Weekly Economic & Financial Commentary: Economic Resilience Continues to Challenge the Fed

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Summary

US: Even with Encouraging Inflation Developments, Economic Resilience Continues to Challenge the Fed

  • In line with last week’s CPI performance, the headline PPI increased 0.2% sequentially, two tenths below expectations. The resilience of the US consumer was also on display, as total retail sales increased a stronger-than-expected 1.3% in October, boosted in part by a 1.3% jump in motor vehicles and parts and a 4.1% increase at gas stations. . Weakness continued in the housing market, which is clearly in recession.
  • Next week: Durable Goods Orders (Wed), New Home Sales (Wed)

International: What’s Happening to Global Inflation?

  • This week, October CPI data was released for the UK, Canada and Japan, highlighting divergent paths for inflation in each economy. In the UK, headline CPI inflation rose to 11.1% year-on-year, with the electricity, gas and other fuels category up almost 90% compared to last year. Meanwhile, headline inflation in Canada has retreated from a recent peak, coming in at 6.9%, but underlying pressures continue to intensify. Lastly, Japan’s inflation is much more contained compared to the UK and Canada, although prices are rising by recent historical standards. Headline inflation accelerated to 3.7% in October.
  • Next week: Australia PMI (Med), Eurozone PMI (Med), UK PMI (Med)

Interest rate watch: Yield Curve Inversion Gets Deeper

  • Various points on the Treasury yield curve have inverted this year amid the Federal Reserve’s aggressive policy tightening cycle. The spread between the yield on the two-year Treasury and the 10-year Treasury first turned negative in the spring and has inverted even more in recent months, reaching a new low of -68 bps at the close on Thursday of this week. .

Topic of the Week: The Economics of the 2022 World Cup

  • What is expected to be the most watched sporting event in world history is back as 32 nations compete in Qatar from Sunday for the 2022 FIFA World Cup. We look at Qatar’s economy as well as our own predictions for the tournament.

Full report here.

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