In attempting to explain the unexpectedly sanguine jobs report for January, Federal Reserve chair Jerome Powell last Tuesday repeated his position from the previous week’s policy meeting in which the central bank raised interest rates by a quarter of a percentage point.
Powell essentially reiterated that another couple of interest rate hikes were probably needed to bring inflation down, as the outcome is still seen as uncertain.
A government report on February 3 showed that US job hiring accelerated in January was “certainly strong – stronger than anyone I know expected,” Powell said last Tuesday during a moderated discussion before the Economic Club of Washington.
He also said “the disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy. But it has a long way to go. These are the very early stages.”
Meanwhile, retail sales in the eurozone fell in December by the biggest decline since April 2021, as households tightened their belts amid high inflation and rising interest rates.
Retail sales in the countries that share the euro currency declined by 2.7 per cent on the month, following a 1.2 per cent increase in November and expectations for a 2.5 per cent fall. Sales of food, drinks and tobacco led the decline with a 2.9 per cent fall, while sales of non-food products followed by 2.6 per cent. At the same time, automotive fuel sales rose by 2.3 per cent on the month.
On the year, retail sales were 2.8 per cent lower in December, following a 2.5 per cent decline the month before. However, these disappointing numbers are unlikely to change the European Central Bank’s hawkish stance in pushing ahead with raising interest rates to control inflation.
Finally, in Germany, industrial production declined more than expected in December, slumping by 3.1 per cent compared to the previous month, far weaker than the expected drop of 0.7 per cent. This December number was driven by a sharp fall in output of intermediate goods, data published by German statistics agency, Destatis, showed on Tuesday.
On an annual basis, industrial production was 0.6 per cent lower than in 2021 and down by five per cent from the pre-pandemic year of 2019.
“This completes a miserable end to 2022 for Germany’s economy, following the crash in retail sales and plunge in exports,” Pantheon Macroeconomics’ chief eurozone economist Claus Vistesen said.
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