Inflation surges

By Colin Twiggs
April 07, 2017 9:00 p.m. ET (11:00 a.m. AEST)

Disclaimer
Please read the Disclaimer. I am not a licensed investment adviser.

Inflation is rising, with CPI climbing steeply above the Fed's 2% target. But core CPI excluding energy and food remains stable.

Job gains were the lowest since May 2016.

But the unemployment rate fell to a low 4.5%.

Hourly wage rate growth has eased below 2.5%, suggesting that underlying inflationary pressures are contained.

The Fed is unlikely to accelerate its normalization of interest rates unless we see a surge in core inflation and/or hourly earnings growth.

Australia

Australia faces shrinking inflationary pressures.

Wage growth is falling.

Credit growth is shrinking.

Growth of currency in circulation is also slowing. The fall below 5% warns of a contraction.

One piece of good news is that Chinese monetary policy seems to be easing. After a sharp contraction of M1 money stock growth in January, February shows a partial recovery. Collapse of the Chinese property bubble may be deferred a while longer.

Which is good news for iron ore exporters. At least in the short-term.

For my part, I favour an approach to statecraft that embraces principles, as long as it is not stifled by them; and I prefer such principles to be accompanied by steel along with good intentions.

~ Margaret Thatcher: Statecraft (2002)