The world needs more inflation and if it doesn’t get it–soon–the slow burn of disinflationary pressure may tip over into outright deflation. It’s another wake-up call for central banks, which is another way of saying that the blowback of the Great Recession is still with us. Back from the dead? In fact, D-risk was never stamped out entirely; rather, it was only tamed. But the virus of falling prices has found renewed strength, which means that the global economy needs another dose of anti-viral medication.
Continue reading →

● IMF Chief Says Global Recovery Faces Strong Headwind | RTT
● Euro zone Dec prices fall confirmed ahead of ECB decision | Reuters
● U.S. jobless claims rise to four-month high | Reuters
● U.S. Producer Prices Fall by Most in Three Years | Wall St Journal
● NY Fed Empire State Manufacturing Report: Activity Expands | Bond Buyer
● Philly Fed: Manufacturing Activity Grows at Weaker Pace in Philly Region | AP/ABC
● U Consumer Confidence Increases to Highest Level Since July 2007 | Bloomberg

US industrial production is expected to rise 0.3% in tomorrow’s December report vs. the previous month, according to The Capital Spectator’s median point forecast for several econometric estimates. The median prediction reflects a substantial deceleration in growth vs. the previous month’s 1.3% advance.
Continue reading →

It’s a forgone conclusion in the markets that the European Central Bank will soon roll out a quantitative easing program—buying government bonds with newly printed money. Yesterday’s legal ruling paves the way for no less—a lawyer at the European Court of Justice said that the ECB’s bond-buying program doesn’t run afoul of EU law. But otherwise the subject of the ECB and QE is morass of uncertainty. In fact, it’s fair to say that the outlook for what can be achieved with the next phase of monetary stimulus, and how it will proceed, is a tangled web of unknown unknowns at this point.
Continue reading →

● US retail sales drop the most in 11 months, but seen as a blip | Reuters
● US Import Prices Fall Sharply In Dec Amid Lower Fuel Prices | RTT
● Atlanta Fed: Inflation expectations slip for 2015 to 1.7% | Atlanta Fed
● Fed’s Beige Book: concern over consumer spending, slumping oil | MarketWatch
● German Economy Grows 1.5% In 2014; Fastest In 3 Years | RTT
● India’s central bank announces surprise interest rate cut | Reuters
● Swiss National Bank scraps minimum exchange rate vs euro | AP/WaPo

Retail consumption fell sharply in December, far more than expected, the US Census Bureau reports. Sales slumped 0.9% last month vs. November, well below the consensus view that predicted a relatively mild 0.1% fall (or the modest 0.2% gain anticipated by The Capital Spectator’s median forecast). Today’s surprisingly weak report translates to a 3.2% annual increase, the slowest year-over-year gain in 10 months. In short, today’s numbers for retail spending at last year’s close look discouraging. It may be a warning sign for the US economy, but a closer review of the data suggests that last month’s skid may be noise.
Continue reading →

Securitized real estate is crushing the competition. The global markets have turned wobbly lately, but you wouldn’t know it by looking at the recent performance for real estate investment trusts. US REITs are far and away the best performer among the major asset classes via our standard list of ETF proxies over the past 12 months. Vanguard REIT (VNQ) has climbed an impressive 33.5% on a total return basis through yesterday (Jan. 13), based on the trailing one-year period (defined here as the past 250 trading days). The number-two performer—US stocks, broadly defined via Vanguard Total Stock Market (VTI)—is far off in the rear-view mirror with a 10.5% advance.
Continue reading →

● Job openings jump to a 14-year high | AP/USA Today
● Small Business Most Optimistic In US Since 2006 | Industry Week
● World Bank Downgrades Global Growth Forecast | RTT
● Eurozone industrial production beats forecasts: +0.2% in November | FT
● Europe court backs ECB bond-buying program | CNBC
● ECB’s Draghi says risk of deflation higher than a year ago | Reuters
● Oil extends losses as World Bank cuts growth forecast | Reuters

US retail sales are expected to rise 0.2% in tomorrow’s December report vs. the previous month, according to The Capital Spectator’s median point forecast for several econometric estimates. The median prediction reflects a substantial deceleration in growth vs. the previous month’s 0.7% advance.
Continue reading →

Atlanta Fed President Dennis Lockhart says that the central bank is still on track to start raising interest rates in mid-2015. Speaking at a conference yesterday, he reasoned that the U.S. economy “is hitting on all cylinders.” But the renewed decline in bond yields, driven by an accelerating wave of disinflationary momentum around the world, suggests that the first rate hike will be delayed.
Continue reading →