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Canada’s CPI rebounds to 2% in Oct, services inflation slows to lowest since Jan 2022

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    ActionForex.com
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    Canada’s inflation accelerated in October, with the annual headline CPI rising to 2.0% yoy, slightly above expectations of 1.9% yoy and up from September’s 1.6% yoy. Slower decline in gasoline prices was a key driver, with prices falling -4.0% yoy compared to a sharper -10.7% yoy drop in September. Excluding gasoline, the all-items CPI maintained a steady rate of 2.2% yoy, consistent with August and September.

    Goods prices saw a modest rebound, rising 0.1% yoy following -1.0% yoy decline in September. Services inflation moderated to 3.6% yoy, the smallest increase since January 2022. On a monthly basis, CPI rose by 0.4% mom, reversing a similar decline from the previous month.

    Core inflation measures also exceeded expectations. CPI median increased from 2.3% yoy to 2.5% yoy, CPI trimmed rose from 2.4% yoy to 2.6% yoy, and CPI common ticked up from 2.1% yoy to 2.2% yoy. All three exceeded consensus forecasts.

    Full Canada CPI release here.

    BoE’s Bailey links tax rises to need for measured policy easing

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      ActionForex.com
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      BoE Governor Andrew Bailey highlighted in a parliamentary committee hearing today that the Labour government’s tax increases, outlined in the Autumn Budget, support the central bank’s gradual approach to easing monetary policy.

      He explained, “There are different ways in which the increase in employer National Insurance Contributions announced in the Autumn Budget could play out in the economy.” This cautious approach, he said, will allow the Bank to observe how these fiscal changes interact with other inflation risks.

      Bailey also cautioned about persistent wage pressures, with firms surveyed by the BoE expecting wage growth of 4% over the next year, even as the labor market shows early signs of loosening. He emphasized the importance of carefully monitoring these developments.

       

      ECB’s Panetta calls for shift to neutral amid stagnant demand

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        ActionForex.com
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        Italian ECB Governing Council member Fabio Panetta emphasized today that restrictive monetary policies are “no longer necessary”, given inflation’s proximity to the target and sluggish domestic demand.

        Panetta noted, “In the current phase, we should focus more on the sluggishness of the real economy,” highlighting the risk that a lack of recovery could drive inflation well below target, creating challenges for monetary policy to counteract.

        He advocated for normalizing the ECB’s stance and moving toward a neutral or even “expansionary territory” if necessary, stressing, “We are probably a long way from the neutral rate.” Panetta also reminded that lowering rates below neutral at the bottom of a cycle aligns with standard policy frameworks historically followed by both ECB and Fed.

        Separately, Estonian ECB Governing Council member Madis Muller shared that, “I wouldn’t ever want to say anything is a done deal,” but he expressed confidence that “we can again reduce interest rates in December.”

        Eurozone CPI finalized at 2% in Oct, core CPI at 2.7%

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          ActionForex.com
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          Eurozone inflation was finalized at 2.0% yoy in October, a rise from September’s 1.7% yoy. Core CPI, excluding volatile components such as energy, food, alcohol, and tobacco, held steady at 2.7% yoy. Among contributors, services had the largest impact, adding +1.77 percentage points to the overall rate, followed by food, alcohol, and tobacco (+0.56 pp) and non-energy industrial goods (+0.13 pp). Energy, on the other hand, exerted downward pressure, subtracting -0.45 pp from the headline figure.

          Inflation across the broader EU came in at 2.3% yoy, up slightly from September’s 2.1%. Member states showed a wide divergence in inflation rates. Slovenia recorded no inflation at 0.0%, while Lithuania and Ireland posted modest increases of 0.1%. At the other end of the spectrum, Romania led with the highest annual rate of 5.0%, followed by Belgium and Estonia at 4.5% each. Compared to September, inflation rose in 19 member states, remained stable in six, and declined in two.

          Full Eurozone CPI final release here.

          RBA minutes highlight need for multiple good quarterly inflation reports before easing

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            ActionForex.com
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            In the minutes from the November meeting, RBA emphasized “minimal tolerance” for a prolonged period of high inflation, acknowledging the already “lengthy period” of elevated prices. They underscored the need to observe “more than one good quarterly inflation outcome” before concluding that a sustainable disinflation trend was underway.

            Members discussed various scenarios that could challenge the forecasts, necessitating adjustments in policy.

            One critical scenario revolved around weaker consumption. If consumption proved “persistently and materially weaker” than anticipated and threatened to significantly lower inflation, RBA suggested that a rate cut might be warranted. Conversely, stronger recovery in consumption could mean the current monetary stance would need to “remain in place for longer”.

            The labor market also featured prominently in deliberations. Should employment conditions ease more sharply than expected, resulting in rapid disinflation, the Board acknowledged that looser monetary policy might become appropriate. On the other hand, if the economy’s supply capacity turned out to be “materially more limited” than assumed, a tighter stance could be required.

            External risks were also assessed, including potential major shifts in US economic policy following the presidential election, uncertainty around the scope of China’s anticipated stimulus measures, and the broader implications of rising global government debt levels.

            Full RBA minutes here.

            BoE’s Greene cautions against aggressive rate cuts amid persistent services inflation and wage growth

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              ActionForex.com
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              BoE MPC member Megan Greene warned during an event overnight that services inflation remains stubbornly high, with wage growth exceeding levels consistent with the 2% inflation target. “There’s some risk that wage growth might be stickier than we would hope,” she said, adding that this could keep both services and overall inflation elevated.

              Greene emphasized the importance of a cautious approach, stating that “the risk of cutting too early or too aggressively is a greater risk than going a bit more slowly.”

              Feedback from firms suggests wage growth could settle closer to 4%, well above the desired level. Companies may respond to higher costs by increasing prices, reducing employment or hours, investing in productivity-enhancing capital, or absorbing costs into profit margins, she noted.

              She also highlighted the UK’s vulnerability to external shocks as an open economy. “Historically speaking, about a third of the moves in our curve in the UK were influenced by things happening outside the UK. Now it’s about half.”

              Greene pointed to the outsized influence of the US Treasury curve, describing it as a “drunken dragon” that heavily impacts the UK market, especially amid global geopolitical risks and shifts in US economic policy under the president-elect.

              ECB’s Stournaras: December 25bps cut optimal

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                ActionForex.com
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                Greek ECB Governing Council member Yannis Stournaras told Bloomberg today that a 25 bps rate cut at the upcoming December meeting would represent “an optimal reduction”.

                He acknowledged that interest rates remain firmly in restrictive territory, emphasizing that even with continued cuts to reach the neutral rate, “it’s still a long way to go,” indicating multiple reductions are likely ahead.

                Stournaras also highlighted the optimistic revision in inflation expectations. “The baseline is that now, inflation falls more rapidly than we thought in our September forecasts,” he noted, adding that ECB could meet its 2% inflation target on a sustainable basis by early to mid-2025 rather than by the end of the year.

                ECB’s Makhlouf: Pretty overwhelming evidence needed for 50bps cut in Dec

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                  ActionForex.com
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                  Irish ECB Governing Council member Gabriel Makhlouf signaled caution today, emphasizing that an interest rate cut at the December 12 meeting is not guaranteed.

                  “It would be going a bit far to say an ECB interest rate cut next month is ‘in the bag,’” he stated, adding that the evidence s would need to be “pretty overwhelming” for a more aggressive 50bps reduction.

                  Makhlouf also addressed the uncertainty surrounding the impact of US President-elect Donald Trump’s administration on inflation dynamics. He stressed that it would be “premature” to base monetary policy decisions on assumptions about Trump’s fiscal and trade policies, stating, “I do think it would be premature to come to conclusions as to exactly what it is that the new US administration is going to do.”

                  Eurozone goods exports rises 0.6% yoy in Sep, imports falls -0.6% yoy

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                    ActionForex.com
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                    Eurozone goods exports rose 0.6% yoy to EUR 237.8B in September. Goods imports fell -0.6% yoy to EUR 225.3B. Trade balance reported a EUR 12.5b surplus. Intra-Eurozone trade fell -1.0% yoy to EUR 215.5B.

                    In seasonally adjusted term, goods exports rose 0.4% mom to EUR 237.6B. Goods imports fell -0.8% mom to EUR 224.1B. Trade balanced reported EUR 13.6B surplus, larger than expectation of EUR 7.9B. Intra-Eurozone trade fell -0.9% mom to EUR 212.9B.

                    Full Eurozone trade balance release here.

                    BoJ’s Ueda Highlights wages as key inflation driver, reaffirms tightening path

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                      ActionForex.com
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                      BoJ Governor Kazuo Ueda reiterated in a speech today that the central bank remains committed to its gradual policy tightening path, conditional on the realization of its economic and price outlook. However, the timing of adjustments will depend on evolving “economic activity and prices” as well as “financial conditions.”

                      Ueda stated that monetary policy decisions would hinge on assessments at each Monetary Policy Meeting, taking into account the latest data and projections. Key considerations include underlying inflation trends and financial conditions, with a focus on balancing risks to economic activity.

                      On inflation, Ueda highlighted that the effects of previous cost pass-throughs from higher import prices are waning. However, he noted that “inflationary pressure stemming from wage increases is projected to strengthen” as economic activity and wage growth remain robust.

                      While underlying inflation currently lags the 2% target, it is expected to rise moderately and align with the price stability target in the second half of the projection period through fiscal 2026.

                      Full speech of BoJ’s Ueda here.

                      NZ BNZ services rises to 46, still extremely challenging conditions

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                        ActionForex.com
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                        New Zealand’s BusinessNZ Performance of Services Index rose slightly from 45.7 to 46.0 in October. Despite the marginal improvement, the index stayed well below the 50 threshold, indicating ongoing contraction in the sector for a fourth consecutive month. The result also falls significantly short of the long-term average of 53.1.

                        The proportion of respondents reporting negative sentiment increased from 58.5% to 59.1%. Concerns about the cost of living and broader economic challenges continued to dominate.

                        BNZ Senior Economist Doug Steel emphasized the sector’s struggles, stating that “although it is contracting at a much slower pace than it was in June (when the PSI was 41.1), the PSI has been hovering between 45 and 46 over the last four months.” He noted that while some business surveys indicate an improving outlook, current conditions remain “extremely challenging”.

                        Full NZ BNZ PSI release here.

                        US retail sales rises 0.4% mom in Oct, ex-auto sales up 0.1% mom

                          By
                          ActionForex.com
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                          US retails sales rose 0.4% mom to USD 718.9B in October, above expectation of 0.3% mom. However, ex-auto sales rose 0.1% mom to US 528.5B, below expectation of 0.2% mom. Ex-gasoline sales rose 0.4% mom to USD 667.1B. Ex-auto & gasoline sales rose 0.1% mom to 621.6B.

                          Total sales for the August through October period were up 2.3% yoy from the same period a year ago.

                          Full US retail sales release here.

                          Fed’s Collins: December rate cut not guaranteed

                            By
                            ActionForex.com
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                            Boston Fed President Susan Collins signaled in a WSJ interview that a rate cut in December is “certainly on the table. However, it remains far from being a “done deal”.

                            She emphasized the importance of upcoming economic data in shaping the Fed’s decision-making process, noting, “There’s more data that we will see between now and December, and we’ll have to continue to weigh what makes sense.”

                            Collins underlined her pragmatic approach, explaining, “I don’t see an argument for maintaining restrictive policy when there is not evidence of new price pressures.”

                            However, she also acknowledged that the inflationary dynamics that have persisted over the past year are “perhaps unevenly and gradually resolving over time.”

                            European Commission forecasts modest recovery and faster disinflation for Eurozone

                              By
                              ActionForex.com
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                              The European Commission maintains its projection for Eurozone GDP growth at 0.8% in 2024, unchanged from its Spring forecast. However, it has slightly downgraded the 2025 growth projection to 1.3% from the previous 1.4% in Spring forecast, introducing a new projection of 1.6% growth in 2026. For the EU as a whole, GDP is expected to grow by 0.9% in 2024, 1.5% in 2025, and 1.6% in 2026.

                              Inflation is anticipated to decline significantly. In Eurozone, headline inflation is projected to more than halve from 5.4% in 2023 to 2.4% in 2024, slightly lower than the previous estimate of 2.5%. It is expected to ease further to 2.1% in 2025 and 1.9% in 2026. The EU is forecasted to see an even sharper disinflation, with headline inflation falling from 6.4% in 2023 to 2.6% in 2024, continuing to decrease to 2.4% in 2025 and 2.0% in 2026.

                              Executive Vice-President Valdis Dombrovskis highlighted that the EU economy is steadily recovering, with growth expected to gain momentum next year. Factors contributing to this acceleration include rising consumption driven by increased purchasing power, sustained record-low unemployment, and anticipated improvements in investment levels.

                              European Commissioner for Economy Paolo Gentiloni noted that as inflation continues to ease and private consumption and investment growth pick up, supported by unemployment at record lows, growth is set to gradually accelerate over the next two years.

                              Full European Economic Forecast release here.

                              UK GDP shrinks -0.1% mom in Sep; Q3 growth slows sharply to 0.1% qoq

                                By
                                ActionForex.com
                                -

                                UK economy contracted by -0.1% mom in September, falling short of market expectations for 0.2% mom growth. The contraction was driven largely by declines in manufacturing output and information and communication services, with monthly services output showing no growth. Meanwhile, production sector experienced a notable -0.5% drop, primarily due to a sharp decline in manufacturing. Construction output offered a slight silver lining, rising by 0.1%.

                                For Q3, GDP grew by a marginal 0.1% qoq, marking a steep slowdown from Q2’s 0.5% qoq growth and missing forecasts of 0.2% qoq. The services sector, which accounts for the largest share of economic activity, expanded by just 0.1%, while construction demonstrated resilience with a 0.8% increase. However, the production sector contracted by -0.2%, reflecting persistent weaknesses in the industrial base.

                                Full UK monthly & quarterly GDP release.

                                China’s industrial growth and investment lag, while retail sales outperform in Oct

                                  By
                                  ActionForex.com
                                  -

                                  China’s economic data for October showed a mixed performance, with retail sales surpassing expectations while industrial production and fixed asset investment slightly underperformed.

                                  Industrial production grew by 5.3% yoy, just shy of the expected 5.4% yoy and holding steady from the prior month. Fixed asset investment also slowed, increasing by 3.4% ytd yoy compared to the forecasted 3.5%.

                                  Real estate investment continued to struggle, declining by -10.3% from the previous year’s level over the January-October period, marking the sharpest annualized contraction since August 2021. This steeper drop reflects ongoing pressures in China’s real estate sector.

                                  In contrast, retail sales surged 4.8% yoy, beating expectations of 3.8% yoy and accelerating from September’s 3.2% yoy. This stronger retail activity was largely driven by a week-long national holiday and an early start to the Singles’ Day shopping festival, which boosted consumer spending.

                                  Japan’s real GDP growth slows to 0.9% annualized, robust consumption but weak investment

                                    By
                                    ActionForex.com
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                                    Japan’s economy expanded by 0.2% qoq in Q3 2024, aligning with market expectations but indicating a slowdown from the previous quarter’s momentum. On an annualized basis, GDP grew by 0.9%, surpassing the anticipated 0.7%, yet decelerating from a downwardly revised 2.2% growth in Q2.

                                    The second straight quarter of expansion was largely propelled by robust private consumption, which accounts for over half of the nation’s GDP. Private consumption increased by 0.9% qoq, up from revised 0.7% in the prior quarter, driven by solid demand for automobiles and the influence of wage increases. Despite persistent high inflation, consumers are channeling funds into spending as a result of wage gains.

                                    However, the economy faces challenges as capital investment declined by -0.2% qoq after previous growth, reflecting the impact of a global economic slowdown on sectors like chipmaking equipment. Exports inched up by 0.4% qoq, indicating some resilience in external demand. In contrast, imports surged by 2.1% qoq, which negatively affected GDP by subtracting 0.4 percentage points from growth.

                                    NZ BNZ manufacturing falls to 45.8, further contraction but new orders show signs of recovery

                                      By
                                      ActionForex.com
                                      -

                                      New Zealand’s BusinessNZ Performance of Manufacturing Index dropped from 47.0 to 45.8 in, marking its lowest point since July and extending the sector’s contraction for a 20th straight month. The reading underscores continued struggles in the manufacturing sector, despite recent RBNZ rate cuts.

                                      A breakdown of the report reveals broad weakness across production and employment indicators, with production slipping from 47.9 to 44.5, and employment declining from 46.8 to 45.8. Deliveries also fell to 44.6 from 45.6, and finished stocks modestly increased to 47.4. However, new orders provided a rare bright spot, rising from 47.9 to 49.0, the highest level since May 2023.

                                      Encouragingly, the proportion of negative comments from respondents fell to 53.5% in October, a marked improvement from the previous months, where negative sentiment had peaked at 76.3% in June.

                                      BNZ’s Senior Economist Doug Steel noted, “Despite lower interest rates, the manufacturing sector continues to face significant headwinds. Recent business surveys show a sharp contrast between improved expectations for activity and weak current conditions.”

                                      Full NZ BNZ PMI release here.

                                      Fed’s Powell: Rate moving towards neutral, but no rush to cuts

                                        By
                                        ActionForex.com
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                                        Fed Chair Jerome Powell conveyed in a speech overnight that the central bank sees no immediate need to reduce interest rates quickly. He added that with an “appropriate recalibration” of monetary policy, Fed believes it can sustain economic growth and robust employment while guiding inflation back down to its 2% target in a sustainable manner.

                                        He highlighted that the risks to achieving the Fed’s employment and inflation objectives are “roughly in balance,” and emphasized that policymakers remain “attentive to the risks to both sides.”

                                        Powell noted that Fed is gradually moving policy toward a “more neutral setting”. However, he stressed that the path to reaching this neutral rate is “not preset.”.

                                        Importantly, Powell remarked that “the economy is not sending any signals that we need to be in a hurry to lower rates.” The prevailing economic strength provides Fed with the ability to approach monetary decisions “carefully.”

                                        Full speech of Fed’s Powell here.

                                        US initial jobless claims falls to 217k vs exp 224k

                                          By
                                          ActionForex.com
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                                          US initial jobless claims fell -4k to 217k in the week ending November 9, below expectation of 224k. Four-week moving average of initial claims fell -6k to 221k.

                                          Continuing claims fell -11k to 1873k in the week ending November 2. Four-week moving average of continuing claims rose 1k to 1875k, highest since November 27, 2021.

                                          Full US jobless claims release here.

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