Wed, Dec 07, 2022 @ 00:43 GMT

US ADP jobs grew 692k, services doing the heavy lifting

    US ADP employment grew 692k in June, above expectation of 600k. By company size, small businesses added 215k jobs, medium businesses added 236k, large businesses added 240k. By sector, goods-producing jobs grew 68k, service-providing grew 624k.

    “The labor market recovery remains robust, with June closing out a strong second quarter of jobs growth,” said Nela Richardson, chief economist, ADP. “While payrolls are still nearly 7 million short of pre-COVID-19 levels, job gains have totaled about 3 million since the beginning of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country.”

    Full release here.

    France PMI composite dropped to 55.9, another strong month of growth

      France PMI Manufacturing dropped from 58.0 to 57.3 in July, matched expectations. PMI Services dropped from 56.8 to 56.4, below expectation of 57.0. PMI Composite dropped from 56.6 to 55.9.

      Joe Hayes, Senior Economist at IHS Markit said: “Another strong month of growth across France was signalled by the flash PMI figure for August. Despite some of the challenges businesses are facing on the supply side, it’s encouraging to see PMI data consistently signalling robust expansion. Furthermore, given we’re now midway through the third quarter, the survey data up to this point suggest we could see another decent out turn in the corresponding GDP figure.”

      Full release here.

      BoE press conference live stream


        Swiss KOF dropped to 110.6 in Sep, slowdown likely to continue in coming months

          Swiss KOF Economic Barometer dropped from 113.5 to 110.6 in September, slightly above expectation of 110.3. That’s the fourth decline in a row. The index remains above its long-term average, but the slowing in recovery is “likely to continue in the coming months”.

          KOF also said: “The recurring decline is primarily attributable to bundles of indicators concerning foreign demand. Indicators of the manufacturing sector send an additional negative signal, followed by indicators of the economic sector other services. By contrast, indicators from the finance and insurance sector are providing slightly positive impulses.”

          Full release here.

          Japan & US agreed to speed up trade negotiation, but no time frame assigned

            Japan Economy Minister Toshimitsu Motegi said US and Japan agreed to speed up trade negotiations. He noted that after meeting US Trade Representative Robert Lighthizer in Osaka as sideline of G20 leaders summit. Working level meetings will be held starting next month, towards a bilateral trade agrement.

            However, Motegi also said there is no time frame for completing the deal. He said noted “we share understanding of each other’s thinking and stance and where our gap lies. Based on that, we are discussing ways to narrow our differences.”

            Australia employment grew 50k in Dec, unemployment rate dropped to 6.6%

              Australia employment grew 50k in December, or 0.4% to 12.9m, matched expectations. Full time employment rose 35.6k to 8.76m. Part-time employment rose 14.3k to 4.15m. Over the year to December 2020, employment dropped by -0.5% or -63.9k. Unemployment rate dropped to 6.6%, down from 6.8%, better than expectation of 6.7%. Participation rate rose 0.1% to 66.2%.

              Bjorn Jarvis, head of labour statistics at the ABS, said, “Although employment has recovered 90 per cent of the fall from March to May, the recovery in part-time employment has outpaced full-time employment. While part-time employment was higher than March, full-time employment was 1.3 per cent below March.”

              Full release here.

              BoE Pill: There’s a conditionality for forceful policy actions

                BoE Chief Economist Huw Pill told BloombergTV that in yesterday policy decision statement, ” the word ‘forcefully’ – which clearly is the word the market is focused on, you focused on, and has a meaning – it’s also important to see that that was put in the context of ‘if necessary we will act forcefully’, and so there’s a conditionality there.”

                “If we do see greater evidence that the current high level of inflation is becoming embedded in pricing behavior by firms, in wage setting behavior by firms and workers, then that will be the trigger for this more aggressive action,” he added.

                But he also indicated that the statement had “a certain level of flexibility because it had to encompass those different views… we were trying to emphasise is that that flexibility also applies to what the decisions are. I don’t think it’s all about August. We talked about the pace, timing and scale of future decisions.”

                Germany PMI manufacturing finalized at 58.4, false impression distorted by delivery times

                  Germany PMI Manufacturing was finalized at 58.4 in September, down from August’s 62.6. Markit said output and new orders rose at slowest rate in 15 months. Input shortages continued to push up costs, leading to higher output prices. Pace of job creation slowed as growth expectations dipped to 13-month low.

                  Phil Smith, Associate Economics Director at IHS Markit, said:

                  “At 58.4, the latest headline PMI reading gives a false impression as to the manufacturing sector’s current performance, with the suppliers’ delivery times component continuing to distort the picture. Trends in output and new orders are weaker than the headline number suggests.

                  “The unprecedented supply shortages we’ve seen in recent months have been holding back production levels for some time now, and we’re increasingly seeing this disruption feed back up the supply chain and resulting in reduced demand for intermediate goods as orders are either postponed or cancelled. As a result, overall growth in new orders dropped to a 15-month low in September.

                  “At the same time, supply bottlenecks continue to drive up input costs and, in turn, put pressure on manufacturers to raise prices, which is acting as another headwind to growth. The rate of input price inflation looks like it might have peaked but is still running close to the fastest in the survey’s history, leading to near-record numbers of goods producers raising prices.

                  “Manufacturers’ optimism towards the outlook is steadily ebbing away, down in September to its lowest for 13 months, with many firms concerned that supply shortages will persist into next year.”

                  Full release here.

                  UK CBI: Investment down, stockpiling up, threat of a no-deal ever present, viable Brexit deal desperately need

                    UK CBI trends total orders dropped to -10 in May, down from -5 and missed expectation of -5. 23% of manufacturers reported total orders books above normal. 32% said they were below normal. The -10 balance was the worst since October 2016, but stayed broadly in line with long-run average of -13.

                    Anna Leach, CBI Deputy Chief Economist, said: “With investment down, stockpiling up, and the threat of a no-deal ever present, we desperately need parliament to thrash out a viable deal in the national interest. Where the cross-party talks failed, Parliament must succeed, or continued economic paralysis will see us hurtle ever closer to disaster.”

                    Full release here.

                    ECB de Guindos: It’s medical question first and foremost

                      Vice President Luis de Guindos said yesterday that “substantial monetary support” is needed for the economy “for some time to come. He added, “even if recovery is successful, there is still a lot of uncertainty.” Pace of inflation will “slow down again” next year as a number of one-off factors wane, such as the temporary VAT cut in Germany last year.

                      He also said that when to end the PEPP is a “medical question first and foremost”. He added, “it depends on whether the vaccination campaigns are successful in combating the Delta variant and whether new, more resistant variants appear.”

                      UK PM May: It’s imperative to bring forward Brexit deal to receive royal assent by summer recess

                        UK Prime Minister Theresa May’s spokesman said the Cabinet has agreed today to continue negotiations with Labour regarding the Brexit deal. He noted that “Ministers involved in the negotiations set out details of the compromises which the government was prepared to consider in order to consider an agreement which would allow the UK to leave the EU with a deal as soon as possible.”

                        Also, “Cabinet agreed to continue discussions with Labour to see what was possible. However it was agreed that it is imperative to bring forward the Withdrawal Agreement Bill in time for it to receive royal assent by the summer parliamentary recess.”

                        Fed Williams: It’s a slowdown that we need, not a recession

                          New York Fed President John Williams told CNBC today, “A recession is not my base case right now. I think the economy is strong. Clearly financial conditions have tightened and I’m expecting growth to slow this year quite a bit relative to what we had last year.”

                          “But that’s not a recession,” he noted. “It’s a slowdown that we need to see in the economy to really reduce the inflationary pressures that we have and bring inflation down.”

                          On interest rate, Williams said, “we’re far from where we need to be”. Rate can rise from current 1.50-1.75% to 3-3.5%. “My own baseline projection is we do need to get into somewhat restrictive territory next year given the high inflation, the need to bring inflation down and really to achieve our goals,” he said. “But that projection is about a year from now. Of course, we need to be data dependent.”

                          Eurozone PMI manufacturing finalized at 61.4 in Aug, another month of buoyant production

                            Eurozone PMI Manufacturing was finalized at 61.4 in August, down from July’s 62.8. Markit said output and new orders sub-indices fell further from survey highs in March. Inflationary pressures eased, but remained substantial.

                            Looking at the member states, readings remained generally strong: Netherlands (65.8), Ireland (62.8), Germany (62.6), Austria (61.8), Italy (60.9), Spain (59.5), Greece (59.3), France (57.5).

                            Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturers reported another month of buoyant production in August, continuing the growth spurt into its fourteenth successive month. The overriding issue was again a lack of components, however, with suppliers either unable to produce enough parts or are facing a lack of shipping capacity to meet logistics demand.

                            “These supply issues were the primary cause of a shortfall of manufacturing production relative to orders of a magnitude not previously recorded by the survey, surpassing the 24-year record deficit seen in July.”

                            Full release here.

                            Fed Kashkari: Let’s not overdo policy normalization

                              Minneapolis Fed President Neel Kashkari said yesterday that it’s “appropriate” to start normalizing policy. However, he cautioned “let’s not overdo it”. “If we raise rates really aggressively, we run the risk of slamming the brakes on the economy, putting the economy into recession, which would then — we’d be crashing back down into this low inflation environment,” he warned.

                              Kashkari also revealed that he and his family had COVID earlier this year, and “a lot of families are experiencing what we just experienced.” He added “this will be a while” before people can be comfortably living with the coronavirus.

                              Bundesbank Weidmann: ECB not striving for either lower or higher inflation

                                Bundesbank President Jens Weidmann said ECB is “”not striving for either lower or higher rates” of inflation with the new symmetric target. He added, the 2% medium term inflation goal is a “clear and easily understandable objective,” and that “temporary deviations from the target in either direction can occur.”

                                Separately, Governing Council member Olli Rehn said the “new inflation goal is unambiguous.” Clearly, the “medium-term core inflation forecast of 1.4% below new aim.”

                                Another Governing Council member Francois Villeroy de Galhau said ECB will still need to analyze the meaning of a “temporary” overshoot of inflation. “We didn’t discuss any duration, we didn’t discuss any numbers. It’s all about the context,” he said. “In monetary policy, you have to combine the direction with judgment. We set the direction very clearly.”

                                Fed Barkin: Recession is obviously a risk in bringing inflation down

                                  Richmond Fed President Thomas Barkin said, “we’re committed to returning inflation to our 2% target and we’ll do what it takes to get there. I’d expect inflation to bounce around on the way back to our target.” He didn’t expect inflation to “come down immediately”.

                                  “A recession is obviously a risk in the process,” Barkin said. But, “it doesn’t have to be like a 2008 recession, it doesn’t have to be calamitous. We’re out of balance today…returning to normal might actually mean products on shelves, cars on lots and restaurants fully staffed.”

                                  RBNZ hikes by 50bps, rate projected to peak at 3.9%

                                    RBNZ raised the Official Cash Rate by 50bps to 2.00% as widely expected. The central bank now projects OCR to peak at 3.9% in Q2 of 2023, before moving down slightly starting from Q3 2024.

                                    In the statement, RBNZ said: “The Committee viewed the projected path of the OCR as consistent with achieving its primary inflation and employment objectives without causing unnecessary instability in output, interest rates and the exchange rate. Once aggregate supply and demand are more in balance, the OCR can then return to a lower, more neutral, level.”

                                    Also in the new forecasts, GDP would grow 5.4% in 2022, then slow to 3.2% in 2023, 1.3% in 2024, and 1.2% in 2025. CPI would average 6.9% in 2022, then slow to 4.4% in 2023, 2.5% in 2024, and 2.0% in 2025. Unemployment rate is projected to be at 3.2% in 2022, then gradually climb to 3.8% in 2023, 4.4% in 2024, and 4.7% in 2025.

                                    Full statement here.

                                    And Monetary policy statement here.

                                    UK Hunt: Attorney general is the key to get Brexit deal through parliament

                                      UK Foreign Minister Jeremy Hunt said the attorney general holds the key on getting the Brexit deal through the parliament.

                                      He said that “We can get this deal through parliament, if we can have a deal where the attorney general can change his advice to parliament. That is going to be key to unlocking it”.

                                      And, “with vision and statesmanship on both sides, this can be done and I am hopeful it will be.”

                                      EU Juncker reiterates no re-negotiation, UK May to request short Brexit delay

                                        European Commission President Jean-Claude Juncker reiterated the EU’s stance on Brexit with Germany’s Deutschlandfunk radio. He said “there will be no re-negotiations, no new negotiations, no additional guarantees in addition to those already given”. He added “we have intensively moved towards Britain, there can be no more.”

                                        Juncker also hinted at another EU summit next week and said “my view this morning at quarter past 8 is that we will not get this through this week and we will have to meet again next week”.

                                        Separately, both BBC and Sky reported that UK Prime Minister Theresa May will request only a short delay to Brexit in her letter to European Council President Donald Tusk today. But the actual length will only be confirmed when the letter is published.

                                        Education Secretary Damian Hinds also said “I don’t see how a long delay gives certainty. Actually we’ve had long time already… People are a bit tired of waiting for parliament to get our act together and get the deal passed… Unless and until a deal is finalized, there remains the prospect of the risk of no deal.”

                                        US ISM services rose to 66.7 in Oct, corresponds to 6.1% annualized GDP growth

                                          US ISM Services PMI rose to 66.7 in October, up from 61.9, well above expectation of 62.0. Business activity/production rose from 62.3 to 69.8. New orders rose from 63.5 to 69.7. Employment dropped from 53.0 to 51.6. Supplier delivers rose from 68.8 to 75.5. Prices rose from 77.5 to 82.9.

                                          ISM said: “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for October (66.7 percent) corresponds to a 6.1-percent increase in real gross domestic product (GDP) on an annualized basis.”

                                          Full release here.