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“We seek a new and equal partnership — between an independent, self-governing, global Britain and our friends and allies in the EU.  Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out.”

K. Prime Minister, Theresa May, 1/17/17

FAST FACTS ABOUT TODAY’S ECONOMIC DATA:

  • K. CPI up +1.6% Y/Y in December-highest since July 2014.
  • NY Fed Manufacturing Index indicates slow growth in January.
  • German ZEW Confidence continues to improve in January.

U.K. HEADLINE & CORE CPI ACCELERATED ON Y/Y BASIS IN DECEMBER:

2017 appears to be the year in which inflation returns around the globe.  The recent surge in China PPI is a precursor to what lies ahead for most of the globe.   According to the Office for National Statistics, U.K. consumer inflation increased for the fifth consecutive month, up +0.5% M/M in December,.  Furthermore, on a Y/Y basis, inflation is now up +1.6% Y/Y (+1.2% Y/Y prior), which is the highest level since July 2014 and much closer to the Bank of England’s target of 2% inflation.  In December, Food and Non-alcoholic prices increased +0.8% M/M, Transport prices rebounded +2.9% M/M, and Furniture prices increased +0.9% M/M.  Conversely, Clothing prices declined -1.0% M/M and Alcoholic prices declined -0.6% M/M.  Lastly, ‘Core’ CPI increased +0.5% M/M and +1.6% Y/Y.

 

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In a related note, the U.K. Input Producer Price Index increased +1.8% M/M and +15.8% Y/Y (+13.3% Y/Y prior) in the month of December, largely due to the sharp decline in the pound after the Brexit vote.  The Output PPI increased +0.1% M/M and +2.7% Y/Y (+2.4% Y/Y prior).

SHAKING OUR HEADS.  THE DONALD TALKS DOWN THE DOLLAR?  

Every U.S. President and U.S. Treasury secretary for as long as we can remember has understood the importance of a strong dollar policy.  Even when Paulson/Geithner were employing every policy known to man to wreck the U.S. Dollar, these former Treasury Secretaries would be quick to state that the U.S. has a strong dollar policy.  There is much reason for a strong dollar policy, as it is a sign of economic strength, it allows for confidence in currency flows, trade, and capital investment, and most importantly a stronger dollar means that inflation is controlled and consumers have better buying power.

If one truly wants to ‘make America great again’, such a statement can only be achieved through strength and confidence in the U.S. Dollar.   Yet, President-elect Trump had this to say to the Wall Street Journal over the weekend, “Our companies can’t compete with them (China) now because our currency is too strong. And it’s killing us.”   Mr. Trump, inflation is coming to the United States in 2017.   The last thing the United States needs at this time is a weaker dollar.

NY FED MANUFACTURING SHOWS SLOW GROWTH:

The NY Fed’s Empire State Manufacturing Index slipped -1.1 points to +6.5 in January.  Nonetheless, the index indicates growth in the region for the third consecutive month.  In the month, there were notable improvements in Current Unfilled Orders (+8.7 points to -1.7), Current Inventories (+16.4 points to +2.5), and Number of Employees (+10.5 points to -1.7).  Also, Prices Paid increased +13.5 points to 36.1 and Prices Received increased +14.1 points to 17.6.  Conversely, New Orders fell -7.3 points to 3.1.  Lastly, the Future General Business Index was unchanged at 49.7, which is the highest level since January 2012.

 

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GERMAN ZEW CONFIDENCE CONTINUES TO IMPROVE IN JANUARY:

According to the ZEW Center for European Economic Research, German Economic Expectations increased +2.8 points to +16.6 in the month of January.  Thus, the index remains at the highest level since June.  Furthermore, the Eurozone Economic Expectations increased +5.1 points to +23.2 (highest level since December 2015).  As for the Current Economic Situation, the German index increased +13.8 points to 77.3 (highest level since July 2011).

 

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SAVE THE DATE-MERION CAPITAL PUERTO RICO INVESTOR FIELD TRIP, FEBRUARY 16-17:

Please let us know if you may be interested in attending our upcoming Puerto Rico Investor Field Trip (February 16-17).   We will be meeting with company managements from BPOP, FBP, and OFG.  Also, we will be having topical discussions with government and business leaders regarding PR’s ongoing debt crisis, economic situation, as well as the impact of recent tax incentives and reforms.

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DISCLOSURE APPENDIX

This publication is for Institutional Investor use only and not for distribution to the general public. The comments herein are based on the author’s opinion at a particular point in time and December change at any time without notice. Merion Capital Group does not guarantee the accuracy or completeness of the information contained herein. Merion Capital Group is a FINRA-registered broker-dealer. Merion Capital Group shares in the commissions for trades that are executed through Tourmaline Partners, LLC, a FINRA-registered broker-dealer. This report is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. It does not constitute a general or personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Past performance is not a guarantee of future performance. All investments involve risk, including the loss of all of the original capital invested.

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