Datatrack - Blog

2024-12-18

U.S. November Retail Sales Beat Expectations, Market Delays Fed Rate Cut Expectations Again

The U.S. retail sales exceeded market expectations in November, demonstrating the resilience of U.S. consumer spending. This has led the market to further postpone its expectations for the Federal Reserve (Fed) to lower interest rates next year. The U.S retail sales grew by 3.8% year-on-year (prior: 2.9%) and 0.7% month-on-month (prior 0.5%) in November, according to U.S. Census Bureau on December 17, both outperforming market forecasts of 3.6% and 0.6%, respectively. Among 13 major retail categories, seven showed growth, with the increase primarily driven by automotive-related sales and e-commerce: Automotive-related sales: Up 6.5% year-on-year (previously 3.7%) and 2.6% month-on-month (previously 1.8%). This reflects promotional discounts from car dealerships that spurred purchases. Additionally, vehicle damage caused by October's hurricanes and concerns about potential tariffs under Trump’s policies may have further boosted sales. E-commerce sales: Up 9.8% year-on-year (previously 6.9%) and 1.8% month-on-month (previously 0.1%). This growth was largely driven by Thanksgiving and Black Friday promotions. However, it may also indicate that some consumers, constrained by limited purchasing power, shifted toward discounted goods. This aligns with a decline in food services and bar sales, which fell 0.4% month-on-month (previously up 0.9%). Excluding automotive and gasoline station sales, core retail sales grew 3.9% year-on-year (previously 3.8%) and 0.2% month-on-month (unchanged). Further excluding food services and building materials, control group core retail sales increased 4.3% year-on-year (previously 3.7%) and 0.4% month-on-month (previously down 0.1%). Read more at Datatrack Overall, while e-commerce and dining-out data may suggest weakening spending capacity, particularly among lower-income groups, consumer spending as a whole remains resilient. It continues to provide strong support for fourth-quarter GDP growth. The latest forecast from the Atlanta Fed projects U.S. real GDP growth of 3.1% in Q4, up 0.3 percentage points from Q3. Later today, the Federal Reserve is set to announce its final rate decision and Summary of Economic Projections for the year. While strong consumer growth persists, downside risks in the labor market remain. The market expects the Fed to cut rates by 25 basis points in December but anticipates a slower pace of rate cuts in 2025. According to FedWatch, the Fed is now expected to cut rates by 25 basis points in March and October 2025 (previously March and June). (Fed Rate Cut Expection in 2025, Source: CME FedWatch Tool)

By TrendForce

2024-12-17

China's November Financial Institution Loan Growth Hits Lowest Pace in Nearly 23 Years

China financial institution loans growth fell to its lowest level in nearly 23 years in November, highlighting the limited impact of stimulus measures introduced since September and the continued weakness in consumer and business confidence. Read more at Datatrack In term of monetary supply, broad money (M2) grew 7.1% year-on-year in November, down 0.4 percentage points from the prior period. Meanwhile, narrow money (M1) contracted 3.7%, though it improved by 2.4 percentage points, marking the second consecutive month of recovery. The M1-M2 gap narrowed further to -10.8%, suggesting slight improvement in financing demand from consumers and businesses, though overall demand remains insufficient. Read more at Datatrack Since September, the Chinese government has implemented a series of stimulus measures, including "trade-in" programs to boost automobile and home appliance consumption, as well as strengthened support for high-tech manufacturing. However, the latest monthly economic data suggest that domestic demand recovery remains limited. On the consumption front, retail sales grew 3.0% year-on-year in November (down from 4.8% previously), falling well short of the 5% market expectation. Sales of non-essential goods, such as apparel, jewelry, and cosmetics, remained weak. While the sharp decline in growth was partially attributed to the "Double 11" shopping festival being brought forward to October, the growth rate still underperformed September’s 3.2%. Read more at Datatrack In terms of investment and production, fixed asset investment grew 3.3% cumulatively (down from 3.4%). Manufacturing investment remained stable at 9.3% year-to-date, supported by government policies targeting high-tech sectors. Industrial production maintained growth at 5.4%. However, the property sector showed no significant improvement, with cumulative real estate investment contracting by 10.4%, a 0.1 percentage point decline from the previous period. Infrastructure investment also slipped by 0.1 percentage points to 4.2%. Read more at Datatrack Overall, November's financial and economic data reaffirm that China’s stimulus measures since September have struggled to boost market confidence and consumption demand effectively. Sluggish loan growth, weak retail sales, and decelerating investment underscore the limited transmission of policies to the real economy, with domestic demand recovery remaining fragile. In light of insufficient domestic demand and weakened confidence, the Chinese government may need to further expand monetary easing and adopt more proactive fiscal measures. This includes ensuring more effective capital flows into the real economy, stimulating domestic demand, and providing stronger support for economic growth in 2025.

By TrendForce

2024-12-16

China's Retail Sales Weaken Unexpectedly in November, Prompting Urgent Policy Stimulus

China's retail sales in November showed an unexpected slowdown, with growth falling significantly short of market expectations, highlighting the pressing need for the Chinese government to strengthen measures aimed at boosting consumption. China's retail sales grew by 3.0% year-on-year in November, a decline of 1.6 percentage points from the previous month, according to data released by the National Bureau of Statistics (NBS) on December 16, falling well below market expectations of 5.0%. The slower growth primarily reflects declines in the sales of non-essential goods, including apparel, jewelry, beverages, and tobacco. Among these, cosmetics sales saw a sharp contraction, with annual growth plummeting to -26.4% from 40.1% in the prior period. In contrast, automobiles (6.6%) and household appliances (22.2%), supported by the "trade-in" policy, continued to grow. Excluding automobile sales, retail sales of other consumer goods grew by only 2.5%, down 2.4 percentage points from the prior month, indicating that consumer spending and confidence have not broadly recovered despite stimulus measures. Read more at Datatrack In terms of industrial production, China's industrial output grew by 5.4% year-on-year in November, slightly exceeding the previous month and market expectations of 5.3%, reflecting continued support for high-tech manufacturing. However, the growth in industrial production outpaced retail sales, highlighting persistent domestic oversupply issues. Read more at Datatrack In recent years, China has typically relied on exports to alleviate oversupply and drive economic growth. However, with Donald Trump set to assume the U.S. presidency, the export-driven growth model—accounting for 20–30% of GDP growth—may face challenges, necessitating a faster pivot toward domestic consumption as the primary growth driver. Last week, the Central Economic Work Conference revealed significant adjustments to China's economic priorities for the coming year. For the first time, consumer demand was elevated to the top priority among the nine key tasks (previously ranked second for the past two years). In monetary policy, the government reintroduced terms like "moderate easing" the first such language since 2014 and pledged to "adjust reserve requirement ratios and interest rates at appropriate times". Fiscal policy is also set to become more proactive, with explicit mentions of "raising the deficit ratio" and "moderately increasing central budgetary investment." While these announcements reflect the government's determination to improve economic growth and domestic demand in 2024, the communiqué lacked specifics on the scale and implementation of these measures, leading to a muted market reaction.

By TrendForce

2024-12-13

U.S. PPI Exceeds Expectations in November, but Rate Cut Expectations Remain Unchanged

The U.S. Producer Price Index (PPI) for November significantly surpassed market expectations, further solidifying the Federal Reserve’s (Fed) anticipated narrower rate cut path for 2025. Additionally, the same day’s report on initial jobless claims showed an increase that exceeded market forecasts, aligning with recent signs of labor market cooling. Following the release of these data, all three major U.S. stock indices closed lower, with the Dow Jones Industrial Average marking its sixth consecutive decline. Meanwhile, the yield on the 10-year U.S. Treasury note continued to climb. PPI Exceeds Expectations The U.S. Producer Price Index (PPI) for November rose by 3.0% year-on-year (previously 2.6%), marking the second consecutive month of acceleration, according to U.S. Bureau of Labor Statistics on December 12. On a monthly basis, the PPI increased by 0.4% (previously 0.3%), exceeding market expectations of 0.2% and hitting a six-month high. Core PPI, which excludes volatile food and energy prices, rose by 3.5% year-on-year (previously 3.4%) and by 0.2% month-on-month (previously 0.3%). The increase in PPI was primarily driven by a 0.7% rise in final demand goods (previously 0.1%), with food prices surging by 3.1% month-on-month (previously 0.0%), contributing to nearly 80% of the total increase in final demand goods. Other categories of goods showed minimal changes month-on-month. Conversely, final demand services prices declined for the fourth consecutive month, rising only 0.2% (previously 0.3%). Key components of the Federal Reserve’s preferred Personal Consumption Expenditures (PCE) price index, such as outpatient care (0.0%, previously 0.4%), nursing home care (0.1%, previously 0.8%), airfare (-2.1%, previously 2.6%), and asset management services (-0.6%, previously 3.1%), all recorded declines. Read more at Datatrack Unemployment Claims Reflect a Cooling Labor Market The jobless claims data showed that initial claims for unemployment benefits rose to 242,000 in the previous week, up 17,000 from a revised 225,000, returning to levels seen two months ago. The four-week moving average increased to 224,250 from a revised 218,500, up by 5,750. Read more at Datatrack Continuing claims for unemployment benefits rose by 15,000 to 1,886,000, maintaining a near three-year high. These figures align with the upward trend in unemployment reported for November but may partially reflect seasonal effects associated with the Thanksgiving holiday. Read more at Datatrack Overall, the rise in PPI was primarily attributed to the sharp increase in volatile food prices, while PCE-related service prices continued to show signs of deceleration. However, changes in trade tariffs and immigration policies could potentially reduce the downward momentum in goods prices, slowing the pace of overall inflation deceleration. Meanwhile, the labor market continues to show signs of cooling, reinforcing expectations for the Federal Reserve to proceed with a December rate cut. Nevertheless, the path for rate cuts in 2025 remains constrained, with markets anticipating a narrower scope for easing. U.S. 10-year Treasury yields rose by 5.5 basis points to approximately 4.33%, while all three major U.S. stock indices closed lower.

By TrendForce

2024-12-12

U.S. CPI Continues to Rise in November, Fed Likely to Narrow Rate Cut Path for Next Year

The U.S. November Consumer Price Index (CPI) release met market expectations and reinforced anticipation for another Federal Reserve (Fed) rate cut this month. Following the data release, the S&P 500 index halted a two-day decline, while the Nasdaq index, buoyed by tech stocks, surpassed the 20,000-point mark for the first time. Meanwhile, the 10-year Treasury yield resumed its upward trajectory. Data published by the U.S. Bureau of Labor Statistics on December 11 showed that the November CPI increased by 2.7% year-over-year (previous 2.6%), marking the second consecutive month of acceleration. The month-over-month increase was 0.3% (previous 0.2%). Core CPI maintained its year-over-year growth at 3.3% (unchanged from previous), with a month-over-month increase of 0.3% (also unchanged). Read more at Datatrack Breakdown the components, the CPI rise primarily reflects a narrowing decline in energy prices, with the year-over-year decrease moderating to 3.2% (previous -4.8%). Core goods prices exhibited a similar trend, with the year-over-year decrease narrowing to 0.7% (previous -1.2%), indicating accelerated annual growth in new and used vehicle prices. Core services prices continued their downward trend, with the year-over-year increase declining to 4.6% (previous 4.8%). Within this category, housing services prices, which constitute the largest component, continued to be influenced by new lease rent. Both residential rent and owners' equivalent rent saw annual increases fall to 4.4% (previous 4.6%) and 4.9% (previous 5.2%), respectively. However, the overall level remains elevated, presenting the main obstacle to further inflation reduction. (November CPI Component MoM, Source: BLS) Overall, this uptick primarily reflects the continuing narrowing of price declines in energy and core goods, while a weakening base effect simultaneously drove up the year-over-year inflation rate. The overall increase aligned with market expectations. The market has further increased its anticipation of a Fed rate cut in December, with the FedWatch tool indicating a 98% probability of a 25 basis point cut. The certainty of a rate cut, coupled with strong performance in tech stocks, ended the S&P 500's two-day decline and propelled the Nasdaq index above 20,000 points for the first time. However, considering that the downward momentum in core goods prices may not be as strong next year as it was this year, and that service price declines are expected to remain slow, combined with November employment data showing a continued slowdown in the labor market without significant deterioration, these factors align with the Fed's scenario for gradual interest rate reduction. Consequently, the market widely anticipates that the Fed will narrow its Summary of Economic Projections (SEP) interest rate dot plot to around 50-75 basis points (compared to 100 basis points in the September SEP) at its December meeting. Reflecting these expectations, the 10-year Treasury yield rose again by approximately 4.5 basis points to around 4.27%. (Fed Rate Cut Expectation in 2025, Source: FedWatch)

By TrendForce

2024-12-11

Middle East Geopolitics & OPEC's Production Delay Boost Oil Prices: What Lies Ahead for Long-Term Trends?

Global crude oil prices have been volatile since the third quarter of this year. Recently, uncertainties surrounding Middle Eastern geopolitics, spurred by the collapse of the Syrian government, alongside OPEC+'s decision to postpone its January 2025 production increase to April, have collectively driven WTI and Brent crude oil prices up by approximately 2.3% within a few days to $68.6 and $72.4 per barrel, respectively. However, these factors appear to offer only short-term support for oil prices, with their long-term trajectory remaining unclear for the following reasons: Weak Demand in China Despite the Chinese government launching a series of easing policies in September, recent inflation data indicates that domestic consumer demand remains weak. Moreover, a recent report by the EIA highlights that the increasing adoption of electric vehicles and liquefied natural gas trucks in China is expected to further reduce the country's demand for crude oil. Trump’s Energy Policies With Donald Trump re-elected as U.S. President and appointing Lee Zeldin as head of the Environmental Protection Agency, U.S. energy policy is expected to shift further toward traditional energy sources. Currently, U.S. crude oil production is at a historical high, and the EIA's December report projects that even if refinery output decreases in the future, crude oil production is likely to continue growing. OPEC Resuming Production Increases Although OPEC announced on December 5 a delay in its planned January 2025 production increase to April, the EIA estimates that while this reduction could lower global crude oil inventories by approximately 700,000 barrels per day in the first quarter of 2025, subsequent production increases by OPEC and continued production growth by non-OPEC countries may lead to a daily global inventory increase of about 100,000 barrels. While crude oil prices have seen short-term support from Middle Eastern political instability and delayed production plans, longer-term dynamics remain uncertain. Factors such as weak demand in China, anticipated production increases by OPEC, and ongoing supply growth from non-OPEC countries are likely to maintain pressure on oil prices. The EIA projects that Brent crude oil prices will gradually decline from $74 per barrel in the first quarter of 2025 to $72 per barrel by the fourth quarter. Read more at Datatrack

By TrendForce

2024-12-09

China's November CPI Indicates Deflation Remains Unaffected by Policy Stimulus

China CPI increased by 0.2% year-on-year in November, a decrease of 0.1 percentage points from the previous period, according to data released by the National Bureau of Statistics on December 9. On a month-on-month basis, CPI declined by 0.6%, falling 0.3 percentage points compared to the prior month, indicating that despite dual monetary and fiscal stimulus measures, deflationary pressures in China have not significantly eased. Breaking down the components, food prices, a key driver of CPI growth, saw a further decline, with the year-on-year increase narrowing by 2 percentage points to 0.9%. Non-food prices posted a year-on-year change of 0.0%, up 0.3 percentage points, reflecting a slower decline in crude oil prices. Meanwhile, service prices maintained a year-on-year increase of 0.4%. Core CPI, which excludes food and energy, rose by 0.3% year-on-year, a marginal increase of 0.1 percentage points from the prior period. Read more at Datatrack In terms of the Producer Price Index (PPI), China's PPI declined by 2.5% year-on-year in November, an improvement of 0.4 percentage points from October, but marking the 26th consecutive month of contraction. On a month-on-month basis, PPI rose by 0.1%, up 0.2 percentage points from the previous period. The producer goods prices fell by 2.9% year-on-year, an improvement of 0.4 percentage points from October, driven by sustained demand resulting from various incremental policies. Consumer goods prices narrowed their year-on-year decline to 1.4%, improving by 0.2 percentage points. Among durable goods, automobile factory prices continued to drop by 3.1% year-on-year, while the output prices of computers, communications, and other electronic products reduced their year-on-year decline by 0.4 percentage points to 2.5%. Read more at Datatrack Overall, China's recent accommodative policies appear to have delivered limited impact. While some economic indicators have shown signs of recovery, overall consumer spending remains weak, keeping deflationary pressures unresolved. As the Central Economic Work Conference convenes this week, markets will closely watch for stronger stimulus measures from the Chinese government to address deflation risks effectively.

By TrendForce

2024-12-09

Key Focus This Week: U.S. CPI & Euro Area and Australia Monetary Policy

Last week, U.S. stock sectors experienced fluctuations, but the strong performance of large-cap technology stocks propelled the S&P 500 Index to a new record high, closing at 6,090.27 points. In the bond market, the 10-year U.S. Treasury yield continued its weakening trend, retreating further to around 4.15%, while the U.S. Dollar Index fluctuated and ultimately settled near 106. Key Economic Data Review for Last Week U.S. ISM Manufacturing PMI: The U.S. ISM Manufacturing PMI for November was 48.4 (previous: 46.5). This increase was primarily driven by improvements in new orders (50.8, previous: 47.1), production (46.8, previous: 46.2), and inventories (48.1, previous: 42.6), reflecting a partial recovery in demand following the conclusion of the presidential election. However, the customer inventories index edged up slightly to 48.1 (previous: 46.8), indicating that end-user demand remains subdued. Read more at Datatrack U.S. ISM Services PMI: The U.S. ISM Services PMI fell to 52.1 in November (previous: 56.0), marking its lowest level in three months. The decline was mainly attributable to drops in the business activity index (53.7, previous: 57.2) and the new orders index (53.7, previous: 57.4), influenced by uncertainty surrounding future tariff policies and cabinet changes under former President Trump. Additionally, the employment index also declined to 51.3 (previous: 53.0), aligning with signs of a slowing labor market. Read more at Datatrack U.S. November Employment Situation: November's employment data presented mixed results. Nonfarm payrolls, based on the establishment survey, rebounded to 227,000 (previous: 12,000), driven by notable job gains in education and healthcare (79,000) and government employment (33,000). Leisure and hospitality (53,000) and manufacturing (22,000) also recovered significantly after disruptions from hurricanes and strikes. However, the unemployment rate, based on the household survey, edged up to 4.2% (previous: 4.1%), while the labor force participation rate fell to 62.6% (previous: 62.7%), reflecting an increase in the unemployed population. Although JOLTs data suggests the labor market remains in a state of low hiring and low layoffs, vulnerabilities are becoming increasingly apparent, warranting close monitoring. Read more at Datatrack Key Economic Data for This Week Australia Interest Rate Decision (12/10): Despite a significant decline in inflation and slowing economic growth, Australia's labor market remains robust, and inflation has not yet returned to the Reserve Bank of Australia's target range of 2-3%. Consequently, markets expect the RBA to maintain interest rates unchanged, citing potential upside inflation risks, with the first rate cut anticipated in Q1-Q2 of 2025. Read more at Datatrack U.S. CPI (12/11): The U.S. CPI for October rose due to low base effects in Q4 and seasonal demand from holiday shopping. Markets expect this trend to continue in November. According to data from the Cleveland Federal Reserve, November CPI is projected at 2.70% (previous: 2.58%), while core CPI is forecast to remain at 3.30% (previous: 3.30%). Read more at Datatrack Eurozone Interest Rate Decision (12/12): Given the Eurozone's persistently weak economic performance, with both manufacturing and services sectors in contraction, markets expect the European Central Bank to implement another 25-basis-point rate cut at this meeting and potentially lower rates by a total of 100 basis points in 2025. Read more at Datatrack

By TrendForce

2024-12-06

Global Monetary Policy Outlook for 6 Major Economies (Dec 2024)

As major global economies adjust their interest rate policies, financial markets continue to focus on central banks' monetary policy directions. From the Federal Reserve's gradual rate cuts to China's multiple rounds of easing measures, and the contrasting policy stances of Japan and Australia, the challenge of balancing inflation and economic growth remains prominent. United States Amid soaring inflation, the Federal Reserve raised the federal funds rate to a 40-year high during 2022-2023 to curb price increases. With restrictive rates exerting downward pressure on the economy, inflation gradually declined, and the risk of labor market deterioration intensified, prompting the Fed to initiate rate cuts in September. The federal funds rate has since decreased by 75 basis points (bps) from 5.25%-5.50% to 4.50%-4.75%. As the labor market conditions have improved since September and core services inflation remains sticky, the Fed noted in its November minutes that a gradual shift toward a more neutral policy stance could be reasonable if inflation and employment align with expectations. Markets anticipate another 25 bps rate cut in December but project the 2025 rate cut path may narrow to 50-75 bps, down from the previous forecast of 100 bps in September. Read more at Datatrack China Following property market reforms in 2021 that led to a sharp decline in housing prices, domestic consumption and investment plummeted, plunging China into a deflationary crisis. In response, China resumed rate cuts in July and implemented further monetary measures such as reserve requirement and rate reductions in September to bolster economic growth. The one-year loan prime rate (LPR) has dropped by 35 bps from 3.45% to 3.1%. While recent fiscal and monetary stimulus measures have shown preliminary improvements in retail sales, industrial production, and PMI data, the real estate sector—China's economic backbone—remains weak. Markets expect the People's Bank of China to cut rates by another 25-50 bps in December and introduce additional fiscal stimulus next year. Read more at Datatrack Japan Prolonged yen depreciation led to imported inflation, which, combined with the strongest spring wage hikes in 30 years, prompted the Bank of Japan (BOJ) to raise rates by 10 bps in March. This move ended eight years of negative interest rates and terminated yield curve control (YCC). The BOJ's benchmark rate has risen by 35 bps, from -0.1% to 0.25%. However, with core inflation above the BOJ’s 2.0% target and real wage growth turning negative after a brief recovery in mid-2023, markets expect another 25 bps rate hike in December or January 2025. Read more at Datatrack Eurozone & Canada The European Central Bank (ECB) raised rates by 450 bps during 2022-2023 to combat inflation. Although this has significantly reduced inflation, the Eurozone's economic growth lacks the resilience seen in the U.S. As inflation nears the 2% target, the ECB preempted the Federal Reserve by initiating rate cuts in June. The main refinancing rate has decreased by 75 bps from 4.5% to 3.75%, with another 25 bps cut expected in December due to persistent economic weakness. Read more at Datatrack In Canada, similar trends are evident, with the added risk of deflation. The Bank of Canada has reduced its policy rate by 125 bps since June, bringing it to 3.75%. Markets expect another 25 bps cut in December to counter ongoing economic sluggishness. Read more at Datatrack Australia Unlike other advanced economies, Australia has maintained its rates despite a sharp decline in inflation, citing potential upide risks to inflation. This makes Australia the only major economy that has yet to begin rate cuts. Markets anticipate the Reserve Bank of Australia will keep rates steady in December, with the first rate cut likely deferred to April 2024. Read more at Datatrack Global monetary policies have diverged significantly as inflationary pressures ease. The U.S. may adopt gradual rate cuts as labor markets stabilize, while Europe and Canada accelerate their easing in response to economic stagnation. China continues its efforts to stabilize growth through rate cuts and fiscal measures amid a weak property sector. Meanwhile, Japan and Australia take contrasting approaches. Japan focuses on tightening monetary policy to normalize rates, driven by wage growth and inflation concerns, while Australia remains on hold, prioritizing inflation management over easing.

By TrendForce