Digesting lower than expected Japan Orders and Trade, UK inflation jump and better than expected Singapore exports, awaiting final Eurozone HICP, Canada CPI & US Housing Starts; busy day for central bank speakers talking on policy related issues, ECB Financial Stability Report and US Treasury Market Conference; retailers again top earnings run; German, US and Canada bond auctions
UK CPI/PPI: energy prices drive inflation jump, aided by autos and leisure; PPI pipeline pressures accelerating; but rate hike(s) would be just tilting at windmills
US Housing Starts: rebound expected, underlying pace of starts and permits very robust on any historical comparison
Canada CPI: energy set to push headline higher again; core CPI likely still relatively well behaved
EVENTS PREVIEW
Appropriately perhaps, it is inflation data that again dominates the schedule today with Australian Q3 Wage Prices, UK CPI, RPI and PPI (much higher than expected) and South African CPI to digest ahead of Eurozone final and Canadian CPI, with softer than expected Japan’s Machinery Orders & Trade along with strong Singapore Exports to digest, ahead of US Housing Starts and Russia’s Q3 GDP. On the events side of the equation, there are again plenty of central bank speakers, many of whom will be talking about the policy outlook: ECB’s Schnabel, Fed’s Daly, Evans & Williams, two of whom are speaking at the Fed et al Treasury Market Conference, particuarly well timed given heightened bond market volatility, amid some signs that the thin veneer of underlying liquidity in govt bond and credit markets is starting to crack. UK PM Johnson will doubtless bluff and bluster his way through an appearance before the UK Parliament’s Liaison Committee (made up of the chairs from Parliament’s select committees), as seemingly perennial accusations of sleaze engulf the UK government. It will also be a busy day for corporate earnings with retailers again to the fore: Baidu, JD.com, Lowe’s, TJX and Target, which follow the solid Retail Sales and better than expected Home Depot & Walmart earnings; with results also due from Gazprom, Norilsk Nickel, Nvidia and SSE. Govt bond auctions see German selling 30-yr, Canada 3-yr and US 20-yr.
U.K. – October CPI and PPI
With all measures of inflation turning out higher than expected, and following on from yesterday’s solid labour data, market expectations of a December rate hike will inevitably harden, even if closer inspection of the detail underlines that a rate hike (or series of rate hikes) will precisely nothing to rein in the drivers of the current price pressures. Energy, both household and fuel, was the primary pressure point, contributing to a seismic jump in the Housing component of CPIH to 6.8% y/y from 1.8%, via way of an even bigger surge in Electricity & Gas from 1.8% to 21.8% y/y. More modest contributions came from Non-processed (1.4% y/y vs. 0.3%) & Seasonal (2.0% y/y vs. 1.0%) Foods, and a further rise in Vehicles & Parts (10.6% y/y vs. 9.2%) and Package Holidays (8.8% vs. 7.3%), with most other categories seeing little change, outside of a fall in Clothing & Footwear (-0.4% vs. 0.5%), though this has much to do with base effects. Pipeline pressures remain very elevated with PPI Input jumping 1.4% m/m to push the y/y rate to 13.0% from an upwardly revised 11.9%, while pass through pressures are becoming ever more evident with PPI Output up 1.1% m/m to push the y/y rate to 8.0%, the highest since 2011. Per se the inflation pressures are very much supply side, rather than demand, and wielding monetary policy tools to rein these pressures in is an exercise in tilting at windmills, outside of the obvious point that the MPC was totally irresponsible in not ending QE at its November meeting.
U.S.A. – October Housing Starts
While there have been many commentators eager to count the US economy out in recent months, the run of robust activity and inflation data over the past fortnight has left them with bloodied noses. Today’s Housing Starts follows on from a further rebound in the NAHB Housing Market Index to a 6-mth high of 83 yesterday, and is seen rebounding 1.6% m/m to a 1.58 Mln SAAR pace (exactly reversing September’s fall), with Building Permits seen up 2.8% m/m to SAAR 1.63 Mln, after a much steeper than expected 7.8% m/m drop in September. Barring a huge downside outlier, these levels remain very robust in historical terms.
Canada – October CPI
By contrast with the US, Canada’s October CPI is expected to post a largely energy related rise of 0.7% m/m to push the y/y rate up to 4.7% from 4.4%, but the core CPI measures are expected to be unchanged or up 0.1 ppt in y/y terms relative to September at an average of 2.7%, high but certainly not casting as much doubt on the BoC’s ‘transitory inflation’ narrative, as US core CPI at 4.6% does on the Fed
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