Bumpy road ahead for Italian budget

The Italian government has submitted its 2019 draft budget plan (DBP) to the European Commission. The proposed DBP is not in line with EU rules and sets the government on a collision course with the European authorities. Several elements within the Italian government’s budget plan have been raising eyebrows. First, the plan’s economic assumptions seem […]

US labour market going strong

We particularly like job openings data as an indicator for a turning point in the US macroeconomic cycle, even though this series has not much history (data start in December 2000), and in spite of its long lag to release (we just had data for August, i.e. it is more than two months old now). […]

USD/JPY: a difficult balance

While widening interest rate differentials are supportive of the US dollar against the yen, if rates rise too far and too fast, they can help the yen against the dollar, as recent financial market volatility has shown. In October, the Japanese yen appreciated by 1.9% against the dollar and outperformed all other major currencies. Coupled […]

Inflation environment remains benign in China

The headline consumer price index (CPI) in China picked up slightly in September, rising by 2.5% year-over-year (y-o-y) compared with 2.3% in August, driven by higher food and fuel prices. Excluding food and energy, core inflation in China actually eased to 1.7% y-o-y in September from 2.0% in August. Looking forward, we see some moderate […]

Weekly View – Going “loco”

US equities declined roughly 7% over six days up to last Thursday. While the decline is in line with the median drawdown level since 2007, it was notable for its length, given the average drawdowns over the same time period lasted 40 days, rather than six. Most likely, investors were reacting to the higher risk […]

Devil is in the details: Italian and French deficits are not quite comparable

Each EU member state is currently preparing 2019 budget plans for formal submission to the European Commission (EC) before mid-October. Among them, France and Italy’s budget plans have been raising eyebrows. Why is the EC concerned about Italy’s proposed 2.4% GDP deficit target for 2019 and not France’s target of 2.8%? Is Italy being treated […]

US inflation remains modest, but tariffs will soon make themselves felt

Core consumer-price index (CPI) inflation rose a modest 0.12% month on month (m-o-m) in September, again undershooting market expectations, and the year-on-year (y-o-y) print stayed unchanged at 2.2% – a relatively benign outcome given the flourishing US economy and the tight labour market. Core inflation (excluding energy and food prices) was abnormally buffeted by a […]

Innovation shock reshapes economic dynamics

When analysing the current economic regime and assessing the potential for a shift in that regime, it is vital to take innovation into account. Demographic trends and productivity gains are commonly identified as the two main drivers of real economic growth. And innovation is a critical contributor to productivity growth. Robert J Gordon, in his […]

Fed rate decoupling

Fed likely to keep tightening while buoyed by a solid domestic backdrop Looking at the Federal Reserve (Fed) from the other side of the Atlantic, the question is really to what extent the Fed can continue to ‘decouple’ its monetary policy from other main global central banks, including those in Europe. The three-month Treasury bill […]

Squaring off over the Italian budget

The Italian government has confirmed its deficit target at 2.4% of GDP for 2019. This represents significant slippage from a previous budget deficit target of 0.8% in 2019. The deficit target has been set at 2.1% for 2020 and 1.8% for 2021. But it is not the headline deficit numbers that are a problem, but […]

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