By Anne D. Picker, International Economist,Econoday
Monday, January 15, 2001

Initial quiet
It was a relatively slow week for economic data. In the United States, retail sales were higher than consensus (up 0.1 percent on the month vs. a negative 0.4 percent expected). Germany's initial estimate of full year 2000 gross domestic product was 3 percent, almost double that of 1999. (See indicator scoreboard below.) Overseas markets are still in reactive mode - they watch U.S. market behavior and act accordingly. Perhaps the exception is Japan where the domestic news has been bad enough to sink the Nikkei to levels approaching the weakest since 1986.

As expected, the Bank of England left its policymaking interest rate on hold, much to the criticism of the business community which is understandably nervous about slower growth. Buy with consumer demand still strong, the British economy is not showing the strains that are appearing in the United States. However, a better picture of the economy will be available next week when key policy making data are released, including retail sales, consumer prices, unemployment and average weekly earnings.

At its meeting this week, the Organization of Petroleum Exporting Countries (OPEC) is expected to cut oil production for the first time in almost two years. This would bolster world energy costs just at the time that economic growth is slowing. Aiming to keep oil prices between $22 and $28 a barrel, OPEC will probably reduce quotas by about 1.5 million barrels daily, or about 5.4 percent of December's output. OPEC is determined to be proactive and avoid a price collapse when demand weakens in the spring. But higher energy prices have already hurt economic growth and contributed to this month's surprise U.S. interest rate cut. Slowing world growth and four OPEC output increases in 2000 helped oil prices to decline, only intensifying members' calls for restraint to avoid a further drop.

In its monthly report, the European Central Bank said economic growth in the 12 nation euro area is likely to stay strong and cautioned that there are still risks to price stability, signs it may not cut interest rates soon. The ECB is concerned about future wage negotiations and individual country's fiscal policies. November inflation rose 2.9 percent, breaching the ECB's inflation target of two percent for the sixth straight month as increased oil prices and the euro's drop in value boosted import costs.

Introduction   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead