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ECB Lagarde press conference live stream
US retail sales dropped -0.2%, ex-auto sales rose 0.1%, both missed expectations
In April, US headline retail sales dropped -0.2%, missed expectation of 0.2% mom rise. Ex-auto sales rose merely 0.1% mom, much lower than expectation of 0.7% mom.
Empires State manufacturing index rose to 17.8 in May, up from 10.1 and beat expectation 8.0.
Fed’s Kugler expects rate cut this year amid cooling demand
Fed Governor Adriana Kugler said overnight that if the disinflation process and labor market conditions evolve in line with her current expectations, a policy rate reduction within the year could be warranted.
“With demand growth cooling, given the backdrop of solid supply, my baseline expectation is that further disinflation can be accomplished without a significant rise in unemployment,” Kugler stated
“If disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate,” she remarked.
BoJ Kuroda: Economy growing moderately despite some weakness in exports and output
BoJ Governor Haruhiko Kuroda reiterated his view that the economy is “growing moderately” even though policymakers were “seeing some weakness in exports and output”. He said today in France that capital expenditure remained “very firm” and the global economy was still sustaining moderate growth despite various risks.
He added, “the board will debate policy this month based on this view”. But he also emphasized we will swiftly consider additional monetary easing steps if the economy loses momentum for hitting our inflation target.”
ECB Knot: There is very good reason to expect robust recovery in H2
ECB Governing Council member, Dutch central bank chief Klaas Knot, said “there is very good reason to expect a robust recovery in the second half of the year.” And, “if the economy develops according to our baseline, we will see better inflation and growth from the second half onwards.”
“In that case, it would be equally clear to me that from the third quarter onwards we can begin to gradually phase out pandemic emergency purchases and end them as foreseen in March 2022,” he added.
Knot was also comfortable with higher nominal rates, if they are “entirely due to higher inflation expectations”. “To the extent that higher nominal yields are driven by better inflation and growth prospects, to me that’s entirely benign.”
US durable goods orders rose 0.6%, ex-transport orders rose 0.6%
US durable goods orders rose 0.6% to USD 248.7b in October, well above expectation of -0.5% contraction. ex-transport orders rose 0.6%, also above expectation of 0.2%. Excluding defense, new orders increased 0.1%.
Fed’s Collins believes rates may have peaked in current cycle
Boston Fed President Susan Collins highlighted that recent rise in long-term yields implies some tightening of financial conditions. “If it persists, it likely reduces the need for further monetary-policy tightening in the near term,” she noted in a speech yesterday.
Such market dynamics further bolstered Collins’ perspective on the current tightening cycle led. “This reinforces my view that we are very near, and perhaps at, the peak federal funds rates for this tightening cycle,” she stated, indicating that the cycle could be nearing its zenith.
However, Collins maintained a flexible stance on the future course of action, and clarified, “I would not take further tightening off the table yet.”
Weighed in on yesterday’s CPI data, which revealed that September’s headline inflation held steady at 3.7% and core inflation eased to 4.1%. Collins said, “Today’s CPI release is a reminder that restoring price stability will take time.”
ECB press conference live stream
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Australia’s employment contracts -6.6k in Mar, labor market still relatively tight
Australia’s employment figures for March revealed a slight contraction of -6.6k, worse than expectation of 7.2k growth. This downturn was primarily due to drop in part-time employment by -34.5k, partially offset by rise in full-time by 27.9k.
Unemployment rate rose from 3.7% to 3.8%, below expectation of 3.9%. Participation rate fell from 66.7% to 66.6%. Monthly hours worked rose 0.9% mom.
Bjorn Jarvis, Head of Labour Statistics at ABS, noted, “The labour market remained relatively tight in March, with an employment-to-population ratio and participation rate still close to their record highs in November 2023.” He pointed out that although there has been a modest decline of 0.4 percentage points since the highs of last November, the metrics remain substantially above pre-pandemic levels.
US durable orders dropped -1.6%, ex-transport orders rose 0.1%, missed expectations
US headline durable goods orders dropped -1.6% to USD 250.6B in February, below expectation of -1.2%. Ex-transport order rose 0.1%, also below expectation of 0.3%.
Fed Daly: Last rate cut an appropriate recalibration of policy for headwinds, not impending downturn
In a Quora.com post, San Francisco Fed Mary Daly said the US is not headed towards a recessions right not. She saw “solid domestic momentum that points to a continued economic expansion:. Also, “the labor market is strong, consumer confidence is high, and consumer spending is healthy.”
But “considerable headwinds”, including global slowdown and trade uncertainties, contributed to fear that a “downturn is right around the corner”. Hence, she’s closely look at whether “fear of recession becomes a self-fulfilling prophecy”.
Daly added that recent rate cut was “appropriate recalibration” of policy in response to the headwinds. And, her support was “not because I see an impending downturn on the horizon.”
Trump: China trade deal could happen sooner than you think
Trump indicated that US and China are “having some very good conversations” on trade. And China want to make deal “very badly” and “it could happen sooner than you think.” He added that’s “because they’re losing their jobs, because their supply chain is going to hell and companies are moving out of China and they’re moving to lots of other places, including the United States.” Additionally, China is “starting to buy our agricultural product again… starting to go with the beef and all of the different things, pork, very big on pork.”
The comments came just a day after Trump’s harsh criticism on China at the United Nations General Assembly. He said “not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale”. And, “as far as America is concerned, those days are over.”
Swiss consumer climate surged to 8 in Q2, highest since 2010
Swiss SECO Consumer Climate rose sharply from -7 to 8 in Q3. That’s the highest level since July 2010, and well above long-term average of -5. Expectations of general economic growth rose to record 48. Employment expectations rose to 29, just slightly below pre-crisis level. Expected financial situation also rose to 3, back above long-term average for the first time in over six years.
BoE’s Pill: The question of sufficient policy action more finely balanced
BoE Chief Economist Huw Pill noted today that the pressing question of whether tigthening has been adequate to curb high inflation is becoming “more finely balanced”.
Over the past two years, the BoE has executed 14 consecutive interest rate hikes, a strategy that is still in the process of fully impacting the economy. “We have done a lot over the last two years. A lot of that policy is still to come through,” Pill told a panel discussion at IMF meetings in Morocco.
But, “Whether we’ve done enough – or whether we have more to do – I think is becoming a more finely balanced issue,” he added. Despite this, Pill assured that the bank remains committed to ensuring inflation returns to the 2% target on a lasting basis.
On the topic of potentially reducing rates, Pill deemed such conversations premature. He reaffirmed the bank’s position that high borrowing costs are likely to be maintained for a duration.
German Altmaier: Most difficult part in US trade talks to follow
German Economy Minister Peter Altmaier told Deutschlandfunk radio today that “for some weeks and months now, we’re observing with concern that the U.S. is tightening its trade policies, that tensions are increasing.” And, “the impact can already be seen in the world economy, global growth has slowed.”
Regarding the trade talks between EU and US, Altmaier said “We are not yet where we want to be. We might have made one-third of the way and the most difficult part will be now”. Though he added he was in favor of lowering auto tariffs, “ideally to zero percent”.
But Altmaier also reiterated EU’s position that agriculture will not be included in any trade talks. He said “agriculture is a very sensitive topic, so we don’t want to talk about this in the current situation.”
EU & UK held construction technical-level Brexit discussions, but more time needed
As noted in a brief statement by European Commission, EU chief Brexit negotiator Michel Barnier held “constructive technical-level talks” with UK over the weekend. However, “a lor of work remains to be done” and technical level discussions will continue on Monday. Barnier is set to brief EU27 minutes at the General Affairs Council on Tuesday.
On the other hand, UK Prime Minister Boris Johnson’s spokesperson said “The Prime Minister said there was a way forward for a deal that could secure all our interests … but that there is still a significant amount of work to get there and we must remain prepared to leave (without a deal) on October 31.”
Reuters quoted a unnamed EU diplomat saying that “differences persist on customs” regarding the Irish border. And, there are “small chances” for a text to be ready for EU summit this week. More time is needed to continue to discussions. European Commission President Jean-Claude Juncker also said in an interview that “it’s up to the Brits do decide if they will ask for an extension… “But if Boris Johnson were to ask for extra time – which probably he won’t – I would consider it unhistoric to refuse such a request.”
EU said no Eurozone country at serious risk of breaching fiscal rules
In the regular annual assessment of national budgets by European Commission, none of the 19 Eurozone state was found at “serious” risk of breaching EU fiscal rules. Though,
Commission Vice President Valdis Dombrovskis warned that “among the budgetary plans found at risk of non-compliance, the ones that concern us most are those with debt levels that are high and not reduced fast enough.” He explicitly pointed to Italy, France, Belgium and Spain.
And, he urged “all members states that are at risk of non-compliance with the (rules) to take the necessary measures within the national budgetary process to ensure that the 2020 budget will be compliant”. Though, for now, no immediate action is requested.
UK urges EU to match its compromises on Brexit
UK Prime Minister Boris Johnson said he made a “very generous, fair and reasonable offer” to the EU on Brexit. And “what we’d like to hear from you now is what your thoughts are.” And, he also told EU, “if you have issues with any of the proposals that we’ve come up with, then let’s get into the detail and discuss them.”
Johnson’s spokesman also noted, “We are ready to talk to the EU at pace to secure a deal so that we can move on and build a new partnership between the UK and the EU, but if this is to be possible, the EU must match the compromises that the UK has made”. And, “the PM still believes there is an opportunity to get a deal done, but the EU must understand, in order to achieve that, the backstop has to be removed.”
BoJ’s Ueda: Economic and price developments could trigger monetary stimulus reduction
Speaking to the parliament today, BoJ Governor Kazuo Ueda highlighted the possibility of future reduction in monetary stimulus, contingent on the alignment of economic and price conditions with current projections.
“If economic and price conditions move in line with our current projections, trend inflation will gradually accelerate. If so, we must consider reducing the degree of stimulus,” he explained.
A significant point of consideration as outlined by Governor Ueda revolves around the outcomes of annual wage negotiations and their subsequent reflection in actual data. “We’ll also check at each policy meeting whether rising wages will be reflected in services prices, he added.
Swiss KOF falls to 101.6 in Feb, rather positive economic signals intact
Swiss KOF Economic Barometer fell from 102.5 to 101.6 in February, below expectation of 102.0. Despite this marginal cooling, KOF maintains an optimistic stance regarding the Swiss economy, asserting that “the rather positive economic signals in Switzerland remain intact.”
This assertion is particularly relevant to manufacturing and construction sectors, which have seen an improvement in their outlooks. Contrastingly, projections for financial and insurance services, hospitality, other services, and foreign demand have experienced a downturn. Meanwhile, forecast for private consumption within Switzerland remains stable.
Full Swiss KOF release here.