Many Data Already Reported… Now Waiting for U.S. CPI and FOMC Minutes

October 13, 2021

The dollar slipped overnight by 0.3% against the Swiss franc and sterling, 0.2% versus the euro, peso and on a DXY weighted basis, and 0.1% relative to the Canadian dollar, Chinese yuan, and Turkish lira.

Ten-year sovereign debt yields have dropped four basis points in Germany and five bps in the U.K. but only a single basis point in the United States as investors await more clarification of Fed policy in today’s FOMC minutes.

Equity markets in Asia fell 1.4% in Hong Kong, 0.7% in Taiwan, and 0.3% in Japan but rose 1.4% in Singapore, 1.0% in South Korea and 0.4% in China after a wider-than-forecast Chinese trade surplus of $66.76 billion in September got reported. European equity trading is also mixed so far, with rises in Germany and France but dips in the U.K., Italy, Switzerland and Spain.

The price of WTI oil declined 0.5%, while that of gold (up 0.5%) moved inversely with the dollar.

A new IMF World Economic Outlook has been released against the backdrop of semi-annual World Bank/IMF meetings going on all week. The IMF observes continuing but somewhat slower growth momentum amid more persistent fault lines caused by Covid 19 and consequently more difficult policy choices. The forecast for global GDP growth this year was revised down 0.3 percentage points to 5.9% and embodies similar projected advances of 5.2% in the United States and 5.0% in Euroland but only 2.4% growth in Japan. Elevated inflation of 2.8% among advanced economies this year is seen receding only to 2.3% on average in 2022. Inflation risks remain skewed to the upside.

The Chinese trade surplus in September was the largest since December. On-year growth in exports of 28.1% was greater than assumed, while import growth slowed more sharply than anticipated to 17.6% from 33.1% in August.

Japanese core private domestic machinery orders in August fell unexpectedly and by 2.4%. That was the second monthly drop in three months. Government and foreign machinery orders declined 1.3% and 14.7%, respectively.

On-year Japanese M2 money growth of 4.2% in September was the least in over a year. Average M2 growth in the third quarter of 4.7% was down from 7.7% in 2Q and 9.5% in 1Q. A monthly measure of business confidence in Japan compiled by Reuters fell to a 6-month low in October.

Chinese new bank lending in September (totaling CNY 1.660 trillion) constituted a 3-month high. On-year growth in M2 money of 8.3% matched July’s result after dipping to 8.2% in August.

Food price inflation in New Zealand accelerated to a 13-month high of 4.0%, but the monthly average increase of 0.4% in August-September was down from 1.4% per month in May-thru-July. Business confidence in New Zealand slid to a 2-month low in October and its second weakest level since March. Consumer confidence in Australia dropped 1.5% in October to a 2-month low.

A 1.6% slump in industrial production in the euro area during August was the biggest monthly slide since April 2020. This followed a 1.4% advance in July and left the July-August average level just 0.3% above the second-quarter mean and produced the smallest year-on-year increase (5.1%) since February. Production of capital goods and consumer durables respectively plunged 3.9% and 3.4% below their July levels.

Several British indicators were released today:

  • Industrial production in August rose 0.8%, which was considerably more than expected and the best gain in five months, but August’s level was only 3.7% above the level in the same month a year earlier and still 1.3% under its pre-pandemic level.
  • Factory output went up 0.5% on month and 4.1% on year.
  • Monthly GDP in August grew 0.4% on month  and was 2.9% higher in June-August.
  • A goods and services trade deficit of GBP 3.716 billion was the largest shortfall since December. Exports fell 2% on month, while imports were just 0.5% smaller. The deficit from merchandise trade only (that is, goods) widened to GBP 14.95 billion from GBP 12.7 billion in July and GBP 12.0 billion in June.
  • Construction output recorded a fifth straight month-on-month contraction, dipping 0.2% in August, and the year-on-year 10.1% advance was the least in five months.

A preliminary estimate of German CPI inflation in September was confirmed. Prices were unchanged on month in both August and September, but the 4.1% year-on-year advance was the most since the end of 1993. On-year growth in energy, food, and service sector prices were respectively 14.3%, 4.9%, and 2.5%. Core CPI (excluding food and energy) dipped 0.1% on month but was 2.9% higher than a year earlier.

South Korean unemployment bounced 0.2 percentage points above August’s record low to 3.0%, which was still well below 5.4% back in January.

Monetary policy is being reviewed today in Chile.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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