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Did US inflation ease in October?

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Did US consumer price growth cool in October?

Investors and economists are expecting the Federal Reserve’s aggressive interest rate rises to eventually curtail inflation, but forecasts suggest it is not likely to be evident in data for October.

The Bureau of Labor Statistics will release its US consumer price index report on Thursday, with economists surveyed by Bloomberg expecting a smaller acceleration in consumer prices for the month of October. Wall Street has forecast CPI to have increased 8 per cent year over year in October, down from 8.2 per cent in September. Core CPI, which strips out the volatile food and energy components, is expected to have risen by 6.6 per hundred year over year, the same rate as in September.

The CPI data come after the Fed raised interest rates by 0.75 percentage points on November 2, the central bank’s fourth consecutive jumbo increase.

“Whether it is this month, next month or the one after that, I have increasing confidence that inflation will decelerate,” said Eric Winograd, an economist at AllianceBernstein, citing lower commodity prices, an easing in supply chain pressures and decelerating house prices.

Inflation may be a key factor in deciding the results of Tuesday’s US midterm elections to determine control of Congress, according to the latest polling data that highlight how the soaring cost of living and recession fears are weighing on the minds of Americans. Kate Duguid

Will Chinese loan growth stabilize?

The Chinese government hopes increased loan issuance will help fund infrastructure spending, restart stalled building projects and revitalize the world’s second-biggest economy, which has weakened owing to repeated Covid-19 lockdowns and a property sector slowdown.

Wang Tao, chief China economist at UBS, forecasts that renminbi loan issuance stabilized at around Rmb800bn ($111bn) in October, after far exceeding expectations the month before.

The September surge — when new loans nearly doubled from the month before to Rmb2.47tn — was in part thanks to recent state support.

That included an order from regulators for state banks to extend at least Rmb600bn in financing to developers before the end of the year and a reduction in benchmark lending rates. The People’s Bank of China also said it would lower interest rates on loans granted by a state fund to some first-time homebuyers at the end of the month.

But analysts said that economic uncertainty and the zero-Covid policy, which officials have vowed to uphold, could continue to hamper demand for credit in October.

“Broad questions about a delayed property market recovery and unfavorable employment conditions still overhang China’s banking sector,” analysts at rating agency Fitch said, noting that issuance this year was driven largely by rising corporate loans to companies in manufacturing and infrastructure, while retail and corporate loan issuance has decelerated sharply. William Langley

Did UK economic output dip in the third quarter?

The UK economy is expected to have shrunk in September and in the third quarter, underscoring the Bank of England’s warnings that Britain is headed for a recession next year.

Economists polled by Bloomberg forecast UK GDP to have dropped 0.2 per cent between August and September, partially reflecting the national mourning period and the additional bank holiday for the Queen’s funeral.

It follows a contraction in the previous month when “there was a general loss of momentum in the economy”, according to Sandra Horsfield, economist at Investec.

As a result, UK GDP is expected to have dropped 0.4 per cent in the third quarter compared with the previous three months, as activity suffered owing to high inflation and energy costs. This means a wider gap compared with the pre-pandemic levels of economic output than the 0.2 per cent shortfall recorded in the second quarter.

In contrast, the eurozone economy expanded 0.2 per cent in the three months to September to 2.1 per cent above its fourth quarter 2019 level, laying bare the large hit of the pandemic and higher inflation on the British economy.

As it raised interest rates to 3 per cent this week — the highest level since 2008 — the Bank of England forecast that the UK economy would enter a recession lasting at least through 2023. It attributed the long-lasting downturn to high energy prices and materially tighter financial conditions weighing on spending.

Benjamin Nabarro, economist at Citigroup, also expects a two-year recession. “The UK is increasingly facing an outlook characterized by tightening monetary policy, restrictive rates and a broad terms of trade shock,” he said. Valentina Romei