Next Week’s News Today – Square Peg And Round Holes

You can forget about GDP. You can forget about Debt-to-GDP. These days it’s all about inflation or, more precisely, the apparent lack of inflation.

Many economies around the world are now in danger of not just experiencing low inflation but actual falling prices. Negative inflation can have a severe impact on economies, as consumers delay purchases. After all, why buy today when it could be cheaper to buy what you need tomorrow.

On Tuesday we should find out just how effective the European Central Bank has been at driving up inflation. Over the last three months, the Eurozone has seen prices fall by between 0.2% and 0.6%. Last month prices fell 0.3%.

Interestingly, the Eurozone Consumer Prices Index (CPI) can vary greatly from one member state to another. Whilst February prices in Greece and Bulgaria fell 1.9% and 1.7%, respectively, they rose 0.7% and 0.5% in Sweden and Austria, respectively. It raises questions as to whether square pegs can really fit into round holes.

The unemployment rate in the Eurozone could also be closely watched next week. Currently it stands at 11.2%, which means that around 20m people are out of work in the 19-member economic region. Whilst this is the lowest unemployment rate since August 2012, it still looks unhealthily high.

The official manufacturing numbers for China will be released on Wednesday. A Purchasing Managers Index (PMI) reading of below 50 could send jitters around the world. But anything above 50 would break a two-month losing streak. Singapore is also pencilled in for manufacturing PMI numbers next week.

Elsewhere, Singapore bank investors could be excused for poring over the latest bank lending figures from the Monetary Authority of Singapore on Tuesday. Banks such as DBS Group (SGX: D05), United Overseas Bank (SGX: U11) and Oversea-Chinese Banking Corporation (SGX: O39) have benefitted from strong demand for loans. But it seems that demand for loans could be coming off the boil.

And finally next Friday is a public holiday. It is the third public holiday so far this year. The next after that will be on 1 May.

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