Daily Review – Monday 17-Oct-2016

Daily Review – Monday 17-Oct-2016

US Fed Chair Yellen Speaks

Janet Yellen delivered her speech titled ”Macroeconomic Research After the Crisis” at the Boston FED annual research conference.

She didn’t give any hints about future rate increases. Instead she admitted that the FED is struggling to understand the behaviour of the labour market and the weakness of inflation.

Investors still believe a December rate hike is very likely.

 

FOMC Member Rosengren Speaks

At the same conference Boston’s very own FED member, Eric Rosengren, spoke and was a lot more clear in his opinion about increasing interest rates.

In his view, the US is close to full employment and unemployment is likely to be 4.5% by the end of  2017.

Rosengren voted in favour of a hike during last FOMC meeting and all signs indicate he’ll do the same for the next one.

 

US Federal Budget Balance

The US government spend less than it received for September and recorded a surplus of 33.4B USD.

This was more than analysts expected and way better compared to the month before which saw a deficit of 107.1B USD.

 

US Preliminary UoM Consumer Sentiment

The University of Michigan preliminary index of consumer sentiment declined to 87.9 from 91.2 in September, the lowest number we’ve seen this year

According to the university this  unexpected fall is likely caused by the uncertainty surrounding the presidential election, especially on low-income consumers.

 

US Preliminary UoM Inflation Expectations

Parallel with the consumer sentiment figures, the inflation expectations stayed mostly the same at 2.4% compared to 2.3% last month.

 

US Business Inventories MoM

After seeing no change in July, the value of inventories held by US manufacturers, wholesalers and retailers increased by 0.2% in August.

 

US Core Retail Sales MoM

After two consecutive months of decline the US core retail sales increased again in September.

Years of increased hiring and a slow acceleration in worker pay have laid a foundation for steady household spending.

 

US Retail Sales MoM

In conjunction with the above the US retail sales increased 0.6% compared to August.

10 of 13 major retail categories showed gains. Motor vehicle dealers, furniture stores, restaurants and building supply outlets were among those showing solid increases.

 

US 30-Y Bond Auction

The 30-Year US treasury bond auction produced an average yield of 2.47%, slightly lower to the one in September at 2.48%.

 

US Core PPI MoM

Excluding food and energy the core producers price index rose by 0.2% in September, 0.1% higher than expected. Prices increased 1.2% compared to the same month last year.

 

US PPI MoM

Taking into account the two most essential components, food and energy, the PPI rose 0.3% in September. Compared to the same period last year this is an increase of 0.7%.

 

UK BOE Gov Carney Speaks

Speaking at the Future Forum 2016 in Birmingham, BOE chief Mark Carney had the following to say.

The pound exchange rate is not part of the BOE’s main target, but its current level does not leave them indifferent.

UK inflation environment is going to change and will affect the most vulnerable households i.e. low-income families.

 

UK BOE Credit Conditions Survey

This report includes detailed data on secured and unsecured lending to households, small businesses, non-financial corporations, and non-bank financial firms.

In summary the supply of credit remained the same, however, the demand for credit decreased significantly. This indicates that households and businesses foresee lesser times ahead and are not willing to take up loans.

 

UK Construction Output MoM

UK construction output decreased 1.5% in August compared to July.

All new work, as well as repair and maintenance reported decreases, falling by 1.4% and 1.5% respectively, with the largest downwards contribution in all new work coming from infrastructure.

 

European Area Trade Balance

Europe exported more in August than it imported, resulting in a trade surplus of 23.3B EUR.

The European economy has had a positive trade balance since November 2011 and its been on a steady climb since.

 

Japanese M2 Money Stock YoY

The Japanese money supply in circulation and deposited in banks in September has increased by 3.6% compared to  the same period last year.

This was slightly higher than what markets expected, but very much in line with the rising trend since January 2016.

 

Japanese PPI YoY

The producers price index for September declined 3.2%  compared to the same month last year.

The index has been on a decline since May 2015.

 

Chinese CPI YoY

The National Bureau of Statistics in China released its consumer price index figures for September.  Compared to one year ago consumer prices are now 1.9% higher, following a 1.3% increase in August this year.

 

Chinese PPI YoY

More interesting than the figure above is the producer price index which for the first time in 4.5 years  saw an increase of 0.1%. The last time the index was above zero was in Feb’12.

 

Australian RBA Financial Stability Review

Excess capacity in China, a shaky banking sector in Europe and risks to domestic property development and resource-related sectors are just some of the challenges facing the Australian economy.

Despite the warning, the RBA believes Australia’s banking system is strong enough to withstand these domestic and global challenges.

 

Upcoming Data Releases

Not much high impact data coming out on Monday 17 October.  New York is releasing its Empire State Manufacturing Index and we’ll be seeing the Industrial Production numbers for the US.

US Empire State Manufacturing Index

After two months of decline analysts are hoping to see positive figures again.

 

European Area Final Core CPI YoY

The CPI number for Europe will see its final revised numbers for September.

 

Time Data Title Currency Previous Forecast
19:30 Canadian Foreign Securities Purchases CAD 5.23B 6.24B
20:15 US Capacity Utilization Rate USD 75.5% 75.6%
US Industrial Production MoM USD -0.4% 0.3%
21:45 UK MPC Member Broadbent Speaks GBP
23:15 US FOMC Member Fischer Speaks USD
Daily Review - Tuesday 18-Oct-2016 Daily Review - Friday 14-Oct-2016