Just so we remember.... it's worth taking one more look at Last Friday's data.
ECI rose a higher than expected 1.1% in Q4. Wages and salary costs jumped 0.9%, while benefits costs rose 1.3%, the largest increase since a 1.5% increase in March of 1993. GDP surged a larger than expected 5.8% in Q4. For all of 1999, GDP grew 4%, following gains of 4.3% in 1998 and 4.5% in 1997.
The economy has not expanded at 4+% pace for three consecutive years since the late seventies. Personal consumption rose 5.3% in Q4, following a 4.9% increase in Q3, while real final sales in Q4 rose at a 4.6% annual rate, following a 4.5% increase in Q3. Finally, the worst news for the bond market came in the deflator, which rose at a 2% annual rate, up from 1.1% in Q3. With some early weakness in stocks, it did not take long for Treasuries to show some signs of improvement. Of course the flattening trend remained intact, with the long end outperforming. The intermediate sector continued to suffer from talk of convexity related selling, ---while the front end was under pressure due to fears of a more aggressive Fed going forward. Once again, we heard talk of accounts having to bail out of bad steepening positions. ----
I don't know about you but this convexity selling keeps me up at night -vbg-
anyway it's tough to see any type of softening in the data. No wonder Friday was a "bloodbath" for the US Stock market.
Luckily we had a weekend to get our courage back -g-
Finally
Today's post ecofin meeting statement from Duisenberg differed markedly from previous remarks. For the first time he acknowledged that the 'continuous weakening' of the euro's external value would pose a risk to price stability. His words differed from the official statement released only a few minutes later by ecofin which made no reference whatsoever to these inflationary risks.
so we heard something a bit different from Duisenberg on Monday. |
