Week 11 | March 13 – 17, 2023
Mr. Van Loven A. Abbu, LPT
SUMMARY
United States (USD) Highlights:
US Inflation Drops to Lowest Level Since September 2021:
In accordance with market expectations and down from 6.4% in January, the US’s annual inflation rate dropped to 6% in February 2023, the lowest level since September 2021. As the cost of used vehicles and trucks continued to rise (-13.6% vs. -11.6%), food costs increased at a slower rate (9.5% vs. 10.1%). Moreover, expenditures for fuel oil (9.2% vs. 27.7%), energy (5.2% vs. 8.7%), and gasoline (2% vs. 1.5% in January) slowed significantly. On the other hand, the cost of housing (8.1% vs. 7.9%) and energy (12.9% vs. 11.9%) increased more quickly. Core inflation, which excludes the cost of gasoline and food, decreased slightly from 5.6% to 5.5%. The CPI increased by 0.4% over the previous month, after a 0.5% increase and also meeting expectations. In contrast to expectations for a 0.4% core rate, the rate increased slightly to 0.5% from 0.4%. The US inflation rate is still three times higher than the Fed’s 2% objective.
Source: U.S. Bureau of Labor Statistics
US Retail Sales Decline in February 2023, Missing Expectations:
In February 2023, retail sales in the US declined 0.4% month over month, missing market expectations of a 0.3% decline and coming off a 3.2% increase in January that was the highest increase since March 2021. Sales at furniture stores fell by 2.5%, at restaurants and bars by 2.2%, at other retailers by 1.8%, at dealers in motor vehicles and parts by 1.8%, at apparel stores by 0.8%, and at petrol stations by 0.6%. Conversely, growth was observed in the following sectors: nonstore merchants (1.6%), health (0.9%), food and beverage (0.5%), general merchandise (0.5%), and electronics and appliances (0.3%). Sales were steady without vehicles and down 0.1% with autos and gas excluded. On the other side, the so-called core retail sales, which don’t include cars, petrol, building supplies, or food services and are more closely related to the consumer spending portion of GDP, rose 0.5%. Inflation correction is not applied to retail sales.
Source: U.S. Census Bureau
US Producer Prices Fall Unexpectedly in February:
In February 2023, US producer prices for final demand decreased 0.1% month over month, below market forecasts of a 0.3% increase. After rising by 1.2% in January, goods prices fell by 0.2%, with food prices falling by 2.2% (chicken eggs fell by 36.1%), and energy prices falling by 0.2%. Fresh and dried vegetables, home heating oil, diesel fuel, residential natural gas, and fundamental basic organic chemicals all saw declines in their indices. Moreover, service costs decreased by 0.1% less than it did the previous month. Prices for final demand transportation and storage services declined 1.1%, while margins for trade services saw a 0.8% decline. The index for final demand services excluding trade, transportation, and warehousing, on the other hand, increased by 0.3%.
Source: U.S. Bureau of Labor Statistics
US Consumer Confidence Drops For First Time in 4 Months:
A preliminary assessment revealed that the University of Michigan consumer confidence for the US fell for the first time in four months to 63.4 in March of 2023 from 67 in February, which was the highest level in over a year and far below projections of 67. Overall, all factors deteriorated quite uniformly, mostly as a result of consistently high prices, which gave the financial turmoil’s feeling a negative impetus. But, this decline was already well appreciated when Silicon Valley Bank went under. Expectations (61.5 vs. 64.7) and the state of the economy (66.4 vs. 70.7) both declined. At the same time, both the year-ahead (3.8%, the lowest since April 2021, vs. 4.1%) and the five-year view (2.8% vs. 2.9%) inflation projections decreased.
Source: University of Michigan
Australia (AUD) Highlights:
Consumer Sentiment Stable in Australia Despite Economic Concerns:
Although high inflation, increasing interest rates, and continuing economic uncertainty continued to weigh heavily, the Westpac-Melbourne Institute Index of Consumer Sentiment for Australia remained stable at 78.5 in March 2023, maintaining close to historical lows. Also, it was the only time since two earlier depressing eras that a reading fell below 80 for two consecutive months. The prospect for large home goods sales was one newly developing area of significant worry. After a 10% decline in February, the sub-index for “time to buy a key home item” dropped 4% to 74.9 in March. The index’s constituents revealed a decline in judgments of whether this was a suitable time to buy a big-ticket home item as well as prospects for family finances and the economy over the coming year. Financial assessments compared to a year ago improved slightly, although from a very low base, and expectations for the economy over the following five years increased dramatically. Overall mood remained unaffected by the net result.
Source: Westpac Banking Corporation, Melbourne Institute
Australia’s NAB Business Confidence Index Drops to the Lowest since Nov 2022:
In February 2023, Australia’s NAB business confidence index dropped 10 points to -4, its lowest reading since November of last year and below its long-term average due to high inflation and rising borrowing rates. Wholesale, leisure, and personal services as well as banking, business, and real estate were the main factors in the fall. Business conditions, meanwhile, continued to be solid (17 vs 18 in January). Employment (at 12) and sales (at 27) both remained constant, but profitability declined (14 vs 18). Retail saw a significant increase, compared to a lesser increase in banking, business, and real estate. When future orders fell (3 vs. 6) and capacity utilization fell but remained high at 85.2%, the leading indicator weakened marginally. Overall, the poll “confirms the economy’s continued resilience, but we continue to expect a more severe downturn in demand later in the year when the full effect of rate hikes has gone through,” according to Alan Oster, the chief economist at NAB.
Source: National Australia Bank
Euro Zone (EUR) Highlights:
ECB Raises Interest Rates by 50 bps to Curb High Inflation:
As anticipated, the ECB increased interest rates by 50 basis points on Thursday in an effort to slow the persistently high inflation in the area. This brought borrowing prices to their highest level since late 2008. The banking system in the euro area is resilient, with good capital and liquidity levels, according to policymakers, who also stated that they were closely observing the present market tensions and were prepared to act as needed to protect the region’s financial stability and price stability. At 3.50%, 3.75%, and 3.00%, respectively, the interest rates on the principal refinancing operations, the marginal lending facility, and the deposit facility were all raised. Inflation would likely average 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025, according to the ECB staff. Core inflation is now anticipated to average 4.6% in 2023, higher than in the December predictions, and underlying price pressures are likely to continue robust.
Source: European Central Bank
Euro Area Inflation at 8.5%, Lowest Since May 2022:
Consumer price inflation in the Euro Area was confirmed in February 2023 to be 8.5 percent year-over-year, the lowest level since May but still much higher than the ECB’s target of 2.0 percent, supporting predictions that the central bank will maintain its hawkish stance for longer. While inflation surged for food, alcohol, and tobacco (15.0 percent versus 14.1 percent), services (4.8 percent vs 4.4 percent), and non-energy industrial goods, energy costs climbed at a slower rate (13.7 percent vs 18.9 percent in January) (6.8 percent vs 6.7 percent). Inflation increased in the biggest economies in the Eurozone—Germany, France, Spain, and the Netherlands—but it decreased in Italy. The core rate, which does not include volatile commodities like food and energy, increased to a new record high of 5.6 percent in February.
Source: EUROSTAT
United Kingdom (GBP) Highlights:
UK Unemployment Rate Steady at 3.7%, Pay Growth Slows:
In the three months from November 2022 to January 2023, the unemployment rate in the United Kingdom was 3.7 percent, essentially unchanged from the prior three months and just under the market estimate of 3.8 percent. Moreover, it remained 0.3 percentage points lower than pre-pandemic levels. While employment levels climbed by 65 thousand to 32.84 million, led by part-time employees and self-employed individuals, the number of jobless persons increased by 5,000 to 1.25 million. In the three months leading up to January, total pay growth slowed to 5.7 percent year over year, while earnings fell by 3.2 percent in real terms, the worst dip since February to April 2009.
Source: Office for National Statistics
Japan (JPY) Highlights:
Japan’s Trade Deficit Hits 19-month High, 2-year Imbalance Record:
In February 2023, Japan’s trade deficit climbed to JPY 897.7 billion from JPY 711.5 billion in the same month the previous year, vs the market estimate of a gap of JPY 1,069 billion. The longest streak since 2015 and the highest trade gap for the month of February, this was the 19th consecutive month with a trade shortfall. Imports increased by 8.3% year over year, the smallest growth rate since March 2021 but continuing a streak of 25 months in a row. Exports increased at a slower 6.5% rate to JPY 7,654.7 billion, marking the 24th consecutive month of growth but the worst pace since a decline in February 2021. A rise in imports amid rising commodity prices and the depreciation of the yen in 2022 caused Japan to record its second consecutive year trade imbalance of JPY 19,971.3 billion, the most since 1979.
Source: Ministry of Finance, Japan
Euro Zone (EUR) Highlights:
ECB Raises Interest Rates by 50 bps to Curb High Inflation:
As anticipated, the ECB increased interest rates by 50 basis points on Thursday in an effort to slow the persistently high inflation in the area. This brought borrowing prices to their highest level since late 2008. The banking system in the euro area is resilient, with good capital and liquidity levels, according to policymakers, who also stated that they were closely observing the present market tensions and were prepared to act as needed to protect the region’s financial stability and price stability. At 3.50%, 3.75%, and 3.00%, respectively, the interest rates on the principal refinancing operations, the marginal lending facility, and the deposit facility were all raised. Inflation would likely average 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025, according to the ECB staff. Core inflation is now anticipated to average 4.6% in 2023, higher than in the December predictions, and underlying price pressures are likely to continue robust.
Source: European Central Bank
Euro Area Inflation at 8.5%, Lowest Since May 2022:
Consumer price inflation in the Euro Area was confirmed in February 2023 to be 8.5 percent year-over-year, the lowest level since May but still much higher than the ECB’s target of 2.0 percent, supporting predictions that the central bank will maintain its hawkish stance for longer. While inflation surged for food, alcohol, and tobacco (15.0 percent versus 14.1 percent), services (4.8 percent vs 4.4 percent), and non-energy industrial goods, energy costs climbed at a slower rate (13.7 percent vs 18.9 percent in January) (6.8 percent vs 6.7 percent). Inflation increased in the biggest economies in the Eurozone—Germany, France, Spain, and the Netherlands—but it decreased in Italy. The core rate, which does not include volatile commodities like food and energy, increased to a new record high of 5.6 percent in February.
Source: EUROSTAT
United Kingdom (GBP) Highlights:
UK Unemployment Rate Steady at 3.7%, Pay Growth Slows:
In the three months from November 2022 to January 2023, the unemployment rate in the United Kingdom was 3.7 percent, essentially unchanged from the prior three months and just under the market estimate of 3.8 percent. Moreover, it remained 0.3 percentage points lower than pre-pandemic levels. While employment levels climbed by 65 thousand to 32.84 million, led by part-time employees and self-employed individuals, the number of jobless persons increased by 5,000 to 1.25 million. In the three months leading up to January, total pay growth slowed to 5.7 percent year over year, while earnings fell by 3.2 percent in real terms, the worst dip since February to April 2009.
Source: Office for National Statistics
Japan (JPY) Highlights:
Japan’s Trade Deficit Hits 19-month High, 2-year Imbalance Record:
In February 2023, Japan’s trade deficit climbed to JPY 897.7 billion from JPY 711.5 billion in the same month the previous year, vs the market estimate of a gap of JPY 1,069 billion. The longest streak since 2015 and the highest trade gap for the month of February, this was the 19th consecutive month with a trade shortfall. Imports increased by 8.3% year over year, the smallest growth rate since March 2021 but continuing a streak of 25 months in a row. Exports increased at a slower 6.5% rate to JPY 7,654.7 billion, marking the 24th consecutive month of growth but the worst pace since a decline in February 2021. A rise in imports amid rising commodity prices and the depreciation of the yen in 2022 caused Japan to record its second consecutive year trade imbalance of JPY 19,971.3 billion, the most since 1979.
Source: Ministry of Finance, Japan
The information and opinions in this report are for general information use only. This report is subject to change without prior notice. The individual investing goals and financial status of any particular recipient have not been taken into consideration in the preparation of this report. While the material in this article was gathered from sources that the author considered to be dependable, the author neither guarantees nor accepts responsibility for any direct, indirect, or consequential losses that may arise from the use of any such information or opinions.