Sat. May 28th, 2022

Will the US inflation rate justify a faster decline of the Fed?

Jay Powell, chairman of the Federal Reserve, said in a testimony before the Senate on Tuesday last week that he no longer considers inflation “perishable”, and has shown an openness to the pace of the central bank’s monetary policy settlement in to accelerate the time of crisis.

November’s consumer price index data, which will be published on Friday, will give the Fed proof of how fast inflation is progressing and whether a faster withdrawal from its monthly purchases of government bonds will be justified. That debate is expected to take place at the central bank’s next policy-making committee meeting on 14-15 December.

The November CPI update holds greater potential as an immediate impact on the path of Fed action, although expectations at the end of the day hold that inflation figures will only serve as further justification for ending QE [quantitative easing] faster, ”said Ian Lyngen, head of US exchange rate strategy at BMO Capital Markets.

Last month’s VPI data showed that consumer prices rose at the fastest pace in three decades. Prices in October rose by 6.2 percent from October the previous year, and 0.9 percent from the previous month, well past the forecast level of 0.6 percent. Economists polled by Refinitiv predicted a 0.7 percent increase for November.

Rising energy costs were among the biggest drivers of inflation in October, with the CPI energy index rising 4.8 per cent from the previous month. Petrol prices at the pump fell over the month of November, but were nonetheless consistently higher than prices in October, according to the U.S. Energy Information Administration. Kate Duguid

Did UK growth return to pre-pandemic levels in October?

The British economy may have recovered in October to levels not seen since before Covid-19 took office, helped by positive momentum before the Christmas holidays.

Economists polled by Reuters expect GDP to grow by 0.5 percent between September and October – before world markets were shaken in late November by news of the Omicron coronavirus variant.

Sandec Horsfield, an economist at Investec, is more optimistic than the consensus view and has sought a 0.7 percent expansion. Horsfield said it was “largely due to the momentum of services”, which she expects to grow by 0.9 per cent, following encouraging labor market data towards the end of the leave scheme.

UK GDP for September was still 0.6 per cent below where it was in February 2020, meaning new data released on Friday could show with the monthly reading that output recovered to pre-pandemic levels in October.

Horsfield said there was “little doubt that the economy pushed forward again in October”, with the only question being the extent of the increase. The IHS Markit Purchasing Managers’ Index, or PMI, has jumped to a jump three months high In October. Retail sales also grew more than expected and measures of consumer activity, such as banking transactions and retail numbers, improved.

Line chart of GDP index, 2018 = 100 showing that the UK economy may return to pre-pandemic levels in October

The impact of supply chain disruptions, with many factories not receiving the materials they need to meet demand, is expected to have weighed on manufacturing output. But Horsfield’s forecast of a 0.5 percent contraction in October is gloomier than the 0.1 percent expansion of the consensus.

The data will be released ahead of the Bank of England’s Monetary Policy Meeting for December, at which some economists expect a rise in interest rates. It is possible that the Omicron coronavirus variant will prevent the bank from tightening, but “we doubt these GDP figures will do that”, Horsfield said. Valentina Romei

When will the US labor market return to normal?

Workers are in extremely high demand, and the US has an extremely limited number of them.

Americans will get an insight into how workers navigate this scenario on Wednesday, when the Department of Labor releases its job survey and labor turnover survey for the month of October.

Workers resigned their jobs en masse this year, probably because they were overwhelmed with better deals. The September issue of Jolts showed a series of high 4.4 million American workers resigning their jobs. The previous record was set in August.

Economists said a large number of those quitting probably already had a different role. Many expect that the large number of resignations is likely to continue as long as competition for labor remains intense and employers strip top talent from their competitors to fill gaps.

After the Department of Labor reported Friday that labor force participation is improving but that employers only 210,000 jobs added in November – less than half of the 550,000 they expected to – economists will keep a close eye on whether employers were able to find new workers to recruit in October. The payroll figures released for October were strong, so the number of appointments is expected to be as well.

The timing of the report means that it could show a boost caused by the withdrawal of the Delta coronavirus variant, just as the world is struggling with the spread of the Omicron variant. But it could also show that the recovery is more volatile than hoped, such as last week’s job report.

“The underlying momentum of the labor market is still strong, but [November] shows more uncertainty than expected, ”said Nick Bunker, an economist at Indeed Workshop. Taylor Nicole Rogers

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