Inflation fears are overdone Concerns over inflation in emerging markets have shaken global financial markets in the past few weeks, amid signs of overheating economies.
But inflation may actually be close to peaking, says a report by Capital Economics' senior emerging markets economist Neil Shearing.
The inflation rate is now running above target in 11 of the 15 largest emerging markets. The run-up has largely been fuelled by a spike in commodity prices over the past six months, according to the report.
But the risk that inflation will spiral out of control is low, says Mr. Shearing. Even if commodity prices were to remain at their present high levels, food and energy inflation should start to fall by the fourth quarter of this year, he believes.
If, on the other hand, commodity prices continue to fall - a likely scenario - food and energy inflation could drop sharply next year, he says.
As for China, the focus of much hand-wringing, inflation has probably already peaked, said Mr. Shearing.
"With domestic food prices falling outright in the past few weeks, we think inflation should drop to around 3 per cent next year (from 5.4 per cent currently)."
Mo' better jobs
Not only are the jobs coming back. They're getting better.
According to statistics gathered by CIBC World Markets economist Avery Shenfeld, the 283,000 new jobs created over the past year in Canada coincided with a 2.7 per cent improvement in the bank's employment quality index.
CIBC's index is made up of a host of factors, including part-time vs. full-time jobs, self-employment compared with paid employment and the compensation ranking of full-time paid employment jobs in more than 100 industry groups.
As of last month, the measure is just about back to pre-recession levels, says Mr. Shenfeld.
The number of high-paying jobs rose almost three times faster than low-paying jobs. More than 60 per cent of the full-time jobs created since April last year were high-paying positions, said Mr. Shenfeld.
That means stronger buying power. The impact of job creation on income growth and, thus, spending is more notable than it was in early 2010.
"This is a much better performance than a similar measure in the U.S., where the quality of employment index continues to soften despite some improvement in the pace of job creation," he writes.
Politics and the dollar
It's a mug's game, but a few economists try every now and then - perhaps in search of an amusing break from the practice of their dismal science - to discover a causal relationship between the activity of the loonie and federal elections.
Xavier Villemaire of National Bank Financial Group recently charted the movement of the Canadian dollar in the wake of the majority victory of Stephen Harper's Conservative party.
A Conservative victory would have led one to believe that the loonie would firm, but in fact the dollar was "totally overpowered by a significant correction on the international financial markets," losing roughly 1.5 cents against the U.S. greenback, he said in a report.
His research indicates it's not clear what impact - if any - federal elections have on the Canadian currency.
He did, however, unearth one interesting fact: In the past decade, for a period of 50 days following a federal election, volatility in loonie trading was 1.46 times greater than normal.
"We will leave it to the politicians to determine who is to blame for this," he adds.
Bertrand Marotte