Hawkish Remark from Powell and Plenty of More Data to Absorb as December Kicks Off

December 1, 2021

Fed Chairman Powell signaled that a faster tapering of Fed quantitative stimulus will be considered at this month’s FOMC meeting. The U.S. economy is showing resilience, and the risk is rising of higher inflation expectations.

The dollar dipped 0.1% on a weighted basis overnight. Equities, 10-year sovereign debt yields, and the prices of oil and gold all advanced.

The Turkish lira fell to a record low in intra-day movement of 13.9127 per U.S. dollar but is current showing a net rise from Tuesday’s closing level.

The  volume of German retail sales underperformed expectations in October, dropping for the third time in four months. A slide of 0.3% followed plunges of 4.3% in July and 1.9% in September sandwiched around a 0.9% rebound in August. Sales were 2.9% lower than a year earlier in the latest month.

Australian GDP did not drop last quarter quite as much as had been feared, but the slide of 1.9% was plenty big and included a 2.4% contraction of personal consumption and very low 0.2% growth in business investment. GDP was 3.9% higher than in 3Q 2020, down from a 9.5% on-year increase in 2Q 2021.

India recorded a record trade deficit in November of $23.27 billion, thanks to a 59% on-year surge in  imports.

Norway, by contrast, posted a record current account surplus last quarter.

ADP’s 534k monthly estimate of U.S. private employment growth last month is modestly above analyst expectations. U.S. construction spending in October only grew 0.2%, half the street estimate.

U.S. manufacturing purchasing managers surveys for November produced mixed results. While the IHS index fell 0.8 index points to an 11-month low of 58.3, the more widely watched ISM survey resulted in a 2-month high of 61.1 and also included a slightly less elevated inflation sub-index.

Price data reported around the world this Wednesday revealed

  • A 13-year high in Swiss consumer price inflation of 1.5% during November, up from 1.2% in October and -0.8% last December.
  • Filipino producer price inflation crossed above zero percent in October for only the first time in 23 months, albeit to just 0.1% from -0.3% in the  prior month and -5.4% last January.
  • Indonesian consumer price inflation of 1.75% in November was 0.4 percentage points higher than in June and the most in 17 months.
  • The Nationwide index of house prices in the U.K. returned to double-digit territory, albeit just 10.0% and below the mid-2020 on-year increase of 13.4% seen in June.

Among released November manufacturing purchasing manager surveys today,

Euroland posted a 2-month high of 58.4, but the report also attested to relentless supply chain disruptions, record growth in both unwanted inventories and output price inflation. The individual PMI readings of euro area economies ranged from 55.9 in France to a record high of 62.8 in Italy. That implies decent growth throughout the region but at the slowest pace in some time in Germany, the Netherlands, Ireland and Austria.

The British manufacturing PMI score (58.1) was at a 3-month high, but the Swiss PMI fell 2.9 points to a 9-month low of 62.5.

Japan‘s PMI reading of 54.5 represents the best reading in 46 months.

China‘s manufacturing PMI slipped 0.7 points to a 19-month low of 49.9, while India’s reading of 57.6 was at a 9-month high.

Turkey may be a mess, but its factory PMI stayed above the 50 threshold between improvement and deterioration and even rose 0.8 points to a 2-month high of 52.0. As in other countries, today’s report wouldn’t fully reflect the Omicron emergence.

Elsewhere in Asia, the Philippines, Vietnam, Malaysia, and South Korea posted respective 8-, 6-, 7- and 2-month PMI highs, while Thailand, Taiwan, and Indonesia saw their manufacturing PMIs dip to 2-month lows. All of those countries had scores above the 50 threshold, however.

In Eastern Europe, Hungary’s manufacturing PMI slid to a 2-month low of 52.2. But the Czech reading of 57.1 and Poland’s of 54.4 were at 2- and 3-month highs. Russia’s index ticked up 0.1 point to a 6-month high of 51.7.

In Nordic Europe, Sweden’s PMI dropped 0.9 points to a 3-month low of 63.3. Denmark’s PMI fell 4 points to a 2-month low  of 68.2. As an oil producer, Norway enjoyed a sharply accelerated pace of manufacturing activity with a reading of 63.7, a 52-month high.

Australia‘s AIG-compiled PMI of 54.8 was the best in four months, and the CBA-compiled reading of 59.2 was at a 6-month high.

Brazil‘s PMI reading for manufacturing fell 1.9 points and below 50 to an 18-month low of 49.8, while the Mexican manufacturing PMI ticked up 0.1 of a point to a 4-month high of 49.4. A separate measure of Mexican business confidence climbed to a 30-month high.

Stock markets are most higher, but the U.S. key indices at noon were well below their morning peaks.

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

 

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