Yellen: Turbulence in Global Financial Markets Worrying

Industrial output for the month of December continued to decline, reaching -1.10% on a monthly basis after missing estimates of -0.10% and falling below the previous month’s -0.80% contraction. Mining production was a main driver of the weakness, having slid by -4.00% while manufacturing also added to the pile on, slipping by -0.20% over the month. The UK Office of National Statistics (ONS) also reported ongoing shrinkage in industrial activity on an annualized basis, printing at -0.40% versus estimates of 1.00% and November’s revised value of 0.70%. The declines in industrial production also reflected on manufacturing production, which trickled -0.20% lower during the month of December after having falling by a revised -0.30% in November. The figures are expected to be echoed by gross domestic product projections from the ONS, with the low growth estimates likely to push a rate hike even further into the future.

In her semiannual congressional testimony, Federal Reserve Chairwoman Janet Yellen underlined that recent turmoil in financial markets and uncertainty attributed to the Chinese economy could cast a shadow over the US economy. If weakness persists in China while a pile up in commodities leads to increased deflationary threats, these factors may weigh negatively on the US economic outlook and the labor market. However, robust consumer spending and supported by modest wage growth, declining unemployment and business investment outside the oil sector is anticipated to aid the US economy proceed on its path towards growth and inflation, but at a more gradual pace.