German's see the OMT as Constitutional

Germany's Constitutional Court will refer a complaint against the European Central Bank's flagship bond-buying plan to the European Court, removing the prospect of it curbing the programme.

The court said there was good reason to think the scheme "exceeds the European Central Bank's monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget".

However, it said in a statement that it "also considers it possible that if the OMT decision were interpreted restrictively" it could conform to the law.

 German Chancellor Angela Merkel and ECB President Mario Draghi

Legally, the German court has to offer its own preliminary interpretation of the case to the European Court. It in turn will use that interpretation as the initial basis for evaluation.

The ECB's Outright Monetary Transactions (OMT) programme, announced by ECB President Mario Draghi in September 2012 at the height of the sovereign debt crisis and as yet unused, is widely credited with stabilising the euro.

Any potential curb on it would alarm investors.

The OMT's power lies in its promise of potentially unlimited sovereign bond purchases - a prospect that provided the necessary backstop to calm fears the euro would fall apart.

The euro fell to a session low against the dollar in response while German government bond futures rose to day's highs and Italian bond yields reversed earlier falls, suggesting some disquiet about the court's decision.

The central bank has been considering the possibility of suspending operations to soak up money it spent buying sovereign bonds during the euro zone's debt crisis under its now-terminated Securities Markets Programme.

Ending the so-called "sterilisation" operations would inject about 175 billion euros ($237.99 billion) of liquidity into the financial system, which would help ease strains in euro zone money markets.

Lackluster growth of Asia means the BOJ will continue printing

The Bank of Japan stands ready to expand monetary stimulus further if necessary to safeguard its inflation mandate, two top policymakers said on Thursday, warning that the rout in emerging markets was already affecting Japanese assets.

Deputy Governor Kikuo Iwata dismissed the chance of an immediate expansion of monetary stimulus, stressing that solid U.S. growth will underpin global demand and keep the world's third-largest economy on track for a moderate recovery.

"I am not too worried about the U.S. economy and therefore in terms of Japan's monetary policy I think we can stick to our existing policy," he told a news conference after meeting with business leaders in Miyazaki, southern Japan

But the former academic, echoing concerns expressed by Governor Haruhiko Kuroda that lackluster growth in emerging Asia is weighing on exports, stressed the BOJ's readiness to act should external risks undermine its inflation target.

ECB keeps the taps flowing as it braces itself for Deflation

 The European Central Bank left interest rates unchanged, while ECB President Mario Draghi said monetary authorities will not consider loosening policy to stave off deflationary pressures for now.

 The ECB voted to leave interest rates across the eurozone unchanged at a record-low 0.25%, but the common currency strengthened after ECB President Mario Draghi did not outline any new measures to shore up slowing inflation.

Draghi said the ECB sees a protracted period of low inflation, not full blown deflation, and reiterated that the bank is “monitoring developments closely" and won't likely make any decisions until the bank reviews more economic indicators, which markets interpreted as March at the earliest.

Deflationary concerns arose last week after data revealed that the annual rate of inflation slowed to 0.7% in January.

Irish Unemployment down

On a seasonally adjusted basis the Live Register total recorded a monthly decrease of 2,300 in January 2014, reducing the seasonally adjusted total to 400,700. 

The standardised unemployment rate (SUR) in January 2014 was 12.3%, down from 12.4% in December 2013.  

Irish Unemployment 13-14

Live Register duration of continuous registration

Male

Female

Part Time and Casual workers 

Casual and Part Time

Irish government tax take down-they blame SEPA

The Irish  Government’s first set of exchequer returns for 2014 are sharply down on last year because of the switchover to the new European electronic payments system.

The latest returns showed the State collected nearly €650 million less than expected in tax last month.

The anomaly was blamed on the introduction of SEPA (Single Euro Payments Area) system which slowed down the Revenue Commissioners’ collection of VAT, corporation tax and employers’ PAYE and PRSI.

Instead of payments being processed within two or three banking days it will now take seven banking days.

The department insisted the fall-off in tax was a “ technical timing issue” and did not alter the tax forecast for the year.

The figures showed the exchequer deficit at the end of January stood at €1.14 billion, compared with a surplus of €704 million at the same stage last year.

Net voted expenditure for January was €4.1 billion, representing a year-on-year increase of 3.8 per cent or €152 million.

	January 2013	January 2014
Overall Tax Revenue	€3.7 billion	€3.1 billion
Income Tax	€1.38 billion	€1.2 billion
Vat receipts	€1.74 billion	€1.37 billion
Corporation tax	€11 million	€7 million
Excise duties	€318 million	€342 million

UK manufacturing improving and demand up

The UK manufacturing sector made a positive start to 2014.

 Rates of expansion in output and new orders remained well above their respective long-run trends, supporting a solid increase in payroll numbers.

The seasonally adjusted Markit/CIPS purchasing manager’s index (PMI) posted 56.7 in January, down from December’s 57.2.

 Although the PMI currently stands at its lowest level in three months, it is still well above the series average of 51.3. The headline index has signalled an improvement in operating conditions in each of the past ten months.

The strong upturn in manufacturing production was maintained in January, as companies scaled up output in response to stronger inflows of new orders. There were reports of improved demand from the domestic market and rising levels of new business from overseas.

The latest expansion in new export orders was broad-based by source, with UK manufacturers mentioning improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and the Middle-East.              

Moreover, the ongoing improvement in global market conditions drove the rate of increase in new export business to a near three-year record.

The ongoing rebound in the sector led to further job creation at the start of the year.

January saw employment increase for the ninth successive month, with the rate of jobs growth remaining close to November’s two-and-a-half year high.