U.S. Personal Consumption Report and Many European Data Releases – Currency Thoughts
U.S. Personal Consumption Report and Many European Data Releases
March 28, 2025
Shortly before the release of U.S. personal income, PCE and the PCE price deflator this Friday morning, the dollar was showing overnight advances of 0.3% against the euro and peso, 0.2% versus the the Swiss franc and sterling, and 0.1% relative to the Canadian dollar. The dollar benefited from tariphobia. Uncertainty ahead of next Wednesday’s rollout of expanded U.S. tariffs regarding both their impact on prices and trade flow and the complicated logistical challenges of the program is reminiscent of the trepidation about how computer systems would handle Y2K computer bug on January 1, 2000. The yen kept pace with the dollar, supported by rising speculation that the Bank of Japan’s overnight interest rate faces more hikes this year. A released summary of the March BOJ Board meeting implies as much so long as inflation and growth evolve as central bank officials are expecting.
Equity markets in the Pacific Rim fell today by 1.9% ion South Korea, 1.8% in Japan, 1.6% in Taiwan, and 0.7% in China and Hong Kong. The German Dax and Paris CAC shows smaller losses of 0.4%, and U.S. stock futures are around 0.5% lower.
Ten-year sovereign debt yields have also dropped, with a six-basis point drop in the British Gilt exceeding declines of four bps in German bund and Japanese JGB yields as well as of three basis points in the French, Italian and Spanish instances.
Safe-haven demand has lifted gold 0.7%. Once again, Bitcoin (-2.3% so far) flunked a test of its allure as an inflation hedge.
The 0.4% monthly increase during February in the U.S. core PCE inflation index that excludes food and energy exceeded market expectations and was the largest rise in 13 months, resulting in a higher 2.8% 12-month rate of increase. The total PCE inflation indicator recorded its third consecutive monthly increase of 0.3% and a year-on-year advance of 2.5%. This rises matched expectations. A 0.8% monthly increase in personal income was the largest increase since January 2024, but a rise of 0.4% in personal consumption expenditures last month was a tad less than forecast.
Price data released today in other countries include
- A smaller-than-expected rise in French consumer prices in March of 0.2% from the previous month and matching the February year-on-year pace of just 0.8%, which had constituted a four-year low.
- French producer prices in February fell 0.8% on month and by 1.4% on year. PPI inflation has been negative since July 2023.
- Spanish consumer prices edged just 0.1% higher this month, depressing their year-on-year increase to a 5-month low of 2.3% from 3.0% in February. Core CPI inflation of 2.0% in March represents a 40-month low.
- Belgian CPI inflation dropped 0.6 percentage points to a 14-month low of 2.9% in March, having crested at 12.3% in October 2022.
- Greek producer price inflation doubled in February to a two-year high of only 0.6%.
- Austrian PPI inflation last month was sub-zero percent for a 26th straight time, albeit at a mere -0.1%.
- Bulgarian PPI inflation, on the other hand, accelerated to a 25-month high of 16.3 last month.
- In Singapore, producer prices fell 0.7% in February, depressing the year-on-year pace to 5.1% from January’s 26-month high of 5.5%.
- In March, on-year measures of Tokyo total consumer prices, core CPI (excluding fresh food) and CPI excluding energy as well as fresh food printed respectively at 2.9%, 2.4% and 1.1%. Tokyo prices get released three week earlier than Japanese CPI data and thus serve as a handy leading indicator.
Several British statistics got reported today. On-year GDP growth last quarter was revised up 0.1 percentage point to 1.5%, but the quarterly pace of 0.1% rounded the same level as the preliminary figure. Six of the last eight reported quarters saw quarterly British growth 0.1% or less. Full-2024 average GDP grew 1.1%, revised up from an earlier reported 0.9% pace and also above the 0.4% growth rate in 2023. The British current account deficit widened to GBP 21.0 billion in the fourth quarter, equal to roughly 2.9% of GDP. And retail sales increased by 1.0% on month in February and were paired with a 2.2% rise from a year earlier.
German consumer confidence showed little immediate effect from the election of a center-right government coalition to be headed by Chancellor Merz with plans to stimulate growth with deficit fiscal spending. The consumer sentiment index printed in March at -24.5, a tiny bump compared to February’s 11-month low of -24.6. German March labor market statistics also were reported this Friday, showing an unexpected jobless rate rise to a multiyear high of 6.3%.
Italian consumer confidence fell to a 16-month low in March, while sentiment among Italian manufacturers slid to a 3-month low.
Portuguese business and consumer sentiment dropped in March to the lowest levels in nine and five months, respectively, and were paired with news that retail sales showed no monthly growth in February and the smallest on-year advance (5.0%) in five months.
Swiss business confidence improved over 1% to a 7-month high in March. Dutch business confidence slid to a 2-month low.
On-year growth in Swedish and Norwegian retail sales during February of 2.8% and 2.2% were the smallest in 3 and 2 months.
Euroland’s monthly economic sentiment index fell 1.1 points in March, defying expectations of a slight rise. The services sub-component dropped to a 47-month low, while the industrial measure improved to a 7-month high. A 3-month low in consumer confidence matched the preliminary estimate. Measures of inflationary pressure picked up.
Central banks in Mexico and Jamaica unveiled their latest interest rate decisions:
The Bank of Mexico‘s overnight interbank rate has been cut another half percentage point to 9.0%, its lowest level since September 2022. There was a 50-basis point cut at the prior February review of monetary policy and five previous cuts of 25 basis points that began a year ago in March 2024. Mexican CPI inflation printed at 3.8% last month, still above the 2.0% target center but just slightly under the 4% target ceiling. Officials noted that ” The Mexican economy is expected to exhibit weakness once again in the first quarter of 2025. The environment of uncertainty and trade tensions poses significant downward risks.” Officials “anticipate that the inflationary environment will allow to continue the rate cutting cycle, albeit maintaining a restrictive stance.”
At the Bank of Jamaica, the policy interest rate was left unchanged at 6.0%, a percentage point below the peak of 7% maintained from November 2o22 until an initial cut last August. There were no changes made during the first quarter of 2025. CPI inflation in Jamaica slowed from 6.2% in February 2024 to 4.4% one year later.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Jamaica, Bank of Mexico, British GDP and current account, Euroland economic sentiment, French and Spanish CPI, U.S. PCE price deflator
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