Fed Daly: Ready to act as we get clearer signal

    San Francisco Fed Bank President Mary Daly urged patience in assess the economic development before acting on interest rates. “Reacting in response to things that aren’t likely to last will move us farther from — not closer to — our goals,” she said.

    “Over the next several quarters, as tapering occurs, we will watch how the economy does and see whether inflation eases and workers come back.”

    “As we get a clearer signal, we will be ready to act accordingly, continuing to provide or remove support as needed to ensure the economy settles at a sustainable place.”

    BoC Schembri: Rate to stay at ELB until excess capacity is absorbed

      BoC Deputy Governor Lawrence Schembri said yesterday, “Our assessment of labour market conditions and underlying capacity and inflationary pressures is now more difficult. Consequently, more uncertainty exists around the timing of when the output gap will close and inflation will return sustainably to our 2-per-cent target.”

      “We’ll keep the policy rate at the effective lower bound [0.25%] until excess capacity is absorbed … that excess capacity includes all the groups of employees that aren’t fully employed at this juncture,” Schembri said in response to a question after the speech.

      “Now of course, one has to take into account that there’s going to be some natural friction in the labour market, people are going to move between jobs, so we’re not saying that there has to be zero unemployment,” he added.

      Bullard: Fed should tack in a more hawkish direction

        St. Louis Fed President James Bullard said Fed should “tack in a more hawkish direction” over the next few meetings. He warned, “if inflation happens to go away we are in great shape for that. If inflation doesn’t go away as quickly as many are currently anticipating it is going to be up to (Fed) to keep inflation under control.”

        He added that if Fed increase the pace of tapering to USD 30B per month, that would open the door for a rate hike at the end of Q1. He has penciled in two hikes for next year and agreed with markets’ assessment. Also, he’s open to the idea of raising interest rate before tapering completes.

        US retail sales rose 1.7% mom in Oct, ex-auto sales up 1.7% mom

          US retail sales rose 1.7% mom in to USD 638.2B in October, above expectation of 1.2% mom. Total sales for the August through October period were up 15.4% from the same period a year ago.

          Ex-auto sales rose 1.7% mom, above expectation of 1.2% mom. Ex-gasoline sales rose 1.5% mom. Ex-auto, ex-gasoline sales rose 1.4% mom.

          Full release here.

          Eurozone GDP grew 2.2% qoq in Q3, EU rose 2.1% qoq

            According to flash estimate, Eurozone GDP grew 2.2% qoq in Q3, 3.7% yoy. Employment grew 0.9% qoq, 2.0% yoy.

            EU GDP grew 2.1% qoq, 3.9% yoy. Employment grew 0.9% qoq, 2.1% yoy.

            Full release here.

            UK unemployment rate dropped to 4.3%, employment rate rose to 75.4%

              UK unemployment rate dropped to 4.3% in the three months to September, down from 4.5%, better than expectation of 4.5%. Employment rate rose 0.4% to 75.4%, “driven by a record high net flow from unemployment to employment”. Payrolled employment rose 160k.

              Wage growth disappointed, however, with average earnings excluding bonus up 4.9% 3moy versus expectation of 6.0%. Average earnings including bonus rose 5.8% 3moy, versus expectation of 7.0%. in October, claimant count dropped -14.9k.

              Full release here.

              EUR/CAD downside breakout on broad Euro weakness

                EUR/CAD’s down trend finally resumed this week, following broad based selloff in Euro, and hit as low as 1.4211 so far. Current fall is part of the down trend from 1.5991. Next target is 100% projection of 1.5783 to 1.4580 from 1.5096 at 1.3893. For now, outlook will stay bearish as long as 1.4661 resistance holds, even in case of recovery.

                Also, it should be noted that 1.4263 key support (2020 low) is now taken out by the cross. Fall from 1.5991 would extend through 1.3782 support before bottoming. Yet, we’re not seeing a strong bearish scenarios for pushing through 1.3019 yet. We’ll see how the downside momentum develops in the medium term.

                RBA Lowe: Still plausible that rate won’t be raised before 2024

                  In a speech, RBA Governor Philip Lowe reiterated, “the latest data and forecasts do not warrant an increase in the cash rate in 2022.” Also, it’s “still plausible that the first increase in the cash rate will not be before 2024” even if underlying inflation hits 2.5%.

                  He said, the central scenario is that underlying inflation will reach “middle of the target by the end of 2023”. That would be the first time in nearly seven years that inflation is at the mid-point. And, “this, by itself, does not warrant an increase in the cash rate.”

                  For rate hike, RBA would like to see inflation “well within the 2–3 per cent range”, and, ” have a reasonable degree of confidence that it will not fall back again”. The “trajectory” is important, “with a slow drift up in underlying inflation having different policy implications to a sharp rise.”

                  Another important consideration will be developments in the labor market. wages growth is used as one of the “guideposts” and “it is likely that wages will need to be growing at 3 point something per cent to sustain inflation around the middle of the target band.”

                  Full speech here.

                  Fed Barkin: It’s helpful to have a few months to evaluate

                    Richmond Fed President Tom Barkin said yesterday that it’s helpful to have “a few more months” to evaluate to see “where reality is in this economy, and if the need to act is there”. He added that “we’re not going to hesitate” to accelerate tapering to get ahead of inflation is needed”.

                    But, “I personally think it’s very helpful for us to have a few more months to evaluate, is inflation going to come back to more normal levels? Is the labor market going to open up as people spend through some of this savings?”

                    US Empire State manufacturing rose to 30.9, employees and price paid surged

                      US Empire State Manufacturing Survey general business conditions jumped to 30.9 in November, up from 19.8, above expectation of 20.2. 43% of respondents reported improved conditions while 12% reported worsened conditions.

                      New orders rose 5 pts to 28.8. Shipment jumped 19 pts to 28.2. Delivery times dropped -5.8 to 38.0. Number of employees jumped 9 pts to 26.0, a record high. Average workweek also jumped 8 pts to 23.1. Price paid rose 4 pts to 83.0. Price paid rose 7 pts to 50.8, a record high.

                      Full release here.

                      ECB Lagarde: Conditions for rate hike very unlikely to be satisfied next year

                        In a European Parliament committee hearing, ECB President Christine Lagarde said, “growth momentum is moderating to some extent owing to supply bottlenecks and the rise in energy prices.” Consumer spending is “solid”, but shortages of materials, equipment and labour are “weighing on manufacturing production, weakening the near-term outlook.” “Although the duration of supply constraints is uncertain, they are likely to persist for several months and gradually ease only during 2022,” she added.

                        Lagarde also reiterated that the upswing in inflation is driven by three primary forces, energy prices, demand outpacing constrained supply, and reversal effect of German VAT cut. “The latter factor will fall out of the inflation calculation from January 2022 but the other two may last longer.” “As a result, we still see inflation moderating in the next year, but it will take longer to decline than originally expected,” she said.

                        On monetary policy, she said the conditions for rate hike are “very unlikely to be satisfied next year”. Intentions on further calibration of bond purchases will be announced in December. But “even after the expected end of the pandemic emergency, it will still be important that monetary policy – including the appropriate calibration of asset purchases – supports the recovery throughout the euro area and the sustainable return of inflation to our target of two per cent.”

                        Full introductory statement here.

                        Eurozone exports rose 10.0% yoy in Sep, imports rose 21.6% yoy

                          Eurozone exports of goods to the rest of the world rose 10.0% yoy to EUR 209.3B in September. Imports rose 21.6% yoy to EUR 202.0B. As a result, Eurozone recorded a EUR 7.3B surplus. Intra-Eurozone trade rose 16.4% yoy to EUR 191.5B.

                          In seasonally adjusted term, Eurozone exports dropped -0.4% mom to EUR 201.4B. Imports rose 1.5% mom to EUR 195.3%. Trade surplus narrowed to EUR 6.1B. Intra-Eurozone trade rose EUR 0.8B to EUR 182.9B.

                          Full release here.

                          China industrial production rose 3.5% yoy in Oct, retail sales up 4.9% yoy

                            China industrial production rose 3.5% yoy in October, above expectation of 3.0% yoy. Retail sales rose 4.9% yoy, versus expectation of 3.8% yoy. Fixed asset investment rose 6.1% ytd yoy, versus expectation of 6.2%.

                            “The national economy was generally stable and maintained the trend of recovery,” the NBS said in a statement. “However, we must be aware that the international environment is still complicated and severe with many unstable and uncertain factors.”

                            BoJ Kuroda: Recovery mechanism maintained, inflation to hit 1% mid 2022

                              In a speech with business leaders, BoJ Governor Haruhiko Kuroda said that CPI is likely to “increase moderately in positive territory for the time being”, reflecting rise in energy prices. Thereafter, “it is projected to increase gradually to about 1 percent as the output gap turns positive around the middle of next year.”

                              He noted that economic recovery in Japan has been “somewhat slower than initially expected”. Nevertheless “the mechanism for economic recovery has been maintained.”

                              Real GDP is expected to recovery to pre-pandemic level in the first half of 2022. Thereafter, “as the resumption of economic activity progresses while public health is being protected, Japan’s economy is expected to follow a growth path that outpaces its potential growth rate, supported by relatively high growth in overseas economies and accommodative financial conditions.”

                              Full speech here.

                              Japan GDP contracted -0.8% qoq, -3.0% annualized in Q3

                                Japan GDP contracted -0.8% qoq in Q3, much worse than expectation of -0.2% qoq. In annualized term, GDP dropped -3.0% qoq, much worse than expectation of -0.8%.

                                Capital expenditure dropped -0.8% qoq, versus expectation of -0.6% qoq. External demand rose 0.1% qoq, versus expectation of 0.0% qoq. Private consumption dropped -1.1% qoq, versus expectation of -0.5% qoq. GDP price index dropped -1.1%, slightly better than expectation of -1.2%.

                                Economy minister Daishiro Yamagiwa said pace of pickup in the economy is weakening and policy support is needed. He also warned of downside risks from the global supply constraints. Prime Minister Fumio Kishida is expected to reveal a stimulus package “worth several tens of trillion yen” later this week on November 19.

                                Eurozone industrial production dropped -0.2% mom in Sep, EU down -0.5% mom

                                  Eurozone industrial production dropped -0.2% mom in September, better than expectation of -0.5% mom. Production of capital goods fell by -0.7%, intermediate goods by -0.2%, while production of energy remained stable, durable consumer goods rose by 0.5% and non-durable consumer goods by 1.0%.

                                  EU industrial production dropped -0.5% mom. Among Member States for which data are available, the largest monthly decreases were registered in Denmark (-5.0%), Czechia (-3.2%) and Austria (-3.0%). The highest increases were observed in Estonia (+5.3%), Lithuania (+4.3%) and Belgium (+3.7%).

                                  Full release here.

                                  New Zealand BusinessNZ manufacturing rose to 54.3, recovery from a large hard hit

                                    New Zealand BusinessNZ Performance of Manufacturing Index rose from 51.6 to 54.3 in October. Looking at some details, production rose from 49.8 to 54.0. Employment dropped from 54.2 to 52.1. New orders dropped from 54.1 to 53.9. Finished stocks rose from 50.2 to 54.9. Deliveries rose from 47.9 to 59.9.

                                    BNZ Senior Economist, Doug Steel stated that “even though October’s reading is above average, we’d classify it more in the realm of some recovery from a large hit rather than an indication of outright strength.”

                                    Full release here.

                                    SNB Maechler: We are still in a territory where the Swiss franc is high

                                      SNB Board member Andrea Maechler said yesterday that “we are still in a territory where the Swiss franc is high.” “The reality is, we continue to have a safe-haven currency,” she said. “Uncertainties remain high, largely because of the COVID crisis which continues to be there.”

                                      “You’ve seen recently there has been quite an appreciation of the Swiss franc,” Maechler said. “Now if you look at the real exchange rate, it’s still higher than 2015. It is something that we do continue to monitor, and we will continue to do so.”

                                      Maechler reiterated that it’s necessary for the central bank to intervene in the markets.

                                      UK NIESR expects 1.1% GDP growth in Q4, as post-Covid bounce nearing its end

                                        NIESR said it expects UK GDP to grow by 1.1% qoq in Q4, including 0.4% mom growth in October.

                                        Rory Macqueen Principal Economist, Macroeconomic Modelling and Forecasting said: The post-Covid bounce seems to be nearing its end, with hospitality returning to normal growth rates in September after a bumper August. Wholesale and retail activity shrank for a fifth consecutive month and gas distribution for the fourth, which may suggest supply constraints or the unwinding of unusually high demand earlier in the year.

                                        “Overall growth is likely to slow further in the fourth quarter but will benefit if public confidence in keeping Covid-19 under control has enabled a return to growth in consumer-facing services sectors.”

                                        Full release here.

                                        EU expect Eurozone inflation to peak at 2.4% this year

                                          In the Autumn Economic Forecast, European Commission upgraded 2021 GDP growth projection to 5.0% (vs Spring’s forecast of 4.3%). Growth is projected to slow to 4.3% in 2022 (vs 4.4), and then 2.4% in 2023.

                                          HICP inflation is projected to peak at 2.4% in 2021 (vs Spring’s 1.7%), then slow to 2.2% in 2022 (vs prior 1.3%) and then slow to 1.4%.

                                          Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “This is no time for complacency: we continue to face uncertainty with this virus and there are some risks to contend with. Not least, we need to address bottlenecks in supply chains, as well as surging energy prices which will affect many households and companies across Europe. We also need to closely monitor inflation and adjust our policies if needed.”

                                          Full release here.