New Zealand good exports rose 37% yoy or NZD 1.6B to NZD 6B in September. Goods imports rose 16% yoy or NZD 1.1B to NZD 7.6B. Monthly trade balance reported a deficit of NZD -1.6B.
Exports to all major trading partners were up, including China (+31% yoy), Australia (+33% yoy), USA (+13% yoy), EU (+21% yoy), and Japan (+42% yoy).
Imports from all major trading partners rose, except EU, including China (+20% yoy), EU (-5.3% yoy), Australia (+11% yoy), USA (+26% yoy), and Japan (+14% yoy).
Japan headline CPI was unchanged at 3.0% yoy in September, below expectation of 3.1% yoy. CPI core (all items ex-fresh food) accelerated from 2.8% yoy to 3.0% yoy, matched expectations. CPI core-core (all items ex-fresh food and energy) accelerated from 1.6% to 1.8% yoy, below expectation of 2.0% yoy.
CPI core has now exceeded BoJ’s target for the 6th straight months, and hit the highest level since 1991 (excluding the effect of the 2014 sales tax hike). CPI core-core was also at the highest level since 2015. Yet, BoJ is seeing inflation as mostly driven by imports rather than domestic price pressures. This could be reflected in the 5.6% yoy rise in goods prices, and the sluggish 0.2% yoy rise in services prices.
Fed Governor Lisa Cook said, “Inflation is too high, it must come down and we will keep at it until the job is done. This likely will require ongoing rate hikes and then keeping policy restrictive for some time.”
“Policy must be based on whether we see inflation actually falling in the data, rather than just in forecasts. Policy should remain focused on restoring price stability, which will also set the foundation for a sustainably strong labor market,” she said.
Philadelphia Fed President Patrick Harker said yesterday, “We are going to keep raising rates for a while. Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year.”
“Sometime next year, we are going to stop hiking rates. At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work,” he said. “It will take a while for the higher cost of capital to work its way through the economy. After that, if we have to, we can tighten further, based on the data.”
US initial jobless claims dropped -12k to 214k in the week ending October 15, lower than expectation of 235k. Four-week moving average of initial claims rose 1k to 212k.
Continuing claims rose 21k to 1385k in the week ending October 8. Four-week moving average of continuing claims rose 2k to 1365k.
BoE Deputy Governor Ben Broadbent said in a speech that firstly, “for as long as it’s in place, the government’s Energy Price Guarantee has the effect of limiting headline inflation and, to that extent, any related strengthening of second-round (and more persistent) effects on domestic inflation.”
Secondly, “by the same token, however, it mitigates the severity of the hit to household incomes and thereby supports domestic demand,” he added. “As the Committee noted last month, this would – all else equal – add to inflation in the medium term.”
“Compared with the forecast we had in August, the MPC has judged that the second effect is likely to outweigh the first,” he said.
But Broadbent added, there is uncertainty about the “nature and duration” of the energy subsidies. “The MPC will take account of any fiscal news in the forthcoming Medium-Term Fiscal Plan, as well as any other news relevant for the medium-term inflation outlook, in its next set of forecasts,” he said.
Japan’s exports rose 28.9% yoy to JPY 8189B in September. Exports to China grew 17.1% yoy while shipments to the US increased 45.2% yoy. Imports rose 45.9% yoy to JPY 10913B. However, the surge in import was unlikely a reflection of domestic demand, but sharp depreciation in Yen’s exchanged rate. Trade deficit came in at JPY -2094B, down from August’s record high of JPY -2817B
In seasonally adjusted term, exports rose 3.2% mom to JPY 8672B. Imports dropped -0.6% mom to JPY 10682B. Trade deficit narrowed to JPY -2010B, slightly smaller than expectation of JPY -2.06T.
Australia employment rose 0.9k in September, below expectation of 25.0k. Full-time employment increased by 13.3k while part0time employment contracted -12.4k.
Unemployment rate was unchanged at 3.5%, matched expectations. Participation rate was unchanged at 66.6%. Monthly hours worked dropped -1m hours to 1853 hours.
“It is important to remember that the 1,000 employed people is a net figure – the difference between two large numbers. While employment growth has slowed in recent months, there are still close to half a million people entering employment each month, and around the same number leaving employment each month,” Bjorn Jarvis, head of labour statistics at the ABS, said.
Chicago Fed President Charles Evans said yesterday, “inflation is just much too high, and so we need to continue on the path that we’ve been indicating — at least that. And I’m hopeful that that will be enough.”
“Continued increases in the funds rate along the lines of our September SEP (Summary of Economic Projections) could lead to a economic outlook where we’re going to see below-trend growth — we’ll be challenged in that regard — we’ll see the unemployment rate go up, but I think that it won’t take off,” Evans said.
“I think if we have to increase the path of the funds rate much more, though, it really does begin to weigh on the economy. I worry that it’s sort of a nonlinear kind of event.”
St. Louis Fed President James Bullard said yesterday that Fed’s goal is to front-load aggressive rate hikes to move to “some meaningfully restrictive level” that would push inflation down.
For November meeting, Bullard said the results “has been more or less priced in to markets” for a 75 basis-point hike, even though he’d prefer to decide at the meting. As for December, didn’t want to “prejudge”.
Then, in 2023, “I think we’ll be closer to the point where we can run what I would call ordinary monetary policy,” he said. “Now you’re at the right level of the policy rate, you’re putting downward pressure on inflation, but you can adjust as the data come in in 2023.”
Minneapolis Fed President Neel Kashkari said yesterday that while headline inflation may have peaked, there is no evidence that core inflation has stopped climbing. So, “I can’t see how I would recommend pausing interest rate increases,” he added.
“My best guess right now is yes, do I think inflation is going to level out over the next few months, the services, the core inflation, and then that would position us some time next year to potentially pause,” he added.
“I’ve seen very little evidence in my region that the labor market is softening,” Kashkari said. “The No. 1 issue I hear from businesses small and large is that they’re struggling to find workers, how they’re having to pay more wages to keep their employees and to attract employees.”
Canada CPI slowed from 7.0% yoy to 6.9% yoy in September, slightly above expectation of 6.8% yoy. Food prices inflation rose to 11.4% yoy, the fastest rate since 1981’s 11.9% yoy. Also, prices for food purchases from stores have been increasing at a faster rate than all-items CPI for 10 consecutive months. Excluding food and energy, CPI accelerated from 5.3% yoy to 5.4% yoy.
CPI median dipped from 4.8% yoy to 4.7% yoy, versus expectation of 4.8% yoy. CPI trimmed was unchanged at 5.2% yoy, above expectation of of 5.1% yoy. CPI common accelerated from 5.7% yoy to 6.0% yoy, above expectation of 5.6% yoy.
Eurozone CPI was finalized at 9.9% yoy in September, up from August’s 9.1% yoy, but revised down from flash reading of 10.0% yoy. CPI core (all items excluding energy, food, alcohol & tobacco) was finalized at 4.8% yoy, up from August’s 4.3% yoy
The highest contribution to the annual Eurozone inflation rate came from energy (+4.19%), followed by food, alcohol & tobacco (+2.47%), services (+1.80%) and non-energy industrial goods (+1.47%).
EU CPI was finalized at 10.9% yoy, up from August’s 10.1% yoy. The lowest annual rates were registered in France (6.2%), Malta (7.4%) and Finland (8.4%). The highest annual rates were recorded in Estonia (24.1%), Lithuania (22.5%) and Latvia (22.0%). Compared with August, annual inflation fell in six Member States, remained stable in one and rose in twenty.
UK CPI rose 0.5% mom in September, above expectation of 0.4% mom. In the 12 months to September, CPI accelerated from 9.9% yoy to 10.1% yoy, above expectation of 10.0% yoy. That’s the highest level since around 1982 based on modelled estimates. CPI core also rose from 6.3% yoy to 6.5% yoy, above expectation of 6.4% yoy.
ONS said: “Rising food prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between August and September 2022. The continued fall in the price of motor fuels made the largest, partially offsetting, downward contribution to the change in the rates.”
Food and non-alcoholic beverage prices accelerated from 13.1% yoy to 14.6% yoy. After 14 consecutive months of acceleration, current rate is estimated to be the highest since 1980.
Also released, RPI came in at 0.7% mom, 12.6% yoy versus expectation of 0.5% mom, 12.4% yoy. PPI input was at 0.4% mom, 20.0% yoy. PPI output was at 0.2% mom, 15.9% yoy. PPI output core was at 0.7% mom, 14.0% yoy.
Australia Westpac leading index six-month annualized growth rate declined from -0.33% to -1.15% in September. It’s now at the weakest level since the pandemic first hit in 2020, and prior to that, since early 2016. The index continued to point to a “material loss in momentum to a below-trend growth pace heading into 2023.”
Westpac added that the signal in broadly in line with forecast that economic growth will slow from 3.4% in 2022 to 1.0% in 2023, with sharp slowdown in consumer spending. It said, “that slowdown is likely to intensify through 2023 as rising interest rates and a softening labour market take their toll.”
On RBA policy, Westpac pointed to minutes of October meeting, which noted, “drawing out policy adjustments would also help to keep public attention focused for a longer period on the Board’s resolve to return inflation to target.” The thinking was in line with Westpac’s forecast that RBA will have a series of 25bps rate hikes in the future months of November, December, February, and March.
BoJ Governor Haruhiko Kuroda told a parliamentary committee that recent depreciation of Yen was sharp and one-sided “This kind of yen weakening makes it difficult for companies to set their business plans and raises uncertainties in their outlook,” he said. “This is negative for our economy and not desirable.”
Separately, board member Seiji Adachi said, “When looking at the global financial and economic environment surrounding Japan, downside risks are building up rapidly… When downside risks are so high, we should be cautious of shifting toward monetary tightening.”
Minneapolis Fed President Neel Kashkari said yesterday, “I’ve said publicly that I could easily see us getting into the mid-4%s early next year.”
“But if we don’t see progress in underlying inflation or core inflation, I don’t see why I would advocate stopping at 4.5%, or 4.75% or something like that,” he added. “We need to see actual progress in core inflation and services inflation and we are not seeing it yet.”
“That number that I offered is predicated on a flattening out of that underlying inflation,” Kashkari said. “If that doesn’t happen, then I don’t see how we can stop.”
USD/JPY is knocked down heavily after edging higher to 149.28. At the time of writing, it’s trading slightly below 149. Apparently, the unexpected excessive volatility is due to intervention by Japan. For now, it’s unsure if 149 is the level Japan would defend, or is it going to be 150. In either case, as USD/JPY looks rather resilient, it’s not a wise choice to sell it to ride on the intervention. It’s an avoid for the moment.
Earlier today, Japanese Finance Minister Shunichi Suzuki said, “We cannot tolerate excessive currency moves driven by speculators. We are closely watching currency moves with a sense of urgency.”
“Generally speaking, there are times when we intervene by making announcements and some other times when we do without it,” Suzuki also noted.
Germany ZEW Economic Sentiment rose slightly from -61.9 to -59.2 in October, above expectation of -66.0. Current Situation Index dropped sharply from -60.5 to -72.2, below expectation of -69.0.
Eurozone ZEW Economic Sentiment improved slightly from -60.7 to -59.7, above expectation of -60.6. Current situation dropped very sharply by -11.7 pts to -70.6. Inflation expectations for Eurozone declined from -23.7 to -35.8.
“The ZEW Indicator of Economic Sentiment rises slightly in October. However, the current economic situation is once again assessed as significantly worse than in the previous month. The probability that real gross domestic product will decline in the course of the next six months has also increased considerably. Overall, the economic outlook has deteriorated again,” said ZEW President Professor Achim Wambach on current expectations.
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Japan Suzuki: We are confronting speculators strictly
Japan stepped up verbal intervention as USD/JPY breaks above 150 level. Finance Minister Shunichi Suzuki warned today, “we are confronting speculators strictly.”
Yet, when asked if Yen was under attack by speculators, Suzuki said, “it’s inappropriate for me to comment on such a question under the current circumstances.”
Regarding BoJ policy, he said, “I’m not in a position to comment anything concrete. We’ll strive to maintain fiscal discipline with a major target of achieving primary budget surplus in fiscal 2025.”