Wednesday, 15 December 2010

US retail sales rise, UK inflation accelerates

Nothing new from the Federal Reserve on Tuesday. From Bloomberg:

Federal Reserve officials kept their plan to expand record monetary stimulus, saying the economic expansion hasn’t been strong enough to reduce joblessness...

Fed officials left their target for the federal funds rate, which covers overnight interbank loans, in a range of zero to 0.25 percent, marking two years of the policy. The central bank is likely to wait until the first quarter of 2012 to raise the rate, based on the median estimate in a Dec. 2-8 Bloomberg News survey of economists.

US economic data on Tuesday suggest little need for further stimulus. From Bloomberg:

Sales at U.S. retailers increased more than forecast in November and optimism among small businesses rose to a three-year high, signaling the economy was gaining momentum as the holiday season began.

The 0.8 percent gain in purchases followed a 1.7 percent jump in October that was larger than previously estimated, Commerce Department figures showed today in Washington. The National Federation of Independent Business’s sentiment gauge rose by 1.5 points to 93.2, the highest since December 2007, as more companies projected sales will grow...

A report from the Labor Department today also showed wholesale costs rose in November by the most in eight months, led by higher prices for gasoline, heating oil and fruit. The producer price index increased 0.8 percent from the prior month after a 0.4 percent rise.

The eurozone economy also looks like it has continued to grow. Bloomberg reports:

European industrial production increased in October led by orders for capital goods such as machinery and tools.

Output in the 16-nation euro region rose 0.7 percent from September, when it fell a revised 0.7 percent, the European Union’s statistics office in Luxembourg said. Economists had forecast a gain of 1.3 percent, the median of 32 estimates in a Bloomberg survey showed. Production increased 6.9 percent from a year earlier, after gaining 5.4 percent in September.

And in the UK, inflation continues to defy expectations for a decline. From Reuters:

Inflation rose to a six-month high in November, extending a run of upside surprises and denting lingering hopes of further monetary easing by the Bank of England.

Annual consumer price inflation rose to 3.3 percent last month from October's 3.2 percent, marking the 11th consecutive month it has been at least a percentage point above the Bank's 2 percent target.

If you can't meet an inflation target, you can always change the target. Another report from Reuters suggests that China's resolve in fighting inflation may be flagging.

China will set a 4 percent target for consumer inflation next year, up from this year's 3 percent objective, state television said on Tuesday, an indication that the government will desist from aggressive tightening even as price pressures mount.

The slightly higher threshold for inflation was consistent with another report in official media earlier in the day that China will aim to cap new loans at about 7.5 trillion yuan ($1.1 trillion) next year, a more generous ceiling than many in the market had been expecting.

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