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Mid-Day Market Report 14 Feb 2014: China inflation hugs 7-month low, producer prices extend slide in January

China’s consumer inflation hugged a seven-month low in January and showed no signs of accelerating anytime soon, a consolation for the government which may need to loosen policy should economic growth founder. But in a sign the world’s No. 2 economy faces continued headwinds, producer prices fell again in January in an uninterrupted decline that has lasted for nearly two years. Prices of raw materials and means of production all dropped across the board. Producer prices slid for the 23rd consecutive month by 1.6 percent from a year ago, the National Bureau of Statistics said on Friday. Consumer prices, on the other hand, were up 2.5 percent, level with December and slightly above market expectations. China’s economic growth narrowly dodged a 14-year low last year by expanding 7.7 percent, a whisker above the government’s 7.5 percent target. Beijing has not announced its 2014 growth target, and some economists suspect it has no plans to do so. At the same time, a growing group of analysts believe that government stimulus is needed if China keeps its growth target at 7.5 percent this year.

German, French growth rose above forecasts in last quarter of 2013

Economic growth in Germany and France, the euro zone’s two largest economies, marginally exceeded expectations in the fourth quarter and offered hope of a more robust 2014. German growth accelerated to 0.4 percent on the quarter thanks to a rise in exports and capital investment, up from 0.3 percent in the previous three months. The French economy expanded by 0.3 percent and statistics office INSEE revised up the third quarter figure to flat from -0.1 percent. That meant France grew 0.3 percent over the course of last year, more than the government’s estimate of 0.1 percent. The German Statistics Office saw “mixed signals” from the domestic economy, which has driven growth throughout most of the year, with public expenditure stable and private consumption slightly below the level of the previous quarter. “Capital investment developed positively,” the Statistics Office said. “However a strong reduction in inventories put the brakes on economic growth.” The German Economy Ministry said on Wednesday it expected gross domestic product (GDP) growth of 1.8 percent in 2014 – more than four times faster than in 2013 as a whole. The European Central Bank kept policy steady earlier this month with President Mario Draghi declaring more information was needed before deciding on any action. He cited fresh ECB staff forecasts which will be ready for the March policy meeting and the fourth quarter GDP numbers. Spain has already reported fourth quarter growth of 0.3 percent, its second successive quarter of expansion. The government now expects growth this year of close to 1 percent, compared with an official forecast of 0.7 percent. The Dutch economy grew by a solid 0.7 percent on the quarter. The French government expects growth will accelerate this year to at least 0.9 percent, driven by a rebound in corporate investment.

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