Around the Globe 10.14.2013

China’s Inflation Rises Faster Than Expected – WSJ.com.

China-to-India Price Jump Risks Growth as World Outlook Dims – Bloomberg.

China inflation at seven-month high, limits room for easing despite export tumble | Reuters.

Data show China passing US as biggest oil importer.

INDIA CPI through September 2013 China CPI

Nascent inflationary pressures have increased in both China and India. China loosened monetary policy starting in June to combat a burgeoning liquidity crisis, and this extra cash is wending its way through the financial system inexorably feeding through to food and energy prices.  India has failed to tighten its monetary policy quickly enough allowing a depreciated rupee to cause inflation.  As these countries grow, heavy resource usage creates a headwind to increasing growth rates.  They are both large enough now so that increases in resource consumption quickly raise prices crimping further growth.  Perhaps this is the reason countries have difficulty making the leap from middleweight economic powers to heavyweight.

Asmussen rules out ECB rollover of Greek bonds | Reuters.

Greek Government Budget Deficit Ratio

 

Asmussen must say things like this for two reasons.  First, Germany needs to keep up the austerity pressure, or else the Greeks will stop “reforming” the economy.  Second, Germany has not yet formed a government.  With sensitive coalition negotiations, it is an inconvenient time to admit that Greece needs a 4th bailout even though this is inevitable.  In order to preserve its export currency, the German government and the voters will continue denying that Greece needs more money until it does.  Then, it will gladly do whatever is necessary to bail Greece out.

Inverted yield curve sign has Wall Street on edge.

US Government Bond Yield Curve

Usually, an inverted yield curve screams, “RECESSION!” This time may be different, but maybe not.  Key pieces of economic data are pointing to a soft patch.  Housing sales, job creation rates, unemployment claims and GDP growth are all past recovery bests.  On the other hand, PMIs are indicating modest growth going forward.  The bottom line is that mixed economic data points to more of the same, i.e. the New Normal.

 

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