Sat, Mar 25, 2023 @ 10:42 GMT

Fed Mester: We’ll see a very strong second half of the year

    Cleveland Fed President Loretta Mester said in a CNBC interview that “we’ll see a very strong second half of the year”. However, ” we are still far from our policy goals,” referring Fed’s dual mandate.

    The March non-farm payrolls report was a “great” one. But Mester added, “we need more of them coming our way.” “I think we need to be very deliberately patient in our approach to monetary policy.”

    Mester was not concerned with this year’s rise in treasury yields. “I think the higher bond yields are quite understandable in the context of the improvement in the economic outlook. The increase has been an orderly increase,” she said. “So I’m not concerned at this point with the rise in yields. I don’t think there’s anything for the Fed to react to.”

    BoJ stands pat as widely expected, with 7-2 vote

      BoJ left monetary policy unchanged today as widely expected. Short term policy rate is held negative at -0.1%. The central bank will continue with asset purchase at around JPY 80T a year to keep 10 year JGB yield at around 0%. The decision was again made by 7-2 vote. Y. Harada against said allowing long-term yields to move to some extent was too ambiguous. G. Kataoka continued to push for strengthen easing.

      On economic outlook, BoJ said the economy is “likely to continue its moderate expansion”. Domestic demand is likely to follow an uptrend, “with a virtuous cycle from income to spending being maintained in both the corporate and household sectors”. CPI is “likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising”.

      BoJ also maintained the risks include US macroeconomic policies, protectionist moves, emerging markets, Brexit and geopolitical risks.

      Full release here.

      DUP confirms it won’t back May’s Brexit deal

        DUP party leader Arlene Foster tweeted that they won’t back May’s Brexit deal in today’s meaningful vote. DUP said in a statement that “sufficient progress has not be achieved” and May just made “limited progress” with the EU.

        Fed Waller: May need rate above 5.1-5.4% if data continue to be too hot

          Fed Governor Christopher Waller said that “a barrage of data” in February has challenged high view that FOMC was “making progress in moderating economic activity and reducing inflation.”

          “It could be that progress has stalled, or it is possible that the numbers released last month were a blip,” he said.

          “If job creation drops back down to a level consistent with the downward trajectory seen late last year and CPI inflation pulls back significantly from the January numbers and resumes its downward path, then I would endorse raising the target range for the federal funds rate a couple more times, to a projected terminal rate between 5.1 and 5.4 percent,” he said.

          “On the other hand, if those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released,” he added.

          Swiss KOF economic barometer dropped to 96.9 in Jun, subdued outlook in upcoming months

            Swiss KOF Economic Barometer dropped from 97.7 to 96.9 in June, slightly above expectation of 96.8. It’s now below long-term average for the second month in a row. KOF said, “the outlook for the Swiss economy in the upcoming months therefore remains subdued.”

            KOF added: “The downward movement of the barometer is primarily driven by bundles of indicators for foreign demand and manufacturing. Only indicators for the financial and insurance services sector and for the construction sector are at a nearly constant level. However, indicator bundles for private consumption show a slight positive trend.”

            Full release here.

            Eurozone retail sales rose 0.2% mom in May, EU flat

              Eurozone retail sales rose 0.2% mom in May, below expectation of 0.4% mom. Volume of retail trade increased by 1.2% for non-food products, while it decreased by -0.2% for automotive fuels and by -0.3% for food, drinks and tobacco.

              EU retail sales was unchanged for the moment. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Cyprus (+9.0%), Croatia (+1.7%) and Portugal (+1.5%). The largest decreases were observed in Ireland (-6.5%), Finland (-2.8%) and Austria (-2.2%).

              Full release here.

              US initial claims ticked down to 194k

                US initial jobless claims dropped -1k to 194k in the week ending February 11, below expectation of 200k. Four-week moving average of initial claims rose 500 to 189.5k.

                Continuing claims rose 16k to 1696k in the week ending February 4. Four-week moving average of continuing claims rose 10k to 1673k.

                Full release here.

                Japan’s export surged 6.4% yoy in Jan, imports dropped -9.5% yoy

                  Japan’s export rose 6.4% yoy to JPY 5780B in January. By region, exports to China jumped a massive 37.5% yoy, largest annual gain since April 2010. Exports to the US, on the other hand, dropped -4.8% yoy. Imports dropped -9.5% yoy to JPY 6104B. Trade deficit came in at JPY -324B.

                  In seasonally adjusted term, exports rose 4.4% mom to JPY 6362B. Imports rose 6.9% mom to JPY 5969B. Trade surplus narrowed to JPY 393B, below expectation of JPY 480B.

                  Also from Japan, machine orders unexpectedly rose 5.2% mom in December, versus expectation of -6.2% mom decline.


                  RBA Debelle: Strong employment not generating pick-up in wages growth

                    RBA Deputy Governor Guy Debelle said in a speech the increase in labor supply in Australia has meant that “the strong employment outcomes in recent years has not generated the pick-up in wages growth that might otherwise have occurred”. He expected “wages growth to remain largely unchanged at its current level over the next couple of years.”

                    He noted that “dynamics of participation and unemployment flows will have an important bearing on wages growth as well as household income growth”. Also, “the more wages growth is entrenched in the 2’s [2-3 per cent range], the more likely it is that a sustained period of labour market tightness will be necessary to move away from that.”

                    RBA has so far failed to push unemployment down to the 4.5% level, which should generate sustainable wages growth and inflation. Markets are expecting more policy easing from the central bank next year, including possibility of QE.

                    Debelle’s full speech here.

                    SNB hikes 50bps to 100%, cannot rule out more

                      SNB raises the policy rate by 50bps to 1.00% as widely expected, to “countering increased inflation pressure and a further spread of inflation”. The central added that additional rate hikes “cannot be ruled out”. It also maintained the willingness to be “active in the foreign exchange markets as necessary”.

                      In the new conditional inflation forecast based on 1.0% policy rate, inflation forecasts was lowered from 3.0% to 2.9% in 2022, left unchanged at 2.4% in 2023, and raised from 1.7% to 1.8% in 2024. Inflation forecast was indeed raised from Q3 2023 through Q4 2024.

                      The higher inflation forecasts was “attributable to stronger inflationary pressure from abroad and the fact that price increases are spreading across the various categories of goods and services in the consumer price index.”

                      Regarding GDP growth, SNB expects its to be at around 2.0% this year. But weaker overseas demand and higher energy prices are likely to “curb economic activity marked in the coming year”. SNB expects GDP growth to slow to 0.5% in 2023.


                      Full statement here.

                      BoJ Kuroda: We are flexible, innovative when considering measures to take

                        BoJ Governor Haruhiko Kuroda reiterated that policymakers will “closely monitor the impact of COVID-19 and not hesitate to take additional easing measures as necessary”. “The BOJ hasn’t run out of policy tools. We have a lot of policy tools to counter,” he added. “We are flexible, innovative when considering measures to take.”

                        Regarding fiscal policy, Kuroda said, “I don’t think we need a so-called negative income tax or basic income system because we already have a fairly well-established, well-developed, medical insurance and pension system.”

                        US initial claims dropped to 200k, continuing claims dropped to 1.309m

                          US initial jobless claims dropped -11k to 200k in the week ending May 28, slightly below expectation of 205k. Four-week moving average of initial claims dropped -500 to 206.5k.

                          Continuing claims dropped -34k to 1309k in the week ending May 21. That’s the lowest level since December 27, 1969, when it was 1304k. Four-week moving average of continuing claims dropped -19.5k to 1327k, lowest since January 10, 1970, when it was 1310k.

                          Full release here.

                          France PMI composite rose to 52.6, manufacturing still lags

                            France PMI Manufacturing rose to 50.5 in October, up from 50.1 and beat expectation of 50.3. PMI Services also rose to 52.9, up from 51.1, and beat expectation of 51.8. PMI Composite rose notably to 52.6, up from 50.8.

                            Commenting on the Flash PMI data, Eliot Kerr, Economist at IHS Markit said:

                            “Following a slowdown in activity growth during September, the private sector rebounded at the start of the start of the fourth quarter. A recovery in manufacturing output coupled with faster growth in services saw total activity rise solidly.

                            “That said, the rate of expansion in manufacturing continued to notably lag behind that registered in the service sector, extending the trend seen throughout the majority of 2019 so far.

                            “Nonetheless, the data are consistent with the continuation of solid gains in both official economic output and employment heading into the end of the year.”

                            Full release here.

                            US initial jobless claims dropped to 232k

                              US initial jobless claims dropped -5k to 232k in the week ending August 27, below expectation of 250k. Four-week moving average of initial claims dropped -4k to 241.5k.

                              Continuing claims rose 26k to 1438k in the week ending August 20. Four-week moving average of continuing claims rose 4.5k to 1428.5k.

                              Full release here.

                              Germany PMI services finalized at 52.8, scope for further rise in services prices

                                Germany PMI Services was finalized at 52.8 in May, up from April’s 49.9. PMI Composite rose to 56.2, up from April’s 55.8.

                                Phil Smith, Economics Associate Director at IHS Markit said: “Germany’s service sector started to revive in May, buoyed by the partial easing of lockdown measures and a surge in new business as progress in the vaccine rollout helped spur confidence and demand…

                                “The other standout feature of the survey remains the growing cost pressures in the service sector, which have now reached the highest since mid-2008…. When factoring in that many services businesses have been mostly absorbing higher costs up to now and are facing up to the prospect of a rapid release of pent up demand, there is scope for services prices to rise further in the coming months.”

                                Full release here.

                                RBA cut to 0.50% in response to global coronavirus outbreak, maintains easing bias

                                  RBA cut cash rate by -25bps to 0.50% in an act to “support the economy as it responds to the global coronavirus outbreak.” It noted that global growth in H1 will be “lower than earlier expected” due to the coronavirus and it’s “too early to tell how persistent the effects” will be.

                                  For Australian economy, the outbreak overseas is “having a significant effect”, particularly in “education and travel sectors”. The uncertainty is “likely to affect domestic spending too”. Q1 GDP is “likely to be noticeably weaker than earlier expected”. Though, once the coronavirus is contained, Australian economy is “expected to return to an improving trend”.

                                  The outbreak is expected to “delay progress” towards full employment and inflation target. RBA maintains easing bias and “the Board is prepared to ease monetary policy further to support the Australian economy.”

                                  BoJ Kuroda: Premature to discuss specifics of monetary policy framework

                                    BoJ Governor Haruhiko Kuroda told the parliament, “the BOJ is seeking to sustainably and stably achieve its 2% inflation target accompanied by wage growth. Our view is that this will likely take more time.”

                                    “It’s therefore premature to discuss specifics about our monetary policy framework,” he said.

                                    “We’ll maintain our current monetary policy to make it easier for companies to raise wages,” he added.

                                    Australia retail sales dropped -4.2% mom in Dec, Victoria down -7%

                                      Australia retail sales dropped -4.2% mom in December, much worse than expectation of -1.5% mom. Over than year, sales rose 9.4% yoy. Victoria led the falls by state, down -7% following a 22% rise in November, while New South Wales fell -5% as localized restrictions in Sydney impacted turnover. All states and territories, except for the Northern Territory, fell this month.

                                      Full release here.

                                      UK retail sales volume up 0.6% mom in Oct, sales value up 1.8% mom

                                        UK retail sales volumes rose 0.6% mom in October, above expectation of 0.3% mom. Ex-fuel sales volume was up 0.3% mom, below expectation of 0.6% mom.

                                        In the three months period to October, comparing with the previous three months, sales volume was down -2.4% while ex-fuel sales volume was also down -2.4%, continuing the down trend started since summer 2021.

                                        In value term, headline sales was up 1.8% mom while ex-fuel sales was up 1.0% mom. Comparing the three month periods, headline sales value was down -0.7% while ex-fuel sales value was down -0.1%.

                                        Full release here.