★ United States: The Federal Reserve is gradually decreasing
US employment data Although the non-agricultural employment population is not as good as expected, the unemployment rate will be lower than expected. At the FOMC meeting on November 3, it announced the gradual reduction of its quantitative easing asset purchases. The signs of officials indicate that they hope to complete this work before the summer, which means that starting from December, the monthly asset purchases will be reduced by 15 billion US dollars.
The key report to watch will be consumer price inflation in September. After peaks reappeared in key areas, we have seen price increases at a moderate rate, but still faster than before the epidemic. Food and housing costs have risen particularly significantly. This will keep the year-on-year inflation rate high. The risk is that, given supply chain issues and inventory shortages, as we enter the critical holiday season, the inflation rate will rise further in the coming months.
Other economic data includes the National Federation of Independent Business Sentiment Survey. The key area we will focus on is the price intention series. We see more and more companies want to increase prices in an environment of rising costs and strong demand. This increase in pricing power will keep the Consumer Price Index (CPI) at a relatively high level for a longer period of time, and expectations for the Fed to raise interest rates will become higher and higher. At the same time, the plunge in car sales will drag down retail sales. This is more due to insufficient supply than falling demand, due to insufficient inventory, production bottlenecks and the fact that used car prices have risen 45% this year. With the exception of cars, these figures should remain positive as income increases and household wealth soars.
★ UK data is unlikely to test the market’s expectations for the Bank of England
market estimates,By the end of 2022, the UK will raise interest rates nearly three times, and the recent increase in energy prices has also stimulated market expectations for a previous interest rate hike. Given the long-term low natural gas reserves in the UK, electricity prices may face further pressure. However, we do not think that this will make interest rate hikes more likely-if there is any difference, it is a modest factor because it will inhibit consumer activity. On the contrary, the prospects for austerity policies depend on wage growth, and here, hope may be boosted by another reliable employment report.
Weekly data shows that the 3-month unemployment rate has fallen again, and recruitment data usually show that the demand recovery in recent months has been encouraging. The vacancy rate is high, but with the end of the layoff plan, we may also see some layoffs in the next few months. The impact on unemployment may not be significant, partly because some unemployment will appear to be "inactive."
In short, the job market is in a state of mismatch. Therefore, the question for policy makers is whether the large salary increases for shortage roles (such as truck drivers) have spread elsewhere, and the jury still has not done so. We believe that the soaring cost of living in winter means that the Bank of England may be cautious, and we don't expect to raise interest rates for the first time until May 2022. There are also a few "pigeons" from the Bank of England on the calendar next week to see if they affect the current market expectations.
In addition, we will get the GDP data in August. After the stagnation in July, these data may see a slight increase in growth.
★ Euro area: Production is expected to decline, but trade continues to grow
Focus on the Euro zone with the release of August trade and production data. The shortage continues to affect production, which is expected to drop again in August. Despite supply chain friction and transportation issues,But trade is still growing. This will make the August trade balance an interesting number to understand the performance of 's net export in the third quarter.
★ next week's financial calendar
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