Monday

The New Zealand Services PMI fell back into contraction:

• Services PMI 48.9 vs. 50.6 prior.
• Below the long-term average of 53.5.

The RBA Assistant Governor Kohler highlighted how the decline in inflation could be more gradual that previously thought and the main risk is that high inflation today feeds into inflation expectations:

• Decline in inflation to be more gradual than previously thought.
• Bringing inflation back to target is likely to be more drawn out.
• Domestically sourced inflation has been widespread and slow to decline.
• Still-strong levels of demand have allowed businesses to pass on cost increases.
• Wages growth has picked up, but now appears to have broadly stabilised.
• Key risks is possibility that high inflation today feeds into inflation expectations.
• Encouragingly, measures of medium-term inflation expectations consistent with target.
• Labour market conditions are easing but are still tight.
• There is no doubt that the RBA cash rate is at a restrictive level.
• There is the risk of shocks, the road ahead could be bumpy.

The Japanese PPI missed expectations with the 3-month and 6-month averages being in deflation:

• PPI M/M -0.4% vs. 0.0% expected and -0.3% prior.
• PPI Y/Y 0.8% vs. 0.9% expected and 2.0% prior.

ECB’s Kazaks (hawk – non voter) maintains a cautious approach as he hasn’t seen a peak in wage growth yet:

• Too soon to say that terminal rate has been reached.
• Sees risk of spillover into inflation.
• No clear peak of wage growth seen yet.

ECB’s de Guindos (dove – voter) continues to support the “wait and see” approach:

• Will be in a better position to reassess inflation outlook in December.
• Expect a temporary rebound in inflation in the coming months.
• It is likely that euro area economy will remain subdued in the near-term.
• There are signs that labour market is beginning to weaken.
• Will be in a better position to reassess inflation outlook and required action in December meeting.
• Sees general disinflationary process continuing over the medium-term.
• Will ensure policy remains sufficiently restrictive for as long as necessary.
• Forward guidance is out of fashion.

BoE’s Mann (hawk – voter) just delivered some general comments on inflation with no policy outlook, although she remains one of most hawkish members:

• Research points to increased inflation, increased inflation persistence, and increased inflation volatility associated with climate shocks, policies, and spillovers.
• Carbon price shocks lead to more inflation persistence and then oil price shocks.
• Redistribution of revenues from carbon taxes or emission certificate auctions have economic effects of direct interest to central banks.

Tuesday

The UK Jobs data beat expectations across the board with positive revisions to the prior figures:

• October Payrolls change 33K vs. 32K prior (revised from -11K).
• September ILO unemployment rate 4.2% vs. 4.3% expected and 4.2% prior.
• September employment change 54k vs. -198k expected and -82K prior.
• September average weekly earnings 7.9% vs. 7.4% expected and 8.2% prior (revised from 8.1%).
• September average weekly earnings (ex bonus) 7.7% vs. 7.7% expected and 7.9% prior (revised from 7.8%).

SNB's Jordan maintains a hawkish tone as he warns that they will not hesitate to tighten more if necessary, although the conditions do not warrant such an action:

• We will not hesitate to tighten monetary policy further if necessary.
• Will review at the next meeting whether measures taken to date are sufficient to keep inflation within price stability range on a sustainable basis.
• To this end, we will monitor inflation developments closely in the coming weeks.
• I'm not sure whether the terminal rate has been reached.

The US NFIB Small Business Optimism Index ticked lower to 90.7 vs. 90.8 prior. This marks the 22^nd straight month that the index sits below its 50-year average of 98. As such, it reaffirms that small business sentiment is still struggling somewhat.

Fed’s Jefferson (neutral – voter) as other Fed speakers recently, maintains a hawkish tone:

• Uncertainty on inflation persistence may warrant stronger policy response.
• Some measures of economic uncertainty, particularly for inflation, are elevated.
• Policy decisions taken under uncertainty may look different from those optimal under certainty.

The US CPI report missed across the board triggering huge moves and making the market to bring forward rate cut odds:

• CPI Y/Y 3.2% vs. 3.3% expected and 3.7% prior.
• CPI M/M 0.0% vs. 0.1% expected and 0.4% prior.
• Core CPI Y/Y 4.0% vs. 4.1% expected and 4.1% prior.
• Core CPI M/M 0.2% vs. 0.3% expected and 0.3% prior.
• Core Services ex-Housing Y/Y 3.8% vs. 3.8% prior.
• Real weekly earnings -0.1% vs. -0.1% prior (revised from -0.2%).

Fed’s Goolsbee (dove – voter) highlighted the progress on the inflation front:

• Inflation progress continues, economic growth has been strong, labour markets are vibrant.
• This year could see the fastest non-war related one-year fall in US CPI inflation in a century, with an unemployment rate that never gets above 4%.
• He attributed this unusual situation to factors such as a rebound in supply following COVID-19 disruptions, increased productivity, and well-anchored inflation expectations.
• Still have a way to go before the US central bank 2% inflation goal is reached.
• Positive supply development allows blockbuster economic growth without added inflationary pressure.
• More concerned about possible external shocks than about the economy overheating.
• Central bank should focus its attention mostly on inflation data.
• Key to further progress on inflation is housing, there will be some bumps.
• October CPI report 'looked pretty good'.
• Labor force participation has come back more than we would have expected.
• Commercial real estate remains an area of concern.
• There are a lot of real pessimistic people that are spending a lot of money, that's a puzzle.
• Consumer sentiment data relationship to spending is 'utterly broken'.
• Inflation is a very real pain.

Fed’s Barkin (neutral – non voter) is wary of the risks from both over and under tightening:

• There are risks from over and under-correcting on inflation.
• The Fed is making real progress on inflation.
• Housing prices remain strong despite slowing activity.
• Hope to eventually bring interest rates back to normal.
• A lot of frenzy has been taken out of the housing market.
• Seeing banks pull back credit, a not-unexpected outcome.

BoE’s Pill (neutral – voter) highlighted the progress on inflation and added that the resilience of the UK economy seems to be easing:

• There is significant progress on inflation.
• 5% inflation would be much too high still.
• We still have some work to do to curb inflation.
• Resilience of the UK economy seems to be easing.
• BoE must focus on inflation and not tackling other issues in the economy.

Wednesday

The Japanese Preliminary Q3 GDP missed expectations:

• GDP Q3 -0.5% vs. -0.1% expected and 1.2% prior.
• GDP Y/Y -2.1% vs. 3.5% prior.
• GDP Deflator 5.1% vs. 3.5% prior.

The Australian Wage price index came in line with expectations with the yearly growth rate ticking higher:

• Wage price index Q/Q 1.3% vs. 1.3% expected and 0.8% prior.
• Wage price index Y/Y 4.0% vs. 3.9% expected and 3.6% prior.

The PBoC kept the MFL rate steady as expected at 2.5% vs. 2.5% prior.

Chinese Industrial Production beat expectations coming in at 4.6% vs. 4.5% expected and 4.5% prior.

Chinese Retail Sales beat expectations coming in at 7.6% vs. 7.0% expected and 5.5% prior.

The UK CPI missed expectations across the board:

• CPI Y/Y 4.6% vs. 4.8% expected and 6.7% prior.
• CPI M/M 0.0% vs. 0.1% expected and 0.5% prior.
• Core CPI Y/Y 5.7% vs. 5.8% expected and 6.1% prior.
• Core CPI M/M 0.3% vs. 0.4% expected and 0.5% prior.

The US PPI missed expectations across the board:

• PPI Y/Y 1.3% vs. 1.9% expected and 2.2% prior.
• PPI M/M -0.5% vs. 0.1% expected and 0.4% prior (revised from 0.5%).
• Core PPI Y/Y 2.4% vs. 2.7% expected and 2.7% prior.
• Core PPI M/M 0.0% vs. 0.3% expected and 0.2% prior (revised from 0.3%).

The US Retail Sales beat expectations with positive revisions to the prior figures:

• Retail Sales Y/Y 2.48% vs. 4.05% prior (revised from 4.10%).
• Retail Sales M/M -0.1% vs. -0.3% expected and 0.9% prior (revised from 0.7%).
• Control group M/M 0.2% vs. 0.2% expected and 0.7% prior (revised from 0.6%).
• Retail sales ex gas and autos 0.1% vs. 0.6% prior.

Fed’s Daly (neutral – non voter) welcomes the progress on inflation but remains wary of risks and declaring the end of the tightening cycle:

• Recent data showing falling inflation “very, very encouraging”.
• Refused to rule out rate hikes, said they should be “thoughtful, take our time, not rush to judgment and not make declarations”.
• We have to be bold enough to say ‘we don’t know’ and bold enough to say ‘we need to take the time to do it right’.
• What I worry about is that without a sufficient amount of information about whether we’re really on that disinflationary process that brings us back to 2 %, we have to ‘stop-start’.
• A stop-start would hurt credibility.
• Indicated little concern about sharp fall in yields recently.
• None of the concerns that I’m hearing are really about a dire, fall-off-the-cliff economy.
• Rate cuts are “not happening for a while”.

Thursday

The Australian Jobs data beat forecasts, although the bulk of jobs added was from part-time:

• Employment Change 55K vs. 20K expected and 7.8K prior (revised from 6.7K).
• Unemployment Rate 3.7% vs. 3.7% expected and 3.6% prior.
• Participation Rate 67.0% vs. 66.7% expected and 66.8% prior (revised from 66.7%).
• Full-time employment 17.0K vs. -36.6K prior (revised from 39.9K).
• Part-time employment 38.0K vs. 46.5K prior.

BoE’s Greene is firmly in the “higher for longer” camp as she’s worried about high wage growth and inflation persistence:

• I am not thinking about rate cuts.
• Latest inflation data is good news.
• But there are reasons to worry about inflation persistence.
• We might need to stay restrictive for longer.
• UK wage growth is still incredibly high.
• Need to see how UK activity is holding up before next rate vote.

ECB’s Centeno (dove – voter) is not foreseeing interest rates going back to zero:

• Interest rates will not desirably return to zero.
• But interest rates will come down eventually.

BoE’s Ramsden maintains the view that rates will stay higher for longer:

• Latest projections indicate that monetary policy is likely to be restrictive for an extended period.
• Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to 2% target.
• I do not judge that there are any financial stability grounds for adjusting our approach to monetary policy or the level of interest rates.

Fed’s Cook (dove – voter) maintains the “wait and see” approach:

• I believe that a soft landing is possible.
• Risks are two-sided, must balance risk of not tightening policy enough against risk of doing too much.
• There’s a risk that continued demand momentum could slow pace of disinflation.
• Small business conditions, housing sector. Lower-income households may be signalling stress ahead.
• Also attentive to risk of renewed global economic shocks, including geopolitical and muted growth in China, Europe.
• Fed policies have spillovers abroad.
• Concurrent global central bank tightening may mean each central bank need do a bit.
• Supply chain improvements, drop in commodity prices has also helped inflation's fall.
• Increased multifamily housing supply will contribute to the expected further reduction in inflation.
• Labor supply, demand coming into better balance.

The US Jobless Claims missed expectations once again:

• Initial Claims 231K vs. 220K expected and 217K prior.
• Continuing Claims 1865K vs. 1847K expected and 1833K prior (revised from 1834K).

Fed’s Mester (hawk – non voter) is taking a more neutral approach as she’s not pre-committing to anything:

• I am expecting growth to slow below trend.
• I don't have a recession in my forecast.
• It's been a strong and resilient economy, but inflation has moved down.
• Term premium played a role in the rise of Treasury yields.
• Data suggests things are going off a cliff in the economy.
• Has not assessed whether she will pencil in another rate hike in her December projections.
• Whether further hikes are needed depends on the economy.
• We're currently in a very good spot for policy.
• We are now in a more balanced place.
• It's not about cutting rates, it's how long we stay in a restrictive stance, and possibly higher.

The US Industrial Production missed expectations across the board:

• Industrial Production -0.6% vs. -0.3% expected and 0.1% prior (revised from 0.3%).
• Manufacturing output -0.7% vs. -0.3% expected.
• Capacity utilization 78.9% vs. 79.4% expected.

The US NAHB Housing Market Index missed forecast once again and it’s getting near the cycle lows:

• NAHB 34 vs. 40 expected and 40 prior.
• Single family 40 vs. 46 prior.
• Next six months 39 vs. 44 prior.
• Traffic of prospective buyers 21 vs. 26 prior.

Friday

BoJ Governor Ueda delivered the same old comments:

• Capex rising moderately.
• Japan's economy is likely to keep recovering moderately.

• Japans' trend inflation likely to gradually accelerate toward 2% through fiscal 2025.
• Must carefully watch impact of market moves, including FX, on economy, prices.
• Will patiently maintain easy policy.
• We cannot say yet with conviction our price target will be stably, sustainably met.
• Important to scrutinise whether Japan sees positive wage-inflation cycle.

• Will take some time but inflationary pressure driven by cost-push factors are likely to dissipate.
• There is still high uncertainty on whether Japan can see positive wage-inflation cycle.
• Govt, BoJ share view on desirable direction on economy, inflation.
• Don't expect 10-year JGB yield to rise sharply above our 1% reference even if yields come under upward pressure.
• We will consider ending YCC, negative rate if we can expect inflation to stably, sustainably hit price target.
• In what order, what part we will change policy will depend on economic, price, market developments at the time.
• Making strong comments now on how we could change policy could have unintended consequences in markets.
• When market expectations of future rise in long-term yields heighten, it is hard to deal with fine-tuning of YCC alone.
• Keeping yields across the curve low with monetary easing has had big positive effect on economy by stimulating demand, creating jobs.
• US Fed may at some point cut interest rates if effect of monetary tightening up till now works its way through US economy.
• If any US rate cut is a result of soft landing in US economy, that could have positive impact on Japan's economy.
• If achievement of our price target approaches, we can discuss strategy, guidelines on exiting ultra-loose policy including fate of our ETF buying.
• BoJ does not have specific plan yet on how it will sell ETFs.
• When we sell ETFs, we will do in a way that avoids as much as possible causing market disruption, huge losses on the BoJ's balance sheet.
• Cannot say decisively that weak yen is negative for Japan's economy.
• Weak yen pushes up domestic inflation via rise in import costs.
• Weak yen is positive for exports, profits of globally operating Japanese firms.
• Won't comment on FX levels.

The UK Retail Sales missed expectations across the board with negative revisions to the prior figures:

• Retail sales Y/Y -2.7% vs. -1.5% expected and -1.3% prior (revised from -1.0%).
• Retail sales M/M -0.3% vs. 0.3% expected and -1.1% prior (revised from -0.9%).
• Retail sales (ex autos, fuel) M/M -0.1% vs. 0.4% expected and -1.3% prior (revised from -1.0%).
• Retail sales (ex autos, fuel) Y/Y -2.4% vs. -1.5% expected and -1.5% prior (revised from -1.2%).

ECB’s Holzmann (hawk – voter) maintains his hawkish stance but he’s definitely in the minority:

• We stand ready to raise rates again if necessary.
• Markets should know that it's not the end of the story yet.
• Anything can happen in December meeting.

The Canadian PPI missed expectations:

• PPI M/M -1.0% vs. 0.2% expected and 0.4% prior.
• PPI Y/Y -2.7% vs. 0.6% prior.
• Raw material prices M/M -2.5% vs. 3.9% prior (revised from 3.5%).
• Raw material prices Y/Y -0.8% vs. 2.9% prior (revised from 2.4%).

The US Building Permits and Housing Starts beat expectations:

• Housing Starts 1.372M vs. 1.350M expected and 1.346M prior (revised from 1.358M).
• Building Permits 1.487M vs. 1.450M expected and 1.471M prior.

The highlights for next week will be:

• Monday: PBoC LPR.
• Tuesday: RBA Meeting Minutes, Canada CPI, FOMC Minutes.
• Wednesday: US Durable Goods, US Jobless Claims.
• Thursday: US Thanksgiving Day, Australia/Eurozone/UK PMIs, ECB Meeting Minutes, New Zealand Retail Sales.
• Friday: Japan CPI, Canada Retail Sales, US PMIs, US Black Friday (early markets close).

That’s all folks. Have a great weekend!