- October’s core CPI probably rose 0.4%, but the risks are biased to the downside.
- Hotel room rates, health insurance and new vehicle prices all seem likely to have pushed up the core.
- Our medium-term optimism remains, but disinflation won’t proceed in a neat straight line every month.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Falling EZ inflation and our call for policy rate cuts mean we do not expect faster ECB QT...
- ...The Bank has pushed ahead with conflicting policies before, however, so the risk remain.
- If we are wrong, the most likely rate of faster ECB balance-sheet shrinkage is tiny, just €30B per month.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- House Republicans are yet to coalesce around a funding plan that could pass the Senate…
- …That might change, but right now a government shutdown starting at midnight Friday looks likely.
- The spike in inflation expectations will reverse, but Fed policymakers will be unhappy in the meantime.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Italian GDP will probably fall in Q4, even if revisions don’t show it declined in the third quarter.
- Budget negotiations are heating up; BTP yields will stay high next year despite a likely fall in spreads.
- Spain may end the year with a government after all, but this won’t change the economic outlook.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Nudging back up, but no sustained increase visible on the near horizon
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Households’ debt service ratios have edged higher since the Fed starting raising rates, but remain low.
- Debt service costs will rise further, but are unlikely to trigger sudden cuts to discretionary spending.
- Consumers’ sentiment likely improved in November, and inflation expectations probably fell.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The central message from ECB policymakers is still that interest rates won’t be lowered any time soon...
- ...but we still see a path to a first rate cut in March, as core inflation undershoots the ECB’s forecasts.
- Sticky wage growth and rising unit labour costs are the main threats to our forecasts for cuts in H1 2024.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Our base case forecast is immaculate disinflation; no recession but inflation heading back to the target.
- The net risk, though, is of a steeper downturn as businesses react to margin pressure with big layoffs.
- In that case, inflation will fall faster and the Fed will cut aggressively, but credit and some stocks will suffer.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
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Ian Shepherdson (Chief Economist, Chairman and Founder)Global
- Inventories are noisy and can’t be forecast with confi- dence, but signs point to drag on Q4 GDP growth.
- Real personal incomes after tax fell outright in the third quarter, but will rebound in the fourth...
- ...Spending, though, likely will head in the opposite direction, we see few signs of an impending rollover.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- German industry was in recession in early H2, and we suspect it will remain so at least to year-end.
- Spanish industry ended Q3 on a high but was still also in recession.
- Construction will continue to struggle; risks to our call for EZ GDP to rebound are to the downside.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The Fed’s Senior Loan Officer Survey shows slightly fewer banks are still tightening lending standards…
- …But on one is easing lending standards, and tight credit will constrain growth for the foreseeable future.
- Consumer credit growth likely rebounded in September, but the trend is slowing.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The PMIs warn that the slowdown in the EZ economy is becoming more broad-based...
- ...But they’re probably too pessimistic, and investor sentiment points to better headlines ahead.
- German factory orders edged higher in September, but the details show that overall weakness persists.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Pointing to better times ahead for the economic surveys.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The slowdown is becoming broad-based.
Claus Vistesen (Chief Eurozone Economist)Global
In one line: The slowdown is becoming broad-based.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Headline lifted by large orders, and revisions signal downside risks to the initial Q3 GDP estimate.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The gradual downshift in job growth continues, but labor demand is not collapsing.
- If unemployment hits 4%, the Fed will struggle to jus- tify sticking to the line that it could hike again.
- Wage growth is slowing, with a further softening in the pipeline; further policy tightening is unnecessary.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
The rebalancing continues; chance of a Dec hike dips further
Ian Shepherdson (Chief Economist, Chairman and Founder)US
In one line: Net exports in goods were virtually flat in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
