KUWAIT: Inflation in the US rose in October, with the year-over-year figure rising 2.6 percent, up from 2.4 percent the previous month. The month-over-month figure rose 0.2 percent, meeting expectations and matching the rise seen in the previous month. Meanwhile, core inflation rose 3.3 percent y/y, unchanged from the previous month. The monthly core price increase stood at 0.3 percent, meeting expectations and the same pace seen in September. The main contribution to the rise in the figures came from housing and shelter, which accounted for half of the monthly all items increase. Expectations for a rate cut in December are currently around 58 percent.

US producer price index

In October 2024, US factory gate prices rose by 0.2 percent month-on-month, following a revised 0.1 percent increase in September, aligning with expectations. Services prices increased by 0.3 percent (up from 0.2 percent in September), driven significantly by a 3.6 percent rise in portfolio management costs. Other sectors with price increases included machinery and vehicle wholesaling, airline services, computer retailing, outpatient care, and cable services.

Goods prices rose slightly by 0.1 percent, ending a two-month decline, with carbon steel scrap prices surging 8.4 percent and increases noted for meats, diesel, vegetables, and oilseeds. Year-on-year, the Producer Price Index (PPI) rose by 2.4 percent, above September’s 1.9 percent and the 2.3 percent forecast. Core PPI increased by 0.3 percent monthly (up from 0.2 percent), and the annual core rate reached 3.1 percent, surpassing expectations of 3 percent.

Unemployment claims

In the week ending November 9th, US unemployment benefit claims dropped by 4,000 to 217,000, the lowest since May, and below the expected increase to 223,000. Continuing unemployment claims decreased by 19,000 to 1,873,000 in late October. This data reinforces the strength of the US labor market despite recent Federal Reserve tightening, giving the central bank flexibility to slow monetary easing if inflation persists. The four-week average for initial claims, which smoothens out fluctuations, decreased by 6,250 to 221,000. On a non-seasonally adjusted basis, initial claims rose by 16,735 to 229,478, mainly due to a rise in California offsetting a decline in Michigan.

Retail sales

In October 2024, US retail sales rose by 0.4 percent month-over-month, surpassing expectations of a 0.3 percent increase, following a revised 0.8 percent gain in September. The largest sales increases were seen in electronics & appliance stores (2.3 percent), auto dealers (1.9 percent), and food services & drinking places (0.7 percent). Gains were also recorded in building materials, nonstore retailers, general merchandise, food & beverage, and gasoline stations. However, sales fell in categories like miscellaneous store retailers (-1.6 percent), furniture (-1.3 percent), sporting goods, and clothing. Excluding autos, sales edged up 0.1 percent. Core retail sales, excluding key categories tied to GDP calculations, decreased by 0.1 percent. The US Dollar Index closed the week at 106.69.

Words from ECB

The European Central Bank (ECB) indicated a potential move towards rate cuts during its December meeting, driven by expectations of easing inflation, particularly from lower energy prices. However, concerns remain over domestic inflation pressures like strong wage growth and weak labor productivity. Despite a positive inflation outlook, the ECB emphasized the need for more data before making policy decisions. Policymakers highlighted that any rate cut would rely on the economic outlook and clear evidence of reduced inflation pressures, signaling a cautious, data-dependent approach. The EUR/USD currency pair closed the week at 1.0541.

UK GDP

The UK economy slowed more than expected in the third quarter, following an unexpected contraction in September as concerns mounted over the Labor government’s fiscal plans. According to the Office for National Statistics, GDP rose by just 0.1 percent compared to the previous quarter, falling short of the 0.2 percent growth economists had anticipated. In September alone, the economy shrank by 0.1 percent, contrasting sharply with the forecasted 0.2 percent expansion. The disappointing figures pose a challenge to Prime Minister Keir Starmer’s pledge to boost UK growth to 2.5 percent annually, aiming to make it the fastest among the Group of Seven economies.

After leading G-7 growth in the first half of the year and rebounding from last year’s mild recession, the UK’s growth slowed significantly from 0.5 percent in the second quarter. The decline appears linked to growing concerns over Labor’s fiscal policies, with consumer and business confidence plunging in September amid fears of tax increases. These fears materialized on October 30, when Labor announced £40 billion ($50.7 billion) in tax hikes, with businesses bearing most of the burden. The GBP/USD currency pair closed the week at 1.2617

Australia’s unemployment

Australia’s unemployment rate came in at 4.1 percent, marking the third month of steady unemployment after reaching 3.5 percent in June. The participation rate increased to 67.2 percent, while the underemployment rate remained at 6.3 percent. Meanwhile, markets are currently expecting no change from the Reserve Bank of Australia, with only 2.5 bps priced in for a December cut.

Australia’s wage growth

Australia’s wage growth showed signs of moderation in Q3 2024, with the seasonally adjusted wage price index rising 3.5 percent year-on-year, down from 4.1 percent in the previous quarter. This marked the weakest growth since late 2022 and fell short of expectations for a 3.6 percent increase. Public sector wage growth outpaced private sector growth for the first time since 2020, at 3.7 percent compared to 3.5 percent. Meanwhile, quarterly wage growth remained steady at 0.8 percent, unchanged from the prior two quarters, and below market forecasts of 0.9 percent. These figures underline a cooling in wage growth momentum. The AUD/USD currency pair closed the week at 0.6461.

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USD/KWD closed last week at 0.30760.