13thDecember 2023
Wednesday
Majoreconomic announcements are lined up for Wednesday, December 13, 2023. TheUnited Kingdom is set to disclose its monthly Gross Domestic Product (GDP)figures, while the United States has a packed schedule with the release of themonthly Core Producer Price Index (PPI), overall PPI, and the Federal fundsrate, accompanied by a press conference. Additionally, New Zealand will unveilits quarterly GDP data, marking a significant day for global economic insights.
GBP - GDP m/m
Gross Domestic Product, is the mostencompassing indicator of a nation's economic health and the primary metric forassessing the overall condition of an economy.
In September2023, the country's real GDP saw a modest uptick of 0.2%, a marginal improvementfrom August's 0.1% growth, which was a downward revision from an initiallyestimated 0.2%. This slight increase, however, did not shift the overalleconomic stagnation, as no significant growth was noted in the quarter endingin September. The growth was mainly driven by the services sector, particularlyin professional, scientific, technical, and health and social work activities,which grew by 0.2% in September, albeit lower than the 0.3% increase in August.On the other hand, consumer-facing services experienced a 0.2% decline inSeptember, following a more substantial 0.7% fall in August. Production outputremained unchanged in September after falling by 0.5% in August, while theconstruction sector showed signs of recovery with a 0.4% growth after a 0.8%decline previously.
TL;DR
Sector
Growth in September 2023
Growth in August 2023
Notes
1 Overall GDP
0.2%
0.1%
Marginal improvement from August
2 Services
0.2%
0.3%
Growth mainly in professional, scientific, technical, and health/social work
3 Consumer-facing Services
-0.2%
-0.7%
Continued decline
4 Production
0.0%
-0.5%
No change after previous decline
5 Construction
0.4%
-0.8%
Recovery after previous decline
The projected forecast for the GDP m/mis showing an expected change of 0%, which is a minor decline from theprevious figure of 0.2%.
The upcomingannouncement for the GDP m/m figures is scheduled for Wednesday,December 13, 2023, at 07:00 AM GMT.
USD - Core PPI m/m
The CoreProducer Price Index (PPI) is an important economic indicator that tracks thechanges in prices paid to domestic producers for their goods, excluding themore volatile food and energy sectors. This exclusion makes it a more reliablemeasure of underlying inflation trends, as it is less affected by short-term swingsin food and energy prices, unlike the headline PPI.
In October 2023,the Core Producer Prices in the United States, which omit the costs of food andenergy, showed no change from the previous month, defying market predictions ofa 0.2% increase.
The projectedforecast for the Core PPI m/m suggests a rise to 0.2%, up fromthe previous rate of 0%.
The upcomingrelease of the Core PPI m/m data is scheduled for Wednesday, December13, 2023, at 1:30 PM GMT.
USD - PPI m/m
As a key predictor of consumer inflation,the principle is that when producers increase prices for goods and services,these higher costs are typically transferred to the consumer.
In October 2023,the United States experienced a 0.5% decline in producer prices from theprevious month, the largest drop since April 2020. The decrease was mainly dueto a 1.4% reduction in goods prices, led by a significant 15.3% fall ingasoline prices - the first such decline since May. This trend was echoed inprice reductions for other items like diesel fuel, hay, oilseeds, home heatingoil, liquefied petroleum gas, and light motor trucks. In contrast, tobaccoproducts saw a 2.4% price increase, along with upticks in butter and residualfuels. Service prices remained unchanged, breaking a six-month streak ofincreases. This was due to a combination of a 1.5% increase in final demandtransportation and warehousing services, a 0.1% rise in final demand services(excluding trade, transportation, and warehousing), offsetting a 0.7% decreasein final demand trade services margins.
TL;DR
Category
Change in October 2023
Notes
1 Overall Producer Prices
-0.5%
Largest drop since April 2020
2 Goods Prices
-1.4%
Leading factor in overall price decline
3 Gasoline Prices
-15.3%
First decline since May
4 Other Items (e.g., diesel fuel, hay, etc.)
Decrease
Price reductions in various items
5 Tobacco Products
+2.4%
Price increase
6 Service Prices
Unchanged
Breaks six-month streak of increases
7 Final Demand Transportation & Warehousing Services
+1.5%
Increase in prices
8 Final Demand Services (Excl. Trade, Transp., & Warehousing)
+0.1%
Slight rise in prices
9 Final Demand Trade Services Margins
-0.7%
Decrease in margins
The projectedforecast for the PPI m/m suggests a 0.1% increase, a reversalfrom the previous -0.5% decline.
The next releaseof the PPI m/m data is set for Wednesday, December 13, 2023, at 1:30PM GMT.
USD - Federal Funds Rate
Short-term interest rates play a centralrole in determining currency value, with traders primarily assessing otherindicators to forecast potential future rate changes.
In November, theFederal Reserve opted to keep the federal funds rate steady at 5.25%-5.5%,maintaining its 22-year high for the second consecutive meeting. This decisionunderscores the Fed's commitment to addressing inflation while avoidingexcessive tightening. Policymakers emphasized the need to assess therepercussions of prior rate increases, the time lag in the impact of policyadjustments on the economy, and broader economic and financial marketdevelopments. Federal Reserve Chair Powell indicated that the previouslyanticipated possibility of one more rate hike this year might no longer beapplicable, and rate cuts were not being considered. The central focus remainson the potential necessity for additional rate hikes.
TL;DR
Decision
Status in November
Notes
1 Federal Funds Rate
5.25%-5.5%
Maintained at 22-year high for second consecutive meeting
2 Policy Emphasis
Assessment & Caution
Focus on assessing impact of prior rate increases and broader economic developments
3 Future Rate Hikes
Potential
Previously anticipated hike may no longer apply, additional hikes possible
4 Rate Cuts
Not Considered
Currently off the table
The forecast forthe Federal Funds Rate suggests stability, with no changes expected,maintaining a rate of 5.5%.
The nextannouncement for the Federal Funds Rate is scheduled for Wednesday,December 13, 2023, at 7:00 PM GMT.
USD - FOMC Press Conference
The pressconference is a fundamental tool employed by the Federal Reserve to communicateits monetary policy position to investors. This event offers an extensiveexamination of the elements that have shaped recent decisions on interest ratesand policy, accompanied by discussions on economic factors like the anticipatedtrajectory of future growth and inflation. Of utmost significance, it furnishesvaluable insights and signals concerning the potential direction of futuremonetary policy.
In November, theFederal Reserve chose to keep the target range for the federal funds ratesteady at its 22-year high of 5.25%-5.5%, marking the second consecutivemeeting with this decision. The central bank's focus remained twofold:addressing inflation and avoiding excessive tightening of monetary policy.Policymakers stressed that any further adjustments to policy would beinfluenced by several factors, including the cumulative effects of previousrate hikes, the time it takes for monetary policy to impact the economy andinflation, and the ongoing developments in both economic conditions andfinancial markets. During the subsequent press conference, Federal ReserveChair Powell suggested that the September dot-plot, which had previouslyindicated a majority of participants expecting another rate hike beforeyear-end, might no longer be an accurate representation. Powell also clarifiedthat discussions about rate cuts had not yet taken place within the FederalOpen Market Committee (FOMC). The primary focus for the central bank remainedcentered on the potential need for additional rate hikes.
TL;DR
- Federal Reserve maintains federal funds rate at 5.25%-5.5%, the highest in 22 years.
- Decision marks second consecutive meeting without a rate change.
- Focus on combating inflation while avoiding overly tight monetary policy.
- Policymakers consider previous rate hikes' cumulative effects and monetary policy's lag time.
- Monitoring ongoing economic and financial market developments.
- Federal Reserve Chair Powell indicates September dot-plot for future hikes may be outdated.
- No current discussions within FOMC about rate cuts.
- Primary focus on the possibility of additional rate hikes.
The upcoming FOMC Press Conferenceis scheduled for Wednesday, December 13, 2023, at 7:30 PM GMT.
NZD - GDP q/q
The GrossDomestic Product (GDP) serves as the most comprehensive indicator of economicperformance, acting as the foremost barometer for assessing the overallwell-being and vitality of the economy.
New Zealand'seconomy had surpassed expectations with a 0.9% expansion in the June quarter ofthe previous year, elevating the yearly growth rate to 3.2% and steering clearof the technical recession territory. This unexpected turn was furtherbolstered by a revised increase of 0.1% in the March quarter figures, whichwere initially deemed negative. Typically, a recession was characterized by twosuccessive quarters of negative growth, underscoring the subtleties in economicanalysis. However, it was noteworthy that much of this growth was linked topopulation growth, with per capita GDP showing only a modest 0.2% rise in Juneand a 1.6% decline from October 2022 to March 2023. This discrepancyhighlighted why some people might have still felt economic strains despite theoverall positive growth figures. BNZ economist Doug Steel, who had predictedthis outcome, continued to point out the ongoing economic challenges faced bymany, regardless of the technical avoidance of a recession.
TL;DR
Aspect
Data
Notes
1 Overall GDP Growth (June Quarter)
0.9%
Exceeded expectations
2 Yearly Growth Rate
3.2%
Steered clear of technical recession
3 Revised March Quarter Growth
0.1% (Revised from Negative)
Initial negative growth corrected
4 Recession Definition
Two successive quarters of negative growth
Standard economic criterion
5 Per Capita GDP Growth (June)
0.2%
Modest rise
6 Per Capita GDP Decline (Oct 2022 - Mar 2023)
-1.6%
Significant decline
7 Economist's Perspective
Doug Steel: Ongoing economic challenges despite technical avoidance of recession
Acknowledges discrepancy between overall growth and individual economic strains
The projected GDPq/q figures suggest a downturn to -0.1%, a decrease from theprevious rate of 0.9%.
The upcoming GDPq/q is scheduled for release on Wednesday, December 13, 2023, at 9:45 PMGMT.
