U.S. Import Prices Fall 0.3% in March Prices of imported goods fell last month, suggesting the weak global economy and moves by foreign central banks are holding back U.S. inflation.
Last month’s drop came entirely outside of oil, reflecting lower prices for everything from capital goods such as computers to industrial supplies to automobiles. Nonpetroleum import prices fell 0.4% last month and are down 2.7% over the past year—the biggest 12-month drop since fall 2009. (…)
But there were significant declines for other goods: a 0.6% drop in industrial supplies, a 0.1% decline in capital goods and a 0.3% drop in consumer goods. Auto-import prices fell 0.3% from February and 1.8% from a year earlier. The year-ago decline was the biggest since 1981.
Import prices ex-food and fuels have declined at a 4.9% annualized rate since December. Imported vehicles: –5.3%
Germany’s Rising Wages Bode Well
Germany’s metalworkers union IG Metall secured a 3.4% pay increase in February for workers in the Baden-Württemberg region, seen as a bellwether for other deals. Unions representing public-sector employees and chemical workers reached favorable pay gains, too.
When a recently enacted minimum wage of €8.50 ($9) an hour is included, German wages will probably rise 3.5% this year, the biggest jump since the early 1990s, said Andreas Rees, economist at UniCredit. With consumer prices largely flat, fatter paychecks will stay in workers’ wallets and won’t get eaten away by inflation. (…)
China Trade Data Point to Weak Growth
According to data released Monday by the General Administration of Customs, Chinese exports fell 15% and imports fell 12.7% last month in dollar terms as weak domestic and foreign demand weighed heavily on Chinese factories. (…)
The March trade figure contrasts with a 15 per cent year-on-year rise in exports — and 20 per cent fall in imports — for the first two months of this year.
Overall, first-quarter export growth slowed to 4.7 per cent from a year ago — and 8.6 per cent on the previous quarter.
All things being equal, most of the drop in imports in the first quarter can be attributed to lower prices for just two line items: oil and iron ore. By value, China’s first-quarter imports of these two were down $63 billion from a year earlier. But in volume terms, China imported more of both—albeit at a slower growth rate than in the go-go past.
Alternative indicators, meanwhile, hardly show a collapse in trade. Container throughput at China’s ports rose 7.4% in first quarter compared with a year earlier, according to Citigroup. (…)
A recent government survey found that more than a third of about 3,000 exporters see a stronger currency as hurting their business, a customs administration official told reporters Monday.
Import demand has been hard hit by China’s slumping property market and the painful ratcheting down of debt and overcapacity in such industries as steel and glass, which undercuts demand for imported commodities, economists said. (…)
(Global recovery at risk of stalling Weaker emerging markets rein in growth, according to Brookings Institution-Financial Times tracking index
Dollar’s Rise Reshuffles Global Economy Into Winners and Losers
The greenback’s ascent to the highest in a dozen years on a trade-weighted basis is eroding the competitiveness of the U.S. and countries whose exchange rates track the dollar, including China. It’s also pushing down commodity prices, hurting producers such as Brazil, and threatening other emerging markets where companies borrowed in the U.S. currency when it was cheaper.
On the flip side, the euro area and Japan are cashing in as their companies gain the edge in world markets that economies need to boost growth. The likes of India are benefiting, too, by paying less for their energy imports. (…)
The currency’s last two prolonged surges — in the first half of the 1980s and the latter half of the 1990s — nevertheless caused disruptions.
In 1985, the U.S. and its allies were forced to band together in the so-called Plaza Accord to drive the dollar down after the currency’s appreciation led to an outburst of trade protectionism in America.
During the late 1990s, a rising dollar helped trigger a worldwide financial crisis that devastated the economies of Thailand, South Korea, Russia and Brazil.
While the currency’s advance this time hasn’t been as large, it is having an impact. Hooper and his team at Deutsche estimate it’s already enough to knock as much as 0.75 percentage point off annual U.S. output growth during the next several years by depressing American exports. (…)
The currency’s rebound now risks reducing the cost of commodities priced in dollars and increasing the burden of debts denominated in them. The rebound also could restrain the capital flows needed to plug current-account deficits and so force up local interest rates. (…)
Malaysia, Chile, Turkey, Russia and Venezuela are the most at risk, according to Slater. Close behind are Brazil, South Africa and Hungary.
India and China will fare better because they are net importers of commodities and their debt ratios are in line with historical averages. (…)
Oil Bulls Boost Wagers by Most Since 2010
Hedge funds boosted net-long positions on West Texas Intermediate crude by 30 percent in the seven days ended April 7, the biggest jump since October 2010, U.S. Commodity Futures Trading Commission data show. Long bets rose to a nine-month high, while shorts tumbled 21 percent.
U.S. crude output and inventories may peak this month amid a record drop in rigs exploring for oil, Goldman Sachs Group said. Refiners returning from seasonal maintenance will add about 500,000 barrels a day of demand by July, the Energy Information Administration forecast, helping ease the biggest glut in 85 years. (…)
U.S. refineries will use 16 million barrels a day of crude this month, the EIA estimated last week. That will jump to 16.5 million in July.
“Our rig-based modeling of near-term U.S. production points to production nearing a peak,” Goldman analysts including Damien Courvalin in New York said in the April 6 report. “Combined with an expected ramp up in refinery runs, we expect U.S. crude oil inventories to peak in April.” (…)
EARNINGS WATCH
While the majority of S&P 500 companies will report earnings results for Q1 2015 over the next few weeks, approximately 5% of the companies in the index (24 companies) have already reported earnings results for the first quarter.
Of the 24 companies that have reported earnings to date for Q1 2015, 20 have reported earnings above the mean estimate and 12 have reported sales above the mean estimate.
Of the 23 companies that have conducted earnings calls to date for Q1, 16 (or 70%) cited some negative impact or expressed a negative sentiment about the stronger dollar during the conference call.
During the upcoming week, 35 S&P 500 companies (including 7 Dow 30 components) are scheduled to report results for the first quarter. (Factset)
U.S. Widens Role in Yemen Campaign The U.S. is expanding its role in Saudi Arabia’s campaign in Yemen amid growing concerns about the goals of the Saudi-led mission.
The U.S. is expanding its role in Saudi Arabia’s campaign in Yemen, vetting military targets and searching vessels for Yemen-bound Iranian arms amid growing concerns about the goals of the Saudi-led mission, according to U.S. and Arab officials.
U.S. officials worry mounting civilian casualties will undermine popular support in Yemen and in other Sunni Arab countries backing the campaign. (…)
Worried by the risk of more direct intervention by Iran, U.S. officials say they are urging the Saudis to set their sights more narrowly on halting rebel advances and reaching what amounts to a battlefield stalemate that leads all sides to the negotiating table.
Seventeen days of Saudi aerial and naval bombardment have prevented the Houthis from holding Yemen’s main port city, Aden, but failed to thwart the group’s advances elsewhere.
The campaign has made one of the world’s poorest countries the center of a regional proxy fight with high stakes for the Obama administration. The April 2 framework agreement that the U.S. and other world powers reached with Shiite Iran to trade sanctions relief for limits on its nuclear program has prompted the Saudis and their Sunni Muslim allies to resist what they see as Iran’s efforts to impose its influence in the Middle East—often along sectarian battle lines.
Prince Saud Al Faisal, the Saudi foreign minister, underscored the tensions on Sunday, telling reporters his country is “not at war with Iran” in Yemen. But he demanded Iran end its political and military support for the Houthis, who adhere to the Zaidi offshoot of Shiite Islam. (…)
U.S. officials want to find a quick diplomatic exit to the fighting—one that enables the U.S. to restore its counterinsurgency operations in the country and resume drone strikes against Yemen-based al Qaeda in the Arabian Peninsula. Those operations were curtailed by the fighting last month. (…)
The Saudi campaign is still focused on trying to slow the Houthi advance, U.S. officials said. And the kingdom’s fighter planes aren’t in a position to go on the offensive against bands of Houthi rebels on the battlefield because the Saudis don’t have the intelligence or advanced military equipment to do so effectively.