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--Barry Asmus

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Friday, January 14, 2011

International Metrics!

Let's start the cavalcade of international data off with Japan, where their Corporate Goods Price Index (think PPI, here) was up 30 bps to close out at a 0.4% increase for the month of December.  This means that, even though analysts were expecting to see 2010 CGPI to finish with a 0.8% increase, Japan has actually experienced a 1.2% increase for the year.  On average.  Petroleum & coal products were up 7.8% for the year and nonferrous metals were up 10.9% for the year, while information and communications equipment were down 5.8% for the year and electronics components & devices were down 3.7% for the year.
Hopping across the Sea of Japan to China, we find not so much economic data as economic news.  Chinese fund managers are gearing up for a series of sweeping regulatory reforms that will simplify the approval process for launching new funds, and will allow employees of fund firms to own stakes in their own companies (which is seen as giving fund managers extra incentive to perform, since their money is at stake as well).  They also plan to crack down harder on insider trading.  Despite this latter reform, international firms are nearly as excited about the changes as Chinese firms, as it will most likely allow increased international competition in China.
Bypassing the wastelands of Central Asia and the Middle East, we turn our attentions now to Europe.  Germany has released CPI figures for December and the end of the year, and they're right in line with expectations.  December saw a 1.0% monthly increase, with a 1.7% increase for the year - exactly what analysts were expecting to see and utterly unchanged from November.
Italy has joined it's one-time ally in releasing CPI data, and is "me tooing" the German "right in line with expectations" results.  For December CPI was up 0.4%, up 1.9% for the year - again, exactly what analysts were expecting to see and utterly unchanged from November.
Even the European Union is climbing on the CPI bandwagon, with HICP (Harmonized Index of Consumer Prices) coming in at 0.6% for December and 2.2% for the year.  This is exactly what analysts were expecting to see but, in a dramatic change of pace after Italy and Germany, December HICP was up 50 bps.
Ah, but CPI is not the only thing Europe has on its collective mind this morning.  Swiss PPI jumped 50 bps in December to close at a 0.3% increase (missing expectations by 10 bps), with PPI for 2010 also wrapping up with a 0.3% increase - not too shabby in terms of actual inflation, but still missing expectations for the year by 10 bps.
Great Britain overachieves on reporting PPI, looking at actual changes in input costs[1] as well as the change in output prices.  For December and for the year, output prices were up 10 bps.  The December output price increase was 0.5% (missing expectations by 10 bps), and for 2010 output prices were up 4.2% (missing expectations by 20 bps).  Input price changes were far more brutal for producers.  December input prices jumped 250 bps to finish up at 3.4% (missing expectations by 190 bps), while for the year input prices jumped 320 bps to wrap up at a 12.5% increase (missing expectations by 230 bps).  I have really only two things to say about that:
  1. Ouch.  And,
  2. Look for British output prices to work upwards in the next few months, as British producers look to keep profit margins from shrinking.
Finally, let's talk about European trade deficits.  Italy's trade deficit widened by E300 million to finish at E2.95 billion for November 2010.  The European Union as a whole saw their trade surplus shrink by E5.4 billion which, given that they only had a E3.5 billion surplus, means that they ended up with a E1.9 billion trade deficit.  This beat expectations, but only in the sense that a group of football hooligans and lager louts mobbed expectations and ended the experience screaming at the expectations to "bite the curb!" before stomping on the back of the expectation's head[3].
[1]  That is, the change in the cost of the raw materials and fuel used by the producer - although, given the current fetish for "core" figures, I'm surprised they actually use fuel and energy costs in calculating this.
[2]  This, on the other hand, measures the change in the prices asked for the goods the producer produces.
[3]  A colorful and roundabout way of saying that analysts were expecting to see the trade surplus shrink, but remain a E1.9 billion surplus.

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