10 Things You Need to Know: November 14, 2023

Key data releases this week include: NFIB Small Business Optimism (Tue), CPI (Tue), PPI (Wed), retail sales (Wed), industrial production (Thu), NAHB Housing Market Index (Thu), and housing starts (Fri).

Bloomberg

November 10, 2023

The University of Michigan’s consumer sentiment index slid to a six- month low of 60.4, weaker than all estimates in a survey of economists. Consumers expect prices will climb at an annual rate of 3.2% over the next five to 10 years, up from 3% a month earlier. They see costs rising 4.4% over the next year, compared to last month’s 4.2%.

Bloomberg

November 9, 2023

The volume of commercial and industrial loans that banks dish out to companies shrank by about 0.2% in September, marking a sixth straight month of declines, according to the Fed’s latest batch of H8 data. The extended stretch of declines is spurring some market watchers to fret that the economic deceleration the Fed has been trying to engineer to curb inflation is now closer.

Capital Economics

November 8, 2023

The ECB’s recent decision to leave interest rates on hold, and its associated communications, confirm that its tightening cycle is now almost certainly over. But despite inflation having fallen sharply, we believe the strength of the labor market, including persistent wage growth, will keep the Bank from cutting rates until the second half of next year – even if the economy tips into recession in the meantime.

Bloomberg

November 13, 2023

Moody’s may downgrade Italy’s credit rating to junk this week, a move that could significantly impact the market and escalate concerns about the country’s fiscal stability. Despite the potential for a shock to the already fragile market, analysts note that Moody’s is the outlier among its peers, with other rating agencies maintaining a more optimistic outlook on Italy’s economic situation.

Reuters

November 7, 2023

China’s 2023 gross domestic product forecast was upgraded to 5.4% from 5% by the International Monetary Fund, attributing the increase to a strong post-pandemic recovery. The IMF reiterated it still expected the Chinese economy to slow next year, to 4.6% from 4.2% previously, due to the country’s troubled property sector and low demand, with the outlook for 2024 also raised by 0.4 percentage point.

Barron’s

November 13, 2023

Congress faces a Friday deadline to avoid a government shutdown. Even the most Pollyanna-ish observers don’t expect Congress, with a new speaker of the House, to suddenly rediscover fiscal probity and balance the budget by the end of this week. A government shutdown is a more likely outcome, or a continuing resolution that keeps the current excess of spending over revenue going.

NYT

November 9, 2023

The Federal Reserve is not confident interest rates are restrictive enough, says Chair Jerome Powell, who indicates the central bank is willing to tighten monetary policy further if necessary. “We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data and the risk of overtightening,” Powell said during an IMF conference.

The Wall Street Journal

November 10, 2023

Moody’s Investors Service has changed the outlook on the US government’s ratings to negative, citing increased fiscal risk and pressure on debt affordability, while maintaining the government’s Aaa rating. The agency highlighted concerns about large fiscal deficits and rising interest payments but acknowledged the US’ strong economic and institutional strengths.

Capital Economics

November 7, 2023

We have raised our gold price forecast to reflect the current heightened geopolitical risk. We think the price will rise further next year as the limited fallout from the Israel-Hamas conflict won’t prevent the US Fed from starting to cut interest rates in 2024. Our forecast is for gold to rise to $2,100 per ounce ($1,925 previously) by end-2024.