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from MacroScope:
Quickening Brazil inflation tops forecasts for 8 straight months
Brazil inflation jumped above expectations in February, despite a steep cut in electricity rates. It was not the first time, though; inflation has been running higher than consensus forecasts since July, considering the market view one month before the data release:
The total gap between market consensus and the actual inflation figures amounts to 1.19 percentage point - about one quarter of the inflation rate reported. Reuters polls conducted a few days before the official numbers come out have also proved wrong since July, with a total error of 0.37 point.
Why is that? Part of the difference was due to an unexpected jump in food inflation. But another part has to do with the mix of strong demand and weak supply that has dragged down the Brazilian economy over the past two years.
After failing to predict that inflation would become a problem, puzzled economists are now expecting a rate increase this year. The key Selic rate is now expected to end this year at 8.00 percent, up from 7.25 percent currently, according to a central bank weekly survey.
from MacroScope:
When interest rates rise, credit growth should… accelerate?
Latin America has defied one of the most elementary rules of macroeconomics in the past decade, Citigroup economists Joaquin Cottani and Camilo Gonzalez found in a report.
Lower interest rates reduce the cost of money and therefore should encourage businesses and consumers to borrow, as we've repeatedly heard from analysts and government officials for decades. Puzzlingly enough, credit growth accelerated after central banks in countries like Brazil and Peru raised rates, and slowed when borrowing costs fell. Why is that?
from MacroScope:
The euro zone: choose your own adventure
Forecasts about the future for the euro zone economy are starting to resemble a multiple-choice novel. Are you an economist working for an Anglo-Saxon institution? Then turn to p.65 -- "Recession for the euro zone". A German bank? Go to p.80 -- "Happy days are here again!"
That simplifies the case slightly, but there's more than a grain of truth in it. We've noted repeatedly that predictions about the euro zone are coloured heavily by whether someone works for an employer based inside the currency union or not.
from MacroScope:
Greece versus Germany
Angela Merkel's visit to Greece today was anything but low key. Greek police fired teargas and stun grenades at protesters in central Athens when they tried to break through a barrier and reach the German chancellor. There are lots of differences between the two countries. Here's a look at some of the main ones:
from MacroScope:
An unpleasant surprise may lurk in euro zone GDP numbers
The euro zone economy may be doing far worse than most economists want to believe. That’s not good news for a central bank trying to rescue the single currency through a hotly-contested bond purchasing programme that has yet to get started.
The latest flash purchasing managers’ indexes, which cover thousands of euro zone companies, suggest the third quarter will mark the euro zone’s worst economic performance since the dark days of early 2009, according to Markit, which compiles them.
from MacroScope:
Surprise plunge in bond yield forecasts may spell more trouble ahead
By Rahul Karunakar
The spread between 2- and 10-year U.S. Treasury yields will shrink to 180 basis points in a year according to the latest Reuters bonds poll - the narrowest margin since August 2008, the month before Lehman Brothers collapsed.
Historically, that spread has been a key indication of what investors and traders are thinking about the economy's prospects: the narrower it gets, certainly with short-term rates already at rock bottom, the darker the outlook.
from MacroScope:
Who expects euro bonds? Look outside the euro zone
It’s already been established that economists’ predictions about the euro zone’s future hinge largely on where their employer is based. Euro zone optimists tend to work for euro zone banks and research houses, and euro zone sceptics for companies based outside the currency union.
It somewhat undermined the idea their analyses are based purely on hard-headed economics, and less on national factors.
from MacroScope:
Euro zone survival is in the eye of the beholder
Despite all their years of experience and complex mathematical models, for economists the question of the euro zone’s survival really has them at the mercy of national bias... at least in terms of where their employer is based.
One of the key points from the latest Reuters poll was that a majority of economists from banks and research houses around the world – 37 out of 59 – expect the euro zone to survive in its current form for the next 12 months.
from MacroScope:
Israel’s new-found jobless
Following on from Nigeria's rebasing of its GDP numbers, giving it a huge growth boost on paper, it is Israel's turn to tinker with the numbers. This time, though, the end result was not positive.
The country's Central Bureau of Statistics said on Monday that the first-quarter jobless rate was 6.7 percent. This a good 1.3 percentage points higher than the announced fourth-quarter figure.
from MacroScope:
Europe in recession – an interactive map
Spain has become the latest European country to slip into recession joining the Belgium, Cyprus, The Czech Republic, Denmark, Greece, Italy, The Netherlands, Ireland, Portugal, Slovenia and the United Kingdom.
Click here to view an interactive map.
*Updated to include Romania and Bulgaria
