Investment

» ECRI - Eurozone FIG at 5 1/2-year high

LONDON, June 2 (Reuters) - Inflation pressure struck a 5-1/2 year high in Europe in April and is steadily becoming a fact of life in Japan after many years when deflation was the problem, the ECRI institute said on Friday.

Increasing inflation in Germany and France pushed underlying price pressures in the euro zone to 5-1/2 year highs, an index from the Economic Cycle Research Institute showed.

That will do little to blunt the ECB's determination to hike euro zone interest rates when it meets next week.

Official data from the European Union confirmed pipeline inflation pressures were evident.

Euro zone producer prices were up 0.8 percent month-on-month in April and 5.4 percent on the year, fuelled by high energy prices, according to Friday figures which analysts said added to the case for a near-term interest rate rise.

The ECRI, which tries to flag turns in the economy via tailormade indices, said its Japan index showed inflation pressures there remained flat in April but near an eight-year high and likely to rise further.

The institute's Eurozone Future Inflation Gauge (EZFIG) rose to 103.4 in April from March's 102.2.

"With the EZFIG rising to a 5-1/2 year high in its latest reading, euro zone inflation pressures are clearly in a cyclical upswing," ECRI said.

For Japan, the equivalent index was unchanged at 98.6, down from the eight-year peak of 98.9 struck in February. "Japanese inflation pressures remain elevated," the institute said.

Core consumer prices in Japan have risen for six consecutive months and show the economy is finally escaping seven years of deflation. The core CPI, which excludes fresh food, rose by 0.5 percent in April, matching the fastest pace in eight years.

ECB POISED TO RAISE RATES

An official report earlier this week showed annual euro zone inflation at a higher-than-expected 2.5 percent in May.

The European Central Bank is expected by almost everyone in the markets to raise interest rates by 25 basis points at a meeting in Madrid on June 8.

But the recent data have increased the probability that the bank may raise rates more aggressively, perhaps by half a percentage point in June, some economists are now saying.

The producer price data did little to counter that view.

"The figure could increase the speculation that people would be calling for a 50 basis point hike, but we stick to our view that a 25 bps outcome is more likely," said Jodie Saul, economist at CIBC World Markets.

The ECRI gauge endeavours to anticipate cyclical swings in regional inflation rates and changes in official interest rate policy by measuring underlying inflationary pressures, rather than actual inflation rates.

The euro zone gauge uses a weighted average of ECRI indices for Germany, France, Italy and Spain, whose components comprise bond yields, loans, raw material prices, employment and unemployment, money supply and business activity.

The German index jumped to 91.5 from 87.2 in March, whilst the French one rose to 103.5 from March's 103.1.

In contrast, the gauge for Italy dipped to 101.2 from 101.5 and the Spanish index eased to 154.3 from 159.8.

"The (German) index was pushed up by inflationary moves in measures of materials prices, money supply, orders and loans, partly offset by disinflationary moves in measures of interest rates and import prices," ECRI said.

In Japan, the authorities recently declared an end to their long-standing policy of ultra-loose credit conditions to fend off deflation and markets are eager to see when rate may rise.

-- posted by ECRI

» ECRI - U.S. FIG eases

NEW YORK, June 2 (Reuters) - Overall U.S. inflation pressures eased in May due to softer home loans and quicker vendor performance, a report on Friday said.

These moves were partly offset by higher commodity prices and slightly stronger jobs figures.

The Economic Cycle Research Institute's U.S. Future Inflation Gauge, which is designed to anticipate cyclical swings in the rate of inflation, slipped to 121.8 in May from an upwardly revised 122.0 in April. It was originally pegged at 121.8.

"The USFIG remains clearly below its October high. Thus, underlying inflation pressures are still in a mild easing trend," said Lakshman Achuthan, managing director for ECRI.

The index's annualized growth rate, which smoothes out monthly fluctuations, fell to 0.2 percent from an upwardly revised 0.8 percent in April. The growth rate was originally pegged at 0.6 percent.

-- posted by ECRI

» ECRI - WLI Slips

NEW YORK, June 2 (Reuters) - A gauge of future U.S. economic growth slipped in the latest week due to higher jobless claims and lower stock prices, a report said on Friday.

These moves were partly offset by lower interest rates.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index edged down to 136.4 in the week to May 26, from 137.0 in the prior week.

The index's annualized growth rate also slipped in the latest week, to 2.5 percent. The prior week's growth rate was 3.4 percent, revised upwards from 3.2 percent.

"While the weekly leading index growth has eased to an 8-week low, U.S. economic growth should stay fairly healthy in the near term," said Lakshman Achuthan, managing director at ECRI.

-- posted by ECRI

» ECRI - WLI up, growth slows

NEW YORK, June 9 (Reuters) - A gauge of future U.S. economic growth rose in the latest week, pulled higher by rising stock and commodity prices, along with lower jobless claims, a report said on Friday.

Rising interest rates during the week ended June 2 partly offset the favorable factors.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index rose to 137.4 in the week ended June 2 from 136.4 in the prior week.

The index's annualized growth rate slipped to 2.1 percent in the latest week from a revised 2.6 percent in the prior week, previously reported at 2.5 percent.

"With growth (of the index) falling to a 10-week low, U.S. economic growth prospects have dimmed a little," said Lakshman Achuthan, managing director at ECRI.

The growth rate is based on a moving average and its direction can move in the opposite direction from the weekly index in some cases, Achuthan said.

-- posted by ECRI

» ECRI - Storm clouds gather over a US economy

Monday view: Storm clouds gather over a US economy heading for icebergs
By Ambrose Evans-Pritchard (Filed: 12/06/2006)

http://www.telegraph.co.uk/money/main.jh...

Like a thunder clap too close for comfort, the US bond market last week issued its time-honoured warning of recession. This time for real. The yield on 10-year Treasuries slid below the short-term rates, an emphatic signal that investors are more worried about a US housing bust than surging inflation.

Fear is creeping into the markets that a hyperactive Federal Reserve run by a chatterbox novice, risks sinking the global economy by tightening too hard - supposedly to curb prices, in reality to combat his fatal reputation as an easy-money ideologue.

Yes, bonds issued the 'inverted yield curve' warning in February. But those were halcyon days when the world was still awash with liquidity. The central banks of Asia, Europe and America have since succumbed to a belated and fierce bout of orthodoxy, raising rates in unison for the first time since the early 1980s.

Bernard Connolly, global strategist for Banque AIG, says the Fed, now chaired by Ben Bernanke, has already gone too far by raising rates sixteen times from 1pc to 5pc since June 2004, too much for an overspent economy running on fumes.

"Unless the Fed begins cutting rates by this summer, which it won't, then the US economy could be in for a nasty recession. The stock market has not yet woken up to the full gravity of this," he said.

If past is prologue, we have three or four months to find shelter before the full lightning storm begins. Buy government bonds, horde cash and shun risk, advises Joachim Fels, credit strategist at Morgan Stanley.

"Only once global GDP growth slows significantly - my story for the second half of this year and the first half of 2007 - and a new monetary easing cycle begins, can risky assets start to rally again," he said. Mr Fels has pencilled in the next upturn for mid-2007.

Beware the dollar too, warns HSBC's currency guru David Bloom. "Inflationary concerns will dissipate as the economy cools and it will become clear the Fed has over-tightened. This will herald the next wave of dollar weakness."

For now, Mr Bernanke seems determined to steam ahead with a quarter point rise to 5.25pc this month - and damn the icebergs. His pilloried "pause" talk in spring gave way last week to studied words about the "unwelcome" level of core inflation, now 2.1pc. Within hours the effects of this volte-face hit Turkey, South Africa, India and Thailand, all compelled to raise interest rates to defend their currencies and slow an exodus of foreign investors.

"He reintroduced testosterone to the inflation-fighting resolve of the Fed," said Diane Swonk, an economist at the US firm Mesirow Financial. She told the Washington Post: "This is a pure male thing. 'You think I'm a wimp? Take me on,' he said to the markets."

Yet the Fed's own staff said in May that inflation will peak over coming months before slowing later in the year. Hourly earnings are remarkably tame, rising just 0.1pc in April, down from 0.6pc in March. The Economic Cycle Research Institute's ECRI index, which signals future inflation, dropped 0.2pc in May and is now well below its peak in October.

Fed doves are pleading for caution. "We want to be looking through the windshield, we don't want to be just looking at the rear view mirror," said Governor Randall Kroszner.

Yet Mr Bernanke has buckled to the will of the Fed's monetary Ayatollahs - Dallas and St Louis come to mind - although he knows the risks of interest rate overkill all too well.

It was he, Professor Bernanke, who wrote the seminal 1995 paper - Inside the Black Box:

The Credit Channel of Monetary Policy Transmission - describing how inflation lags the cycle, flashing amber long after the real danger has switched to recession.

And it was he - scholar of the Great Depression - who blamed the Fed for crushing the American banking system in the early 1930s by starving it of funds. "You're right, we did it," he said theatrically as a junior Fed governor at the 90th birthday party of Milton Friedman. "We're very sorry. We won't do it again."

Talk about hostages to fortune.

Mr Bernanke is counting on a "soft-landing" for the housing boom, the central pillar of the US consumer economy.

It provided $600bn of spending last year from home equity withdrawals - ie, from ever-bigger mortgages entailing ever-more debt.

This rosy assumption is looking shakier by the day. The inventory of unsold new houses is now at the highest level in a decade, rising by 1m properties to 4m over the last year.

The Philadelphia index of US construction equities has crashed 23.3pc since early May, pointing to an immediate wave of lay-offs.

Some 32pc of the 4.22m jobs created by the US economy since the expansion began in 2001 have been in the housing sector, more than four times the usual ratio, according to a study by Merrill Lynch. HSBC warns that US property has already tipped into a downturn, with the likelihood of outright price declines in the overheated markets of the East and West coast.

Ian Morris, the bank's chief US economist, said the combined cost of mortgage payments and house insurance for new buyers in California takes up 70pc of pre-tax income.

"Affordability is now worse than in 1981 when mortgage rates were 16pc. This is pretty scary stuff," he said, predicting a property slump lasting four to five years.

The Federal Reserve's blunder was to hold interest rates at almost free-money levels of 1pc until the summer of 2004, yet blowing fresh asset bubbles at home and abroad, and stealing prosperity from the future by pushing spending to the reckless level of 107pc of GDP.

The time for tough love was then, not now, sixteen rate rises later - with delayed effects only just starting to exact their toll.

If Ben Bernanke had guts, he would now be holding the ground he staked out to Congress in April, explaining patiently that inflation lags the cycle. Are the bond markets telling us he has failed his first test of nerves?

-- posted by ECRI

» jjMcCoy - Storm clouds gather over a US economy

In response to Storm clouds gather over a US economy posted by ECRI:

Did someone from ECRI actually write this drivel?

-- posted by jjMcCoy

» ECRI - Storm clouds gather over a US economy

In response to Storm clouds gather over a US economy posted by jjMcCoy:

No, ECRI did not right the article, it was in a newspaper and we posted it because it referred to ECRI (see bolded text.

-- posted by ECRI

» ECRI - WLI up, but growth rate down

NEW YORK, June 16 (Reuters) - A gauge of U.S. economic growth edged up in the latest week, supported by lower interest rates and jobless claims, a report said on Friday.

These moves were partly offset by weaker stock prices.

The Economic Cycle Research Institute, an independent forecasting group, said its weekly leading index rose to 137.5 in the week ended June 9 from a downwardly revised 137.2 in the prior week. The prior week's number was originally reported at 137.4

The index's annualized growth rate edged down to 1.5 percent in the latest week from a downwardly revised 1.8 percent in the prior week. The growth rate was originally pegged at 2.1 percent.

"With the weekly leading index growth falling to a 29-week low, U.S. economic growth prospects have dimmed," said Lakshman Achuthan, managing director at ECRI.

-- posted by ECRI

» ECRI - CNBC: Link to interview

Here's a link to yesterday's interview. ECRI comments at start and end of segment...

http://video.msn.com/v/us/v.htm?g=145242...

-- posted by ECRI

» Jas_Jain - Any Comments From ECRIOn Leading Indicator of Fall In Inflation?

YIELD-CURVE, INFLATION, AND RECESSIONS: Are Recessions Necessary to Control Inflation in the US?

http://www.financialsense.com/fsu/editor...

Comments would be appreciated.

TIA,

Jas

-- posted by Jas_Jain