Week 2 | January 9-15, 2023
Mr. Van Loven A. Abbu, LPT
SUMMARY
United States (USD) Highlights:
US annual Inflation slows to 6.5% – lowest since October 2021.
In accordance with market expectations, the annual inflation rate in the US decreased for a sixth consecutive month in December 2022 to 6.5%, the lowest level since October 2021. It comes after a reading of 7.1% in November. Gasoline prices fell 1.5% after rising 10.1% in November, bringing the energy cost increase to 7.3%, much below the 13.1% in November. Additionally, the price of fuel oil decreased (41.5 % vs. 65.7 %) but the price of electricity increased by 14.3 % vs. 13.7 %. Food costs also decreased (10.4% vs. 10.6%), while the price of old vehicles and trucks kept falling (-8.8% vs. -3.3%). However, the price of housing rose more quickly (7.5% vs. 7.1%). While month-to-month, the CPI fell 0.1%, its first drop since May 2020, beating expectations for unchanged readings. Inflation looks like it peaked at 9.1% in June 2022, but is still more than three times above the Fed’s 2% target.
It is obvious that inflation has slowed down from its frenzied speed in mid-2022. Despite this, we still need to think that the FOMC is prepared to proclaim success in its battle to curb inflation. A broad variety of inflation outcomes exist between the heights witnessed last summer and the central bank’s 2% inflation objective, and previous head fakes on inflation need to be revised. The deflation of goods prices will eventually end, and labor cost growth is still beyond what Fed policymakers consider to be consistent with 2% inflation. Hence, the likelihood that the FOMC will raise the fed funds rate by just 25 basis points at its next meeting is increasing due to the increasingly convincing evidence of slowing inflation. However, because the trend in inflation is still above target, we anticipate that even if the FOMC slows down the pace of tightening, it will continue after its next meeting.
Switzerland (CHF) Highlights:
Swiss unemployment rate up to 2.1 percent in December, the highest since April.
The non-seasonally adjusted unemployment rate in Switzerland increased from 2.0 percent in the previous month to 2.1 percent in December 2022, the highest level since April. To reach 96,941, the unemployment rate rose by 5,614, or 6.1 percent. The number of young unemployed increased by 140, or 1.6 percent, to 8,773 while the youth unemployment rate, which counts job-seekers between the ages of 15 and 24, increased to 2.0 percent from 1.9 percent in November. The unemployment rate decreased from 3.0% in 2021 to 2.2% in 2022. After accounting for seasonal variables, the unemployment rate decreased slightly from 2.0 percent in November to 1.9 percent in December.
United States (USD) Highlights:
Euro Area jobless rate at 6.5 percent in November, an all-time low.
The seasonally adjusted unemployment rate for the Euro Area was 6.5 percent in November 2022, the same as the previous month’s record low and a decrease from 7.1 percent in the same month of the previous year. The number of jobless declined by 2 thousand from a month earlier to 10.849 million, the lowest level since comparable data began in 1995. A measure of job searchers under 25 years old, the youth unemployment rate increased slightly from 15.0 percent to 15.1% in November. Spain (12.4 percent), Italy (7.8 percent), and France (7.0 percent) had the highest unemployment rates among the biggest economies in the Euro Area, while the Netherlands (3.6 percent) and Germany had the lowest rates (3.0 percent).
Australia (AUD) Highlights:
Trade surplus up to AUD 13.20 billion in November, beating forecasts.
In November 2022, Australia’s trade surplus grew to AUD 13.20 billion from AUD 12.74 billion in October, above market expectations of an AUD 10.5 billion surplus. Due to strong inflation and vigorous monetary tightening by major economies, the trade surplus reached its highest level since June as exports declined less than imports. Exports declined 0.4% from the previous month to AUD 59.35 billion, a three-month low, while imports fell faster at 1.5% to AUD 46.15 billion, a five-month low. The trade surplus for the first eleven months of the year increased from AUD 111.41 billion in the same time in 2021 to AUD 127.36 billion. Due to strong sales of iron ore and natural gas, Australia has had monthly trade gains for the past 4-and-a-half years.
China (CNY) Highlights:
China’s December consumer prices are up 2.7% YoY, in line with forecasts.
China’s annual inflation rate climbed to 1.8% in December 2022 from November’s eight-month low of 1.6%, in accordance with market consensus. The most recent outcome was mostly driven by a 4.8% increase in food costs, despite weak domestic demand due to an increase in COVID infections. Meanwhile, non-food inflation remained constant (at 1.1%), with costs for health (0.6% vs. 0.5%), clothes (0.5% vs. 0.5%), education, and culture (1.4% vs. 1.3%), while the price of housing continued to decline (-0.2% vs. -0.2%). Following a 0.6% increase in November, core consumer prices—which exclude the volatile costs of food and energy—rose by 0.7% YoY in December. Meanwhile, consumer prices unexpectedly held steady on a monthly basis in December against expectations for a 0.1% decline and following a 0.2% decline in November. Inflation in 2022 as a whole was 2%, less than the government’s 3% objective.
United Kingdom (GBP) Highlights:
UK GDP up 0.1% in November, beating market estimates – but still below pre-covid levels
Despite slowing from a 0.5% rise in the prior period, the British economy grew by 0.1% from October to November of 2022, exceeding market expectations of a 0.2% loss. In a month when the FIFA World Cup began, output in consumer-facing services increased by 0.4% (vs. 1.5% in October), driven by food and beverage service activities. After expanding by 0.7% in October, the services sector as a whole increased by 0.2%, with information and communication and administrative and support service activities making up the majority of the expansion. After falling by 0.1% in October, factory output fell by 0.2% in November. The primary cause of the fall was manufacturing, which was only somewhat offset by mining and quarrying, which had a beneficial impact. In contrast to 0.8% in October, the construction industry was flat. In the three months leading up to November, the UK GDP decreased by 0.3%. According to current estimates, the economy will be 0.3% lower in February 2020 than it was before the coronavirus.