10 Things You Need To Know: October 11, 2022
Key data releases this week include: NFIB Small Business Optimism (Tue), PPI (Wed), FOMC meeting minutes (Wed), CPI (Thu), retail sales (Fri), and consumer sentiment (Fri).
Haver
October 7, 2022
Nonfarm payrolls increased 263,000 (3.7% y/y) during September following an unrevised 315,000 August rise. Payrolls rose 537,000 in July, revised from 526,000. Expectations had been for a 250,000 rise in the Action Economics Forecast Survey. On average, payrolls have risen 420,000 each month during 2022 versus a 562,000 average in 2021.
Haver
October 5, 2022
The Services PMI from the Institute for Supply Management eased to 56.7 during September and reversed the August improvement to 56.9. The figure remained below the peak of 68.4 in November 2021. The Action Economics Survey expected a reading of 56.2 for September.
Haver
October 7, 2022
Consumer credit outstanding rose $32.2 billion (8.0% y/y) in August after a $26.1 billion July increase (revised from $23.8 billion). A $25.0 billion rise had been expected in the Action Economics Forecast Survey. The ratio of consumer credit outstanding to disposable personal income edged up to 25.1% in August, the highest since March 2020, from 25.0% in July.
Capital Economics
October 6, 2022
A recession has looked unavoidable for some time, and we now think it will be deeper than most anticipate. Manufacturing output is already declining and services activity is slowing. What’s more, inflation is in double-digit territory and does not seem to have peaked. Against this backdrop the ECB has little choice but to tighten policy rapidly in the coming months but that in turn will further squeeze households’ disposable incomes.
Bloomberg
October 10, 2022
Chinese residents are experiencing the worst job market prospects on record amid a sharp slowdown in the economy, a worrying sign for officials as the Communist Party prepares to hold a key political meeting next week. The central bank’s Employment Sentiment Index, based on a survey of households’ outlook for jobs, declined to 35.4 in the third quarter, the lowest level since data began in 2010. Figures below 50 represent a contraction in the sector.
Capital Economics
October 7, 2022
The strongest increase in regular wages in 25 years is an early sign that the virtuous cycle between prices and wages that the Bank of Japan would like to see is starting to materialize. But with inflation set to drop back next year and profit margins coming under pressure from weaker external demand and a renewed strengthening of the yen, we don’t expect wage growth to reach the lofty heights the Bank considers necessary to sustain inflation at target.
Barron’s
October 10, 2022
The drop in house prices has only started. Sam Hall, a property economist for Capital Economics, estimates U.S. home prices will decline by 8%. That’s less than the crash following the financial crisis, however, owing to tight supplies of homes. Foreclosures ought to be far less this time as well. Recent buyers had to have good credit to qualify for mortgages and they have locked in historically low borrowing costs, unlike the adjustable-rate mortgages in the 2000s.
Financial Times
October 6, 2022
Federal Reserve Governors Christopher Waller and Lisa Cook have both emphasized that taming inflation remains the Fed’s top priority, effectively dismissing speculation that its policy may turn more dovish. “I believe a risk-management approach requires a strong focus on taming inflation,” Cook said, with Waller noting that “we haven’t yet made meaningful progress on inflation and until that progress is both meaningful and persistent, I support continued rate increases.”
Financial Times, WSJ
October 5, 2022
The US Treasury’s Office of Financial Research’s Financial Stress index is getting close to its highest reading in two years. Analysts and investors are starting to express concern about whether the financial system could cope with a series of shocks in which stock and bond prices become highly volatile at the same time as the US dollar is strengthening rapidly.