Aurelia Butler

Will the US inflation rate justify a quicker taper from the Fed? Federal Reserve chair Jay Powell said in testimony before the Senate on Tuesday last week that he no longer viewed inflation as “transitory”, and signalled openness to accelerating the pace of the central bank’s unwinding of crisis-era monetary policy. November’s consumer price index data, due to be published on Friday, will give the Fed evidence of how quickly inflation is progressing and whether a faster withdrawal of its monthly purchases of government bonds would be warranted. That debate is expected to happen at the central bank’s next policymaking committee meeting on December 14-15. “The November CPI update holds greater potential as an immediate influence on the path of Fed action although, at the end of the day, expectations hold that the inflation figures will only serve as further justification to wind down QE [quantitative easing] more quickly,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets. Last month’s CPI data showed that consumer prices had risen at the fastest pace in three decades. Prices in October rose by 6.2 per cent from October the previous year, and 0.9 per cent from the previous month, far outpacing the predicted level of 0.6 per cent. Economists polled by Refinitiv have forecast a 0.7 per cent rise for November. Rising energy costs were among the biggest drivers of inflation in October, with the CPI energy index rising 4.8 per cent from the previous month. Petrol prices at the pump fell over the month of November but were nevertheless consistently higher than prices in October, according to the US Energy Information Administration. Kate DuguidDid UK growth return to pre-pandemic levels in October?The UK economy may have rebounded in October to levels not seen since before Covid-19 took hold, helped by positive momentum ahead of the Christmas holiday.Economists polled by Reuters expect GDP to have grown 0.5 per cent between September and October — before global markets were shaken by news of the Omicron coronavirus variant in late November. Sandra Horsfield, economist at Investec, is more optimistic than the consensus view and has pencilled in expansion of 0.7 per cent. Horsfield said this was “largely thanks to the buoyancy of services”, which she expects to have grown by 0.9 per cent, following encouraging labour market data after the end of the furlough scheme. UK GDP for September was still 0.6 per cent below where it was in February 2020, meaning that on the monthly reading, new data released on Friday could show that output recovered to pre-pandemic levels in October.Horsfield said that there was “little doubt that the economy pushed ahead again in October”, with the only question being the extent of the increase. The IHS Markit purchasing managers’ index, or PMI, jumped to a three-month high in October. Retail sales also grew more than expected and measures of consumer activity, such as bank transactions and retail footfall, have improved.The impact of supply-chain disruptions, with many factories not receiving the materials they need to meet demand, is expected to have weighed on manufacturing output. But Horsfield’s forecast of a 0.5 per cent contraction in October is gloomier than the 0.1 per cent expansion of the consensus.The data will be released ahead of the Bank of England Monetary Policy meeting for December, at which some economists expect a rise in interest rates. It is possible that the Omicron coronavirus variant will prevent the bank from tightening, but “we doubt that these GDP figures will”, said Horsfield. Valentina RomeiWhen will the US labour market return to normal?Workers are in exceedingly high demand, and the US has an extremely limited number of them.Americans will get an insight into how workers are navigating this scenario on Wednesday, when the labour department releases its Job Openings and Labor Turnover Survey for the month of October.Workers have been quitting their jobs in mass this year, probably because they have been inundated with better offers. The September edition of Jolts showed a series-high 4.4m US workers quitting their jobs. The previous record was set in August.Economists have said that a large number of those who quit probably already had another role lined up. Many expect that the high number of resignations will probably continue as long as competition for labour remains intense and employers poach top talent from their competitors to fill openings. After the labour department reported on Friday that labour force participation is improving but that employers added only 210,000 jobs in November — less than half of the 550,000 they were expected to — economists will be watching closely to see if employers were able to find new workers to recruit in October. The payroll figures released for October were strong, so the number of appointments is expected to be, too.The timing of the report means that it could show a boost brought on by the retreat of the Delta coronavirus variant, just as the world contends with the spread of the Omicron variant. But it could also show that the recovery is more volatile than had been hoped, like last week’s jobs report.“The underlying momentum of the labour market is still strong, but [November] shows more uncertainty than expected,” said Nick Bunker, an economist at jobs site Indeed. Taylor Nicole Rogers More

Frydenberg is due to deliver an update to the budget in coming weeks, halfway through Australia’s fiscal year which ends in June.Australia’s economy shrank a steep 1.9% in the third quarter as the Delta outbreak put half the population under lockdown, though a speedy recovery is underway as the country sets a world-beating vaccination rates.”The market is coming back strongly,” Frydenberg said in an interview on the Australian Broadcast Corporation’s “Insiders” programme, pointing to numbers showing growth in jobs and retail sales.”That comes as a result of the fact that we now have one of the highest vaccination rates in the world, one of the lowest mortality rates in the world.”Health data shows that 88% of Australians over the age of 16 are fully vaccinated and nearly 93% have received one dose.Asked whether Omicron, the new variant that has also been spreading in Australia, would pose a threat to the economic outlook, as indicated by the International Monetary Fund, Frydenberg said there should be no panic.”It’s too early to make any conclusive decisions or estimates about the economy as a result of Omicron,” Frydenberg said.He did not say whether the expected upgrade to growth would be for 2022 calendar year of fiscal year, which start in July. The budget released in May forecast a 4.5% expansion for the 2021-22 fiscal year before slowing to 2.5% the following year. More

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.Late on Friday, Bukele announced the government had stepped into the market again.”El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter (NYSE:TWTR).Until Nov. 26, El Salvador had 1,220 bitcoins.In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions. The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency. More

Goldman economist Joseph Briggs said in a note that the Omicron variant could slow economic reopening, but the firm expects “only a modest drag” on service spending.The firm now sees 2022 gross domestic product (GDP) growth of 3.8%, down from 4.2% previously on a full year basis, and Q4/Q4 growth of 2.9%, down from 3.3% before, Briggs said.”While many questions remain unanswered, we now think a moderate downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely,” he said.Worker shortages could last longer if people do not feel comfortable returning to work due to the variant, according to the note.Goldman pointed the spread of the virus could worsen supply shortages should other countries implement tighter restrictions, but increase in vaccination rates among foreign trade partners would prevent severe disruptions.Goldman Sachs’ U.S. forecast comes after the International Monetary Fund Managing Director Kristalina Georgieva said on Friday that the lender was likely to lower its global economic growth estimates due to the new Omicron variant of the coronavirus. More

Lloyd Austin, US defence secretary, warned that China’s air incursions by fighter jets, bombers and other warplanes near Taiwan appeared to be rehearsals for military operations against the country.“It looks a lot like them exploring their true capabilities and sure it looks a lot like rehearsals,” Austin said in a speech on Saturday at the Reagan National Defense Forum.Austin did not appear to suggest that China was preparing for conflict in the near future, but the country’s air force has significantly increased the scale and frequency of missions into Taiwan’s “air defence identification zone” this year. The military activity, coupled with rapid technological advances by the People’s Liberation Army, have raised concerns about China’s intentions towards Taiwan, over which it claims sovereignty. Some experts believe China’s recent rapid expansion of its nuclear arsenal is designed to make it harder for the US to intervene in any conflict over Taiwan.Antony Blinken, US secretary of state, on Friday told Reuters that a Chinese invasion would have “terrible consequences” and stressed that Washington was absolutely committed to ensuring Taipei could defend itself. Speaking at the event in California, Lloyd declined to specify how the US would respond to China invading the island.“We’re committed to helping Taiwan develop and maintain the capability to defend itself,” Blinken said. “Nobody wants to see this develop into a conflict in this region, so we’re going to do everything in our power to help prevent conflict and dial down the temperature whenever possible.”Austin was speaking in California on the way back from Seoul, where he and his South Korean counterpart included language about preserving peace in the Taiwan Strait in a communiqué for the first time, illustrating the growing concern in the Indo-Pacific region about China’s military aggression.President Xi Jinping last month told President Joe Biden that any country that supported pro-independence forces in Taiwan was “playing with fire”. But the Chinese leader also said he was “patient” and wanted to strive for peaceful reunification, which some US experts saw as an attempt to lower the temperature of the potential conflict.On Saturday, Austin said the US faced real challenges that included “the emergence of an increasingly assertive and autocratic China”.

He said China was expanding its ability to project force and to build a global network of military bases. He added that the Chinese military was rapidly advancing its capabilities in areas from missiles and missile defences to anti-submarine technologies. He noted that the Pentagon believes China will quadruple its stockpile of nuclear weapons to more than 1,000 warheads by 2030.Austin said Washington would work with allies to counter China but he also wanted to see better channels of communication with Beijing to help manage risks, including in the area of nuclear weapons.Austin and Mark Milley, chairman of the US joint chiefs of staff, have not held conversations with their Chinese counterparts since the start of the Biden administration. The Pentagon is hoping that the recent virtual meeting between Biden and Xi will pave the way for better communication between the countries’ militaries.In his speech, Austin also called on the US private sector to work with the Pentagon to develop cutting-edge technologies. But he acknowledged that the military had to do a better job of streamlining its bureaucracy and becoming less risk-averse to make sure entrepreneurs did not view it as the “valley of death”.Follow Demetri Sevastopulo on Twitter: @Dimi More