Week 13 | March 27 – 31, 2023
Mr. Van Loven A. Abbu, LPT
SUMMARY
United States (USD) Highlights:
US Core PCE Prices Rose 0.3% MoM in Feb, Annual Rate Eases to 4.6%:
Core PCE prices in the United States increased by 0.3% month over month in February 2023, falling short of market expectations of 0.4% and following a 0.5% gain in the previous month. Although the annual rate, the Federal Reserve’s preferred measurement of inflation, grew by 4.6%, it was the lowest in 15 months and fell short of market forecasts of 4.7%, indicating that inflation may have peaked. This news has fuelled anticipation that the Fed’s rate-tightening cycle will soon come to an end. In February, however, the headline number increased by 0.3% from the previous month, but the annual rate fell to 5.0% from 5.3%.According to statistics from the Bureau of Economic Analysis, core PCE inflation is the most significant inflation metric used by the Fed, and it has remained above the Fed’s objective of 2% since March 2022. Recent data shows that inflationary pressures are beginning to diminish, but it remains to be seen whether this trend will continue. If inflation continues to decline, the Fed may adopt a more accommodating monetary policy, which would benefit both firms and consumers. Yet, if inflation continues high, the Fed may continue to tighten policy, slowing economic growth.
Source: U.S. Bureau of Economic Analysis
US Consumer Sentiment Drops in March 2023 on Recession Concerns:
In March 2023, the University of Michigan downgraded its initial assessment of the US consumer mood, dropping it from 67 to 62. This decrease in consumer mood, which is the first in four months, is due to rising concerns about an impending recession. All five index constituents fell, with one-year business conditions seeing a particularly pronounced deterioration. The five-year prognosis was revised up, despite reduced annual inflation predictions. Despite the recent upheaval in the banking industry, there was no impact on customer confidence because the sector was already in a downturn before Silicon Valley Bank failed.According to Reuters, the updated research confirms that consumer sentiment in the US is declining and that there are growing signs of an imminent recession. Joanne Hsu, the report’s director, said that consumer mood did not appear to have been much affected by the recent turmoil in the banking industry. The abrupt decrease in one-year business conditions, however, raises the possibility that the prognosis for the industry may be less promising in the near future. This may have an impact on consumer spending and slow down the economy even further. In general, the research makes the case that consumer mood is a crucial indicator to keep an eye on in the months ahead since it may be a predictor of future economic activity.
Source: University of Michigan
Euro Zone (Euro) Highlights:
German Business Confidence Reaches One-Year High at 93.3 in March:
The Ifo Institute for Economic Research’s most recent report indicates that in March 2023, the Ifo Business Climate index for Germany increased to 93.3, which was the highest reading since February 2022. The gain, which was driven by a sixth consecutive month of growth in business confidence despite high prices, high borrowing rates, and recent banking instability, outperformed market estimates of 91. The expectations gauge increased to 91.2 from an upwardly revised 88.4 while the present conditions subindex increased to 95.4 from 93.9. Notwithstanding their optimism, Ifo economists observed that industry expectations have marginally decreased, and that supply constraints and rising pricing continue to be issues.The Ifo Business Climate survey indicates that company confidence has increased and is now at its highest point since February 2022. Notwithstanding the current banking crisis and inflationary pressures, the gain is ascribed to the optimistic forecast for the German economy. While the percentage of companies wanting to raise prices has decreased, both the expectations gauge and the present conditions subindex have risen. The research did note, however, that in order to achieve sustainable development, issues including supply constraints and price increases must to be addressed.
Source: Ifo Institute
Germany’s GfK Consumer Climate Indicator rises to -29.5 in April:
In April 2023, the GfK Consumer Climate Indicator for Germany increased for the sixth consecutive month to -29.5, the highest level since July of the same year and higher than market expectations of -29.2. The improvement in income expectations, which has been substantially fueled by a recent decline in energy costs, notably for gasoline and heating oil, is primarily responsible for the improvement in consumer morale. Yet, compared to earlier months, progress has slowed, revealing a more circumspect perspective from consumers. Notwithstanding the rise, Rolf Buerkl, a consumer specialist at GfK, pointed out that the decline in buying power is preventing a long-term revival of domestic demand.According to GfK statistics, the rise in the Consumer Climate Index has been mostly attributed to increased income expectations. Consumer attitude has been significantly impacted by the decline in energy costs, especially for gasoline and heating oil, which has resulted in an increase in consumer confidence. The recent decline in energy costs was brought on by a number of reasons, including the downturn in the global economy and the fall in oil prices. Notwithstanding the rise in the Consumer Climate Index, the cautious view of German consumers suggests that the domestic demand rebound may be short-lived.
Source: GfK Group
Euro Area Inflation Eases to 6.9%, Core Hits Record High:
Consumer price inflation in the Euro Area decreased to 6.9 percent YoY in March 2023, which was slightly below market estimates and the lowest level since February 2022. The result was still much higher than the ECB’s goal rate of 2.0%, though. The core index, which does not include volatile commodities like food and energy, reached a new record high of 5.7%, indicating that policymakers will be under pressure to continue raising interest rates. As prices of non-energy industrial items rose more slowly, the cost of energy decreased for the first time in two years. Food, wine, and cigarette prices all increased faster than service prices. The governing council of the European Central Bank is anticipated to announce more policy measures to reduce inflation in light of the persistent inflationary pressures.Energy costs in the Euro Area decreased by 0.9 percent in March 2023, according to a preliminary estimate issued by Eurostat, the first decrease in two years. In contrast, the cost of industrial non-energy items rose at a slower rate of 6.6% as opposed to 6.8% in February. Contrarily, inflation rose for both goods and services, including food, alcohol, and cigarettes, making it difficult for the European Central Bank to control inflation. The governing council of the European Central Bank is anticipated to propose more policy measures to control inflation in light of the escalating inflationary pressures.
Source: EUROSTAT
Euro Area Unemployment Rate at Record Low of 6.6% in February 2023:
The seasonally adjusted unemployment rate for the Euro Area was 6.6% in February 2023, which is a record low and somewhat below than market predictions. To reach 11.142 million, there were 59,000 fewer jobless people than in January. The unemployment rate in the Euro Area is much lower than it was a year ago, suggesting that the labor market there is still strong even though the young unemployment rate stayed constant at 14.4%. Among the biggest economies in the area, Germany continues to dominate with the lowest unemployment rate, with Spain, Italy, and France recording the highest figures.The unemployment rate in the Euro Area in February 2023 was 6.6%, somewhat lower than market expectations, according to statistics from Eurostat. The lowest unemployment rate among the major economies in the Euro Area was found in Germany, where it was at 2.9%. The greatest percentage was recorded in Spain, however, at 12.8%, followed by Italy (8%) and France (7%). Despite the pandemic’s negative economic effects on the area, the unemployment rate has been falling since 2020, pointing to a healthy labor market.
Source: EUROSTAT
New Zealand (NZD) Highlights:
ANZ Business Outlook Index Unchanged at Subdued Level in New Zealand:
In March 2023, the ANZ Business Outlook Index in New Zealand stayed constant at -43, indicating ongoing pessimism among businesses providing goods and services as well as rising expenses. A more upbeat note was provided by respondents in the retail, building, and agricultural industries. The study also revealed that inflationary expectations and pressures are beginning to subside. Yet, there were a variety of shifts in the primary indices, with some weakening while others marginally improving. This indicates that, despite some encouraging trends in particular industries, the general business climate is still gloomy, which is expected to have an adverse effect on the nation’s economic expansion.Own Activity Outlook, which measures enterprises’ confidence in their own business operations, declined from -9.2 in February to -8.5 in March, according to the ANZ Business Outlook Survey. Investment Intentions fell from -4.9 to -6.8 while Export Intentions declined from -5.2 to -8.9. A modest decline in Employment Intentions, from -3.4 to -4.6, may indicate weaker employment growth in the months to come. Profit Estimates increased marginally in March from -33.9 to -37.7 in February. These contradictory findings imply that, despite improvements in some industries, New Zealand’s overall economic environment is still precarious.
Source: ANZ Bank New Zealand
Switzerland (CHF) Highlights:
Switzerland’s Economic Barometer Falls Below Average Amid Manufacturing Woes:
In March 2023, the KOF economic barometer, a leading indicator of the Swiss economy, dropped to 98.2, just shy of the market consensus of 100.5. This shows that the Swiss economy’s prospects have not changed materially from the previous month. Negative indicators from the manufacturing sector, including employment and inventories, as well as the services and construction sectors, were mostly to blame for the fall. Yet, the indices for the export economy showed signs of improvement. The barometer nonetheless above the key level of 90 despite the fall, showing that the economy is still growing, albeit more slowly.The KOF Swiss Economic Institute’s data show that the manufacturing sector’s declining employment and inventories were the major causes of the KOF economic barometer’s drop. Yet, the export economy’s indicators, such as orders and attitude, indicated encouraging changes. This shows that while Switzerland’s economy is still growing, it is doing so more slowly than before, and that the industrial industry is having difficulties. Policymakers and investors regularly monitor the KOF barometer, which is a crucial leading indicator for the Swiss economy.
Source: Swiss Economic Institute (KOF)
Japan (JPY) Highlights:
Japan’s Unemployment Rate Rises Unexpectedly to 2.6% in February:
Unexpectedly rising to 2.6 percent in February 2023, Japan’s jobless rate exceeded market expectations of 2.4 percent and reached its highest level since October 2022. As employment fell by 300,000 to 67.14 million, the number of jobless people rose by 130,000 to 1.8 million. Despite this, more people are actively looking for work as the non-seasonally adjusted labor force participation rate rose to 62.1 percent in February from 61.8 percent in the same month the year before. Also, unexpectedly, the jobs-to-applications ratio dropped from 1.35 in the previous four months to 1.34 in February, indicating that it has become more challenging for job searchers to get employment.The Ministry of Internal Affairs and Communications reports that in February 2023, there were 0.4 percent fewer people employed in Japan than the previous month. The COVID-19 pandemic has had an impact on a number of businesses, including tourism and hospitality, as seen by the statistics, which shows a decline in job prospects. The number of people who have ceased looking for employment for a variety of reasons, such family care, has climbed by 1.7 percent year over year, which has a positive impact on the labor force participation rate. The rising unemployment rate and declining work opportunities highlight the persistent difficulties the Japanese economy is facing as it attempts to recover from the epidemic.
Source: Ministry of Internal Affairs & Communications
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.