Shaken Confidence

September 27, 2023

German consumer confidence dropped to a 6-month low in late September with a depressed reading of -26.5.

French consumer confidence fell two points to a 4-month low of 83 in September, well below its long-term mean of 100.

At -11.5, Finnish consumer sentiment slid 3.5 points in September to its weakest value since February. Business confidence in Finland punched in at a 39-month low in September.

Swedish consumer confidence weakened to a 5-month low, while business confidence in that economy fell to its lowest reading in 37 months.

South Korean business sentiment rebounded just one point in September after sliding 5 points to a 6-month low in August.

Taiwanese consumer sentiment fell to a 3-month trough this month.

Austria’s September manufacturing purchasing managers index (39.6) was below 40 for the fourth time in the past five months and below the 50 level that separates improvement from deterioration for the fourteenth consecutive time.

Despite an upward revision, Japan’s index of leading economic indicators in July was at a 3-month low. Minutes from the Bank of Japan’s late-July Board meeting revealed mixed confidence regarding next spring’s annual round of wage awards. Concern about weak profits among small- and mid-sized firms prevailed the majority to conclude that it’s still premature to pull back from the ultra-loose monetary policy.

August monthly money and credit growth figures for the euro area paint a weak demand situation. The latest 3-month average of M3 money expansion (-0.4%) dipped below zero versus 1.0% in the second quarter. On-year bank lending to households (1.0%) and non-financial firms (0.6%) was its lowest in eight years. Mortgage lending was merely 0.6% greater than a year earlier.

A 35k jump in unemployed French workers was the largest two-month jump since the economy was crushed by the pandemic in the first half of 2020.

Last week’s 30-year U.S. fixed mortgage rate (7.41%) was its highest level in 23 years.

Consumer price inflation in Sri Lanka has imploded from a record 69.8% in September 2022 to 1.3% a year later.

Australian monthly CPI inflation estimates from August revealed an upward bounce to 5.2% from July’s 17-month low of 4.9%. The Reserve Bank of Australia’s target is considerably below these figures at 2-3%.

The Bank of Thailand surprised central bank watchers with yet another unanimous 25-basis point interest rate hike to a ten-year high of 2.50%. The rate benchmark had been 0.50% from May 2020 until an initial 25-bp increase in August 2022, and the latest on-year increase of CPI inflation (0.9%) remained below the target corridor of 1-3%.

A surprising 17.2% year-on-year jump in Chinese corporate profits in August versus a 15.5% decline in January-July is likely to be accepted as not-entirely good news because it may strengthen the government’s reluctance to augment fiscal and monetary support. A festering banking crisis and excessively low inflation in China suggest that the economy is probably not at an inflection point between recent doldrums and a return to robust growth.

Market jitters continue to be fed by inadequately addressed existential dangers like climate change, creeping political authoritarianism that endangers democratic traditions, and military threats posed by China, Russia, and North Korea; the resurgent price of oil; fading hope for any early end to monetary restraint to quell excessive inflation; and the high possibility of a U.S. government shutdown at the end of this month.

In overnight market action, equities recovered only marginally following heavy recent losses. Ten-year sovereign debt yields settled back three basis points in France, Germany, the U.K. and United States. The price of gold slid 0.4%, but those of bitcoin and oil  jumped by 2.1% and 1.8%.

The dollar continued to benefit from elevated interest rates and the shift by investors from risky assets into safer harbors. The U.S. currency is up 0.4% against the Australian dollar, 0.3% versus the euro, Swiss franc and Mexican peso, 0.2% vis-a-vis sterling and 0.1% against the loonie and yen. In weighted terms, the dollar is at an 11-month high.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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