Covid-19 keeps eurozone inflation negative. Eurozone inflation remains stubbornly negative, the latest official data showed on Thursday. Eurostat figures for December show that the 19-nation currency bloc registered an inflation rate of minus 0.3 percent, the same level as in November. That was the fifth consecutive month inflation languished in negative territory. The reading is well below the European Central Bank’s inflation target level of just under two percent. The biggest drag on inflation were energy prices, which fell by 6.9 percent in December compared a fall of 8.3 percent the month before. The biggest positive component was food, alcohol and tobacco, which rose by 1.4 percent, compared with a 1.9 percent rise in November. Persistently negative inflation is a major worry for policymakers at it can lead to a downward spiral that can severely hinder economic activity and employment.
German factory orders jump unexpectedly in November. German factory orders posted an unexpected increase in November, as Europe's biggest manufacturing sector withstood a resurgence of Covid-19 cases. Orders rose by 2.3 percent from a month earlier, blowing past economists' mean forecast for a 0.5 percent decline, as exports to other eurozone countries surged. Compared to the same month last year, orders rose by 6.3 percent, German statistics agency Destatis said, beating an average estimate of a 2.1 percent increase. Export orders to other EU markets rose by 6.1 percent and domestic orders increased by 1.6 percent. Non-eurozone export orders rose by 0.9 percent. Germany and many markets for manufactured goods increased Covid-19 restrictions in November in an effort to stem rising infections.
Fed pledges to give plenty of notice before cutting back bond purchases. Following a two-day session on December 15-16, the Federal Open Market Committee unanimously voted to keep interest rates anchored near zero and strengthened its commitment to the bond buying programme, pledging to maintain a $120 billion monthly pace of purchases until there is “substantial further progress” toward its employment and inflation goals. Policymakers agreed that markets would get plenty of notice before asset purchases were curtailed. The last time the Fed cut back on its asset purchases, it triggered a period of market turmoil that came to be known as “taper tantrum” that officials want to avoid this time.
China services sector continues to recover in December, albeit at a slower pace. China's services sector activity expanded at a slower rate last month, a private sector survey showed, as sporadic coronavirus outbreaks hampered the recovery in consumer confidence and put pressure on new business growth. The Caixin/Markit services Purchasing Managers' Index for December eased to 56.3, a three-month low, from 57.8 the prior month, but stayed well above the 50-mark that separates expansion from contraction on a monthly basis, pointing to brisk expansion. The loss of momentum was largely in line with the findings in an official survey released last week, which showed that activity for the catering industry had contracted. The private survey also revealed a further sharp rise in input prices, which led firms to increase their prices charged at the fastest rate since January 2008.