US initial jobless claims rose 13k to 231k in the week ending November 11, above expectation of 222k. Four week moving average of initial claims rose 8k to 220k.
Continuing claims rose 32k to 1865k in the week ending November 4. That’s the highest level since November 27, 2021. Four-week moving average of continuing claims rose 34.5k to 1823k.
BoE monetary policymaker Megan Greene expressed cautious optimism in a recent interview with Bloomberg TV, acknowledging the positive signs of declining inflation in the UK.
Greene noted that the recent data, which showed a drop in inflation to 4.6% and a weakening in wage growth, was indeed “good news.” However, she voiced concerns about the persistence of inflation, particularly in the services component of CPI. Besides, her apprehension primarily stems from the still elevated wage growth, which she described as “incredibly high.”
She emphasized the challenges posed by this situation, stating, “If we have an economy with fairly low productivity growth and really high wage growth, it’s going to be hard to hit the (2% inflation) target.”
In October, Japan experienced a mixed bag in its trade sector. Exports saw a modest rise of 1.6% yoy to JPY 9167B, marking the second consecutive month of growth, albeit at a slower pace compared to September’s 4.3% yoy increase.
One notable aspect was the continued decline in shipments to China, which fell by -4.0% yoy. This marks the eleventh consecutive month of decline, underscoring the strained trade relations and potentially shifting economic alliances in the region.
Conversely, exports to the US surged by 8.4% yoy, buoyed by robust demand for hybrid vehicles and mining and construction machinery. This surge propelled the value of U.S.-bound shipments to record levels. Similarly, exports to Europe experienced a healthy increase of 8.9% yoy, indicating diversified trade relations.
On the import front, Japan witnessed a significant drop of -12.5% yoy to JPY 9810B. The trade balance resulted in a deficit of JPY -663B.
Looking at seasonally adjusted terms, both exports and imports saw month-on-month declines, with exports decreasing by -1.2% mom to JPY 8800B and imports falling by -0.7% mom to JPY 9262B. Consequently, trade deficit widened from September’s JPY -420B to JPY -462B.
Australia’s labor market displayed stronger-than-anticipated performance in October, with employment figures surpassing expectations. The economy added 55k jobs, well above forecasted growth of 22.8k. This increase was driven by both full-time and part-time employment, which rose by 17k and 37.9k respectively.
Despite this robust job growth, unemployment rate edged up slightly from 3.6% to 3.7%, aligning with market expectations. Participation rate also saw an uptick, rising by 0.2% to 67.0%. Additionally, month-over-month hours worked in the economy increased by 0.5%.
Bjorn Jarvis, ABS head of labour statistics, noted that over the past two months, this equates to an average monthly employment growth of approximately 31k people, slightly lower than average growth of 35k people a month since October 2022.
He also highlighted that annual growth rate in hours worked has slowed to 1.7%, down from around 5% mid-year, and lower than annual employment growth of 3.0%. This slowdown may suggest that “the labour market is starting to slow, following a particularly strong period of growth.”
San Francisco Fed President Mary Daly, in an interview with the Financial Times, acknowledged the “very, very encouraging” signs of falling inflation in this week’s data. However, she cautioned against hastily concluding the rate-raising cycle, emphasizing the importance of a cautious and informed approach.
Daly expressed concern about prematurely ending the cycle, noting the potential risks involved. “We have to be bold enough to say ‘we don’t know’ and bold enough to say ‘we need to take the time to do it right’,” she stated. She warned that a premature halt could lead to a “stop-start” scenario, which could ultimately harm the Fed’s credibility.
In her view, rate cuts are not on the immediate horizon. “Rate cuts are ‘not happening for a while’,” Daly remarked, suggesting a continued commitment to the current restrictive monetary policy direction until there is substantial evidence of a sustainable return to the 2% inflation target.
US PPI for final demand fell -0.5% mom in October, below expectation of 0.1% mom rise. That’s also the largest monthly decline since April 2020. PPI goods fell -1.4% mom while PPI services was unchanged. For the 12 months period, PPI slowed from 2.2% yoy to 1.3% yoy, below expectation of 1.9% yoy.
PPI less foods, energy and trade services rose 0.1% mom, the fifth consecutive rise. For the 12 months period, PPI less goods, energy and trade services rose 2.9% yoy.
US retail sales fell -0.1% mom to USD 705.0B in October, better than expectation of -0.3% mom. Ex-auto sales rose 0.1% mom to USD 570.9B, above expectation of -0.2% mom decline. Ex-gasoline sales fell -0.1% mom to 648.4B. Ex-auto and gasoline sales rose 0.1% mom to USD 514.3B.
Total sales for August through October period were up 3.1% from the same period a year ago.
In European Commission’s Autumn Economic Forecasts, 2023 GDP growth forecast has been lowered to 0.6%, a reduction from the earlier summer forecast of 0.8%. Outlook for 2024 is also tempered, with GDP growth projections scaled back to 1.2%, compared to previous 1.3%. However, there is an anticipation of pickup in growth to 1.6% in 2025.
In terms of inflation, 2023 forecast remains unchanged at 5.6%. However, there was an upward adjustment for 2024, with inflation rate now predicted to be 3.2%, higher than summer’s forecast of 2.9%. The Commission expects inflation to decelerate further in 2025, slowing to 2.2%.
Valdis Dombrovskis, Executive Vice-President of European Commission, expressed a cautiously optimistic view, stating, “Following very weak growth this year, we can expect growth to rebound modestly in 2024, helped by strong labour markets and continued easing of inflation.” He also highlighted the uncertain geopolitical context, particularly noting the recent conflict in the Middle East and its potential implications.
Paolo Gentiloni, Commissioner for Economy, echoed these sentiments. He pointed out that “Strong price pressures and the monetary tightening needed to contain them, as well as weak global demand, have taken their toll on households and businesses.”
Looking ahead, Gentiloni expects “a modest uptick in growth as inflation eases further and the labour market remains resilient.” He also acknowledged the limited immediate economic impact of the Middle East conflict, while cautioning about the heightened geopolitical tensions and the increased uncertainty and risks they pose for the future economic landscape.
Eurozone exports of goods fell -9.3% yoy to EUR 235.8B in September. Imports fell -23.9% yoy. As a result, a EUR 10.0B trade surplus was recorded. Intra-Eurozone trade fell -15.5% yoy to EUR 217.3B.
In seasonally adjusted term, Eurozone goods exports fell -0.5% mom to EUR 234.0B. Imports rose 0.3% mom to 224.8B. Trade surplus narrowed from August’s EUR 11.1B to EUR 9.2B, smaller than expectation of EUR 12.3B. Intra-Eurozone trade fell from August’s 215.8B to EUR 213.9B.
Eurozone industrial production fell -1.1% mom in September, worse than expectation of -0.9% mom. Production of durable consumer goods and non-durable consumer goods fell both by -2.1%, energy by -1.3% and intermediate goods by -0.3%, while production of capital goods grew by 0.3%.
EU industrial production fell -0.9% mom. Among Member States for which data are available, the largest monthly decreases were registered in Belgium (-3.2%), Portugal (-3.0%), Estonia and Ireland (both -2.9%). The highest increases were observed in Croatia (+4.3%), Slovenia (+4.1%) and Hungary (+1.3%).
UK CPI showed a marked slowdown in October, dipping below market expectations. The annual CPI rate decelerated from 6.7% yoy to 4.6% yoy , falling short of the anticipated 4.7% yoy. This decline reflects a broader trend of easing inflationary pressures, as evidenced by a flat monthly CPI rate of 0.0% mom, which was below the forecasted 0.2% mom.
Delving deeper, core CPI, which excludes volatile items such as energy, food, alcohol, and tobacco, mirrored this downtrend. It slowed from an annual rate of 6.1% yoy to 5.7% yoy, again undershooting the expected 5.8% yoy.
A notable aspect of the report was the significant drop in CPI goods annual rate, which plummeted from 6.2% yoy to 2.9% yoy. Meanwhile, services sector also saw a decline, albeit less pronounced, with CPI services annual rate reducing from 6.9% yoy to 6.6% yoy.
The most substantial downward pressure on the annual rates came from housing and household services sector. Notably, CPI annual rate in this category recorded its lowest level since record-keeping began in January 1950. Additionally, food and non-alcoholic beverages sector contributed to the downward trend, marking its lowest annual rate since June 2022.
China’s industrial output and retail sales for October exceeded market expectations. Industrial production rose 4.6% yoy, surpassing forecasted 4.5% yoy, marking an improvement from September’s 4.5% yoy growth. Retail sales recorded a robust 7.6% yoy growth, significantly higher than anticipated 7.0% yoy and showing a considerable improvement from 5.5% yoy increase in September.
However, fixed asset investment experienced slower growth, rising only 2.9% ytd yoy, which was below the expected 3.1%. The real estate sector particularly faced challenges, with investment dropping by -9.3% ytd yoy, a deterioration compared to the previous period through September.
In a separate development, People’s Bank of China maintained the interest rate on CNY 1.45T worth of one-year medium-term lending facility loans at 2.50%, consistent with previous operations. As CNY 850B worth of MLF loans were set to expire this month, this move resulted in a net injection of CNY 600B of fresh funds into the banking system.
The central bank stated that this loan operation aimed to keep the banking system’s liquidity at a reasonably ample level, countering short-term factors such as tax payments and government bond issuances.
Japan’s GDP contracted -0.5% qoq in Q3, starkly underperformed market expectations of -0.1% qoq decline. On annualized basis, the situation appears even more drastic, with the economy shrinking by -2.1%, far exceeding anticipated -0.6% contraction, and being the worst since Q3 2021.
A critical factor in this downturn was a -0.6% decrease in business investment, marking a continuous decline for two consecutive quarters. This reduction was primarily influenced by reduced spending on semiconductor production equipment, reflecting broader challenges in global tech sector.
Additionally, private consumption, a key driver of economic activity, saw a marginal fall of -0.04%. This marks the second successive quarter of decline, with slump in vehicle sales significantly impacting consumer spending.
Chicago Fed President Austan Goolsbee acknowledged yesterday that “progress continues towards 2% inflation target. He highlighted the decline in goods inflation, but points out the critical role of housing inflation in the coming quarters.
Goolsbee emphasized, “With goods inflation already coming down and nonhousing services inflation typically slow to adjust, the key to further progress over the next few quarters will be what happens to housing inflation.”
Separately, Richmond Fed President Thomas Barkin exhibited a more guarded stance. He expresses doubts about a smooth transition to the Fed’s inflation target, underscoring the complexity of the current economic scenario.
Barkin noted, “I’m just not convinced that inflation is on some smooth glide path down to 2%.” He acknowledges the recent decrease in inflation rates but attributes it primarily to the partial reversal of spikes seen during the Covid era, driven by high demand and supply constraints.
Barkin further points out that certain sectors, such as shelter and services, continue to exhibit inflation rates above historical norms.
Richmond Fed President Thomas Barkin has voiced skepticism regarding the trajectory of inflation, even in light of today’s U.S. CPI data showing decline in headline and core readings. In his comments at a event, Barkin remarked, “I’m just not convinced that inflation is on some smooth glide path down to 2%.”
Barkin pointed out that the recent decrease in inflation figures is largely attributable to a partial reversal of the price spikes experienced during Covid-era, which were driven by elevated demand and supply shortages. He highlighted ongoing concerns, stating, “Shelter and shelter inflation remain higher than historic levels, so does services inflation.”
Emphasizing the resilience of businesses in the current economic environment, Barkin noted, “Businesses aren’t going to back down from prices until they have to,” suggesting that a slowdown might be necessary.
“I do see some sort of slowdown,” he added.
BoE Chief Economist Huw Pill emphasized today the readiness of the Bank to raise interest rates further if the situation demands, but also indicated that further rate hikes are not a necessity at the current juncture.
Pill highlighted today’s wage growth data, noting, “We did have this morning the latest official data on pay growth in the UK with pay growing at 7.7%… But actually over the summer pay growth has remained very strong and we certainly wouldn’t see pay growth of that rate as consistent with achieving the 2% inflation target on an ongoing basis.”
BoE is closely monitoring the upcoming October CPI data, anticipating a decline to “around 5%.” However, Pill acknowledges that even this level is significantly higher than the target, remarking, “But nonetheless, 5% is still much too high.”
Pill also expressed concerns about the persistence of inflation, partly attributed to ongoing supply issues. He stressed the importance of maintaining a consistent policy approach, stating, “We need to meet inflation persistence with persistent restrictiveness in policy.”
US CPI slowed from 3.7% yoy to 3.2% yoy in October, below expectation of 3.3% yoy. CPI core (less food and energy) fell from 4.1% yoy to 4.0% yoy, below expectation of being unchanged at 4.1% yoy. That’s the lowest core CPI reading since September 2021. Energy index was down -4.5% yoy. Food index was up 3.3% yoy.
For the month, CPI was flat at 0.0% mom, below expectation of 0.1% mom. CPI core rose 0.2% mom, below expectation of 0.3% mom. Energy index fell -2.5% mom. Food index rose 0.3% mom.
Germany’s ZEW Economic Sentiment soared to 9.8 in November, far surpassing the anticipated 4.9, signaling increasing optimism among financial market experts. However, Current Situation Index barely moved, nudging from -79.9 to -79.8, and falling short of expected -75.5.
Eurozone’s ZEW Economic Sentiment experienced a similar upswing, rising from 2.3 to 13.8, well ahead of the forecast of 6.1. Despite this, Current Situation Index in Eurozone showed a decline, dropping by -9.4 points to -61.8.
Achim Wambach, ZEW President, noted that while current economic conditions are still challenging, there’s growing optimism. He added, “These observations support the impression that the economic development in Germany has bottomed out.”
The increase in economic expectations is supported by a more positive view of the German industrial sector and both domestic and foreign stock markets. Additionally, “inflation and short- and long-term interest rates also appear to have reached turning points in expectations,” he added.
In today’s remarks at a central bank conference in Zurich, SNB Chairman Thomas Jordan warned that “price stability may not yet be ensured.” He pledged that the central bank “will not hesitate to tighten monetary policy further if necessary.”
This statement comes as inflation have dipped and interest rates have risen compared to last year, presenting a challenging environment for policy to balance the risk of tightening too much and too little.
“Given the high uncertainty regarding the economic outlook, there is no clearly mapped-out path for monetary policy in the near future,” he remarked.
With SNB’s next policy meeting scheduled for December 15, market expectations currently lean towards maintaining policy rate at 1.75%.
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US import price fell -0.8% mom in Oct
US import price index fell -0.8% mom in October, larger decline than expectation of -0.3% mom. That’s the first monthly drop since June, and the largest since March.
Prices for import fuel declined -6.3% mom, after advancing 6.3% mom the previous month. The October drop was the first 1-month decrease since May and the largest monthly decline since September 2022.
Nonfuel import prices declined -0.2% mom for the third consecutive month. Prices for nonfuel imports have not recorded a monthly advance since February.
Full US import price release here.