A more accommodative ECB? My macroeconomic column

Point #1The global economic momentum remains weak
World trade was up by only 2% when November 2015 is compared to November 2014. This growth rate is still below the average seen before 2008 (blue band on the graph).  The explanation framework based on the absence of growth drivers seems always the good one. No impulse from the US or China and the incapacity for the world economy to converge to a higher growth trajectory. Continue reading

The importance of oil – My weekly Column

First graphA lower oil price will drive inflation rates down
With Iran back on the oil market, the price dropped below 30 dollars for a barrel. This could have an important impact on the inflation rate and therefore on monetary policy strategies in Europe and in the US.
The graph shows, for the Euro Area, the energy contribution to the inflation rate. It also shows the one year change of oil price (Brent) in euro. The two curves have consistent profiles.
With an oil price at 50 and the EURUSD exchange rate at 1.07 (red line), the oil price change is consistent with an energy contribution that could be close to 0 on average in 2016. It was a good hypothesis to put the price at 50. In that case, the headline inflation rate was able to converge to the core inflation rate. It was a comfortable situation for central bankers.
If on average, the oil price is 35 USD and 1.07 (green line), the contribution could be close to -0.6%. In that case, the inflation rate would be circa 0%. With 30 USD and 1.07 it would be probably negative.
These simple calculus show that the oil price trajectory will be important in 2016 (close to 30 or below?) and that there is no guarantee that inflation rates could converge to 2% in a finite time. Continue reading

My Macroeconomic column in 8 points: Will employment change the Fed’s strategy?

The main issue this week was the US employment figure as it may change the Fed’s mind on monetary policy. Nevertheless, employment is not the only aspect to mention to catch the US economy momentum. Another important issue, this week, is the rapid and deep drop of German industrial orders from outside the Euro Area. It’s a source of concern for the global investment dynamics. The last important point is the non-null probability of a rate lift-off at the Bank of England in 2016. Mark Carney has mentioned this possibility after the Monetary Policy Committee Meeting of the Bank. It’s not the first time that the BoE and Carney take this kind of commitment.

Eight points this week to follow the macroeconomic environment

1 – There was impatience to get the number of jobs creation in October in the US as it could be a trigger for a Fed’s rate move at its December meeting.
The number was strong at 271 000, way above expectations at 185 000. Nevertheless, the employment rate was almost unchanged for all classes of age and was unchanged for the 25-55 years of age. In other words, there were no supplementary pressures on the labor market even with employment surprising on the upside.
This figure comes after August and September during which the number of jobs creation was low. As a consequence, the average number of new jobs in the last 3 months is below the average of the 3 previous months: +187 000 in August, September and October versus 243 000 from May to July. Continue reading

My Macroeconomic column in 13 points (November the 2nd)

13 points this week to follow the macroeconomic momentum.

1 – The Fed is back in the game after its last week meeting (27/28 October). It hasn’t changed the stance of its monetary policy but it has deeply changed its press release. Headwinds coming from the external environment of the US economy were the main point to notice in September. The message from the Fed was that the probability of a Fed’s lift-off this year was low. This point has been erased in the October’s press release. Moreover, the Fed has mentioned explicitly a potential change at its next meeting (15/16 December).
Can we expect a lift-off in December? I don’t think so. The main reason for a change would come from the US central bank commitment to hike its interest rates in 2015. But as always the decision will be data dependent. The current economic situation will not create tensions that could push the Fed to change its strategy very rapidly. Recent data on the ISM and on retail sales have shown weakness that cannot be a support for a change.
Janet Yellen will testify in the Congress at the beginning of December (2 and 3). It could be a source of information on the Fed’s strategy Continue reading

My Macroeconomic column in 8 points (October the 26th)

Published in French on October the 26th – Data expected this week but already published are briefly discussed.

8 points to keep in mind this week to highlight the macroeconomic momentum

1 – The improvement of the French economy is the real good news
The business climate index, published by INSEE the French Statistical Institute, is above its historical average for the first time since August 2011.
It shows how deep and persistent was the negative shock that has hit the French economy since this period. Looking at the different sectors, building construction is the only one being still on the weak side. Services, Industry and retail trade contribute positively to growth.
france-2015-october-business climateFor the French economy we also notice in the INSEE quarterly survey that expected demand is improving rapidly. Continue reading