Draghi Pledges To Not Allow Inflation To Remain Too Low

CONFERENZA IN MEMORIA DI CURZIO GIANNINIOn Monday ECB President Mario Draghi gave a keynote address at the ECB Forum on Central Banking in Sintra, Portugal and spoke about the need for the central bank to not allow inflation to remain too low for too long in the 18 member euro area where sluggish GDP growth and low inflation threaten to keep much of Europe in the economic doldrums.

“We are not resigned to allowing inflation to remain too low for too long” Draghi said.

Draghi fell short of providing any direct clues about what type of monetary easing measures the central bank plans to undertake during its next ECB meeting in June to help stimulate the economies of the euro area.

Draghi said that the central bank expects low inflation to be prolonged but gradually return to its inflation target of near 2 percent.

Speaking about the future downside risks of low inflation, Draghi admitted that low inflation combined with expectations that prices will fall further amid tight credit in economically stressed countries are a concern for the central bank.

“What we need to be particularly watchful for at the moment is the potential for a negative spiral to take hold between between low inflation, falling inflation expectations and credit, in particular in stressed countries” Draghi said.

Addressing the causes of low inflation in the euro-area, Draghi explained that “falling commodity prices explain the lion’s share of the disinflation the euro area has experienced since the end of 2011″ while pointing out that falling Brent crude and food prices accounted for around 80% of the decline in euro area HICP inflation since late 2011.

According to Draghi, the reasons for low inflation also includes the effects of relative price adjustment in economically stressed countries due to the sovereign debt crisis and credit constraints in those countries.

“This analysis suggests that credit constraints are putting a brake on the recovery in stressed countries, which adds to disinflationary pressures” Draghi stated.

-Johnathan Schweitzer

 

 

 

 

 

EU Searching For New Identity as Elections Come To A Close

eu4Europeans took to the polls over the week-end and voted in the highest number of members of the European Parliament skeptical about the future of the European Union.

Despite a low voter turnout rate, the outcome from the recent elections will reverberate in future national politics and EU policies.

France’s right-leaning and EU skeptic party Front National led by Le Pen won the election in France as did anti-immigrant People’s party in Denmark.

It is still unclear whether Marine Le Pen will be successful gaining enough future votes from other parties in other countries to form a majority voting bloc in the parliament.

In Austria the far-right Freedom party won the majority vote.

In Greece, leftist party Syriza with its leader Alexis Tsipras was victorious and won against Greece’s main two political parties: New Democracy and Pasok.

Syriza remains fundamentally opposed to deep spending cuts across Greece’s government as a condition of an economic rescue package that Athens accepted from Brussels over the past two years.

Italian Prime Minister Matteo Renzi managed to overcome anti-EU comic Beppe Grillo and could be on the right footing to push for greater reforms in Italy according to early exit polls in Italy which have not always been reliable in the past.

Later today ECB President Mario Draghi will provide a keynote speech.

Investors will be listening closely for signs about what the ECB plans to do in their next policy meeting in June.

The consensus view among economists is that the ECB will ease further in June.

But the degree to which the ECB eases remains an open-ended question.

In mid- May eurostat reported that growth in the euro area measured by GDP (Gross Domestic Product) grew only 0.2 percent during the first quarter of 2014 while annual inflation was 0.7 percent in April, up from 0.5 percent in March, but still well below 1.2 percent in the same period a year ago.

The ECB wants to avoid low inflation and has set an annual inflation target just below 2 percent.

ECB President Draghi said the ECB Governing Council was “comfortable with acting next time” in reference to the ECB’s next policy meeting on June 5th.

Economists are expecting the ECB to cut its main  interest rate below 0.25 percent while bank overnight deposit rates could even turn negative at the ECB, a move that is intended to spur more greater lending and investment across Europe.

The ECB’s current overnight deposit rate is 0 percent.

-Johnathan Schweitzer

 

Surface Pro 3 Unveiled

Surface-Pro-3On Tuesday Microsoft unveiled the latest version of its Surface tablet called Surface Pro 3 that the Redmond based company hopes will replace laptops and better compete with Apple’s iPad and tablets running on Google’s vast Android operating system.

“So many people carry both a laptop and a tablet but really want just one device that serves all purposes,” said Panos Panay, corporate vice president, Microsoft Surface, in a statement from New York.

“Surface Pro 3 is the tablet that can replace your laptop — packing all the performance of a fully powered laptop into a thin, light and beautifully designed device. You’ll love being able to carry a single device for your next class, workday or weekend getaway knowing you have all the power you need” Panay added.

Starting at $799.00 with a 12” display, Surface Pro 3 has the power of a laptop in a lightweight, thinner, and more versatile form with a multi-position kickstand.

Weighing only 1.76lbs (800 grams) the Surface Pro 3 is lighter than Apple’s 13″ MacBook Air (2.96 pounds) and has a 12-inch Clear Type Full HD display, 4th-generation Intel® Core processor with up to 8 GB of RAM operating on Windows 8.1 Pro software.

Battery life can last up to 9 hours with web browsing.

The Surface Pro 3 has a 5.0 megapixel rear-facing camera and a 5.0 megapixel front-facing camera. It also has stereo microphones and stereo speakers carrying Dolby sound.

The new premium Surface Pen comes with pressure sensitivity, enabling a more natural writing experience, allowing users to mark up documents, take notes in your own handwriting, and gather electronic signatures.

The Surface Pro 3 lacks 4G connectivity.  It uses Wi-Fi 802.11ac and Bluetooth 4.0 Low Energy technology.

Pre-orders of the Surface Pro 3 start on May 21st at the Microsoft Store as well as select third party retailers but it won’t ship until June 20th in the U.S. and Canada.

At the end of August, Surface Pro 3 and select new accessories will become available for purchase in 26 additional markets.

Microsoft’s slow transition to the growing world of tablet computing has come at a heavy price.

Microsoft has already lost over $ 1.2 billion on its Surface tablets and took a $ 900 million write down last year, mostly from a glut of its unsold Surface RT tablets.

In terms of capturing more tablet market share, Microsoft has some catching up to do.

Gartner reported that worldwide tablet sales grew 68 percent in 2013, with Android capturing 62 percent of the market followed by Apple at 36 percent and Microsoft trailing behind at only 2 percent.

-Johnathan Schweitzer

 

 

Microsoft Expected To Unveil New Larger Surface Tablet

surfaceRumors on the street have suggested that Microsoft plans to  release a new smaller  “Surface Mini” tablet with a 7-8 inch screen later this morning in New York at 11:00 EST.

However, some other tech sources are reporting that Microsoft will actually increase the size of its Surface Pro screen to include a 12 inch display.

The Surface Pro 2 with its high end Office products has been gaining traction in some corporate circles and could potentially become a more profitable tablet for the company.

-Johnathan Schweitzer

* I will be following up with another post about Microsoft’s new tablet later this evening

Euro Under Pressure Amid Weak Data, ECB Expected To Ease In June

Euro currency concept illustrationThe euro has faced downward pressure in May and saw its most significant 2 week pullback versus the dollar since the end of 2013 amid weak economic and inflation data in the 18 member euro area combined with growing expectations that ECB President Mario Draghi will move forward with monetary easing during the central bank’s next policy meeting in June.

Last Thursday eurostat reported that growth in the euro area measured by GDP (Gross Domestic Product) grew only 0.2 percent during the first quarter of 2014 while annual inflation was 0.7 percent in April, up from 0.5 percent in March, but still well below 1.2 percent in the same period a year ago.

The ECB wants to avoid low inflation in the euro area and has set an annual inflation target just below 2 percent.

To help jump start the economy in Europe, ECB President Mario Draghi is expected to provide additional monetary easing measures at the June policy meeting.

On Thursday Draghi said the ECB Governing Council was “comfortable with acting next time” in reference to the ECB’s next policy meeting on June 5th, although he admitted that he wants to review staff projections in advance of the meeting.

Economists are expecting the ECB to cut its main  interest rate below 0.25 percent while bank overnight deposit rates will turn negative for keeping money parked overnight at the ECB, a move that is intended to spur more greater lending and investment across Europe.

The ECB’s current overnight deposit rate is 0 percent.

The ECB is not expected to engage in any type of quantitative easing in the near future.

-Johnathan Schweitzer

 

 

 

 

Euro-area GDP growth up only 0.2 percent in first quarter of 2014

rfU.S. stock futures are lower on Friday and investors are on edge after the stock market had its worst day on Thursday in over a month following disappointing growth numbers out of the 18 member euro-area in Europe along with weaker U.S. data on housing and industrial production.

According to Eurostat, GDP growth in the euro-area rose only 0.2 percent in the first quarter of 2014, missing the estimate of 0.4 percent and matching the 0.2 percent increase in the fourth quarter of 2013.

Germany, which accounts for 28.6 GDP growth in the euro-area, posted the strongest economic gain in the euro-area with 0.8 percent first quarter GDP growth.

France, the second largest economy in the euro-area which accounts for 21.5 percent of euro-area GDP, saw no growth at all and registered  0.0 percent GDP growth in the first quarter of 2014.  Economists were expecting a modest 0.1 percent increase in first quarter for France.

GDP growth in the EU 28 grew 0.3 percent in the first quarter of 2014.

Later this morning, new U.S. economic data related to housing starts and building permits will be released followed by Michigan sentiment.

 

New Studies Show The Impact Of Climate Change, Global Warming

antarticLarge glaciers in West Antarctica are melting at a faster pace than scientists previously estimated according to the latest findings from a new study released on Monday.

The study undertaken by NASA and researchers from the University of California- Irvine compiled 40 years of observations, relying on some satellite radar measurements taken from 1992 to 2011.

Six large glaciers in the Amundsen Sea region of the Antarctic “have passed the point of no return” said Eric Rignot, a UC Irvine professor who is also working with NASA on the project.

Rignot believes that an increase in ocean heat was responsible for melting the massive glacier ice with the vast majority of glacial melting happening on the underside of their sections.

“The collapse of this sector of West Antarctica appears to be unstoppable” and was triggered by a common cause, such as an increase in the amount of ocean heat beneath the floating parts of the glaciers.

Rignot believes that human produced greenhouse gasses have contributed to global warming.

Scientists like Rignot have theorized that human produced greenhouse gasses in the atmosphere impact wind patterns around Antarctica and push warmer ocean water to the frozen continent.

The melting glaciers are already causing the sea level to rise and hold enough ice to increase the global sea level by 4 feet (1.2 meters) in the decades and centuries to come.

They are now melting at a faster pace than most previous estimates from scientists.

Reductions in greenhouse gas emissions may help to slow the Antarctic glacier thawing that has captured the attention of scientists worldwide.

But the findings from the recent study have also led to criticism from naysayers on the other spectrum such as conservative talk show host Rush Limbaugh who downplayed the study and ranted instead about “propagandized millennials”, claiming they are the “most indoctrinated generation in our country’s history.”

Many Americans led by conservative groups and the fossil fuel industry are highly suspicious of climate research that is used to show that climate change is man-made and insist that its unfair to blame humans for natural changes to the climate.

According to research from Pew Research, Americans are relatively unconcerned about global climate change when measured against citizens from other nations.

Only four-in-ten surveyed Americans said that climate change poses a major threat to their nation which ranks among the bottom of the list compared to citizens from other countries.

On May 6th the Obama administration released the third U.S. National Climate Assessment in Washington and welcomed national meteorologists and scientists to the White House in an effort to help understand the key reasons behind climate change.

The climate assessment is the culmination of a three year study by a team of over 300 climate scientists and experts.

The findings from the  assessment indicated that the global warming of the past 50 years is primarily due to human activities.

According to the assessment, the earth is getting warmer as “many more high temperature records are being broken as compared to low temperature records over the past three to four decades – another indicator of a warming climate.”

“The number of record low monthly temperatures has declined to the lowest levels since 1911, while the number of record high monthly temperatures has increased to the highest level since the 1930s” according to the assessment.

The findings also showed that the majority of the warming to the earth during the past 50 years can only be explained by the effects of human influences, such as the emissions from burning fossil fuels (coal, oil, and natural gas) and from deforestation.

Although humans have caused a buildup of greenhouse gases in the atmosphere, the future choices that humans make toward the environment could impact future climate change.

“Global climate is projected to continue to change over this century and beyond. The magnitude of climate change beyond the next few decades depends primarily on the amount of heat trapping gases emitted globally and how sensitive the earth’s climate is to those emissions” the assessment states.

* The Atlantic Cities has some good new information (good maps as well) that show A Map of History’s Biggest Greenhouse Gas Polluters.

-Johnathan Schweitzer

 

 

U.S. Stock Futures Rise; Dow at Record High

graphU.S. stock futures are pointing higher for Monday and Asian and European stock markets have advanced despite ongoing geopolitical tensions in eastern Ukraine after pro-Russian separatists declared victory in a one question vote about self-rule and autonomy from Kiev.

The Dow Jones closed at a record high on Friday and the S & P 50o edged near its all time high in a volatile week that saw Fed Chair Janet Yellen speak about Fed policy on Capitol Hill.

On Monday Chinese stocks rallied after Beijing agreed to move forward with market reforms, including a move to soften their limits on foreign investment and increasing quotas for capital flows.

There is no major economic data on deck for Monday in the United States.

-Johnathan Schweitzer

Yellen To Speak Before Senate Budget Committee

File of Federal Reserve Vice Chair Janet Yellen addressing a conference in WashingtonToday Fed Chair Janet Yellen will speak before the Senate Budget Committee in Washington for a second day on Capitol Hill as investors await more discussion about the economic and fiscal outlook for the economy.

Yesterday Yellen said that the economy has continued to recover from the steep recession of 2008 and 2009 while real gross domestic product (GDP) growth expanded to an average annual rate of about 3 1/4 percent over the second half of last year, a faster pace than in the first half and during the preceding two years.

Concerning the sluggishness in the economy during the first quarter of 2014, Yellen replied, “I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather.”

Yellen struck a cautionary note about a key driver of the U.S. recovery: the housing market.

Yellen said that the readings on housing activity, a sector that has been recovering since 2011, “have remained disappointing so far this year and will bear watching.”

When speaking about the job outlook, Yellen said that conditions in the labor market have continued to improve with 200,000 job gains in employment per month over the past year but they are still far from satisfactory.

Yellen explained that the number of individuals who work part time but would prefer a full-time job are at historically high levels but the unemployment rate will continue to decline gradually, and inflation will begin to move up toward 2 percent.

Monetary Policy

Yellen explained that the Fed’s policy will continue to be guided by the evolving economic and financial situation.

“In light of the considerable degree of slack that remains in labor markets and the continuation of inflation below the Committee’s 2 percent objective, a high degree of monetary accommodation remains warranted” Yellen said.

Sounding more cautious about providing forward guidance for the Federal Reserve to begin increasing short-term interest rates with the federal funds compared to other times in the past, Yellen explained “we will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.”

“In particular, we anticipate that even after employment and inflation are near mandate-consistent levels, economic and financial conditions may, for some time, warrant keeping the target federal funds rate below levels that the Committee views as normal in the longer run” Yellen added later.

-Johnathan Schweitzer

 

 

 

U.S. Climate Study Shows Climate Change Is Man Made

EnvironmentYesterday the Obama administration released the third U.S. National Climate Assessment in Washington and welcomed national meteorologists and scientists to the White House in an effort to help understand the key reasons behind climate change as Americans struggle to cope with severe weather that plagues the country.

The assessment is the culmination of a three year study by a team of over 300 climate scientists and experts.

Many Americans led by conservative Republican groups have been highly suspicious of climate research that is used to show that climate change is man-made and insist that its unfair to blame humans for natural changes to the climate.

According to research from Pew Research, Americans are relatively unconcerned about global climate change when measured against citizens from other nations.

Only four-in-ten surveyed Americans said that climate change poses a major threat to their nation which ranks among the bottom of the list compared to citizens from other countries.

Energy Secretary Ernest Moniz issued a statement during the release of the U.S. National Climate Assessment.

“The scientific community has been sounding the alarm over climate change for decades, and the 3rd U.S. National Climate Assessment released today offers the most comprehensive scientific report to date on U.S. climate change impacts” Moniz said.

“If our emissions of greenhouse gases remain unabated, we will face increasingly significant damages, including rising sea levels and an increase in droughts, heat waves, wildfires and intense storms” Moniz added later.

The findings from the  U.S. National Climate Assessment revealed that the global warming of the past 50 years is primarily due to human activities.

The research findings from the U.S. National Climate Assessment revealed that the earth is getting warmer as “many more high temperature records are being broken as compared to low temperature records over the past three to four decades – another indicator of a warming climate.”

“The number of record low monthly temperatures has declined to the lowest levels since 1911, while the number of record high monthly temperatures has increased to the highest level since the 1930s” according to the assessment.

A new record for minimum area of Arctic sea ice was established in 2012.

The assessment claims that the majority of the warming to the earth during the past 50 years can only be explained by the effects of human influences, such as the emissions from burning fossil fuels (coal, oil, and natural gas) and from deforestation.

– Johnathan Schweitzer

* I will be writing a longer more comprehensive version about this topic in the near future. I have written in the past about the environment and energy policy related to the Keystone Pipeline and look forward to sharing more in the future.