Ed’s Daily Notes for April 10th   Leave a comment

Bloomberg: Central Banks See What They Want in Ignoring Deflation

Federal Reserve Chair Janet Yellen and her international counterparts are suffering from a case of what psychologists call confirmation bias: They keep insisting inflation will accelerate even as it continues to ebb.

That’s the diagnosis of Ethan Harris, co-head of global economics research at Bank of America Corp. in New York. He says central bankers are seeing what they want to see by blaming subpar inflation in their countries on temporary, partly home-grown forces. That risks ignoring more lasting, global influences ranging from weak worldwide demand and more emerging-market competition to cheap labor in developing nations, cooling commodity prices and technological breakthroughs.

“There is much lower-than-expected inflation showing up in too many places in the world to dismiss it as transitory,” said Allen Sinai, chief executive officer at consultant Decision Economics Inc. in New York.

Almost two-thirds of the 121 economies tracked by Bloomberg are experiencing smaller gains in consumer prices than a year ago, with many undershooting their goals. Global inflation was just 2 percent in February, the lowest since late 2009, when the world was struggling with recession, according to a tally by economists at JPMorgan Chase & Co.

Once the Fed’s QE gets pulled off the table, will we see inflation pick up with the world economy? (I know that may sound “Ameri-centric”, but the dollar is still the world’s reserve currency.)

This is the problem with economic forecasts here. We are traveling down a road where we have never been. Caution is warranted.

Bloomberg: China Exports Unexpectedly Fell in March

Not just exports:

China’s exports and imports unexpectedly fell in March as Premier Li Keqiang said the nation will roll out more policies to support growth while avoiding stronger stimulus.

Overseas shipments declined 6.6 percent from a year earlier, the customs administration said in Beijing today, attributing the drop partly to distortions from inflated data in early 2013. Imports fell 11.3 percent, in part on falling commodity prices, leaving a trade surplus of $7.71 billion.

…Today’s numbers compared with analysts’ median estimates for a 4.8 percent increase in exports, a 3.9 percent gain in imports and a $1.8 billion trade surplus. Six of 47 analysts had projected a decline in exports for March, as did six of 47 on imports.

This is a 180 degree turn in China’s numbers. As I have said for awhile now, China is the canary in the coal mine for the world’s economy, and that canary is squawking loud.

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Posted April 10, 2014 by edmcgon in China, Economy, Federal Reserve, News

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