Fri, Sep 30, 2022 @ 07:06 GMT

UK BRC shop price reported another record increase

    UK BRC shop price index accelerated from 5.1% yoy to 5.7% yoy in August, another record increase since the index began in 2005. Food inflation surged from 9.3% yoy to 10.6% yoy. Non-food inflation also rose from 2.9% yoy to 3.3% yoy.

    Helen Dickinson, Chief Executive, British Retail Consortium: “Retailers are battling huge cost pressures from the weak pound, rising energy bills and global commodity prices, high transport costs, a tight labour market and the cumulative burden of government-imposed costs.”

    Mike Watkins, Head of Retailer and Business Insight, NielsenIQ: “NielsenIQ data shows that 76% of consumers are saying they expect to be moderately or severely affected by the cost-of-living crisis over the next 3 months, up from 57% in the summer. ”

    Full release here.

    Fed Harker: Shelter inflation and food particularly alarming

      Philadelphia Fed President Patrick Harker said in an article, “inflation is far too high across most goods and services in our economy. But I find shelter inflation, along with food inflation, particularly alarming…. We must do everything we can to get shelter inflation under control.”

      “Monetary policy has a role to play here, and the Federal Reserve is working to stabilize inflation and put the economy on a firmer footing for the long haul,” he said. “But getting shelter inflation under control will require action not just by the Fed, but also by federal, state, and local governments.”

      Full article here.

      Fed Kashkari: We are moving at an appropriately aggressive pace

        Minneapolis Fed Bank President Neel Kashkari said yesterday, “We are moving very aggressively. There’s a lot of tightening in the pipeline. We are committed to restoring price stability but we also recognize given these lags there is a risk of overdoing it.”

        “We are committed to restoring price stability, but we also recognize, given these lags, there is the risk of overdoing it on the front end, and so I think we are moving at an appropriately aggressive pace,” he said.

        “The economy is sending us a lot of mixed signals right now,” Kashkari said. “We need to keep tightening policy until we see some compelling evidence that core inflation is actually having peaked and is on its way down,”

        “And then I think we need to sit there and we need to pause and wait and let the tightening work its way through the economy to see at that point, have we done enough?”

        US consumer confidence rose to 108.0, second month of improvement

          US Conference Board Consumer Confidence rose from 103.2 to 108.0 in September, above expectation of 104.5. Present Situation index rose from 145.3 to 149.6. Expectations Index also rose from 75.8 to 90.3.

          “Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages, and declining gas prices,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

          “The Present Situation Index rose again, after declining from April through July. The Expectations Index also improved from summer lows, but recession risks nonetheless persist. Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year.”

          Full release here.

          BoE Pill: Recent significant fiscal news require a significant monetary policy response

            BoE chief economist Huw Pill said at a conference, “We have all seen recent significant fiscal news in the past few days. That has had significant market consequences as well as significant implications for the macro outlook…

            “It’s hard not to draw the conclusion that all this will require a significant monetary policy response,” he added.

            US durable goods orders dropped -0.2% mom in Aug, ex-transport orders up 0.2% mom

              US durable goods orders dropped -0.2% mom to USD 272.7B in August, slightly worse than expectation of -0.1% mom. Ex-transport orders rose 0.2% mom, below expectation of 0.3% mom. Ex-defend orders dropped sharply by-0.9% mom. Transportation equipment dropped -1.1% mom to USD 92.0B.

              Full release here.

              Fed Evans agrees to get to the peak funds rate by March

                Chicago Federal Reserve President Charles Evans told CNBC, “There are lags in monetary policy and we have moved expeditiously. We have done three 75 basis point increases in a row and there is a talk of more to get to that 4.25% to 4.5% by the end of the year, you’re not leaving much time to sort of look at each monthly release. ”

                “I still believe that our consensus, the median forecasts, are to get to the peak funds rate by March — assuming there are no further adverse shocks. And if things get better, we could perhaps do less, but I think we are headed for that peak funds rate,” Evans said.

                “That offers a path for employment, you know, stabilizing at something that still is not a recession, but there could be shocks, there could be other difficulties,” he added.

                World Bank cut China growth forecasts to 2.8% in 2022

                  For 2022, the World Bank downgraded China’s growth forecasts sharply from 5.0% (April’s) to just 2.8%. On the other hand, ASEAN-5 growth forecasts was upgraded from 4.9% to 5.4%. East Asia & Pacific (excluding China) growth was upgraded from 4.8% to 5.3%. However, East Asia & Pacific as a whole was down graded from 5.0% to 3.2%,

                  The World Bank said in the release: “Growth in much of East Asia and the Pacific has been driven by recovery in domestic demand, enabled by a relaxation of COVID-related restrictions, and growth in exports. China, which constitutes around 86% of the region’s output, uses targeted public health measures to contain outbreaks of the virus, inhibiting economic activity.”

                  Full release here.

                  Selloff in Yuan is still in force, with USD/CNH approaching 2020 high at 7.1961. There is so far no clear support for the Yuan at 7 psychological level. Break of 7.1961 will mark the highest level for the pair, lowest for offshore Yuan, since 2008. Technically, USD/CNH might top only after hitting 100% projection of 6.3057 to 6.8372 from 6.7159 at 7.2474.

                  RBNZ Orr said tightening cycle very mature, AUD/NZD topping soon?

                    RBNZ Governor Adrian Orr today, “We believe we still have some work to do, but the good news is because we’ve done so much already, the tightening cycle is very mature, it’s well advanced.”

                    There’s s “a little bit more to do before we can drop to our normal happy place, which is to watch, worry and wait for signs of inflation up or down,” he said.

                    AUD/NZD’s rally picks up some momentum recently on expectations that RBA is catching up with RBNZ on tightening. However, the cross is now pressing medium term channel resistance, and in proximity to 61.8% projection of 1.0314 to 1.1168 from 1.0987 at 1.1515. Overbought condition could finally limit upside. Break of 1.1303 will argue that it has turned into a corrective phase.

                    Nevertheless, firm break of 1.1515 could prompt further upside acceleration to 100% projection at 1.1841.

                    SNB Maechler: More signs that price increases are spreading

                      SNB board member Andrea Maechler said yesterday, “We have tightened monetary policy and raised interest rates to send a clear signal that we will do everything to bring down inflation over time.”

                      “There are ever more signs that price increases are spreading to goods and services which have not been affected so far,” she said. “We are acting to make sure that inflation does not become entrenched.”

                      On the question of further rate hike, she said, “I never speak of interest rate expectations. I can only say what the market expects, and it expects the SNB and other central banks to further increase their rates.”

                      Fed Mester: Monetary policy needs to be in a restrictive stance

                        Cleveland Fed President Loretta Mester said yesterday, “when there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about.”

                        “Further increases in our policy rate will be needed,” Mester said. “In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time.”

                        “There will be some pain and bumps along the way as the growth in output and employment slow and the unemployment rate moves up,” Mester said. “But the current persistent high inflation is also very painful for many households and businesses. “

                        Fed Bostic: UK growth plan adds uncertainty to the economy

                          Atlanta Fed President Raphael Bostic said market reaction to UK government’s new growth plan, with sharp volatility in Sterling, was a “real concern”. There’s “a fear that the new actions will add uncertainty to the economy.”

                          The key question will be what does this mean for ultimately weakening the European economy, which is an important consideration for how the U.S. economy is going to perform,” he added.

                          But for now, Bostic gave no indication on how Fed could respond to the development in the UK. “The more important thing is that we need to get inflation under control,” he said. “Until that happens, we’re going to see I think a lot of volatility in the marketplace in all directions.”

                          BoE to assess the government’s growth plan at “next scheduled meeting”

                            BoE Governor Andrew Bailey said in a statement that it’s “monitoring developments in financial markets very closely in light of the significant repricing of financial assets.

                            He pointed to the UK government’s Growth Plan announced on Friday and he “welcome the Government’s commitment to sustainable economic growth”.

                            The MPC will make a full assessment “at its next scheduled meeting” of the impact of the plan on demand and inflation, and the fall in Sterling, and “act” accordingly.

                            Full statement here.

                            Fed Collins: A more modest slowdown is achievable

                              Boston Fed President Susan Collins said, “I do anticipate that accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate.” But she added that “the goal of a more modest slowdown, while challenging, is achievable.”

                              “A significant economic or geopolitical event could push our economy into a recession as policy tightens further,” she warned. “Moreover, calibrating policy in these circumstances will be complicated by the fact that some effects of monetary policy work with a lag.”

                              ECB Lagarde expects to raise interest rates further over next several meetings

                                In the hearing of a European Parliament committee, ECB President Christine Lagarde said, “most measures of longer-term inflation expectations currently stand at around two per cent. However, signs of recent above-target revisions to some indicators warrant continued monitoring.”

                                “The risks to the inflation outlook are primarily on the upside, mainly reflecting the possibility of further major disruptions in energy supplies,” she said. “While these risk factors are the same for growth, their effect would be the opposite: they would increase inflation but reduce growth.”

                                “We expect to raise interest rates further over the next several meetings to dampen demand and guard against the risk of a persistent upward shift in inflation expectations… Our future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach,” she said.

                                Full remarks here.

                                Germany Ifo dropped to 84.3, slipping into recession

                                  Germany Ifo Business Climate dropped from 88.6 to 84.3 in September, below expectation of 87.1. That’s the lowest level since May 2020. Current Assessment index dropped form 97.5 to 94.5, below expectation of 96.0. Expectations index dropped from 80.3 to 75.2, below expectation of 78.6.

                                  Ifo said: “Companies assessed their current business as clearly worse. Pessimism regarding the coming months has grown decidedly; in retail, expectations have fallen to a record low. The German economy is slipping into recession.”

                                  By sector, manufacturing dropped from -6.8 to -14.2. Services dropped from 1.4 to -8.9. Trade dropped from -25.8 to -32.3. Construction dropped from -14.8 to -21.6.

                                  Full release here.

                                  ECB de Guindos sees significant slowdown in Q3 and Q4

                                    ECB Vice President Luis de Guindos said in a conference today, “we are seeing that in the third and fourth quarters there is a significant slowdown and we may find ourselves with growth rates close to zero.” He also noted that inflation in becoming increasingly broad and further rate hike will depend on incoming data.

                                    Separately, Governing Council member Boris Vujcic said this months’ 75bps hike was “the right way to go”. “Inflation, if it’s persistently strong, has to be the clearly dominant goal,” he added. “Paying much attention to lower growth now, at the expense of fighting inflation, is often luring. But letting inflation become entrenched always has a higher cost than a temporary decline in GDP.”

                                    BoJ Kuroda: It’s highly likely for economic recovery to continue

                                      BoJ Governor Haruhiko Kuroda said today that rapid currency moves were undesirable as they would have a negative impact on the economy. He added that intervention to address exchange volatility was the appropriate move.

                                      Also, he pledged in a speech that BoJ will “continue with monetary easing so as to firmly support Japan’s economy from wage increases.”

                                      Kuroda also noted, it’s “highly likely” for the economy to continue recovering following three factors. The first is improvement in exports, production, and business fixed investment. The second factor is solid private consumption. he third factor is that, with the government relaxing entry restrictions, inbound tourism demand is expected to recover. But he also pointed out risks from COVID-19, and developments in overseas economic activity and prices.

                                      Japan FM Suzuki: Will take action against speculations on Yen if needed

                                        Japanese Finance Minister Shunichi Suzuki reiterated that the government is “strongly concerned” about one-sided, rapid yen moves.

                                        “We took appropriate action against excessive volatility driven by speculators. The intervention has had a certain effect,” he said, referring to last week’s intervention to support Yen. “There is no change in our stance that we will take (further) action if needed.”

                                        “Governor Kuroda expressed Thursday in his remarks his strong concerns about the rapid depreciation of the yen. We have a shared view on this with the BOJ,” Suzuki added.

                                        Former top currency diplomat Naoyuki Shinohara, however, said, “it’s unlikely Japan will continue intervening to defend a certain line, such as 145 yen to the dollar… It’s impossible to reverse the market’s broad trend with intervention alone.” Shinohara oversaw Japan’s currency policy during the global financial crisis in 2008.

                                        Japan PMI manufacturing dipped to 51.0, services rose to 51.9

                                          Japan PMI Manufacturing dropped slightly from 51.5 to 51.0 in September, below expectation of 51.1. That’s the lowest reading since January 2021. Manufacturing Output Index dropped from 49.2 to 48.9. PMI Services, on the other hand, rose from 49.5 to 51.9. PMI Composite rose from 49.4 to 50.9.

                                          Joe Hayes, Senior Economist at S&P Global Market Intelligence, said: “Business are reporting concerns around the economic outlook amid steep cost pressures and the rising likelihood of a global economic downturn. The remarkable weakness we’ve seen in the year-to-date in the yen continues to push up price pressures, with companies struggling to fully pass on these higher costs burdens to clients. Subsequently business confidence slumped to a 13-month low”.

                                          Full release here.