Week 5 | January 30 to February 5, 2023
Mr. Van Loven A. Abbu, LPT
SUMMARY
United States (USD) Highlights:
Federal Reserve Boosts Interest Rates with 25 Basis Point Hike After Six Consecutive Increases:
In its meeting in February 2023, the Federal Reserve increased the fed funds rate target range by 25 basis points to 4.5%-4.75%, reducing the extent of the rise for a second meeting in a row while still driving borrowing costs to their highest level since 2007. The choice was consistent with what the market anticipated. The target range will need to continue to rise, according to policymakers, in order to have a stance of monetary policy that is sufficiently restrictive to bring inflation back to 2%. Chair Powell reiterated the disinflation process is in its early stages and that interest rates are not yet at a suitably restrictive level during the regular news conference. The Committee will consider the cumulative tightening of monetary policy, the delays between monetary policy’s effects on inflation and economic activity, and economic and financial events when deciding how much to raise interest rates in the future
Source: Federal Reserve
Surge in Non-Farm Payrolls Triples Market Expectations with 517k Jobs Added in January:
The US economy unexpectedly added 517K jobs in January 2023, the highest since July, and significantly more than the 401K jobs added on a monthly average in 2022, considerably above the 185K jobs predicted by the market. Jobs increased across the board in January, with improvements in leisure and hospitality (128K), professional and business services (82K), and health care serving as the main drivers (58K). Government employment also grew (by 74K), in part due to staff returning from a California university strike. Other industries that saw growth include manufacturing (23K), transportation and warehousing (23K), construction (25K), retail trade (30K), and (19K). Additionally, there were significant adjustments, with the cumulative job increases for November and December coming in 71K higher than initially estimated. Although some businesses are preparing for an economic slowdown and the tech layoffs are still going on, the January figures continued to reflect a tight labor market.
Source: U.S. Bureau of Labor Statistics
Unemployment Hits Historic Low of 3.4% in January 2023, Surpassing Expectations:
The number of jobless individuals fell by 28,000 to 5.69 million, while the number of employed persons rose by 894 thousand to 160.1 million, bringing the unemployment rate in the US to its lowest point since May 1969 and below market estimates of 3.6 percent. Following a dramatic drop in weekly unemployment claims to nine-month lows and a larger-than-anticipated rise in the number of job opportunities in December to a five-month high, the most recent jobs data showed that the labor market has remained tight.
Source: U.S. Bureau of Labor Statistics
ISM Services PMI Surges to 55.2 in January, Beating Expectations and Rebounding from 2-1/2 Year Low:
The US ISM Services PMI surprisingly increased to 55.2 in January 2023, above market expectations of 50.4, after falling to a low of 49.2 in December, over a 2-1/2 year low. The majority of organizations said that business is developing positively as capacity and logistical performance continued to improve. Business activity/production had faster growth (60.4 vs 53.5) and backlogs of orders saw faster growth (52.9 vs 51.5), while new orders saw a recovery (60.4 vs 45.2). Additionally, employment remained steady (50 vs. 49.4) as some businesses continue to have trouble filling available positions while others are allowing employee cutbacks. Additionally, the level of pricing pressures decreased (67.8 vs. 68.1), and supplier deliveries (50 vs. 48.5) showed no change in performance.
Source: Institute for Supply Management
Eurozone (EUR) Highlights:
ECB Boosts Borrowing Costs to 2008 High with 50 BPS Rate Hike, Pledges Another Increase in March:
At its meeting in February, the European Central Bank increased the interest rate on the main refinancing operations by 50 basis points to 3.0%, bringing borrowing costs to their highest level since late 2008. The bank also announced that it would raise the rate by an additional 50 basis points at its next monetary policy meeting in March. Additionally, the central bank maintained that it would continue to raise interest rates gradually and considerably in order to guarantee that inflation reached its medium-term objective of 2% in a timely manner. The APP portfolio will also decrease by an average of €15 billion each month from the beginning of March through the end of June 2023, according to authorities, with the exact speed of the portfolio reduction to be established over time. Additionally, the interest rates for the deposit and marginal lending facilities were raised to 3.25 percent and 2.50 percent, respectively.
Source: European Central Bank
Euro Area’s 4Q 2022 GDP Surges 1.9% YoY, Beats Market Expectations:
The Eurozone’s GDP grew 1.9% YoY in the final quarter of 2022, exceeding market predictions of 1.8% but lagging behind Q3’s 2.3% growth. The strongest increase was seen in Ireland (15.7%) followed by Portugal, Spain, and Austria with a growth of 3.1%, 2.7%, and 2.7% respectively. The GDP of the largest economies in the bloc saw a growth of 1.1% in Germany, 0.5% in France, and 0.1% in Italy, while the Eurozone’s overall GDP rose by 3.5% in 2022. The preliminary assessment also showed that the Eurozone’s GDP expanded by 0.1% in Q4 2022, higher than the expected 0.1% decrease, but lower than the previous quarter’s 0.3% gain. The growth was hindered by high inflation, rising borrowing costs, and other factors. The growth was hindered by high inflation, rising borrowing costs, supply chain bottlenecks, and other factors, demand and activity declined at their slowest rate since the first quarter of 2021.
Source: EUROSTAT
Euro Area Unemployment Holds Steady at 6.6% in December, Surpassing Forecasts:
Seasonally adjusted unemployment in the euro area was 6.6 percent in December 2022, which was higher than market expectations of 6.5% and unchanged compared to November 2022. The unemployment rate was higher at 7.0% a year ago. To reach 11.048 million, there are already 23 thousand more unemployed people than a month ago. The rate of young people without jobs, or those under the age of 25, remained constant at 14.8%. The three largest economies in the Euro Area with the highest unemployment rates were Spain (13.1%), Italy (7.8%), and France (7.1%), while Germany had the lowest rates (2.9 percent).
Source: EUROSTAT
Euro Area Inflation Hits 8-Month Low With 8.5% Drop in January 2023:
Preliminary estimates revealed that the annual inflation rate in the Euro Area decreased to an eight-month low of 8.5% in January 2023 from 9.2% in December, undershooting projections of 9%. However, there is no information on inflation in Germany as the country’s statistics office had to postpone the release of its own data owing to data processing technical difficulties. While rising somewhat in Spain and France, inflation dropped in Italy, Ireland, and the Netherlands. Additionally, core inflation, which includes costs for energy, food, alcohol, and cigarettes, was unchanged at 5.2%, providing another proof that pricing pressures in the economy of the bloc remained high. Although preliminary estimates indicated a 0.4% month-over-month fall in January 2023, the same as in December, they also indicated that energy costs had reduced by 0.9%.
Source: EUROSTAT
Japan (JPY) Highlights:
Japan’s Unemployment Stays at 2.5%, Hitting Lowest Point Since Feb 2020:
According to market expectations, Japan’s unemployment rate stayed constant at 2.5% in December 2022, which was the lowest number since February 2020. Seasonally adjusted, the number of jobless fell by 1.2% to 1.71 million in December from a month earlier, while employment increased by 0.1% to 67.19 million. In December, the non-seasonally adjusted labor force participation rate was 62.3%. The employment-to-applications ratio, meanwhile, remained constant in December at 1.35, remaining at its best level since March 2020.
Source: Ministry of Internal Affairs & Communications
Consumer Confidence in Japan Soars to 8-Month High, Reaches 31.0 in January 2023:
In January 2023, the consumer confidence index in Japan climbed from 30.3 in December to 31.0, above the 30.5 market expectation. The economy continued to recover from pandemic disruptions, and consumer confidence reached its highest level since August of last year. Nearly all indicators were improving, including overall well-being (up 0.4 points from the previous month to 27.8), income growth (up 0.5 points to 35.6), and employment (up 2.2 points to 37.2). The inclination to purchase, however, was lower (down 0.2 points to 23.5).
Source: Cabinet Office, Japan
Switzerland (CHF) Highlights:
Swiss Economic Barometer Soars to Seven-Month High of 97.2 in January 2023, Surpassing Market Expectations:
The top KOF economic barometer for Switzerland increased to 97.2 in January 2023 from 91.5 the previous month, the highest reading in seven months and far higher than market expectations of 93.3. All questioned industries contributed to the uptick in attitude, with the manufacturing and hotel services sectors seeing the biggest changes. However, a number of economic sectors in Switzerland continued to be below their mid-term averages. Manufacturing companies reported improved demand and higher output levels compared to the previous month, with the mechanical engineering, pharmaceutical, electrical, and wood and paper goods industries leading the way in the upward trend.
Source: Swiss Economic Institute (KOF)
Swiss Consumer Confidence Rises to Seven-Quarter High of -30.2 in Q1 2023:
In Switzerland, the consumer confidence indicator increased from -46.53 in the previous quarter to -30.2 in the first quarter of 2023. Consumers are substantially more positive about the future of the economy in January than they were in October 2022, according to the study. The mood, however, is still well below the long-term norm (-6 points).
Source: State Secretariat for Economic Affairs
New Zealand (NZD) Highlights:
New Zealand’s Unemployment Climbs to 3.4% in Q4 2022, Surpassing Forecasts of 3.3%:
In the fourth quarter of 2022, New Zealand’s unemployment rate increased to 3.4% from 3.3% the previous quarter, above estimates of 3.3%. A more comprehensive indicator of available labor capacity, the underutilization rate, increased from 9.1 percent in Q3 to 9.4 percent in Q4. The employment rate was reported in the fourth quarter at 69.3 percent, unchanged from the third quarter, while the labor force participation rate remained at a record high of 71.7%. On employment, an increase of 0.20% in the fourth quarter of 2022 followed the 1.3% rise in the prior quarter.
Source: Statistics New Zealand
United Kingdom (GBP) Highlights:
Bank of England Hikes Interest Rates to 4% Despite Recession Risks, in 10th Consecutive Hike and Highest Since 2008:
At its February meeting, the Bank of England decided by a margin of 7-2 to increase interest rates by 50 basis points to 4.0 percent, the highest level since late 2008. Despite the dangers of the anticipated economic crisis this year and officials’ efforts to battle excessive inflation, it was the 10th consecutive rate increase. In the meantime, the central bank abandoned its promise to maintain raising rates “forcefully” if necessary and said that inflation had likely peaked, indicating that it may soon begin decreasing the rate of hikes. In mid-2023, the bank rate is predicted to increase to roughly 4.50 percent before declining to a little over 3.25 percent in three years. By mid-2023, CPI inflation was forecast to be about 8.0 percent, and by the end of the year, it would be around 4.0 percent. Policymakers also predicted a considerably shallower contraction than originally anticipated.
Source: Bank of England
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.