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Global Daily: Euro Area inflation contracts in February

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Financial Markets

 

China’s central bank has cut the required reserve ratio, the amount of cash the nation’s lenders must lock away, by 0.5 percent.  The latest cut, which comes into effect Tuesday, takes the ratio to 17 percent for most large Chinese banks, and signals that shoring up growth is the government’s top priority even if dosing so might further weaken the yuan.  This is the fifth time since last February that the central bank has lowered its ratio, the last time being on October 23, 2015.

 

Developing-country currencies erased a monthly loss as Russia’s rubble and South Africa’s rand gained 1.6 percent and 3.3 percent against the dollar, respectively.  India’s rupee advanced with local bonds on optimism the country will stick to fiscal target.  Turkish lira gained 1.8 percent versus the dollar after the country retained its investment-grade status.  The index of 20 emerging-market currencies against the dollar climbed 0.4 percent, heading for its first monthly advance since October

 

 

Advanced Markets

 

Consumer prices in the Euro Area fell by an estimated 0.2 percent (y/y) in February, below expectations. The return to deflation for the first time in five months comes ahead of the European Central Bank monetary policy meeting on March 10, and was spurred by an 8 percent (y/y) decline in energy prices.  Core inflation, excluding energy and food, decelerated to 0.7 percent (y/y).

 

Consumer credit in the U.K. rose 9.1 percent (y/y) in January 2016, the largest gain since 2006 and ahead of expectations.  Separately, the number home mortgage loan approvals rose strongly to reach 74,581 in January, 2016, the highest level in two years.   

 

Retail sales in Japan fell by 1.1 percent (m/m) in January, the third month of declines and below expectations.  Year-on-year, retail sales are down 0.1 percent, indicating continued softness in the economy.  Separately, industrial production also fell in the year to January 2016, despite an output rebound for the month compared with December 2015.

 


Emerging and Frontier Economies

 

Europe and Central Asia

 

The Latvian economy contracted by 0.3 percent (q/q) in Q4 2015 after expanding by 0.9 percent in Q3 while missing preliminary estimates. Mining and energy supply, manufacturing, construction, accommodation and food services and financial and insurance activities contracted the most.  For 2015 as a whole, GDP expanded by 2.7 percent, from the 2.4 percent increase in 2014.

 

Turkey's economic confidence index decreased sharply by 14.8 percent (m/m) to 71.46 points in February from 83.88 points in January.  It was the lowest value on record, as confidence among consumers, services, retail trade, construction and manufacturing decreased firmly.

 

Latin America and the Caribbean

 

Industrial production in Chile shrank 8.1 percent (y/y) in January, after 3.3 percent decrease in December. It was the sharpest drop since June 2009, dragged down by a 12.6 percent fall in mining and a 4.6 percent decline in manufacturing.  Copper production fell 13.8 percent.  On a monthly basis, industrial output grew 0.8 percent.

 

South Asia

 

Infrastructure output in India went up 2.9 percent (y/y) in January, following a 0.9 percent growth rate in December. Infrastructure accounts for nearly 38 percent of India's industrial output.  Considering the April to January, infrastructure output rose 2 percent.

 

Sub-Saharan Africa

 

South Africa posted a ZAR 17.9 billion gap in January, compared to a downwardly revised ZAR 7.6 billion surplus in December while missing market expectations of ZAR 14.1 billion deficit.  Exports dropped 18.8 percent due to lower sales of precious metals and vehicles while imports rose 11 percent mainly boosted by higher purchases of equipment components.

 

Consumer prices in Kenya increased by 6.8 percent (y/y) in February, easing from a 7.8 percent in January. It was the lowest value since October last year.