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A Note To Inflation Hawks
There is practically no inflation right now, despite the Federal Reserve's proactive open-market operations. According to Reuters, the Core PCE (Personal Consumptions Expenditures) Price Index, the favored inflation guage of the Federal Reserve, has fallen to a 3 and 1/2 year low of 1 percent.
With that said, this is probably the most textbook example of the need for fiscal and monetary stimulus. Although recent comments from the San Francisco FRB president signal that the Fed's open-market operations could tighten in the summer following decreases in unemployment, the combination of a 1% inflation (not even remotely close to the 2% Fed inflation target) and an unemployment rate of 8.4% (significantly higher than the NRU) shows that unemployment is more of a problem right now.
Encouraging Results Of Abenomics
In the first three months of 2013, Japan's economy grew by 3.5%, a solid beat of the 2.7% analysts were expecting. Now, initial reports are coming out that Japanese Core Machinery Orders are up 14.2% in March, destroying the 2.5% analyst estimates. This has been coupled with a huge stock market rally; the Nikkei recently broke through a 5-year high. Despite the initially encouraging news, it would be premature to pass decisive economic judgment on the effect of Abenomics right now.
China's Flash PMI Heavily Disappoints
Early indicator of manufacturing activity and overall economic health falls to 2-month low of 50.5 in April compared to 51.6 in March and analyst estimates of 51.5