Mon, Oct 25, 2021 @ 13:19 GMT

Bundesbank: German economy to growth significantly weaker in Q4

    Bundesbank said in the monthly report that inflation in Germany “continue to rise before it gradually declines in the coming year.” Industrial products prices continued to increase. Energy prices have risen mainly due to higher oil prices. “On the other hand, the considerably higher spot market prices for natural gas will probably only have an impact on consumer prices after the turn of the year.”

    The economy is expected to “growth significantly weaker” in Q4. Strong momentum in service sector is “likely to subside considerably” too. Manufacturing is likely to “continue to suffer from delivery problems. Output will probably “still fall short of its pre-crisis level of the final quarter of 2019 in Autumn. For 2021, GDP growth is likely to be “significantly less than was expected in the Bundesbank’s June projection.

    Full release here.

    ECB de Cos: High commodity prices have transitory nature, but may persist

      ECB Governing Council member Pablo Hernandez de Cos warned that supply chain problems and rising raw material prices affected the pace of economic recovery negatively. “Recent developments anticipate a significant downward economic outlook revision for 2021.”

      “We’ll keep observing relatively high inflation rates in coming months,” he added. “High commodity prices have transitory nature, though we cannot rule out price hike will persist over coming months.” In particular, “high energy prices may persist through winter as oil and gas storage is relatively low.”

      Germany Ifo dropped to 97.7, sand in the wheels hampering recovery

        Germany Ifo Business Climate dropped slightly to 97.7 in October, down from 98.8, missed expectation of 97.8. Current Assessment dropped to 100.1, down from 100.4, above expectation of 99.3. Expectations index dropped to 95.4, down from 97.3, below expectation of 96.1.

        By sector manufacturing dropped from 20.0 to 17.2. Service dropped from 191. to 16.5. Trade dropped notably from 9.0 to 3.7. Construction rose from 11.1 to 12.9.

        Ifo said: “Supply problems are giving businesses headaches. Capacity utilization in manufacturing is falling. Sand in the wheels of the German economy is hampering recovery.”

        Full release here.

        WTI continues up trend, but overbought condition might limit upside at 88

          Rally in WTI crude oil continues today and hit another 7-year high at 85.26. Upside momentum remains strong as seen in daily MACD. Further rally is expected to 61.8% projection of 33.50 to 77.16 from 61.90 at 88.88. Nevertheless, considering overbought condition in daily RSI, we’d look for topping signal around there to bring pull back. Meanwhile, break of 8.36 support will argue that a short term top is formed and turn WTI into correction first.

          Silver pressing 24.86 resistance, Gold still trying 1800

            Silver hit as high as 24.81 last week but lost momentum ahead of 24.86 near term resistance. For now, further rise will remain mildly in favor as long as 23.55 minor support intact. Sustained break of 24.86 will argue that whole corrective pattern from 30.07 has completed with three waves down to 21.41. In such case, near term outlook will be turned bullish for 28.73/30.07 resistance zone. However, rejection by 24.86 will retain near term bearishness. Break of 23.55 will bring retest of 21.41 low instead.

            Gold breached 1800 handle last week as the rebound from 1721.46 but quickly lost momentum again. Still, further rise is in favor as long as 1760.01 supports holds, to 1833.79 resistance. Firm break there will resume the rally from 1682.60 to 1916.30 key structural resistance next. however, break of 1760.01 will retain near term bearishness and target 1721.46 support instead.

            Fed Powell: Supply constraints and elevated inflation likely to last longer than expected

              Fed Chair Jerome Powell said Fed is “on track” to start tapering the asset purchases. “Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages,” he added. “Of we were to see a risk of inflation moving persistently higher, we would certainly use our tools.”

              Separately, San Francisco Fed President Mary Daly said recent “eye-popping” inflation will subside with the pandemic. The decision on not raising interest rate is appropriate. “Just because we are standing pat, being patient, is not the same as being asleep,” Daly said.

              Canada retail sales rose 2.1% mom in Aug, to fall -1.9% mom in Sep

                Canada retail sales rose 2.1% mom to CAD 57.2B in August, slightly above expectation of 2.0% mom. The gain was led by higher sales at food and beverage stores (+4.8%), gasoline stations (+3.8%), and clothing and clothing accessories stores (+3.9%). Sales increased in 9 of 11 subsectors. Based on preliminary data, sales has decreased -1.9% mom in September.

                Full release here.

                UK PMI composite rose to 56.8, picking up economy pouring fuel on inflation worries

                  UK PMI Manufacturing ticked up to 57.7 in October, from September’s 57.1, above expectation of 55.6. PMI Services rose to 58.0, up from 55.4, above expectation of 54.5. PMI Composite rose to 56.8, up from 54.9, highest in 3 months.

                  Chris Williamson, Chief Business Economist at IHS Markit, said: “The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases. Growth is also being accompanied by an unprecedented rise in inflationary pressures, which will inevitably feed through into higher consumer prices in coming months.

                  “The news comes at a time when the Bank of England is already leaning towards hiking interest rates to safeguard against inflationary expectations becoming entrenched. The record readings of the PMI survey’s price gauges will inevitably pour further fuel on these inflation worries and add to the case for higher interest rates.

                  Full release here.

                  Eurozone PMI composite dropped to 54.7, growth much weaker in Q4

                    Eurozone PMI Manufacturing dropped slightly to 58.5 in October, down from September’s 58.6, above expectation of 57.3. But that’s still the lowest level in 8 months. PMI Services dropped to 54.7, down from 56.4, below expectation of 55.4, and a 6-month low. PMI Composite dropped to 54.3, down from 56.2, a 6-month low.

                    Chris Williamson, Chief Business Economist at IHS Markit said: “A sharp slowdown in October means the eurozone starts the fourth quarter with the weakest growth momentum since April… The ongoing pandemic means supply chain delays remain a major concern, constraining production and driving prices ever higher, both in manufacturing and in the services sector. Average selling prices for goods and services are rising at a rate unprecedented in over two decades, which will inevitably feed through to higher consumer prices in the coming months.

                    “While the overall rate of economic growth remains above the long-run average for now, risks seem tilted to the downside for the near-term as the pandemic continues to disrupt economies and push prices higher. After strong second and third quarter expansions, GDP growth is looking much weaker by comparison in the fourth quarter.”

                    Full release here.

                    Germany PMI composite dropped to 52.0, beginning to plateau

                      Germany PMI Manufacturing dropped slightly to 58.2, down from 58.4, better than expectation of 56.8. That’s still a 9-month low. PMI Services dropped notably to 52.4, down from 56.2, below expectation of 55.2, a 6-month low. PMI Composite dropped to 52.0, down from 55.5, an 8-month low.

                      Phil Smith, Associate Director at IHS Markit said: “October’s flash PMI data point to economic activity in Germany beginning to plateau at the start of the fourth quarter. Growth has slowed to a modest pace, with supply bottlenecks holding back manufacturing production and the rebound in services activity continuing to lose momentum, in part due to supply issues spilling over to the sector.”

                      Full release here.

                      France PMI composite dropped to 54.7, growth profile akin to a K

                        France PMI Manufacturing dropped to 53.3 in October, down from September’s 55.0, below expectation of 54.3. That’s also a 9-month low. PMI Services rose to 56.6, up from 56.2, above expectation of 55.3. PMI Composite dropped slightly to 54.7, down from 55.3, a 6-month low.

                        Joe Hayes, Senior Economist at IHS Markit said: “Responsibility for France’s economic recovery was placed firmly on the shoulders of the service sector in October, as latest PMI data showed manufacturing output falling for the first time since January. The overall rate of expansion slowed to a six-month low as the supply-side issues hurting manufacturers the most offset a faster expansion in services activity. Of the medley of letters that an economic recovery can look like, France’s growth profile is currently akin to a “K”.

                        Full release here.

                        UK retail sales dropped -0.2% mom, -1.3% yoy in Sep

                          UK retail sales dropped -0.2% mom, -1.3% yoy in September, below expectation of 0.7% mom, -0.4% yoy. Ex-fuel sales dropped -0.6% mom, -2.6% yoy, below expectation of 0.2% mom, -1.7% yoy.

                          ONS also noted: “Despite relaxation of COVID-19 restrictions in summer 2021, in-store retail sales remain subdued; the proportion of retail sales online rose to 28.1% in September 2021 from 27.9% in August, substantially higher than the 19.7% in February 2020 before the pandemic.”

                          Full release here.

                          Japan PMI manufacturing rose to 53.0, returned to growth

                            Japan PMI Manufacturing rose to 53.0 in October, up from September’s 51.5, above expectation of 51.6. PMI Services rose to 50.7, up from 47.8. PMI Composite rose to 50.7, up from 47.9.

                            Usamah Bhatti, Economist at IHS Markit, said: “Activity at Japanese private sector businesses returned to expansion territory at the start of the fourth quarter of 2021… Panel members commonly associated the slight recovery to a reduction in COVID-19 cases and looser pandemic restrictions.

                            “Private sector businesses also noted an increase in aggregate new business for the first time since April, assisted by a quicker rise in export orders. That said, firms continued to highlight sustained supply chain pressures and material shortages. As a result, input prices rose at the fastest rate in over 13 years. This contributed to the sharpest rise in output charges since July 2018.”

                            Full release here.

                            Australia PMI composite rose sharply to 52.2, back in expansion

                              Australia PMI Manufacturing rose to 57.3 in October, up from September’s 56.8. PMI Services jumped sharply to 52.0, up from 45.5. PMI Composite rose to 52.2, up from 46.0. All are four-month highs.

                              Jingyi Pan, Economics Associate Director at IHS Markit, said: “Composite PMI indicated that the Australian economy is back in expansion in October as the easing of COVID-19 restrictions and plans for further opening up of the Australian economy restored confidence and rejuvenated economic activity…

                              “Higher demand however translated to greater strains on the supply chain… Meanwhile employment levels rose at a slower rate with reports of constraints when trying to hire staff. These are issues that may persist in the short- to medium- term for firms as they take their time to clear.”

                              Full release here.

                              RBA Lowe: Inflation not to sustain unless feeding through to wages

                                RBA Governor Philip Lowe at Universidad de Chile’s Conference that he didn’t expect the current rise in inflation to sustain, unless it led to higher wages growth.

                                “Is it going to reset expectations about what type of wage growth people should get, or will the spike dissipate and we will go back to the type of labour market outcomes we’ve seen before the pandemic?” Lowe said. “So there is quite a lot of uncertainty around that issue, but we are watching very carefully.”

                                BoE Pill: Nov MPC meeting is finely balanced, live

                                  BoE’s new Chief Economist Huw Pill said UK inflation is likely to rise “close to or even slightly above 5 per cent” early next year. And, “that’s a very uncomfortable place for a central bank with an inflation target of 2 per cent to be.”

                                  As for market expectation of a November rate hike, Pill declined to disclose his stance, and just said it’s “finely balanced”, “November is live”. And he added, “maybe there’s a bit too much excitement in the focus on rates right now”.

                                  “The big picture is, I think, there are reasons that we don’t need the emergency settings of policy that we saw after the intensification of the pandemic,” said Pill. “The settings that we now have are supportive settings. The need for support has diminished, as this bridge has been built and largely traversed.”

                                  Fed Bostic penciled in a rate hike in Q3, maybe early Q4 of 2022

                                    Atlanta Fed Raphael Bostic told CNBC he has “penciled in” a rate increase in “late third, maybe early fourth” quarter of 2022. “Our experience from the pandemic has really frankly surprised to the upside,” he added “I’ve really adjusted my expectations moving forward.”

                                    Bostic expected the supply chain disruptions to “last longer than we expected”. He said, “the labor markets are not going to get to equilibrium as quick as we hoped, but demand was also going to stay high and that combination was going to mean we’re going to have inflationary pressures.” It’s becoming “clearer and clearer” inflation pressure “is going to last into 2022.”

                                    US Philly Fed manufacturing dropped to 23.8, price indicators remained elevated

                                      In the October Philadelphia Fed Manufacturing Business Outlook Survey, the diffusion index for current general activity dropped to 23.8, down from 30.7, below expectation of 26.0.

                                      Looking at some details, current shipments index was essentially unchanged at 30.0. New orders rose 15 pts to 30.8. Employment index rose from 26.3 to 30.7. The index for prices paid rose 3 pts to 70.3. Current prices received index dropped -2 to 51.1. Price indicators remained elevated.

                                      Full release here.

                                      US initial jobless claims dropped to 290k, continued to trend down

                                        US initial jobless claims dropped -6k to 290k in the week ending October 16, better than expectation of 298k. It’s also the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -15k to 320k, lowest since March 14, 2020 too.

                                        Continuing claims dropped -122k to 2481k in the week ending October 9, lowest since march 14, 2020. Four-week moving average of continuing claims dropped -85k to 2656k, lowest since March 21, 2020.

                                        Full release here.

                                        Australia NAB business confidence dropped to -1 in Q3

                                          Australia NAB business confidence dropped from Q2’s 18 to -1 in Q3. Current business conditions dropped from 30 to 13. Conditions for the next 3 months dropped from 35 to 8. Conditions for the next 12 months also dropped from 33 to 19. Capex plans for the next 12 months dropped from 37 to 26. Trading conditions dropped from 36 to 16. Profitability dropped from 30 to 11. Employment dropped from 23 to 11.

                                          Alan Oster, NAB Group Chief Economist, “With lockdowns in place for most of Q3, it’s unsurprising to see both business conditions and confidence take a fairly large hit for the quarter… While conditions deteriorated sharply, they didn’t fall to the depths seen during the first lockdowns in 2020.”

                                          “While these survey results confirm the large hit to activity that took place in Q3, we are optimistic for a strong rebound in activity in Q4 and into 2022 and reopening progresses.”

                                          Full release here.