Japan industrial production rose 2.7% mom in August, much better than expectation of -0.2% decline. That’s also the third consecutive month of growth. The Ministry of Economy, Trade and Industry expects production to rise further by 2.9% mom in September and then 3.2% mom in October.
Retail sales rose 4.1% yoy in August, well above expectation of 2.8% yoy. Unemployment rate dropped from 2.6% to 2.5%, matched expectations.
San Francisco Fed President Mary Daly said yesterday she’s “quite comfortable” with the economic projections that interest rate will rise to 4-4.5% by the end of this year, and 4.5-5% next.
“It’s going to take restrictive policy for a duration of time to get clear and convincing evidence that inflation is getting back to 2% — so from my mind, that’s at least through next year,” she added.
“If inflation continues to print very high and we get no easing of inflation and only modest easing of labor markets, then that’s basically an economy that’s still got a lot of momentum, and inflation is still too high — we’re going to have to keep moving up because we are going to understand that the terminal rate isn’t as close as it would be,” she said.
BoE Chief Economist Huw Pill said in a speech, “on the basis of the fiscal easing announced last week, the macroeconomic policy environment looks set to rebalance. Taken in conjunction with the macroeconomic impact of ensuing market developments, it is hard to avoid the conclusion that the fiscal easing announced last week will prompt a significant and necessary monetary policy response in November.”
The MPC forecasts will be the “vehicle” for making ” necessarily comprehensive assessment” on recent developments. The assessments will “embody recent evidence of weakness in economic activity, as well as the impact of the Government’s Energy Price Guarantee on headline inflation and wage and price setting behaviour.” They will factor in “the evolution of international commodity prices, not least developments in wholesale natural gas markets” and “impact of the Government’s Growth Plan and other fiscal announcements in detail.”
As for the gilt interventions announced by BoE this week, Pill emphasized it’s a “temporary and targeted financial stability operation”. It was “not a monetary policy operation”.
Cleveland Fed President Loretta Mester told CNBC she didn’t see a case for slowing down tightening right now. She said, “We can have that conversation (about a pause) but we’re still not even in restrictive territory on the funds rate.”
“I probably am a little bit above that median path because I see more persistence in the inflation process,” Mester added. Getting above a 4% fed funds rate is important to helping to lower inflation, she said.
Separately, St. Louis Fed President James Bullard said, “If you look at the dots, it does look like the committee is expecting a fair amount of additional moves this year. I think that that was digested by markets and does seem to be the right interpretation.”
US initial jobless claims dropped -16k to 193k in the week ending September 24, smaller than expectation of 213k. Four-week moving average of initial claims dropped -9k to 207.
Continuing claims dropped -29k to 1347k in the week ending September 17. Four-week moving average of continuing claims dropped -22.5k to 1381k.
Canada GDP grew 0.1% mom in July, better than expectation of -0.1% mom contraction. Goods-producing industries grew 0.5% mom while Services-producing industrial contracted -0.1% mom. 11 of 20 industrial sectors increased.
Advance information indicates that real GDP was essentially unchanged in August. Increases in retail and wholesale trade, as well as in agriculture, forestry, fishing, and hunting were offset by decreases in manufacturing and oil and gas extraction.
BoE Governor Deputy Governor Dave Ramdsen reiterated in a speech that the target gilt purchases announced this week, after severe repricing of assets, are “strictly time limited until 14 October”.
“They are intended to tackle a specific problem in the long-dated government bond market,” he added. “The purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided.
Eurozone Economic Sentiment Indicator dropped from 97.3 to 93.7 in September. Employment Expectation Indicator dropped from 107.9 to 106.7. Economic Uncertainty Indicator rose from 25.4 to 29.3.
Eurozone Industrial confidence dropped from 1.0 to -0.4. Services confidence dropped from 8.1 to 4.9. Consumer confidence dropped from -25.0 to -28.8. Retail trade confidence dropped from -6.5 to -8.4. Construction confidence dropped from 3.4 to 1.6.
EU ESI dropped from 96.1 to 92.6. Amongst the largest EU economies, the ESI fell markedly in Germany (-4.8), the Netherlands (-3.7), Italy (-3.7), France (-3.2), Poland (-2.4) and, to a lesser extent, Spain (-1.0).
ECB Governing Council member Gediminas Simkus said he choice for the next rate hike is 75, adding that “a couple of options may be on the table but 50 is the minimum.” He indicated that ECB should target “as soon as possible” on reducing its balance sheet.
At the same event another Governing Council member Madis Muller said “inflation calls for significant rate hikes,” but it’s “too early to say how much in basis points.”
Also Governing Count member Mario Council said, “Right now frontloading other debates may in my opinion have a destabilizing effect that we really need to avoid. We have a path towards normalization of monetary policy and that’s the focus right now.”
New Zealand ANZ Business Confidence rose from -47.8 to -36.7 in September. Own Activity Outlook rose from -4.0 to -1.8. investment intentions rose from -2.0 to 1.8. Employment intentions rose from 3.4 to 5.9. Pricing intentions rose from 68.0 to 70.1. Cost expectations dropped from 90.9 to 89.8. inflation expectations eased from 6.13 % to 5.98%.
ANZ said: “It’s fair to say that demand has not yet rolled over as feared as the Reserve Bank has raised interest rates. But insofar as the RBNZ can just keep on going until they see the cooling in demand they need to tame inflation, that’s likely to be a temporary reprieve, if not an outright double-edged sword for firms that have considerable debt.”
“Inflation pressures are easing, but painfully slowly. It’s not enough for the RBNZ to see inflation pressures top out and ever so gradually fall. They will be concerned about the chance that wage and price-setting behaviour will change in structural ways that make bringing inflation down more difficult. We expect that the RBNZ will need to deliver a policy rate closer to 5% than 4% to get on top of inflation pressures.”
In its first monthly release, Australia CPI rose 6.8% yoy in June, accelerated to 7.0% yoy in July, and slowed to 6.8% yoy in August
Monthly CPI excluding fruit, vegetables and fuel rose 5.5% yoy in June, accelerated to 6.1% yoy in July, then 6.2% yoy in August.
David Gruen, Australian Statistician, said: ” The slight fall in the annual inflation rate from July to August was mainly due to a decrease in prices for Automotive fuel. This saw the annual movement for Automotive fuel fall from 43.3 per cent in June to 15.0 per cent in August.”
Chicago Fed President Charles Evans said while interest at 3-3.25% is restrictive, ” with inflation as high as it is, and getting inflation under control being job one, it’s not nearly restrictive enough.”
“The risks continue to be high about more persistent inflation, and we just really need to get inflation in check,” Evans said.
Evans added that he expects interest rate to reach top by March.
Atlanta President Fed Raphael Bostic said yesterday, “the lack of progress thus far has me thinking much more now that we have to get to a moderately restrictive stance. And for me, that is in the 4.25% to 4.5% range for our policy. My preference is that we get there by year end.”
Bostic said that his expects another 75bps rate hike in November, followed by 50bps in December. But he added that “I don’t think it’ll be appropriate for us to continue to tighten and increase your rates until inflation gets to 2%. That will be guaranteeing that we’ve gone too far and we’ll take the economy into a negative space.”
“I’m still in the place of not really thinking that a recession is a foregone conclusion as we battle this,” he said. “So we can have some weakening, but I don’t think it, at this point, will take us to the historical recessionary experience.”
US goods exports dropped -0.9% mom to USD 179.8B in August. Goods imports dropped -1.7% mom to USD 267.1B. Trade deficit came in at US D-87.3B, comparing with July’s USD -90.2B.
Wholesale inventories rose 1.3% mom to USD 913.1B. Retail sales rose 1.4% mom to USD 741B.0B.
ECB Governing Council member Robert Holzmann said “50 may be the minimum” rate hike at next meeting in October. He added, “could it be 100? It could but I don’t see the necessity now to go as fast. I think 75 would be a good guess.”
Holzmann also noted that ECB is still “some way” from neutral interest rate. He said lifting deposit rate from current 0.75% to 2.50% would definitely take it beyond neutral.
Regarding quantitative tightening, he said it’s part of the normalization process, and will be discussed at a non-monetary-policy meeting next week in Cyprus.
BoE announced today to carry out temporary purchases of long-dated UK government bonds, to “restore orderly market conditions”. It warned that the significant repricing of UK and global financial assets “has become more significant in the past day”, particularly affecting long-dated government debt. Continuing or worsening dysfunction would be a “material risk” to financial stability.
The purchases will be carried out on “whatever scale is necessary” to effect this outcome. However, they will be “strictly time limited” with auctions taking place from today until October 14.
BoE also reiterated that a full assessment of the government’s mini budget will be done at its “next scheduled meeting”. BoE “will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit.”
GBP/USD was lifted briefly after the announcement, and turned south quickly.
ECB President Christine Lagarde said in a conference today, “we have to return inflation to 2% in the medium term, and we will do what we have to do, which is to continue hiking interest rates in the next several meetings.”
“Our primary goal is not to create a recession. Our primary objective is price stability and we have to deliver on that. If we were not delivering, it would hurt the economy far more,” she said, adding that the “first destination” of rate hikes will be to reach neutral rate.
Separately, Governing Council member Peter Kazimir indicated that ECB may need to hike again by 75bps next month as inflation remains unacceptably high.
Germany Gfk Consumer Sentiment for October dropped from -36.5 to -42.5, below expectation of -38.8. That’s also a new record low. In September, economic expectations dropped from -47.6 to -21.9, lowest since 2009. Income expectations dropped from -45.3 to -67.7, a record low since 1991. Propensity to buy dropped from -15.7 to -19.5, lowest since 2008.
“The current very high inflation rates of almost eight percent are leading to large real income losses among consumers and thus to significantly reduced purchasing power,” explains Rolf Bürkl, GfK consumer expert.
“Many households are currently forced to spend significantly more money on energy or to set money aside for significantly higher heating bills. Accordingly, they need to cut back on other expenses, such as new purchases. This is sending consumer sentiment plummeting to a new record low.”
Australia retail sales turnover rose 0.6% mom to AUD 34.88B in August, slightly above expectation of 0.5% mom. That’s the eighth consecutive monthly increase.
Ben Dorber, head of retail statistics at the ABS, said: “This month’s rise was driven by the combined increase in food related industries, with cafes, restaurants and takeaway food services up 1.3 per cent and food retailing up 1.1 per cent.”
“While households continue to spend, non-food industry results were mixed and only contributed a small amount to the total rise in retail turnover.”
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2025 All rights reserved.
China PMI manufacturing rose to 50.1, but Caixin PMI manufacturing dropped to 48.1
China’s official PMI Manufacturing rose from 49.4 to 50.1 in September, above expectation of 49.2. PMI Non-Manufacturing dropped from 52.6 to 50.6, below expectation of 52.0.
Senior NBS statistician Zhao Qinghe said, “In September, with a series of stimulus packages continuing to take effect, coupled with the impact of hot weather receding, the manufacturing boom has rebounded. The PMI returned to the expansionary range… [The non-manufacturing index] remained above the threshold, with the overall expansion of the non-manufacturing sector decelerating.”
On the other hand, Caixin PMI Manufacturing dropped from 49.5 to 48.1, below expectation of 49.9. Caixin said production fell for the first time in four months amid quicker dropped in sales. Firms cut back on purchasing activity and inventories. Selling prices fell at quickest rate since December 2015.