Awaiting FOMC and Digesting Japanese Tankan and Released Price Data
December 14, 2022
The last scheduled FOMC meeting of 2022 will release a statement at 19:00 GMT. It will be accompanied by updated forecasts and followed by Chairman Powell’s press conference that starts at 19:30 GMT (14:30 EST). Street estimates center on a half percentage point interest rate hike today.
In overnight trading the dollar has dropped 0.6% against the yen, 0.5% relative to the Swiss franc and 0.3% vis-a-vis sterling but risen 0.8% versus the peso, 0.2% against the euro and 0.1% relative to the Canadian dollar and Chinese yuan.
U.S. share prices rose around 0.5% in just over the first hour of trading this Wednesday. Stock markets in the Pacific Rim had closed up 1.1% in South Korea, 1.5% in Taiwan, and 0.7% in Japan and Australia, but European stock markets are somewhat lower after a disappointing 2.0% drop in Euroland industrial production was reported for October.
Prices for West Texas Intermediate oil and Bitcoin have jumped 1.7% and 1.5%, while gold is 0.2% softer.
The ten-year British gilt and German bund yields have risen 3 and 2 basis points, but the 10-year Treasury yield is a basis point softer in anticipation of a reduced size of Fed interest rate increase.
According to the Bank of Japan’s quarterly Tankan survey of 9,235 companies, growth this fiscal year in business investment spending has been scaled back around 2 percentage points to 19.2% among all large firms and by around 1% to 15.1% for all firms. Business conditions for large manufacturers weakened a bit to a 7-quarter low, but those for large non-manufacturers got a boost from more open social gathering. The outlook for the first quarter of 2023, however, is less upbeat.
In other Japanese economic news, core domestic private orders for machinery jumped 5.4% in October (twice the expected rebound from a 4.6% slide in September), but export orders only edged up 0.2%. And October’s monthly drop in industrial production got revised downward from 2.6% reported originally to a slide of 3.2%. On-year growth in production of 3.0% in the latest month was down from 4.2% in the third quarter.
In today’s menu of released price statistics,
- U.S. import prices (-0.6%) recorded a fifth consecutive monthly decline in November and a 22-month low year-on-year rise of 2.7% versus 11.8% in the year to November 2021. Reflecting the dollar’s strength in part, non-fuel import price inflation slowed from 6.4% in November 2021 to 1.9% last month. Export price inflation of 6.3% was down from 18.1% in November 2021.
- The combined Swiss producer price/import price index posted a 3.8% on-year advance last month, down from 4.9% in October and 5.8% in November 2022. Import price inflation slowed over the past year from 10.9% to 5.8%, but domestic producer prices proved stickier, dropping only to a 12-month rate of increase of 2.8% from 3.4%.
- Indian wholesale price inflation of 5.85% last month constituted a 21-month low. The disinflationary process was led by food, which at 1.1% was sharply lower than October’s reading of 8.3%.
- Finnish consumer price inflation is still cresting, having risen to a 39-year high of 9.1% last month from just 3.7% in November 2021.
- British CPI inflation receded to a 2-month low of 10.7% last month after posting a 41-year high of 11.1% in October, but it still dwarfs 5.1% in November 2021.
- Swedish CPI inflation accelerated to a 381-month high of 11.5% in November, up from 3.3% a year earlier and minus 0.4% in April 2020. Core CPI climbed to 9.5%.
- Spanish consumer price inflation subsided for a fourth straight month and at 6.8% in November was down from a 38-year peak of 10.8% in July.
- In Portugal, CPI inflation ticked down 0.2 percentage points to 9.9% from October’s 30-year high.
- South African CPI inflation 0f 7.4% last month was marginally lower than forecast but roughly in line with the four preceding results on a high plateau. Core CPI remained steady at 5.0%.
The aforementioned 2.0% plunge in euro area industrial production during October was associated with a 3.4% 12-month rate of increase after 5.1% in September. Germany, France, Italy and Spain all experienced monthly drops in output, respectively of 0.9%, 2.6%, 1.0% and 0.4%.
The British index of leading economic indicators sank 0.8% in October on top of a 1.0% drop in September.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan Tankan survey, Euroland industrial production, U.S. import prices
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