When China announced that inflation had reached 5.1% in November, the authorities insisted it was only a temporary peak. But this seems less likely today, with January’s inflation still at 4.9%. The surge in food prices is very worrying. They jumped 10.3%. And with a major drought underway in the North East, there is a […]
Chemicals and the Economy
Boom/Gloom Index at a crossroad
The blog’s Boom/Gloom Index presents a fascinating picture this month. The main Index (blue column) remains strongly positive, in keeping with the solid performance of most stock markets. It confirms evidence from other sentiment indices that investors are optimistic about the outlook. But the Austerity index (red line) refuses to collapse. It is, of course, […]
‘Correlation trade’ keeps energy costs rising
After the events of the past few days in Egypt, it seems timely to look at the latest state of the ‘correlation trade’ currently ruling global financial markets. As the chart shows, prices for WTI crude oil (green line), continue to follow those of the S&P 500 (blue) in most remarkable fashion. The trade is […]
China’s interest rates “have to go up more” – World Bank
What happens if you suddenly double bank lending in a country, and make it equal to 1/3rd of total GDP? And, as part of the experiment, add a further 13% of GDP via a $580bn stimulus programme? We don’t know yet, because it has never been done before. But we are about to find out. […]
US core inflation at lowest-ever level
In one of its first posts, at the time of the ill-fated Access deal for Lyondell in July 2007, the blog highlighted the strange divergence that had developed between the front pages of the newspapers, and their business coverage: “If you read the financial pages of your newspaper, everything sounds rosy. But if you turn […]
China to halt property loans till year-end
China’s export-led economy was badly hit when the financial Crisis began in Q4 2008. In response, the government moved quickly to stimulate domestic consumption, in order to keep people employed. It doubled bank lending overnight, and introduced a $580bn stimulus programme. Worth 13% of GDP, this alone was far larger than any seen elsewhere. Doubling […]
China warns of stability risks from housing bubble
China’s leadership seems to be increasingly confident about its ability to redirect the economy towards more domestic consumption over time, and away from the previous over-reliance on exports. As the above chart shows, bank lending (red column) is well on track to meet the $1.1trn target set for 2010, down 21% from 2009’s high. In […]
Global inflation on the rise
Pimco, the world’s largest bond investors, are worried about rising inflation. Their main concern is that many Asian and Middle Eastern countries had ‘anchored’ their currency to the US$. ‘With that anchor gone’, they comment, ‘due to the US Federal Reserve’s focus on preventing the US financial system from falling into a depression-style downward spiral, […]
Bank of England warns on inflation
Andrew Sentance of the Bank of England has issued a very clear analysis of current oil and commodity price movements. It rejects the view that these have been primarily caused by speculators. Instead, it points to increasing demand, and lack of supply, as the main causes of today’s higher prices. The slide above sums up […]
The ‘difficult task of damage control’
The central bankers’ bank (the Bank for International Settlements) is not very impressed with its members’ efforts over the past year. Readers may remember that the BIS Report last year explicitly warned of the problems that were about to occur in world financial markets. This year’s Report expresses its disappointment about what central banks did […]