U.S. CPI Figures about to Be Released

November 14, 2023

Analysts expect to learn of a further dip in U.S. inflation last month shortly. While waiting for confirmation, financial markets around the world marked time overnight.

  • Dollar changes against other major currencies were held to plus or minus 0.2%.
  • U.S. stock futures are likewise steady. Share prices in the Pacific Rim closed up 0.3% in Japan and China.
  • The German Dax is 0.4%, while the British Ftse has slipped 0.4%.
  • The price of oil is unchanged. Those of gold and bitcoin are down 0.1%.
  • The 10-year U.S. Treasury yield was two basis points lower, and comparable British and Japanese yields had slid a basis point.

Among European releases, euro zone GDP growth last quarter was confirmed at flash indications of a 0.1% drop on quarter and a 0.1% rise from the third quarter of 2022. On-year growth in had been 2.3% between the third quarters of 2021 and 2022. Employment growth of 1.4% in the year through last quarter, by contrast, only slowed a half percentage point from 1.9% recorded in the year ending 3Q 2022.

Negative quarterly growth in 3Q 2023 occurred in Germany (-0.1%), the Netherlands (-0.2%), Finland (-0.9%), Ireland (-1.8%), Austria (-0.6%), the Czech Republic (-0.3%) and Denmark (-0.6%).  The Swedish and Italian economies were flat, and French GDP edged 0.1% higher. Among Euroland’s four largest economies, on-year GDP growth ranged from -0.4% in Germany to zero percent in Italy, 0.7% in France and 1.8% in Spain. U.S. GDP by comparison grew 2.9% on year and 1.2% quarter-on-quarter but not expressed as an annualized pace.

The ZEW Institute’s November indices of German and Euroland investor expectations also came out today, showing improved confidence about the outlook of each economy, lessening pessimism about current economic conditions in the euro area, but still extreme pessimism about Germany’s current situation with a reading of -79.8 after October’s 38-month low of -79.9.

The latest batch of British labor statistics revealed a rise in jobless insurance claims (17.8k) for the fourth time in the past five months, 4.2% unemployment for a fourth straight month, and a slight further retreat in average weekly earnings to 7.9% and 7.7% in regular pay only, which had peaked two months before at 8.5% and 7.9%, respectively.

The combined Swiss producer price and import price index rose in October for the first time in a half year. The 0.2% monthly uptick was associated with a 0.9% year-on-year drop, just slightly less than September’s 31-month year-on-year largest 12-month 1.0% rate of decline. Import prices sank 4.1% on year, while domestic PPI rose 0.8%.

Swedish consumer price inflation in October of 6.5% matched September’s 6.5% 17-month low, while Finnish CPI inflation declined 0.6 percentage points to a 20-month low last month. Each of those figures had peaked in the final month of 2022 at 12.3% and 9.1%, respectively.

Spanish consumer price inflation in October remained unchanged at September’s 5-month high of 3.5% versus a 27-month low of 1.9% touched in June. But core CPI decelerated further to a 17-month low of 5.2%.

New Zealand food price inflation, which peaked at 12.5% in June dropped two more percentage points to 6.3% in October.

Indian wholesale price inflation of -0.52% remained in the red for a sixth straight time in October but unexpectedly became twice as negative as September’s reading of -0.26%.

Just In: U.S. CPI decelerated more sharply than predicted. Consumer prices failed to rise month-on-month for the first time since July 2022 and posted their lowest on-year advance (3.2) since June’s 27-month low of 3.0%. CPI inflation had peaked in June 2022 at 9.1%. The main drag on inflation last month came from energy, which was 4.5% below its year-earlier level. Core inflation, excluding food and energy, edged 0.1 percentage point lower to 4.0%, 2.6 percentage points below its September 2022 high of 6.6%. Parenthetically, the marked slowdown in U.S. inflation hasn’t scored any political points for President Biden. Opinion polls have drilled down on the seeming paradox and have learned two explanations: 1) consumer impressions of the government’s economic policies are far more influenced by the prices they have to pay than labor market conditions and 2) consumers react to price levels, not their rate of change, and would feel empowered only if prices returned to their pandemic lows. Such a development is not going to happen and in fact would be an extremely alarming deflationary event if it did.

In other data news today, small business sentiment in the United States softened to a 5-month low in October and at 90.7 remained considerably below the 104.5 reading in February 2020 when the Covid pandemic was just getting started.

Consumer confidence in Australia weakened 2.6% this month. Not coincidentally, the Reserve Bank of Australia ended a rate hike pause earlier this month, lifting its official cash rate to the highest level since January 2011. A separate Australian data release showed business confidence swinging below zero to a 5-month low of -2.

South African unemployment remained above 30% last quarter at 31.9%.

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

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