a press conference.
A rate hike in Japan certainly cannot be ruled out, considering that producer prices rose the most in more than 25 years in September. Bloomberg reports:
An index of prices that companies pay for energy and raw materials such as iron ore surged 3.6 percent from a year earlier, up from a revised 3.5 percent gain in August, the Bank of Japan said in Tokyo today. The result beat the median 3.3 percent forecast of 33 economists surveyed by Bloomberg News.
And Japanese industrial production continues to grow. From Kyodo/Yahoo! News:
Japan's industrial production grew a seasonally adjusted 1.8 percent in August from the previous month, down 0.1 percentage point from the preliminary reading, the Ministry of Economy, Trade and Industry said Friday.
China too might do well to consider additional tightening measures. From AFP/CNA:
Chinese banks stepped up their lending in September compared with August, marking the second consecutive month-on-month increase as the economy continued to move ahead strongly, analysts said.
New yuan-denominated loans last month totaled 220 billion yuan (27.8 billion dollars), the China Securities Journal reported, citing unnamed sources, implying a 16 percent expansion from August...
Consumer prices rose 1.5 percent in September from a year earlier, against a 1.3 percent rise in August, the China Securities Journal also reported, suggesting again an uptick in demand...
The China Securities Journal also reported a 16.8 percent increase in M2, the broad money supply measures, in September.
While this was down from 17.9 percent year-on-year M2 growth in August, the figure did suggest a slight month-on-month rise in the measure, which includes cash in circulation and all deposits.
But China's foreign exchange policy isn't helping. From Xinhua Online:
China's foreign exchange reserves had climbed to 987.9 billion U.S. dollars by the end of September, up 28.46 percent on the previous year, the People's Bank of China reported on Friday.
The central bank report said the reserves increased by 169 billion dollars in the first nine months of the year.
Official figures show the increase in reserves fell to 15.9 billion dollars in September from 17.5 billion dollars in August, but still higher than July's 13.6 billion dollars.
It could all lead to overheating in China, but at least in the meantime, it is surely helping to keep interest rates and inflation in the US low -- prices of imports from China to the US fell 0.2 percent in September after increasing the previous two months.
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