A Chinese factory gauge sank to a seven-month low in December, holding near a preliminary reading and putting pressure on policy makers to provide more support for the world’s second-largest economy. The final reading of the Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 49.6 this month from 50 in November, compared with the Dec. 16 reading of 49.5. Numbers below 50 indicate contraction.
ECB’s Praet Warning of Oil Effects Signals Higher Chance of QE:
Euro-area inflation will drop below zero “for a longer period” in 2015 amid a slide in the cost of crude, and the Governing Council “cannot simply look through”. Inflation expectations are currently “extremely fragile” and the danger of second-round effects is “higher than usual,”. ECB policy makers are preparing to consider a proposal for large-scale asset purchases, including sovereign bonds, when they meet on Jan. 22.
ECB’s Praet Says Lower Oil Prices Raise Scope For More QE
Lower oil prices could depress inflation and raise scope for additional quantitative easing, the European Central Bank’s chief economist Peter Praet said. “Inflation expectations are extremely fragile,” and “we cannot simply “look through,” Praet said. The price competition could also depress core inflation and contribute to the de-anchoring of inflation expectations, he observed. The economist said sovereign bonds are the only sort of security that has a significant market volume. “There is not too much to buy on the corporate bond market and it is concentrated in a small number of countries,” Praet said.
South Korea CPI Slows To 0.8% In December
Consumer prices in South Korea were up just 0.8% on year in December, below forecasts for a gain of 1.0%, which would have been unchanged from November. CPI was flat on month after easing 0.2% in the previous month. Core consumer prices added 0.1% on month following the flat reading in November; on a yearly basis, core CPI was unchanged at 1.6%. The Bank of Korea continues to expect inflation to rise 2.3% for all of 2014