Softer Growth Into the Holidays
November 17, 2023
With the Thanksgiving holiday less than a week away, 2023 is moving into the home stretch with plenty of unanswered questions. Investors wonder how the twin wars in Ukraine and Gaza will resolve and whether the federal funds rate has in fact crested and, if so, how long it will stay at its peak. Will U.S.-Chinese relations continue to deteriorate, and how poorly might those two linchpin economies perform in 2024? A U.S. government shutdown was averted but only for a short span into early 2024. Looming above all uncertainties is the increasingly likely return of former President Donald Trump to the White House. If as in his previous stint, he attempts most of what he promises to do, it will be the end of the world as we know it economically, politically, and from a life-supporting climate perspective.
Being more focused on the short term than the long term, financial markets remain calm as we move deeper into the holiday season. The ten-year U.S. Treasury yield fell 2 basis points overnight and is 60 basis points below the 2023 high reached only a month ago. The 10-year British gilt yield fell 7 basis points overnight, and comparable German, Spanish and Japanese assets are three basis points softer.
The weighted dollar index is currently a mere 0.3% above the mid-point of its 52-week high-low range. In overnight action, the dollar’s biggest move was a 0.9% drop against the yen. Declines since Thursday’s close versus the euro, Swiss franc, Canadian dollar, and sterling were held to just 0.2-0.3%, by contrast.
Among stock markets, Japan’s Nikkei index closed up 0.5%, but Hong Kong’s Hang Seng fell 2.1%. Major European exchanges show gains so far of 0.7-0.9%, whereas U.S. stock futures are up only modestly. WTI oil recovered 1.3% but is roughly 9% below its 52-week high-low corridor mid-point. Prices for Bitcoin and gold are 0.7% and 0.3% firmer than yesterday.
Businesses continue to pull capital out of China. Foreign direct investment posted a 9.4% on-year decline in January-October, down from drops of 8.4% over the first three quarters of 2023, and 5.1% during the first half of the year and constituting a dramatic reversal from year on year gains of 9.9% in 2022 and 4.9% in the first quarter of this year.
British retail sales in October fell 0.3% in October after a 1.1% slide in September. This third decline in four months defied expectations of a slight increase and left sales 2.7% below their year-earlier level.
October Euroland consumer price inflation was confirmed at the flash estimate of 2.9% overall (a 27-month low and down from a record 10.6% in October 2022. Core inflation of 4.2% also was left unrevised from its preliminary estimate but only 0.8 percentage points below its year-earlier level.
A separate Euroland data release revealed a 26-month high nonadjusted current account surplus in September of EUR 40.8 billion. As a percentage of GDP during a 12-month period, the current account swung from -0.2% in September 2022 to a surplus equal to 1.2% over the ensuing 12-month period. On a seasonally adjusted basis, the surplus equaled EUR 31.2 billion in both April and September.
Swiss industrial production rebounded 2.7% in the third quarter following a 2.9% contraction in the prior quarter and was also 2.0% above its year-earlier level.
New Zealand producer output and producer input prices rose 0.8% and 1.2% on quarter during 3Q 2023. Compared to the year-earlier quarter, PPI-O rose 2.1% in 3Q versus 3.0% in 2Q and 8.4% in 3Q 2022. PPI-I rose 1.5% on year last quarter, up from 1.1% in 2Q and 8.8% in 3Q 2022.
Canadian producer prices, which had been projected to increase modestly on month in October, instead fell 1.0% (most in 14 months), which resulted in a return to sub-zero PPI inflation. The 2.7% year-on-year PPI drop last month was the seventh non-positive outcome in the last eight months.
U.S. housing starts and building permits recovered 1.9% and 1.1% in October, beating expectations. Compared to a year earlier, such fell 2.7% and 4.4%, respectively.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British retail sales, Chinese foreign direct investment, Euroland CPI and current account
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