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UK CPI eases significantly to 4.7% in Oct, another step to BoE’s target

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    ActionForex.com
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    UK CPI showed a marked slowdown in October, dipping below market expectations. The annual CPI rate decelerated from 6.7% yoy to 4.6% yoy , falling short of the anticipated 4.7% yoy. This decline reflects a broader trend of easing inflationary pressures, as evidenced by a flat monthly CPI rate of 0.0% mom, which was below the forecasted 0.2% mom.

    Delving deeper, core CPI, which excludes volatile items such as energy, food, alcohol, and tobacco, mirrored this downtrend. It slowed from an annual rate of 6.1% yoy to 5.7% yoy, again undershooting the expected 5.8% yoy.

    A notable aspect of the report was the significant drop in CPI goods annual rate, which plummeted from 6.2% yoy to 2.9% yoy. Meanwhile, services sector also saw a decline, albeit less pronounced, with CPI services annual rate reducing from 6.9% yoy to 6.6% yoy.

    The most substantial downward pressure on the annual rates came from housing and household services sector. Notably, CPI annual rate in this category recorded its lowest level since record-keeping began in January 1950. Additionally, food and non-alcoholic beverages sector contributed to the downward trend, marking its lowest annual rate since June 2022.

    Full UK CPI release here.

    China’s industrial and retail growth surpass expectations, PBOC injects fresh funds

      By
      ActionForex.com
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      China’s industrial output and retail sales for October exceeded market expectations. Industrial production rose 4.6% yoy, surpassing forecasted 4.5% yoy, marking an improvement from September’s 4.5% yoy growth. Retail sales recorded a robust 7.6% yoy growth, significantly higher than anticipated 7.0% yoy and showing a considerable improvement from 5.5% yoy increase in September.

      However, fixed asset investment experienced slower growth, rising only 2.9% ytd yoy, which was below the expected 3.1%. The real estate sector particularly faced challenges, with investment dropping by -9.3% ytd yoy, a deterioration compared to the previous period through September.

      In a separate development, People’s Bank of China maintained the interest rate on CNY 1.45T worth of one-year medium-term lending facility loans at 2.50%, consistent with previous operations. As CNY 850B worth of MLF loans were set to expire this month, this move resulted in a net injection of CNY 600B of fresh funds into the banking system.

      The central bank stated that this loan operation aimed to keep the banking system’s liquidity at a reasonably ample level, countering short-term factors such as tax payments and government bond issuances.

      Japan’s GDP down -0.5% qoq, -2.1% annualized in Q3

        By
        ActionForex.com
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        Japan’s GDP contracted -0.5% qoq in Q3, starkly underperformed market expectations of -0.1% qoq decline. On annualized basis, the situation appears even more drastic, with the economy shrinking by -2.1%, far exceeding anticipated -0.6% contraction, and being the worst since Q3 2021.

        A critical factor in this downturn was a -0.6% decrease in business investment, marking a continuous decline for two consecutive quarters. This reduction was primarily influenced by reduced spending on semiconductor production equipment, reflecting broader challenges in global tech sector.

        Additionally, private consumption, a key driver of economic activity, saw a marginal fall of -0.04%. This marks the second successive quarter of decline, with slump in vehicle sales significantly impacting consumer spending.

        Fed’s Goolsbee eyes housing as crucial for continued disinflation progress

          By
          ActionForex.com
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          Chicago Fed President Austan Goolsbee acknowledged yesterday that “progress continues towards 2% inflation target. He highlighted the decline in goods inflation, but points out the critical role of housing inflation in the coming quarters.

          Goolsbee emphasized, “With goods inflation already coming down and nonhousing services inflation typically slow to adjust, the key to further progress over the next few quarters will be what happens to housing inflation.”

          Separately, Richmond Fed President Thomas Barkin exhibited a more guarded stance. He expresses doubts about a smooth transition to the Fed’s inflation target, underscoring the complexity of the current economic scenario.

          Barkin noted, “I’m just not convinced that inflation is on some smooth glide path down to 2%.” He acknowledges the recent decrease in inflation rates but attributes it primarily to the partial reversal of spikes seen during the Covid era, driven by high demand and supply constraints.

          Barkin further points out that certain sectors, such as shelter and services, continue to exhibit inflation rates above historical norms.

           

          Fed’s Barkin not convinced of steady inflation decline despite today’s CPI data

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            ActionForex.com
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            Richmond Fed President Thomas Barkin has voiced skepticism regarding the trajectory of inflation, even in light of today’s U.S. CPI data showing decline in headline and core readings. In his comments at a event, Barkin remarked, “I’m just not convinced that inflation is on some smooth glide path down to 2%.”

            Barkin pointed out that the recent decrease in inflation figures is largely attributable to a partial reversal of the price spikes experienced during Covid-era, which were driven by elevated demand and supply shortages. He highlighted ongoing concerns, stating, “Shelter and shelter inflation remain higher than historic levels, so does services inflation.”

            Emphasizing the resilience of businesses in the current economic environment, Barkin noted, “Businesses aren’t going to back down from prices until they have to,” suggesting that a slowdown might be necessary.

            “I do see some sort of slowdown,” he added.

            BoE’s Pill prepared to raise rates if necessary

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              ActionForex.com
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              BoE Chief Economist Huw Pill emphasized today the readiness of the Bank to raise interest rates further if the situation demands, but also indicated that further rate hikes are not a necessity at the current juncture.

              Pill highlighted today’s wage growth data, noting, “We did have this morning the latest official data on pay growth in the UK with pay growing at 7.7%… But actually over the summer pay growth has remained very strong and we certainly wouldn’t see pay growth of that rate as consistent with achieving the 2% inflation target on an ongoing basis.”

              BoE is closely monitoring the upcoming October CPI data, anticipating a decline to “around 5%.” However, Pill acknowledges that even this level is significantly higher than the target, remarking, “But nonetheless, 5% is still much too high.”

              Pill also expressed concerns about the persistence of inflation, partly attributed to ongoing supply issues. He stressed the importance of maintaining a consistent policy approach, stating, “We need to meet inflation persistence with persistent restrictiveness in policy.”

              US CPI core down to 4%, lowest since Sep 2021

                By
                ActionForex.com
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                US CPI slowed from 3.7% yoy to 3.2% yoy in October, below expectation of 3.3% yoy. CPI core (less food and energy) fell from 4.1% yoy to 4.0% yoy, below expectation of being unchanged at 4.1% yoy. That’s the lowest core CPI reading since September 2021. Energy index was down -4.5% yoy. Food index was up 3.3% yoy.

                For the month, CPI was flat at 0.0% mom, below expectation of 0.1% mom. CPI core rose 0.2% mom, below expectation of 0.3% mom. Energy index fell -2.5% mom. Food index rose 0.3% mom.

                Full US CPI release here.

                Germany’s ZEW economic sentiment surges to 9.8, suggesting bottoming out

                  By
                  ActionForex.com
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                  Germany’s ZEW Economic Sentiment soared to 9.8 in November, far surpassing the anticipated 4.9, signaling increasing optimism among financial market experts. However, Current Situation Index barely moved, nudging from -79.9 to -79.8, and falling short of expected -75.5.

                  Eurozone’s ZEW Economic Sentiment experienced a similar upswing, rising from 2.3 to 13.8, well ahead of the forecast of 6.1. Despite this, Current Situation Index in Eurozone showed a decline, dropping by -9.4 points to -61.8.

                  Achim Wambach, ZEW President, noted that while current economic conditions are still challenging, there’s growing optimism. He added, “These observations support the impression that the economic development in Germany has bottomed out.”

                  The increase in economic expectations is supported by a more positive view of the German industrial sector and both domestic and foreign stock markets. Additionally, “inflation and short- and long-term interest rates also appear to have reached turning points in expectations,” he added.

                  Full German ZEW release here.

                  SNB’s Jordan: Price stability not ensured, won’t hesitate to tighten further

                    By
                    ActionForex.com
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                    In today’s remarks at a central bank conference in Zurich, SNB Chairman Thomas Jordan warned that “price stability may not yet be ensured.” He pledged that the central bank “will not hesitate to tighten monetary policy further if necessary.”

                    This statement comes as inflation have dipped and interest rates have risen compared to last year, presenting a challenging environment for policy to balance the risk of tightening too much and too little.

                    “Given the high uncertainty regarding the economic outlook, there is no clearly mapped-out path for monetary policy in the near future,” he remarked.

                    With SNB’s next policy meeting scheduled for December 15, market expectations currently lean towards maintaining policy rate at 1.75%.

                     

                    UK payrolled employment rose 33k in Oct, unemployment rate unchanged at 4.2% in Sep

                      By
                      ActionForex.com
                      -

                      UK payrolled employment rose 33k, or 0.1% mom in October. Over the year, payrolled employment rate 398k or 1.3% yoy. Median monthly pay rose 5.9% yoy, down from prior month’s 6.0% yoy. Claimant count rose 17.8k, above expectation of 15.0k.

                      In the three months to September, unemployment rate was unchanged at 4.2%, matched expectations. Average earnings including bonus rose 7.9% yoy, above expectation of 7.4%, slowed from prior 8.2%. Average earnings excluding bonus rose 7.7% yoy, matched expectations, slowed from prior month’s 7.8%.

                      Full UK employment release here.

                      Japan’s Suzuki emphasizes balancing positives and negatives of weak Yen

                        By
                        ActionForex.com
                        -

                        As Japanese Yen continues to hover near multi-decade lows against Dollar after yesterday’s selloff, Japan’s Finance Minister Shunichi Suzuki reiterated the government’s commitment to addressing the currency’s movements. In his latest remarks, Suzuki avoided any direct mention of intervening in the currency markets, focusing instead on a strategy to balance the impact of the Yen’s weakness.

                        Suzuki stated, “What’s important is to maximize positive effects from the weak yen while mitigating negatives.” His comments come as the Japanese government faces the challenges of managing economic implications of Yen’s prolonged decline. While a weaker Yen can benefit Japan’s export-driven economy, it also raises concerns about increased import costs, especially in the context of global inflationary pressures.

                        Suzuki’s emphasis on maximizing the benefits and reducing the drawbacks of the weak Yen highlights the delicate balancing act the Japanese authorities must perform in the current economic environment. His statement suggests a cautious approach from the government, possibly hinting at measured responses rather than abrupt market interventions.

                        Australia NAB business confidence dips to -2, conditions resilient

                          By
                          ActionForex.com
                          -

                          In Australia, NAB reported a dip in Business Confidence for October, falling from 0 to -2. However, Business Conditions saw a slight improvement, rising from 12 to 13. Notably, trading conditions increased from 18 to 20, and profitability conditions improved from 9 to 12, while employment conditions slightly decreased from 9 to 8.

                          NAB Chief Economist Alan Oster commented, “Business conditions remain healthy, picking up in October and still well above average. Still, business confidence remained soft in the month, still well below average at -2 index points.” He highlighted the persistent gap of 10-15 index points between current conditions and the more forward-looking confidence indicator, emphasizing that “Businesses clearly remain cautious about the outlook for the economy despite the resilience we are seeing.”

                          The report also noted a slowdown in price and cost growth. Labour cost growth eased to 1.8% in quarterly equivalent terms, and purchase cost growth declined to 1.8%. Retail price growth remained stable at 1.9%, while overall price growth eased to 1.0%, marking the slowest rate since July 2020.

                          Oster added, “The Q3 CPI showed inflation had been persistent through the middle of the year and the survey suggests this remained the case heading into Q4. We still expect to see gradual moderation over time but it will be a protracted process, especially given the resilience of domestic demand thus far.”

                          Full NAB business confidence release here.

                          Australia’s consumer sentiment plummets post RBA rate hike

                            By
                            ActionForex.com
                            -

                            Australia’s Westpac Consumer Sentiment Index saw a significant decline in November, dropping by -2.6% mom to 79.9, reflecting a deepening pessimism among consumers.

                            Westpac attributed this drop to the recent RBA rate hike, noting a -6% decrease in confidence during the survey period. Despite the overarching pessimism, labor market confidence and housing-related sentiment remained relatively stable.

                            Westpac further commented, “The Reserve Bank Board next meets on December 5. The November Consumer Sentiment survey highlights the weak and uneven conditions across Australia’s consumer sector.

                            “How this plays out for wider domestic demand in the context of strong population growth is something the Board will need to consider as it acts to ensure inflation returns to target.”

                            Full Australia Westpac consumer sentiment release here.

                            ECB’s de Guindos foresees temporary inflation rebound, December forecasts crucial for policy assessment

                              By
                              ActionForex.com
                              -

                              In a speech today, ECB Vice President Luis de Guindos said the central bank expects “a temporary rebound” in inflation in the coming months as base-effect drops out of calculations. However, he emphasized that ECB foresees the overall disinflationary process to continue over the medium term.

                              De Guindos highlighted the unpredictability surrounding energy prices due to geopolitical tensions and fiscal policy impacts, along with the potential upward pressure on food prices resulting from adverse weather events and the broader climate crisis.

                              Despite a marked decrease in inflation, de Guindos warned that it is expected to remain high for an extended period, with persistent domestic price pressures. “We will therefore ensure that our policy rates will be set at sufficiently restrictive levels for as long as necessary,” he affirmed.

                              Emphasizing the ECB’s data-dependent approach, de Guindos stated, “Our future decisions on policy rates will continue to be taken on a meeting-by-meeting basis.” He added that the ECB’s December meeting, armed with fresh macroeconomic projections and additional data, will be crucial for reassessing the inflation outlook and necessary policy actions.

                              Full speech of ECB de Guindos here.

                              Japan’s wholesale inflation eases to 0.8% yoy, continued downward trend

                                By
                                ActionForex.com
                                -

                                Japan’s corporate goods price index, a key indicator of wholesale inflation, exhibited a significant slowdown in October, underscoring a continued trend of easing price pressures.

                                The index increased by just 0.8% yoy, falling short of the anticipated 0.9% yoy and marking its first dip below 1% since February 2021. This latest figure also represents the 10th consecutive month of slowing wholesale inflation.

                                The deceleration in the CGPI can be largely attributed to decreases in the prices of specific commodities. Notably, costs for wood, chemical, and steel products experienced declines, reflecting the broader impact of reduced global commodity prices.

                                Export price index saw an uptick from 0.5% yoy to 1.0% yoy. Import price index showed a lesser decline, moving from -15.5% yoy to -12.5% yoy.

                                Full Japan CGPI release here.

                                New Zealand BNZ services fell to 48.9, contraction with economic angst

                                  By
                                  ActionForex.com
                                  -

                                  New Zealand’s BusinessNZ Performance of Services Index experienced a notable dip in October, falling from 50.6 to 48.9, a level indicative of contraction in the sector. This decline also positions the index well below its long-term average of 53.5.

                                  Activity and sales experienced a significant drop, moving from 50.9 to 47.4. There was also a downturn in employment, which decreased from 50.5 to 49.3. New orders and business fell as well,from 53.9 to 51.9. On a more positive note, stocks and inventories saw an increase, rising from 48.0 to 51.1, and supplier deliveries edged up slightly from 49.7 to 49.8.

                                  Despite these declines, the proportion of negative comments in October decreased to 58.2%, a reduction from 61.8% in September and 63.9% in August, indicating a slight improvement in business sentiment.

                                  BNZ Senior Economist Craig Ebert said that “combined, the PSI (48.9) and PMI (42.5) paint a picture of economic angst. This counsels caution around GDP for Q3, after it posted a surprising gain of 0.9% in Q2”.

                                  Full NZ BNZ PSI release here.

                                  RBA’s Kohler warns of bumpy road ahead in tackling inflation

                                    By
                                    ActionForex.com
                                    -

                                    In a speech, Marion Kohler, Acting Assistant Governor of RBA, remarked that decline in inflation is expected to be a “more gradual process than previously thought.”

                                    This outlook stems from the current economic environment characterized by “still-high level of domestic demand” and “strong labour” alongside other cost pressures. These factors contribute to the prediction that inflation will hover just below 3% by the end of 2025.

                                    The Assistant Governor pointed out that the recent trend of declining inflation has primarily been “driven by lower goods price inflation.” In stark contrast, “domestically sourced inflation” – especially in the services sector – has shown resilience, being “widespread and slow to decline.”

                                    Kohler also underscored the nuanced challenges in the next phase of controlling inflation, which she anticipates to be “more drawn out than the first.” This outlook aligns with experiences in other advanced economies that have faced similar inflationary patterns.

                                    Furthermore, she cautioned about the potential for unforeseen challenges, citing the recent increase in fuel prices as an example of supply shocks that could unpredictably influence headline inflation.

                                    Kohler emphasized the uncertain nature of the journey ahead in managing inflation, stating, “the road ahead could be bumpy.”

                                    Full speech of RBA Kohler here.

                                    ECB’s Lagarde cautions against complacency as swift disinflation phase may wane

                                      By
                                      ActionForex.com
                                      -

                                      ECB President Christine Lagarde, speaking at a Financial Times event, warned that the recent phase of quick disinflation might be nearing its end, with the potential for near-term inflation re-acceleration. This caution comes amid the possibility that the dampening effect of high energy prices on year-on-year comparisons may soon diminish.

                                      Lagarde emphasized the need for vigilant monitoring of energy prices, suggesting that the current headline inflation figure of 2.9% shouldn’t be taken for granted. “We should not assume that this respectable 2.9 headline number is something that should be taken for granted and for long,” she stated.

                                      Lagarde also alerted to the likelihood of seeing “a resurgence of probably higher numbers going forwards.” She highlighted that even if energy prices stabilize, the dissipating base effect could lead to higher inflation figures in the early months of the coming year.

                                      Despite these challenges, Lagarde reiterated her confidence in ECB’s current interest rate policy. She believes that maintaining the current rate for a sufficient duration “will make a significant contribution to bringing inflation back to our 2% target.”

                                      However, she was quick to add a caveat, indicating that ECB’s stance might need reevaluation in the face of major unforeseen shocks: “If major shocks come up, depending on the nature of the shocks, we’ll have to revisit that.”

                                      NIESR forecasts slight growth for UK economy, averting recession in 2023

                                        By
                                        ActionForex.com
                                        -

                                        According to NIESR’s projections, UK economy is set to witness a marginal increase in GDP of 0.1% in the fourth quarter of this year. The institute’s report highlighted, “Our central forecast does not expect a recession in 2023.”

                                        Delving into the specifics of the economic forecast, NIESR stated, “These forecasts remain broadly consistent with the longer-term trend of low, but stable economic growth in the United Kingdom.”

                                        Looking ahead to the next two years, NIESR expects the pace of growth to remain relatively subdued. The institute’s report forecasts GDP growth of 0.6% for 2023, followed by further restrained growth of 0.5% in 2024. The primary cause for this muted growth, as per NIESR, is the ongoing productivity slump.

                                        Full NIESR release here.

                                        UK economy shows resilience: GDP up 0.2% mom in Sep, flat in Q3

                                          By
                                          ActionForex.com
                                          -

                                          UK’s economy displayed unexpected resilience in today’s data releases, GDP figures surpassed market expectations both on a monthly and quarterly basis.

                                          In September, GDP grew by 0.2% mom, defying the stagnation prediction of 0.0% mom. This growth was primarily driven by a 0.2% increase in the services sector, a crucial component of the UK economy. Additionally, the construction sector contributed positively with a 0.4% mom= growth, while production remained steady with no significant change.

                                          On a quarterly scale, GDP figures remained flat at 0.0%, which is a more favorable outcome compared to the anticipated contraction of -0.1% qoq. On a year-on-year basis, GDP registered a growth of 0.6% yoy, indicating a modest but steady recovery from the same quarter in the previous year.

                                          The services sector experienced a slight contraction of -0.1% qoq, whereas construction saw a marginal growth of 0.1% qoq. The production sector’s performance was broadly unchanged.

                                          Full UK monthly GDP release here.

                                          Full UK quarterly GDP release here.

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