Bernanke on inflation expectations


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Elevated inflation expectations are unacceptable to a mainstream Central Banker, and Bernanke seems to be clearly telling us we’ve reached his limits.

To get ahead of the ‘inflation curve’ will mean interest rates of at least the 5.25% level of last August, when the FOMC didn’t cut because inflation was deemed too high.

While GDP growth is lower now, inflation is a lot higher now. And while GDP was higher then, their forecast for growth had been deteriorating through year end, and now it’s both above expectations and improving.

“The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations,” Bernanke said in remarks prepared for delivery to a conference organized by the Boston Federal Reserve in Chatham, Mass.

“The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation,” Bernanke said.


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2008-06-09 US Economic Releases


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2008-06-09 Pending Home Sales MoM

Pending Home Sales MoM (Apr)

Survey -0.4%
Actual 6.3%
Prior -1.0%
Revised n/a

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2008-06-09 Pending Home Sales YoY

Pending Home Sales YoY (Apr)

Survey n/a
Actual -13.8%
Prior -21.7%
Revised n/a

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2008-06-09 Pending Home Sales ALLX

Pending Home Sales ALLX

Yet another better than expected release.

Might be too strong to call this a blow out number, but only because it’s from a low base.

The northeast was about flat, the rest of the regions up.

For a while I’ve been suggesting we bottomed in the Oct/Nov period and it still looks like that could be about right.

Note the large jump in the non seasonally adjusted numbers.

Prices should be (irregularly) moving up as well.

And housing will be expected to subtract less from GDP. Might even start adding soon.

The Fed is getting what it perceives as ‘further and further behind the inflation curve’ as CPI continues higher and GDP moves higher.

And much of the financial sector is getting left behind as the real economy moves forward without it.

Friday’s unemployment info was a lagging indicator and now it’s fading from market memory as well as evidenced by the large increases in market interest rates.


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Reuters: Machine tool orders


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US April machine tool demand down from March

by Ayesha Rascoe


(Reuters) Demand for the machine tools that shape metal for products such as car engines and refrigerators dropped sharply in April, two groups said in a joint report on Sunday.

U.S. April machine tool demand declined 27.6 percent to $396.47 million from $547.81 million in March, the American Machine Tool Distributors’ Association (AMTDA) and the Association for Manufacturing Technology (AMT) said.

Demand grew 29.2 percent from $306.86 million a year earlier in April 2007.

Exports continue to boom as this very volatile series suggests.

2008-06-09 US Exports YoY

US Exports YoY

March demand was revised upward from $544.62 million reported a month ago.

In the first four months of 2008, demand for machine tools, which gives a sense of the pace of manufacturing, stood at $1.587 billion, up 19.9 percent from $1.324 billion in the same 2007 period.

“Export demand for U.S. manufactured products and the global boom in infrastructure development continues to fuel the surprising growth in capital equipment investment,” said AMT President John Byrd in a statement. “The decline from March to April is not surprising, considering the extraordinary results posted in March.”

Demand for machine tools dropped throughout the country in April. In the South, demand fell 59.8 percent, while demand decreased 35.2 percent in the Northeast and 31.7 percent in the Central United States.

Demand also dipped 10.4 percent in the Midwest. In the West, however, demand rose 3.4 percent.

The machine tools report is generally based on a survey of about 200 manufacturers, distributors and importers of machine tools that represent 76 percent of the machine tool market.


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Re: Korea


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(an interoffice email)

>
> On Mon, Jun 9, 2008 at 5:05 AM, Sean wrote:
>
> Today Korea announced a plan to spend $10bb to counter the effects of
> rising oil prices. The $100bb will include tax rebates and subsidizing
> power providers. This is with GDP growing at 5.8% ( although expected
> to slow to the mid 4% range and CPI at 4.9% – the package is expected
> to add 0.2% to GDP.
>
> There is no political will in Asia to avoid measures that sustain demand
> for energy related products – subsidy cuts have been very small and the
> outcry loud enough to prevent further meaningful cuts. Inflation is
> ripping in Asia, the second round effects are unavoidable and its going
> to be imported to the US.
>
>

Thanks, looks like Japan cpi break evens have a long way to go!


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