At the Rio Olympics, American Ryan Lochte won gold as part of the US men’s 4 x 200 metre freestyle relay team. That medal, his 12th, made him the second most successful male Olympian swimmer of all time.

At the Rio Olympics, American Ryan Lochte won gold as part of the US men’s 4 x 200 metre freestyle relay team. That medal, his 12th, made him the second most successful male Olympian swimmer of all time.

A few days later, he was accused of urinating in public, vandalising a petrol station, and making up stories about being robbed at gunpoint by a gang of Brazilians in the city. Lochte’s spectacular fall from grace led to serious consequences for the former world record holder. He faces career sanctions, was publicly castigated by Brazilian politicians, and lost an estimated US$1m in sponsorship.

The domestic US media also had a field day, with the New York Post printing the frontpage headline: “Liar, liar, Speedo on Fire”. The New York Post went on to say that the 32-year-old was “The Ugly American” and typified “everything the world hates about Americans”.

View image on Twitter

Shortly after that Speedo headline, the swimwear manufacturer and long-term sponsor of Lochte announced that their relationship with him was over. The company said it would instead donate a US$50,000 portion of Lochte’s fee to Save The Children’s charity work in Brazil, and said of the swimmer: “We cannot condone behaviour that is counter to the values this brand has long stood for.”

They added: “We appreciate his many achievements and hope he moves forward and learns from this experience.”

Since Speedo’s decision, three more of Lochte’s sponsors have followed suit. A common theme in the reasons given by all four companies was the insinuation that Lochte’s behaviour did not fit with their respective brands. In marketing terms, a brand is affected by what is called the “totality of perceptions” – everything a potential customer knows, sees, feels and hears about an organisation.

In the expensive world of athlete endorsements, organisations such as Speedo attempt to capitalise on the positive public attention and emotional ties generated by an athlete’s successes. The hope is that these associations then transfer to people’s perceptions of their product.

Therefore, if the emotional response that an athlete triggers is negative, as in Lochte’s case, we can hardly blame sponsors for wanting to terminate the relationship to minimise the potential damage to their own brands. Sponsors will also want to sever their ties before such perceptions become stable and enduring, and take the opportunity to reassert their own brand identities.

Speedo has done this extremely effectively.

To begin with, research suggests that athlete endorsements can both positively impact sponsor sales and market value. Put simply, the better an athlete does, the more stuff the sponsor will sell and the more money the sponsor will be worth.

Speedo cannot have failed to notice that Lochte’s performance at the London 2012 games (five medals in total, three of them in individual events) was significantly better than his performance at Rio 2016 (one medal in the four-man relay).

Glory days in London 2012. PA

At 32, he is also eight years older than the average member of the American men’s swimming team, suggesting that his major sporting achievements are probably behind him. From a purely business perspective, then, Speedo’s decision therefore seems justified. Fewer medals means fewer bathing suits sold.

The decision to dump Lochte also brought Speedo a priceless amount of publicity. Their reaction was covered by media outlets across the globe, who also mentioned the company’s donation of part of Lochte’s endorsement fee to charity.

A gold medal in PR

The fact that Speedo has been so widely talked about has reminded both the swimming and non-swimming public that the company still exists. The statement announcing the end of the deal reiterated or introduced to the public how Speedo wishes to be perceived. The donation to Save the Children, as well as guaranteeing traction in the media, served to both provide a counterpoint to the athlete’s behaviour, and distinguish Speedo from their competitors.

For the cost of a press release and a relatively small charitable donation, Speedo achieved massive media penetration, and a global assertion of their brand values. They could only have dreamed of such an impact if they had spent millions on a carefully calculated marketing campaign.

The overall effect is even more impressive if you consider that Speedo’s deal with Lochte was reportedly due to expire this year anyway. In addition, although levels of publicity surrounding the organisation will wane as interest in the swimmer and his shenanigans dissipates, Speedo has used their brief opportunity effectively.

Lochte, meanwhile, who had aimed to compete at the Tokyo 2020 Olympic Games, is left with no lucrative endorsements, and the prospect of serious punishments from the US Olympic Committee and USA Swimming. He may have a good collection of medals to look at – but after his latest performance, Speedo are the clear winners.

Ditching their deal with disgraced Olympic swimmer Ryan Lochte puts Speedo out in front is republished with permission from The Conversation

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Africa’s natural environments and spectacular wildlife are about to face their biggest challenge ever. In a paper published today in Current Biology, my colleagues and I assess the dramatic environmental changes driven by an infrastructure-expansion scheme so sweeping in scope it is dwarfing anything the Earth’s biggest continent has ever endured.

People, food, and mining

Africa’s natural environments and spectacular wildlife are about to face their biggest challenge ever. In a paper published today in Current Biology, my colleagues and I assess the dramatic environmental changes driven by an infrastructure-expansion scheme so sweeping in scope it is dwarfing anything the Earth’s biggest continent has ever endured.

People, food, and mining

Africa’s population is exploding – expected nearly to quadruple this century, according to the United Nations. With that, comes an escalating need to improve food production and food security.

In addition, Africa today is experiencing a frenzy of mining activity, with most of the investment coming from overseas. China, for instance, is investing over US$100 billion annually, with India, Brazil, Canada, and Australia also being big foreign investors.

To feed its growing population and move its minerals to shipping ports for export, Africa needs better roads and railroads. When located in the right places, improved transportation can do much good. It makes it easier for farmers to get access to fertiliser and new farming technologies, and cheaper to get crops to urban markets with less spoilage. It can also encourage rural investment while improving livelihoods, access to health services, and education for local residents.

Improved transportation is especially important for Africa’s agriculture, which is badly under-performing. In many areas, large “yield gaps” exist between what is producible under ideal conditions and what is actually being produced. With better farming, Africa’s yields could double, or triple without clearing one more hectare of land.

Using rudimentary methods, small-scale farmers eke out a living in Gabon. William Laurance

Pandora’s box

However, there is another side to new transportation projects — a dark side, especially for the environment. When located in areas with high environmental values, new roads or railroads can open a Pandora’s box of problems.

Roads slicing into remote areas can lead to range of legal and illegal human land uses. For instance, in the Amazon, 95% of all deforestation occurs within five kilometres of a road; and for every kilometre of legal road, there are three kilometres of illegal roads. In the Congo Basin, forest elephants decline sharply, and signs of hunters and poachers increase, up to 50 kilometres from roads.

A forest elephant shot by poachers. Ralph Buij

In the wrong places, roads can facilitate invasions of natural areas by illegal miners, colonists, loggers, and land speculators. In my view, the explosive expansion of roads today is probably the greatest single peril to the world’s natural environments and wildlife.

Africa’s ‘development corridors’

Earlier studies that my colleagues and I conducted, including a major study published in Nature last year, suggest Africa is likely to be a global epicentre of environmental conflict. A key reason: an unprecedented scheme to dramatically expand African roads, railroads, and energy infrastructure.

In total, we have identified 33 massive “development corridors” that are being proposed or are underway. At the heart of each corridor is a road or railroad, sometimes accompanied by a pipeline or power line.

The 33 development corridors that are being proposed or constructed in sub-Saharan Afirca. William F. Laurance et al. (2015) Current Biology.

The projects have a variety of proponents, including the African Development Bank, national governments, international donors and lenders, and commercial agricultural and mining interests. They’re intended to promote large-scale development and their scope is breathtaking.

If completed in their entirety, the corridors will total over 53,000 kilometres in length, crisscrossing the African continent. Some individual corridors are over 4,000 kilometres long.

Will these corridors generate key social and economic benefits, or will they cause great environmental harm? To address this question, we looked at three factors, focusing on a 50-kilometre-wide band laid over the top of each corridor.

First, we assessed the “natural values” of each corridor, by combining data on its biodiversity, endangered species, critical habitats for wildlife, and the carbon storage and climate-regulating benefits of its native vegetation.

Second, we mapped human populations near each corridor, using satellite data to detect nightlights from human settlements (to avoid lands that were simply being burned, we included only places with “persistent” nightlights). We then combined the natural-value and population data to generate a conservation-value score for each corridor, reasoning that sparsely populated areas with high natural values have the greatest overall conservation value.

Finally, we estimated the potential for new roads or railroads to increase food production. Areas that scored highly had soils and climates suitable for farming but large yield gaps, were within several hours’ drive of a city or port, and project to see large future increases in food demand.

Costs versus benefits

When we compared the conservation value of each corridor with its potential agricultural benefits, we found huge variation among the corridors.

A half dozen of the corridors look like a really good idea, with large benefits and limited environmental costs. However, another half dozen seem like a really bad idea, in that they’d damage critical environments, especially rainforests of the Congo Basin and West Africa and biologically rich equatorial savanna regions.

In the middle, there are 20 or so, corridors that appear “marginal.” These tend to have high environmental values and high potential agricultural benefits, or vice versa.

We argue for an evaluation of these marginal projects in detail, on a case-by-case basis. If they do proceed, it should only happen under the most stringent conditions, with careful environmental assessment and land-use planning, and with specific measures in place (such as new protected areas) to limit or mitigate their impacts.

Dangers for Africa

There’s no such thing as a free ride. For Africa, the dangers of the development corridors are profound. Even if well executed, we estimate that the current avalanche of corridors would slice through over 400 protected areas and could easily degrade another 2,000 or so. This bodes poorly for Africa’s wildlife and biodiversity generally.

Wild zebras in the Serengeti. William Laurance

Beyond this, the corridors will encourage human migration into many sparsely populated areas with high environmental values. The wild card in all this is the hundreds of billions of dollars of foreign investments pouring into Africa each year for mining. Even if a corridor is likely to yield only modest benefits for food production, it may be very difficult for governments and decision makers to say no to big mining investors.

The bottom line: it could be a fraught battle to stop even ill-advised development corridors, though not impossible. If we shine a bright light on the corridors and argue strongly that those with limited benefits and large costs are a bad idea, we may succeed in stopping or at least delaying some of the worst of them.

This is unquestionably a vital endeavour. Africa is changing faster than any continent has ever changed in human history, and it is facing unprecedented socioeconomic and environmental challenges.

The next few decades will be crucial. We could promote relatively sustainable and equitable development — or end up with an impoverished continent whose iconic natural values and wildlife have been irretrievably lost.

Massive road and rail projects could be Africa’s greatest environmental challenge is republished with permission from The Conversation

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Estimates are that household air pollution kills more than 500,000 people in Africa each year. Through solar energy, people can stop using dirty and extremely polluting fuels like kerosene in their homes. However, with domestic solar energy comes an unintended consequence. When the light bulbs switch on, they can attract disease-carrying bugs.

Estimates are that household air pollution kills more than 500,000 people in Africa each year. Through solar energy, people can stop using dirty and extremely polluting fuels like kerosene in their homes. However, with domestic solar energy comes an unintended consequence. When the light bulbs switch on, they can attract disease-carrying bugs.

Given the health threats of kerosene and other indoor pollutants, a number of initiatives are driving the use of solar power for domestic uses. Organisations associated with the UN Sustainable Energy for All initiative are promoting various programmes.

Donors are moving into this space. One example is the EnergyAfrica campaign, driven by UK’s Department for International Development, or DFID. Its focus is on domestic solar, providing individual householders with systems to power small electrical devices in the home. This mainly involves light bulbs.

The irradiation potential for sunshine to provide this form of clean energy in Africa is substantial. There will undoubtedly be enormous health benefits provided people switch from kerosene and other so-called dirty fuels, instead of adding solar to the mix of energy types they use.

So what’s the problem?

Let us temporarily set aside the potential problems of financing and sustainability for individual householders unused to looking after complete solar systems. There is one glaring issue with providing electrical light into otherwise non-improved residences like mud huts with corrugated iron roofs: flying insects.

Light sources attract many different types of insects. This is either in search of a mate or after taking a meal. Many insects attracted to lights may be harmless, but key species are vectors of disease that affect both humans and animals. These include:

* domestic flies, which carry the bacteria that cause blinding trachoma

* mosquitoes, which carry the parasites that cause malaria, filariasis, dengue

* sandflies, which carry the parasites that cause leishmaniasis

Ironically, low-energy LED light bulbs are the most attractive because they emit more blue light. This is such a major issue that attempts are underway to tune LEDs so that they attract a smaller number of flying insects.

Artificial light + human odours + evolution = trouble

Mosquitoes are not just attracted to light. They also seek out human skin due to the CO2 released by our bodies when we breathe, and are attracted to chemicals released by skin bacteria.

Historically, this may not have been a major issue because mosquitoes tend to feed after midnight. However, mosquito populations may have evolved to seek blood meals earlier in the night due to the selective pressure of bed nets. In addition, the efficiency of transmission from humans to mosquitoes may have increased over recent decades. This again is due to the pressure of control measures against the parasite.

So what might happen if the introduction of artificial light, using low-energy LEDs, combines with other interventions?

Research is still at an early stage. On the one hand, modern housing may reduce the risk of malaria. However, there is already some epidemiological evidence that electrification of community buildings and neighbourhoods may accidentally increase the risk of malaria and other diseases.

Some of these effects may be directly because of lights attracting vectors of disease to places where humans are present. Alternatively, the vectors may not be attracted to light itself but to humans who are undertaking domestic and economic activities near to a source of artificial light. This may be happening even after reducing the harmful effects of particulates from kerosene lamps.

Joining the dots

To find solutions to this double-edged sword we can first turn to the field of Evolutionary Medicine. This considers how evolutionary processes shape our ability to combat disease. Research in this field can be combined with an integrated approach involving sustainable buildings, and sociotechnical research to tackle both energy and health issues simultaneously.

At the heart of that idea is the fact that solar power, when integrated into modern, energy-efficient buildings, can bring electricity to hundreds of millions of people in Africa entirely off the grid who lack access to energy. Many of these people live in areas where vector borne diseases are common.

Such an integrated approach needs careful planning and it will not provide solutions at the same pace as providing small-scale solar systems to individual householders. This is probably why DFID is now behind small-scale solar. The technology has overcome historic barriers of affordability, availability and energy storage and can be installed into otherwise unimproved residences.

DFID is keen to open up the market to businesses in the solar sector. I am keen to ensure that the evidence base keeps on building so that the public, private, and civil sectors are informed about the consequences and impact of their activities.

More generally, forewarned is forearmed, and by conducting research and examining the evidence ahead of wide-scale implementation, we can generate testable hypotheses and combine basic, applied, operational and implementation research to greater effect.

There’s a fly in the ointment of solar-powered LED lighting is republished with permission from The Conversation

The post Disease-carrying Insects Like LED Lights – Who Knew? appeared first on Economy Watch.

Despite numerous concerns surrounding Myanmar’s upcoming election, the most important factor determining its success will be whether the electoral system becomes an arena of genuine competition for political power or remains subject to manipulation for the purposes of regime maintenance. There are five main actors: the military (or Tatmadaw); the Union of Solidarity and Development Party (USDP); the National League for Democracy (NLD); a number of well-organised ethnic parties; and the Buddhist nationalist organisation, Ma Ba Tha.

Despite numerous concerns surrounding Myanmar’s upcoming election, the most important factor determining its success will be whether the electoral system becomes an arena of genuine competition for political power or remains subject to manipulation for the purposes of regime maintenance. There are five main actors: the military (or Tatmadaw); the Union of Solidarity and Development Party (USDP); the National League for Democracy (NLD); a number of well-organised ethnic parties; and the Buddhist nationalist organisation, Ma Ba Tha. Their actions and interactions will determine the outcome of the election and the post-election political environment.

The Tatmadaw has resisted pressures to retrench politically, retaining significant representation in parliament and the executive. This has made it an indispensable actor in the functioning of the polity. While the commander in chief, Senior-General Min Aung Hlaing, has stated that the military will respect the results of the election, he has cautioned those in uniform and their families (a voting bloc of over 1 million people) to vote for the ‘correct candidates’.

Still the military does not seem willing to support overt force or large-scale electoral manipulation tactics to ensure a victory of the ruling USDP, which is run by their retired brethren. The involvement of the security services in the ouster of former USDP chairman Thura Shwe Mann (though it is unclear who exactly ordered his removal) demonstrates the military’s determination to keep the USDP a close surrogate, but not a willingness to preserve their parliamentary majority at all costs.

The USDP has struggled to portray themselves as an autonomous political actor with their own platform. Given Shwe Mann’s removal and that President Thein Sein is not seeking re-election (but has indicated a willingness to stand a second presidential term if elected by parliament), the USDP has no high-profile leader to promote its message during the campaign. The suspected coordination between the USDP leadership, the president’s office, and the military in the removal of Thura Shwe Mann has left the USDP with an ‘electoral handicap’. These actions not only demonstrate the military’s pervasive influence over the party but also harken images back to the junta era where political change was adjudicated via force and intimidation.

Opposition leader Aung San Suu Kyi is running on one simple message to voters: the NLD is the only entity capable of ensuring the state moves towards democracy. While the NLD is hugely popular, winning two-thirds of the available seats to secure an absolute majority in the parliament (to offset the 25 percent allotted to the military) is a tall order. Throughout the campaign, Suu Kyi has been careful not to alienate two powerful entities: the Tatmadaw and the Bamar Buddhist majority. She has avoided criticising those in uniform, promising to focus on national reconciliation rather than seeking ‘revenge’ for past grudges. This is because gaining the levers of power and governance depends not only on an electoral victory but also on accommodation with the military.

The USDP is the primary electoral rival of the NLD in the seat-rich centre of the country, an area overwhelmingly populated by the Bamar. To deflect focus away from their relationship with the military, the USDP has employed identity political strategies targeting the Muslim minority. These have been promoted and supported by Ma Ba Tha, with many of its prominent leaders having officially endorsed the USDP.

Ma Ba Tha has become an influential political organisation that accuses Muslims of threatening Buddhism’s privileged position and affiliation with the state as a whole. Discrimination against Muslims (specifically Rohingya Muslims) has mobilised popular support amongst Bamar Buddhists, intimidating the NLD from speaking out for fear of alienating them. With ethnic minority electorates accounting for approximately one-third of the contested seats, ethnic parties may hold the balance of power if there is no clear majority winner in the election. A number of ethnic parties are undertaking formal arrangements to become a pseudo-parliamentary bloc, which would aggregate their individually small seat shares into a significant voting group.

The upcoming election may be a ‘lose-lose’ affair for all involved. The next parliament will most likely be comprised of members outside the regime, making it increasingly difficult for the military to protect their privileged position and powers. The USDP may end up with a trivial lump of seats, which may question their relevancy as a political entity. The NLD may not be able to win an absolute majority. With Suu Kyi remaining barred from the presidency, the NLD may have to negotiate the election of another presidential candidate (such as Thein Sein or Thura Shwe Mann, whom remains a powerful political figure) acceptable to the military. Ethnic parties may not get the seat numbers desired and have no real influence over the main Bamar-dominated political entities.

However, if Myanmar is moving towards a more competitive system — not a fully functioning democratic polity but one where there exists the real possibility of a power transfer to those outside the ruling regime — one would expected a messy post-electoral landscape. The growing number and diversification of various political actors will most likely result in a confusing array of shifting alliances and short-term agreements that necessitate political compromises from all involved.

Such an environment would erase characterisations of the political arena as a contest between the monolithic groupings of democrats and reformers on one side and the military and their allies on the other. The development of new interests, relationships, and perhaps even identities in this evolving political dynamic may be signalling slow progress towards a system capable of addressing Myanmar’s decades of conflict, economic stagnation, and virulent social and ethnic tensions.

Competition the litmus test for Myanmar’s upcoming election is republished with permission from East Asia Forum

The post Myanmar’s Election Could End Up Just ‘Regime Maintenance’ appeared first on Economy Watch.

The Bank of Japan is engaged in the most aggressive asset purchases, and yet it has largely failed to lift inflation.  National consumer prices for June will report at the end of this week.  The headline rate expects to fall to 0.3% year-over-year from 0.5% in May.  This would be the smallest increase since June 2013. 

The Bank of Japan is engaged in the most aggressive asset purchases, and yet it has largely failed to lift inflation.  National consumer prices for June will report at the end of this week.  The headline rate expects to fall to 0.3% year-over-year from 0.5% in May.  This would be the smallest increase since June 2013. 

The BOJ’s targeted measure excludes fresh food.  This CPI measure expects to fall to zero from 0.1%.  It would be the lowest since May 2013.  BOJ officials seem to have played down the policy implications of such low figures, anticipating a recovery in CPI later this year.  Yet, it news forecasts suggest the 2.0% target is likely to be met in the medium term.  This has reinforced expectations in some quarters that the BOJ will expand its asset purchases at the start of the second half of the fiscal year that begins in October.

We detect a potential shift in the BOJ’s stance.  We have often suggested to officials that they ought to consider adopting the Fed’s preference to target prices excluding both food and energy.  The argument in the US is that the historical record shows that headline inflation moves toward core inflation and not the other way around.

It is not that food and energy are not prices that households must pay, but rather than they are noisy, and Fed officials want to focus on the price signal.  The same appears to hold for Japan. Over the past forty years, spikes in headline inflation, both on the upside and downside, have not been sustained, and headline prices returned to the core rate.

The BOJ published several alternative measures of inflation this month’s report on Recent Economic and Financial Developments, including CPI, excluding all food and energy.  It had not including this in its month report previously.  In addition, it also reported a diffusion index showing the ratio items with increasing and decreasing prices.

The BOJ is trying to distinguish the noise from the signal as well.  The key take away is that many of the alternative measures point to a better price profile that the BOJ’s preferred measure. It may lie behind BOJ Governor Kuroda’s claim that CPI will accelerate “at a rapid pace” later this year. Of course, many central banks anticipate a jump in inflation when H2 15’s sharp drop in oil prices drop out of the year-over-year comparisons.   In addition, reports suggest that the BOJ is lobbying to change the housing cost estimate within CPI.  Rents fell 0.3% in May from a year ago. 

The central bank’s chief economist argues that the estimates of rents are misleading because property prices themselves have fallen over time.  Rents account for almost a sixth of the headline CPI.  We also noted the recent promotion of a specialist in consumer prices to deputy head of the monetary affairs department at the BOJ.  A decision to re-jig the CPI basket is being debated now to prepare for next year’s re-basing of the index that take place every five years.  It would take effect July 2016. 

Next week, the BOJ issues its monetary policy statement and provides updates its target for the monetary base.  We do not expect a change in the JPU80 trillion annual increase.  The IMF recommended last week that that the BOJ should be ready to increase its stimulus and provide stronger guidance to the market because the multilateral lender’s forecast do not show the inflation target in the medium term.

The IMF was also critical of Japan’s fiscal policy.  Optimistic growth assumptions predicate the anticipation of a primary budget surplus in 2020.  Japan’s preliminary Q2 GDP estimate comes on August 17 in Tokyo.  There has been increasing concerns that the economy stagnated or worse in Q2.

The combination of faltering growth and weak price pressures seemingly bolsters the case for additional monetary support from the BOJ.  However, if an expansion of the monetary base of JPY80 trillion a year is insufficient, and this itself represents last year’s increase from JPY60 trillion, there is little reason to expect another modest increase will alter the dynamics.  Since much of this is about the psychology of businesses and investors, perhaps the best hope is that it will alter that psychology by changing the metrics.  It is arguably good economics and good politics.

BOJ: When All Else Fails, Change the Metric is republished with permission from Marc to Market

The post Should the Bank of Japan Consider the U.S. Fed Method? appeared first on Economy Watch.

Overall, the investment climate for EM is likely to remain negative in this strong dollar environment.  A weaker than expected official China PMI over the weekend didn’t help matters. Indeed, most of the Asian PMI readings out already came in weaker than expected, with Korea and Indonesia coming in below 50. Expect further deterioration in EM sentiment ahead.

Overall, the investment climate for EM is likely to remain negative in this strong dollar environment.  A weaker than expected official China PMI over the weekend didn’t help matters. Indeed, most of the Asian PMI readings out already came in weaker than expected, with Korea and Indonesia coming in below 50. Expect further deterioration in EM sentiment ahead.

As we wrote last week, the weaker yen has negative implications for EM exporters, particularly in Asia. Taiwan reported weaker than expected Q3 GDP last week, and we expect softer regional data to continue. While we do not see a hard landing in China, neither is it likely to provide much in the way of positive headlines ahead. We downplay talk of more large-scale stimulus by China.

Brazil reports October trade to start the week. It then reports October FIPE inflation and September IP on Tuesday, with the latter seen at -1.9% y/y vs. -5.4% in August. COPOM minutes from last week’s meeting (when it surprised markets with a 25 bp hike) will be released Thursday. October IPCA inflation will be reported Friday, expected to rise to 6.66% y/y vs. 6.75% in September. Minutes and IPCA print should give markets a better idea of how much tightening to expect ahead.

Mexico reports October PMI on today. Manufacturing seen at 52.5 vs. 52.7 while non-manufacturing seen at 52.0 vs. 51.8. October consumer confidence will be reported Wednesday, expected at 91.2 vs. 91.8 in September. Mexico then reports October CPI Friday, headline expected to rise to 4.30% y/y vs. 4.22% in September. Last Friday, Banco de Mexico kept rates steady at 3%, as expected. The statement was balanced, and suggests it is no hurry to move rates in either direction. It continues to view the current above-target inflation as temporary, and we agree.

Korea reports October CPI on Tuesday, expected to rise to 1.3% y/y vs. 1.1% in September. Core is seen steady at 1.9% y/y. BOK just cut rates 25 bp in October, and is unlikely to cut again so soon at its November 13 meeting. However, continued softness in inflation will give BOK cover to cut again in the coming months. This is especially so in light of renewed yen weakness, which will pressure Korean exporters. October PMI was reported over the weekend at 48.7.

Romanian central bank meets Tuesday and is expected to cut rates 25 bp to 2.75%. Earlier today, September retail sales were reported at 5.8% y/y vs. 5.6% in August. On Friday, Romania reports September industrial sales. Inflation is starting to turn higher, but the central bank is clearly focused on growth right now as it has cut rates two straight months and is in the midst of an extended easing cycle.

Taiwan reports October CPI on Wednesday, expected to rise to 1.2% y/y vs. 0.7% in September. WPI will also be reported, seen at -0.43% y/y vs. -0.67% in September. Taiwan then reports October trade on Friday, with exports seen rising 4.9% y/y and imports seen rising 4.5% y/y. Export orders have been growing nicely, up % y/y in September and pointing to ongoing firmness in exports.

Philippines reports October CPI on Wednesday, expected to rise to 4.2% y/y vs. 4.4% in September. Core is seen easing to 3.3% y/y from 3.4% in September. We believe the central bank’s tightening cycle has ended after the last 25 bp hike in September. Lower commodity prices should start to filter into the CPI, while growth headwinds are growing.

Indonesia reports Q3 GDP Wednesday, with growth expected to remain steady at 5.1% y/y. October CPI inflation accelerated to 4.83% y/y from 4.53% in September. Bank Indonesia appears unlikely to move rates until after fuel subsidies are cut, but we think the central bank will lean more dovish in early 2015. Lower commodity prices should start to filter into the CPI, while growth headwinds are growing.

Thai central bank meets Wednesday and is expected to keep rates steady at 2.0%. Earlier today, Thailand reported October headline CPI at 1.48 vs. 1.6% y/y consensus and 1.75% in September. Core eased to 1.67%. If the economy remains soft, we think the BOT will resume cutting rates in the coming months. Data reported last week remained very weak. Private investment contracted -5% y/y and IP -3.9% y/y. Exports and private consumption showed small y/y gains, but the overall outlook remains soft. BOT has not cut rates since the last 25 bp move back in March, but we think more easing will be seen in the months ahead.

Czech Republic reports September retail sales on Wednesday, expected to rise to 5.3% y/y vs. 2.7% in August. It then reports September trade (CZK14 bln consensus) as well as industrial (4.4% y/y consensus) and construction output on Thursday. The central bank then meets later on Thursday and is expected to keep rates steady at 0.05%. It is possible that it will extend its forward guidance for maintaining the EUR/CZK floor, which it currently says it won’t exit before 2016.

Hungary reports September retail sales on Wednesday, expected to rise to 2.8% y/y vs. 2.5% in August. It then reports September IP on Thursday, expected to rise to 5.9% y/y WDA vs. 2.9% in August. September trade will be reported Friday, seen at EUR800 mln vs. EUR279 mln in August. Even though the central bank signaled an end to the easing cycle, low inflation gives it cover to cut rates again if headwinds to growth get too strong.

Polish central bank meets Wednesday and is expected to cut rates by 25 bp to 1.75%. Governor Belka has said that easing should be completed by year end, which supports our view of a 25 bp cut in both November and December that would result in 100 bp of total easing in Q4. Even though the economy is in decent shape, headwinds are growing stronger and policymakers are being proactive.

Colombia reports October CPI Wednesday. CPI is expected to rise to 3.02% y/y vs. 2.86% in September. This is still near the center of the 2-4% target range. We think the tightening cycle will remain on hold after the 25 bp hike in August. Minutes from the October 30 meeting come out November 14; while the next policy meeting is November 28 (no move then is expected).

Malaysian central bank meets Thursday and is expected to keep rates steady at 3.25%. Malaysia then reports September trade on Friday, with exports seen rising 3.0% y/y and imports seen rising 9.1% y/y. With inflation set to fall and growth starting to slow, we think the tightening cycle is over after the 25 bp hike in July.

Chile reports October CPI and trade on Friday. CPI is expected to rise to 5.0% y/y vs. 4.9% in September, while the trade surplus is seen at $800 mln. We think the easing cycle is on hold after the 25 bp cut in October. Next meeting is November 18; no move then is expected after four straight months of cuts. Central bank minutes and comments out on Monday confirm that the easing cycle is on hold, with the bank saying it has done its best to stimulate and is now starting a period of evaluation of the economic data as it comes in.

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 Less Americans are buying new homes as the prices of those homes become unaffordable, according to new data from the Department of Commerce and the U.S. Bureau of Labor Statistics.

While salaries are beginning to see modest rises of roughly 2% growth on a year-over-year basis, home prices have risen much faster in a shorter period of time, but those home prices are beginning to stagnate as demand falls for homes amidst tight credit and diminishing affordability in the housing market.

New Home Sales Fall

 Less Americans are buying new homes as the prices of those homes become unaffordable, according to new data from the Department of Commerce and the U.S. Bureau of Labor Statistics.

While salaries are beginning to see modest rises of roughly 2% growth on a year-over-year basis, home prices have risen much faster in a shorter period of time, but those home prices are beginning to stagnate as demand falls for homes amidst tight credit and diminishing affordability in the housing market.

New Home Sales Fall

New home sales slowed in July to their lowest pace since winter, when the nation’s GDP contracted 2.9% on extremely cold weather. Despite a warmer climate, new homes are selling slower, with purchases declining 2.4% to an annualized rate of 412,000 units, according to the Commerce Department.

While income gains have remained modest, some analysts expected loosening credit standards to help new home sales. However, some analysts are beginning to weigh whether American consumers are simply too tapped out to afford the loosening credit without an expansion of higher risk subprime loans.

Home supplies have reached a steady equilibrium as the seasonally adjusted estimate of new houses for sale at the end of July was 205,000. This represents a supply of 6.0 months at the current sales rate.

Home Price Growth Decelerates

Home price growth, which was in the double digits in April, has fallen to less than 9% in recent months and is continuing to slow. The S&P/Case-Shiller Home Price Index has shown a steady decline in yearly price growth for every month of 2014, after peaking in December last year.

While home prices have risen in recent years thanks to record low interest rates, steadily growing demand, and lackluster supply, home prices have begun to see growth taper as costs hit the ceiling of what most Americans can afford.

According to the Census Bureau, the median sales price of new houses sold in July 2014 was $269,800; the average sales price was $339,100. Since the median household income in the U.S. is $53,891, the median new home costs 5x the median American’s household income. Historically, that ratio has been almost half as much most of the time.

Low Wage Growth, Price Ceilings

Falling home price growth may be tied to stagnant wage growth in the U.S., which Federal Reserve economists say may be facing deflationary pressures as slack in the labor market continues to linger.

In her speech at Jackson Hole, Janet Yellen said that the Federal Reserve will increasingly look at additional indicators beyond the unemployment rate, such as wages, labor participation, and job openings. According to Yellen, “the labor market has yet to fully recover.”

Real wage growth has fallen from over 3% before the global financial crisis to less than 2% for most of the past five years, although hourly earnings rose 2% on average in July over the prior year.

Wages are not rising more for public employees, either. According to the employment cost index, civilian workers saw 2% pay increases in the 12-month period ending June 2014, identical to private industry workers for the same period. However, benefits rose 2.5% for civilian workers and 3.2% for state and local government workers, compared to 2.4% for private employees.

So-called “blue collar” workers in natural resources, construction, and maintenance occupations saw higher wage growth of 2.4% in the same period, compared to 1.1% growth for service occupations.

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