1)While more than offset by the acceleration in services prices ex energy, there was no m/o/m change in core goods prices after a .5% rise in August. They are still up 6.6% y/o/y but that’s the slowest since May 2021.
2)Core retail sales in September rose .4% m/o/m, one tenth more than expected and August was revised up by 2 tenths. The internals though were pretty mixed. Overall, headline retail sales were up 8.2% y/o/y which is where headline CPI was yesterday and vs the 6.6% y/o/y core goods print.
3)The September Survey of Consumer Expectations from the NY Fed saw a 3 tenths drop in one yr inflation expectations to 5.4% which is the lowest since September 2021. The 3 yr outlook though rose one tenth m/o/m to 2.9%. Home price gain expectations not surprisingly continue to fall and fell to 2% growth, the lowest since June 2020. This offset rising expectations for the prices of gas, food, education and rents.
4)The September NFIB small business optimism index rose a touch to 92.1 from 91.8 in August, 89.9 in July, 89.5 in June and 93.1 in May. The NFIB said “Inflation and worker shortages continue to be the hardest challenges facing small business owners. Even with these challenges, owners are still seeking opportunities to grow their business in the current period.”
5)The October UoM consumer confidence index rose 1.2 pts m/o/m and that was 1 pt above the estimate. The components though were very mixed as Current Conditions rose almost 6 pts while Expectations declined by almost 2 pts. Helping the former was a 4 pt rise in income, hurting the latter was a drop in both business expectations and employment. Spending intentions for both vehicles and major household items both rose m/o/m “owing to an easing in supply constraints” said the UoM. As this survey is still near historic lows, the UoM bottom lined the report by saying “Continued uncertainty over the future trajectory of prices, economies, and financial markets around the world indicate a bumpy road ahead for consumers.” Also of note from the UoM, “Typically, higher income consumers view their personal finances more favorably than lower income consumers. However, the current data show that for higher income consumers, assessments of personal finances continued declining in recent months and are now worse than their lower income counterparts.”
6)Just as the BoE is ending its LDI ‘buy time’ program, hopefully enough deleveraging has taken place.
7)For the 3 months ended August, the number of employed fell in the UK by 109k but that wasn’t as weak as the drop of 160k that was expected. Also, the unemployment rate in August fell one tenth to 3.5% with wages ex bonuses rising by 5.4% y/o/y, the highest since last year.
8)The Monetary Authority of Singapore altered its FX trading band in a move that tightens policy. They also reported that Q3 GDP rose 1.5% q/o/q, double the estimate and by 4.4% y/o/y as the country is now fully opened up.
9)The Bank of Korea hiked interest rates by 50 bps as expected to 3% but the pace might slow from here. Two members wanted a 25 bps hike and Governor Rhee said “There’s a lot of disagreement over the pace of the November hike among board members.”
10)While it’s partly in response to counterproductive China domestic policy on covid, that inflation remains muted is a good thing for them with per capita incomes still relatively low.
1)Consumer prices in September rose by .4% headline and .6% core, both 2 tenths more than expected. The y/o/y gain was 8.2% vs 8.3% in August and the core rate accelerated to a 6.6% rise from 6.3% and that’s a 40 yr high. While energy prices fell by 2.1% m/o/m, food prices rose by .8%. Services inflation ex energy drove the core rate higher with an .8% m/o/m and 6.7% y/o/y increase.
2)Headline PPI in September rose .4% m/o/m, two tenths more than expected but partly offset by a one tenth downward revision to August which fell .2%. The core rate up .3% was actually one tenth below expectations when we include the also one tenth lower revision to the month prior. On a y/o/y basis, headline PPI was up 8.5% vs 8.7% in August. The core rate was higher by 7.2% vs 7.3% in the month before. Food and energy prices rebounded after the August drop. Goods prices ex energy was actually unchanged m/o/m. Service prices grew by .4% m/o/m.
3)Initial jobless claims was up to 228k from 219k while continuing claims were unchanged w/o/w.
4)Within the October UoM consumer confidence index, one yr inflation expectations jumped back over 5% at 5.1% and that is up from 4.7% in September. the 5-10 yr guess rose to 2.9% from 2.7%. The main reason for both was the rise in expectations for gasoline prices after the sharp drop. Plans to buy a home fell to the lowest since 1981.
5)Of note in the NY Fed’s Consumer Expectations Survey, and a big deal for the consumer dependent US economy, “Median household spending growth expectations fell sharply to 6% from 7.8% in August, its steepest one month decline since the series’ inception in June 2013, and its lowest reading since January of this year. The decline was broad based across demographic groups.”
6)The September Cass Freight shipments index fell 2.9% m/o/m after a 5.5% rise in August. Versus last year it is still up 4.8% however and they gave 5 reasons for the y/o/y strength, 1)retail discounting to clear excess inventory in some categories, 2)seasonal inventory building ahead of the holidays, 3)repositioning mis-timed inventory, 4)easing supply constraints, particularly in auto production, 5)easing prior-year comparisons. While the implied freight rates were still up 16% y/o/y, “The supply/demand balance in US trucking markets has loosened significantly this year and as a result freight rates are leveling off and set to slow sharply in the months to come. While shippers aren’t seeing any real savings yet, considerable cost relief is now highly probable for 2023, which we think will be welcome news for the broader inflation picture,” said Cass.
7)With the average 30 yr mortgage rate up again (Bankrate has it now above 7%), purchase applications fell 2.1% w/o/w after last week’s 13% drop and it is now lower by 39% y/o/y. Refi’s declined by 1.8% after the sharp drop in the prior two weeks and is lower by 86% y/o/y.
8)Others will disagree but I believe the outrage over Liz Truss, her Exchequer and their budget plan that cost the Exchequer his job and the plan will be now slimmed down if not scraped, was economically shameful as math and the modest degree of the plan relative to the UK economy didn’t make any difference to the critics.
9)The UK economy did contract in August by .3% from July and the estimate was for no change with manufacturing production and services softer than expected.
10)UK jobless claims in September rose 25.5k which is the highest since February 2021.
11)BoJ governor AGAIN reiterates he will not alter monetary policy. Yen trades close to 32 yr low in response.
12)Japan said that PPI in September rose 9.7% y/o/y, well above the estimate of up 8.9% as the weak yen continues to make it really expensive to import energy. Prices jumped by .7% in the month from August. The forecast was up .3%.
13)The September private sector weighted China Caixin services index was a big miss relative to expectations. It came in at 49.3 vs 55 in August and well below the estimate of 54.4. Not surprisingly Caixin is blaming covid “as firms noted disruption to operations and restrictions on travel. New business also declined for the first time in four months, albeit modestly, despite a slight improvement in foreign demand.” Business optimism about the coming year fell to the lowest since March.