Bracing for the Fed’s Decision but First Dealing with Weaker-than-Forecast Retail Sales and More Disconcerting Inflation News
December 15, 2021
The FOMC statement will be released in about two hours. New Fed projections are also due, and Chairman Powell, who’s been renominated by President Biden to serve a second four-year term (pending senate confirmation) will kick off his press conference at 19:30 GMT.
The dollar has been marking time ahead of the Fed’s likely announced acceleration of bond purchase tapering. The U.S. currency compared to Tuesday closing levels is unchanged against the euro, yen, sterling, yuan, and its weighted DXY index. The dollar has strengthened 0.4% relative to the Canadian dollar and 0.2% versus the Swiss franc but is 0.3% softer against the Australian dollar.
Ten-year sovereign debt yields are up two basis points in the United States and a single basis point in both Germany and the U.K., while equity markets are mostly lower, including a 0.3-0.5% extension of the recent losses sustained by the DOW, S&P 500 and Nasdaq. Stock markets closed down 0.7% in Australia, 0.4% in China, New Zealand and Taiwan, but up 0.1% in Japan. The British Ftse is 0.3% lower, while markets have risen moderately in Germany and France.
Prices for WTI oil and gold are down by 0.9% and 0.2%.
U.S. retail sales last month rose only 0.3%, about a third of what analysts were anticipating and suggesting that a drag from higher inflation may be starting to impede household spending. In year-on-year terms, sales growth remained robust at 18.2% in November and 16.2% in September-November.
U.S. import price inflation accelerated another full percentage point in November to a 122-month high of 11.7%. This rise reflected nonfuel items. Monthly advances of 0.7% in import prices and 1.0% in export prices surpassed expectations.
The Central Bank of Chile late yesterday became the latest central bank to lift its interest rate further. Until midyear, Chile’s policy rate had been only 0.5%, but now such will move to 4.0% following increases of 25 basis points in July, 75 bps in August, and 125 basis points each in October and this month. “The Board foresees that the MPR will continue to increase in the short term being above its nominal neutral level – that which is consistent with the inflation target of 3.0% – for a long part of the monetary policy horizon.”
In other price news today, British consumer price inflation climbed to a 122-month high of 5.1% in November, having ended 2020 at just 0.6%. Core CPI of 4.0% was twice as high as targeted and up from 3.4% in October and 2.9% in September. Producer output prices rose 0.9% on month and by 9.1% from November 2020, which is the largest 12-month rate of increase in 158 months. Producer input price inflation in the U.K. of 14.3% was at its highest in 55 months.
French CPI inflation in November was confirmed at the preliminary estimate of 2.8%, up from 2.6% in October and 0.6% in the first two months of 2020.
Italian CPI inflation last month was revised down 0.1 percentage point to 3.7%, still a 158 month high and up from -0.2% last December.
Spanish consumer price inflation of 5.5% in November was the most in 350 months and up from negative 0.5% last December.
South African CPI inflation rose half a percentage point in November to a 56-month high of 5.5%, and producer price inflation in the country where Omicron first surfaced jumped 1.5 percentage points last month to a record high of 9.6%.
In Poland, CPI inflation rose from 2.4% at the end of 2020 to 5.9% in September, 6.8% in October and a 251-month high of 7.8% last month.
Sri Lankan producer price inflation swelled to a 6-month high of 12.2% in October.
Canadian consumer price inflation, in an exception from other inflation reports today, was actually a tad lower than forecast, holding steady in November at October’s 224-month high of 4.7%. Measures of core inflation were narrowly mixed. Canada’s other data news today was a 26% resurgence of housing starts to an 8-month high during November. That was the first monthly increase since May.
Consumer confidence in Australia fell 1.0% this month to a 4-month low.
Greek unemployment recorded a month-to-month rise in October for the first time in a half year but, at 13.3%, was below its end-2020 level of 15.6%.
Japan’s tertiary index of service sector activity advanced 1.5% in October, its biggest monthly rise since June, but was also 1.1% lower than its year-earlier level.
New Zealand experienced a record high current account deficit of NZD 8.3 billion in the third quarter of 2021.
In other U.S. data news, the NAHB housing market sentiment index edged a point higher to 84 in December, matching this year high watermark last February and up from the year’s lowest reading of 75 last August. And the Empire State manufacturing index edged slightly upward to a 3-month high in December. On the Covid front, the Center for Disease Control in Atlanta warns that the Omicron variant may be poised for an upsurge, which even if less deadly than the Delta variant may be so prevalent as to overwhelm many hospital capacities.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
ShareThis
