Fri, Jun 02, 2023 @ 21:31 GMT

US initial jobless claims dropped 10k to 204k

    US initial jobless claims dropped -10k to 204k in the week ending January 11, better than expectation of 220k. Four-week moving average of initial claims dropped -7.75k to 216.25k.

    Continuing claims dropped -37k to 1.767m in the week ending January 4. Four-week moving average of continuing claims rose 10.5k to 1.756m.

    Full release here.

    FOMC Minutes: A substantial majority judged slowing rate hikes soon appropriate

      The minutes of FOMC November 1-2 meeting noted, the considerations that would influence the pace of future rate hikes include “the cumulative tightening of monetary policy to date, the lags between monetary policy actions and the behavior of economic activity and inflation, and economic and financial developments”.

      “A number of participants” observed that, as monetary policy approached a stance that was “sufficiently restrictive”, it would become appropriate to slow the pace of rates increase.

      Also, “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate”.

      Full minutes here.

      NZ goods exports rose 11% yoy in Dec, imports rose 1.8% yoy

        New Zealand goods exports rose 11% yoy or NZD 640m to NZD 6.7B in December. Goods imports rose 1.8% yoy or NZD 125m to NZD 7.2B. Monthly trade deficit narrowed to NZD -475m, comparing to November’s NZD -2180m and expectation of NZD -1750m.

        The US leads monthly expect rise, up 40% yoy, while exports to all trade partners were up, including China (up NZD 4.2m), Australia (up 17% yoy), EU up (9.8% yoy), and Japan (up 14% yoy).

        The US also leads monthly import rise up 80% yoy. Others were mixed with China down -11% yoy, EU up 3.8% yoy, Australia up 7.0% yoy and Japan up 3.4% yoy.

        Full release here.

        ECB Vujcic: We should persevere if core inflation persists

          ECB Governing Council member Boris Vujcic told Bloomberg TV yesterday, “as long as core (inflation) persists at the levels we’re talking about and this is significantly higher than our rates are and significantly higher than where are target is, we should persevere.”

          The markets have been raising their bets on higher interest rates and are betting tightening extending into 2024. Vujcic said, “I think this repricing in a way is what we did during our last projections, where we projected basically higher inflation for longer, core inflation which turns out to be stickier than most people probably expected.”

          “Probably markets are now repricing and saying ‘OK, we might see higher rates for maybe longer,'” he said.

          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.

            China Caixin PMI manufacturing rose to 51.9, price pressures to limit policy choices

              China’s official NBS PMI Manufacturing dropped to 51.1 in April, down form 51.9, below expectation of 51.4. NBS PMI Non-Manufacturing dropped to 54.9, down from 56.3, below expectation of 52.6. “Some surveyed companies report that problems such as chip shortages, problems in international logistics, a shortage of containers, and rising freight rates are still severe,” NBS statistician Zhao Qinghe said.

              Caixin PMI Manufacturing rose to 51.9, up from 50.6, above expectation of 50.9. Wang Zhe, Senior Economist at Caixin Insight Group said: “Policymakers have expressed concerns about rising commodity prices on several occasions and urged adjusting raw material markets and easing businesses’ cost pressure. In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery.”

              China’s manufacturing PMI contracts for first time this year

                Released over the weekend, China’s official PMI Manufacturing declined from 51.9 in March to 49.2 in April, falling short of expectation of 51.4. This drop also brought the reading below the 50-mark, signaling the first contraction in manufacturing activity this year.

                A significant contributor to the decline in the headline indicator was the new orders sub-index, which dipped to 48.8 from 53.6, suggesting a decrease in market demand. Additionally, new export orders decreased to 47.6 from 50.4, reaching a three-month low.

                Senior NBS statistician Zhao Qinghe attributed the contraction in April to a lack of market demand and the high-base effect resulting from the rapid manufacturing recovery in the first quarter. The chemical fiber, ferrous metal mining, and processing sectors have experienced slowed production due to weak market demand, while the special equipment and electrical and mechanical equipment sectors continue to expand, according to a separate NBS statement.

                PMI Services index also fell, dropping from 58.2 to 56.4, below the expected 57.0, but it remains the second-highest reading this year. The composite PMI, encompassing both manufacturing and non-manufacturing activity, declined to 54.4 from 57.0.

                RBA SoMP: Faster inflation slowdown in 2023, but not after

                  In the quarterly Statement on Monetary Policy, RBA reiterated that “some further tightening of monetary policy may be required” to ensure that inflation returns to target in a “reasonable timeframe”. But that will depend upon “how the economy and inflation evolve.”

                  The new economic projections show both headline and trimmed mean inflation slowing more rapidly in 2023. However, both measures are only expected to reach the top of target range by mid-2025. Additionally, the central bank downgraded its GDP growth forecasts for 2023 and predicts a higher unemployment rate. The evolving economic landscape will be key in determining the RBA’s future policy moves.

                  Year-average GDP growth forecast:

                  • 2023 at 1.75% (revised down from 2.25%).
                  • 2024 at 1.50% (unchanged).

                  Unemployment rate forecast:

                  • Dec 2023 at 4.00% (revised up from 3.75%).
                  • Dec 2024 at 4.50% (revised up from 4.25%).

                  Headline CPI forecast:

                  • Dec 2023 at 4.50% (revised down from 4.75%).
                  • Dec 2024 at 3.25% (unchanged).
                  • Jun 2025 at 3.00% (unchanged).

                  Trimmed mean CPI forecast:

                  • Dec 2023 at 4.00% (revised down from 4.25%).
                  • Dec 2024 at 3.00% (unchanged).
                  • Jun 2025 at 3.00% (unchanged).

                  Full RBA SoMP here

                  BoJ Kuroda: Consumption to strengthen, external demand remains solid

                    In the post meeting press conference, BoJ Governor Haruhiko Kuroda said the recent slump in consumption was “in a way unexpected”. But he’s still optimistic on consumption outlook. He added that the decline was not because households lacked income, but more due to the pandemic keeping them from boosting spending. He added, “as the pandemic subsided, consumption is expected to strengthen.”

                    Kuroda also said he expected “external demand to remain solid” and there is no need to project a “clear slowdown” in US and China growth. He added that actual economic indicators, consumption and output were growing very steadily in the US. The woes of Evergrande is see as “purely” and individual company’s issue, and that of the real estate sector.

                    BoE Pill: We’ve had a series of transitory inflation shocks one after the other

                      In an interview on the “Beyond Unprecedented” podcast produced by Columbia University’s law school, BoE Chief Economist Huw Pill reiterated the central bank’s official forecast, stating that some factors maintaining high inflation are likely to recede in the upcoming months and that inflation could fall below the 2% target in the next few years.

                      Discussing the continuous inflationary shocks faced by the UK, Pill said, “We’ve had a series of inflation shocks that just come one after the other.” He added, “Each of those shocks was in itself transitory, but they just were timed in a way that inflation never dissipated.”

                      Pill emphasized the need for UK citizens to accept being worse off and to refrain from trying to maintain their real spending power by driving up prices through higher wages or passing on energy costs to customers. Pill observed, “What we’re facing now is that reluctance to accept that, yes, we’re all worse off and have to take our share.”

                      He also highlighted the UK’s status as a major net importer of natural gas and the resulting challenges, noting, “The UK, which is a big net importer of natural gas, is facing a situation that the price of what you’re buying from the rest of the world has gone up a lot, relative to the price of what you’re selling to the rest of the world, which is mainly services in the case of the UK.”

                      Pill concluded, “If what you’re buying has gone up a lot relative to what you’re selling, you’re going to be worse off.”

                      German EM Habeck: We have broken the inflation trend

                        German Economy Minister Robert Habeck told Bundestag that inflation will remain high at the beginning of this year. But, “we have broken the inflation trend.”

                        According to the government’s annual economic report published yesterday, inflation is projected to be at 6% in 2023, revised down by prior forecast of 7%. The economy is projected to growth 0.2% this year, much better than autumn forecast of -0.4% contraction.

                        Habeck also noted that in 2024, inflation will be lower than in 2023 and growth will be higher.

                        Australia AiG services dropped to contraction at 48

                          Australia AiG Performance of Services Index dropped sharply by -5.3 pts to 48.0 in September, back in contraction. Looking at some details, sales tumbled by -10.1 to 41.8. Employment edged down by -0.6 to 52.6. New orders dropped -7.1 to 50.2. Input prices rose 4.7 to 73.4. Selling prices dropped -2.9 to 58.3. Average wages dropped -1.7 to 65.9.

                          Innes Willox, Chief Executive of Ai Group, said: “The increasingly uncertain economic environment is dragging on service industries. The sector has fallen into contraction in September, and all services activity indicators have worsened in the last month. Low consumer and business confidence – following repeated interest rate rises and persistent inflation – were major factors in this decline. The indicators for sales, new orders, and selling prices all fell, while input prices continued their upward march adding to inflationary pressures.

                          Full release here.

                          Japan’s exports grow at slowest pace since Feb 2021 despite setting record high for Apr

                            Japan’s exports grew by a modest 2.6% yoy to JPY 8288B in April. Although this represented the lowest growth in exports since February 2021, it still marked the largest export figure for April on record.

                            A closer examination of the data reveals a shift in trading dynamics. Exports to China fell by -2.9% yoy, marking the fifth consecutive month of decline. The decrease was driven by downturns in shipments of cars, car parts, and steel. Similarly, exports to Asia overall declined by -6.6% yoy, continuing a contraction trend for the fourth month in a row.

                            However, things looked rosier elsewhere. Exports to the US and EU showed robust growth, rising by 10.5% yoy and 11.7% yoy respectively. This uptick was led by a rebound in exports of cars and car parts, which have seen easing supply constraints.

                            Contrasting with export trends, imports fell by -2.3% yoy to JPY 8721B, the first annual decline witnessed in 27 months. This decrease was largely attributed to a slump in imports of crude oil and liquefied natural gas. Consequently, Japan recorded a trade deficit of JPY -432B for the 21st month running.

                            In seasonally adjusted term, the situation presents a slightly different picture. Exports rose by 2.5% mom to JPY 8259B, while imports inched up by 0.1% mom to JPY 9276B. In light of this, trade deficit narrowed to JPY -1017B.

                            Japan PMI services composite finalized at 47.9, but firms optimist on eventual end to pandemic

                              Japan PMI Services was finalized at 47.8 in September, up from August’s 42.9. PMI Composite was finalized at 47.9, up from August’s 45.5. Markit said contractions in output and new business eased. Employment rose at quickest pace since April. Business optimism also strengthened to three-month high.

                              Usamah Bhatti, Economist at IHS Markit, said: “Overall private sector activity saw a sustained, albeit softer decline in September, led by a slower decline in the larger service sector. At the same time, manufacturing output and new orders were both in decline for the first time since late-2020.

                              “Businesses in the Japanese private sector also noted the strongest cost pressures for 13 years, as supply chain disruption continued to dampen domestic and global activity. Price rises were notably sharp for raw materials, staff and fuel. Regardless of this, firms were optimistic that an eventual end to the pandemic would occur within the coming 12 months, and provide a broad-based boost to demand and activity. As a result, IHS Markit expects the economy to grow 2.5% in 2021.”

                              Full release here.

                              NASDAQ closed lower after comments from Fed hawks

                                US stocks closed lower overnight as traders turned cautious, watching the development in Afghanistan and upcoming speech of Fed chair Jerome Powell at the Jackson Hole Symposium. A few Fed officials expressed their support for tapering asset purchases, somewhat talking down the impact of the spread of Delta. Yet, we’d note that those are known hawks already. Doves might come out today telling another story while Powell would likely sound non-committal. The overall Jackson Hole event would likely leave the market with nothing new on the net.

                                NASDAQ apparently faced some resistance from 61.8% projection of 10822.57 to 14175.11 from 13002.53 at 15074.39, and 15k psychological level. While it’s now in a retreat, there is no sign of reversal, at least before covering the gap made at weekly open. Nevertheless, it might still take some time to build the base to power through 15k at a later stage.

                                BoJ Kuroda: Inflation will eventually reach 2% target, but not before 2023

                                  BoJ Governor Haruhiko Kuroda reiterated in an online seminar, “Japan’s economy will recover as the impact of COVID-19 wane due to further progress in vaccinations.”

                                  “We expect that inflation rate will steadily go up and eventually reach 2% target, although not before 2023,” he said.

                                  He also pledged, “if necessary, we will further relax our monetary policy”.

                                  Fed Bostic: No need to rush to neutral interest rate

                                    Atlanta Fed President Fed Bostic said that one more rate hike this year remains his model projection, provided that the economy growths by 2.5%.

                                    However, he emphasized “it’s important that we don’t go too fast and act in a non-prudent way that lines up inadvertently restricting the economy and weakening the economy.”

                                    Also he noted nervousness among business has “informed my view of how we should think about it. It’s made me feel I don’t need to rush to get us into neutral, we can take our time to get to that point.”

                                    New Zealand BNZ manufacturing dropped to 53.4, employment and new orders plunged

                                      New Zealand BusinessNZ Performance of Manufacturing dropped sharply to 53.4 in February, down -4.6 pts from 58.0. Looking at some details, production dropped from 59.3 to 57.3. Employment dropped from 56.1 to 49.8. New orders tumbled from 62.8 to 56.2.

                                      “Despite the PMI remaining in expansion, the proportion of those outlining negative comments stood at 54%, compared with 46% in January.  Given the second recent partial lockdown, it remains to be seen what impact this will have on the sector over the next few months,” said BusinessNZ’s executive director for manufacturing Catherine Beard.

                                      BNZ Senior Economist, Craig Ebert said that “supply issues were to the fore from respondents’ comments to February’s PMI survey.  Of those citing negative factors, supply rather than demand problems dominated, with frequent references to supply chains, shipping, freight, costs, and difficulties in finding suitable staff.”

                                      Full release here.

                                      ECB Knot: We’re not in even half-time yet in inflation fight

                                        ECB GoverningCouncil member Klaas Knot said on Sunday, “we will take a significant interest step again in December,” adding that next hike would either be 50bps or 75bps.

                                        He said, “we are not in even half-time yet” in the fight against inflation. “We are still returning interest rates towards their neutral level, for which we will also need the December meeting.”

                                        “From 2023 we will play the second half, with smaller interest rate steps and by shrinking our balance sheet,” he said. “Then we will be in the zone where we will effectively cool down the economy, which is necessary to bring inflation down from 10% to 2% in the next 18 to 24 months.”