Macroeconomics: The Day Ahead for 9 November

Today’s statistical schedule is again heavily front-loaded, with China’s weak inflation data and Japan’s mixed Economy Watchers (services) survey to digest ahead of Mexican CPI, and little else to distract from the focus on watching results from the US mid-term elections roll in, with many of the key races still much too close to call, but gridlock in Congress still looks to be the most likely outcome. There are a good number of central bank speakers, though only Fed’s Barkin and Williams are due to speak on the economy and monetary policy, but BoE Cunliffe’s speech at the FDIC on ‘Title Resolution for CCPs’ may be of interest given a good many regulatory concerns in the UK, following the Gilt market meltdown, particularly given Breeden’s comments on Monday about improving transparency in non-bank finance. Poland’s NBP is expected to hike rates 25 bps to 7.0%, as sky-high inflation (CPI 17.9% y/y, core 10.7% y/y) forces the dovish majority on the NBP to grudgingly cede some ground to the hawks, on what is a bitterly divided NBP MPC.

Commodity markets will focus on weekly EIA oil inventories, but with weather and logistics disruptions, the USDA’s monthly World Agricultural Supply and Demand (WASDE) report gets top billing, along with equivalent reports from China’s CASDE and Brazil’s Conab. A busier day for corporate earnings has results from Nissan and Tata Motors, ABN Amro and Commerzbank to digest, while DR Horton, Rivian Automotive and Wynn Resorts are among the highlights in the US. Govt bond supply features 10-yr supply in the UK, Germany and the US.

** China – October PPI & CPI **
While PPI was slightly higher than expected, it still dropped sharply (-1.3% y/y) for the first time since the end of 2020, even if the fall owes much to base effects, and with CPI dropping back to 2.4% y/y, as food price pressures eased significantly (7.0% y/y vs. prior 8.8%), with core CPI unchanged at a very low 0.6%, this continues to underline the weakness of domestic demand. Notably, Coal Mining prices (-16.5% y/y) and Ferrous Metal processing (-21.1% y/y) continue to pressure PPI lower, and with Zero-Covid lockdowns and little prospect of any resolution to the multitude of woes in the property sector, as export demand fades, PPI will likely fall further in coming months. While this along with a weaker CNY ostensibly imparts a greater competitive advantage in export terms, the pressures from the energy crisis and broader inflation suggest that there will be little reward for China as a result.