Economy of the United States and Europe
2023-12-20
■The US economy >> Individual consumption remains strong.
■The European economy >> Continues to experience sluggish corporate activity.
In the Consumer Price Index (CPI) for November, the core CPI excluding food and energy (up 4.0% year-on-year and 0.3% month-on-month) had a similar year-on-year growth rate compared to the previous month, but the rate of increase accelerated month-on-month. The reasons for the month-on-month increase include the accelerated growth rate of the largest component of housing costs, as well as the rise in second-hand car prices starting five months later.
Retail sales in November (month-on-month growth of 0.3%) have increased for two consecutive months, and the basic data of personal consumption in GDP statistics, including core sales of automobiles, catering, building materials, and excluding gasoline (month-on-month growth of 0.4%), have also increased for eight consecutive months. The significant increase in sales without storefronts indicates a good performance in the early stages of the year-end business war. Although the momentum has slowed down, the growth trend continues, and the firmness of personal consumption has been confirmed.
At the Federal Open Market Committee (FOMC) meeting held on December 13th, policy rates remained unchanged for the third consecutive meeting. In the Summary of Economic Projection (SEP), the policy interest rate outlook (median) for participants related to the end of 2024 is 0.75% lower than the current level, indicating a cautious policy stance since September. Federal Reserve Chairman Powell acknowledged that he has discussed next year's interest rate cut and has begun communication-related to the cut, which has become clear.
In October, industrial production in the Eurozone (down 0.7% month-on-month) declined for two consecutive months. Among various commodities, capital goods, non-durable consumer goods, and intermediate goods are all declining, and these downward trends continue to exist. In addition, the decline in Germany and the Netherlands is more pronounced, and Italy is also showing a downward trend, but the trend in France and Spain is relatively stable.
The initial PMI for the Eurozone in December was for the manufacturing sector (44.2, the same as the previous month), which was comparable to the previous month, while the service sector (48.1, up 0.6 points) experienced a second consecutive month of decline. The activity level of the manufacturing industry is far below the expansion/contraction benchmark of 50, maintaining a low and stable level, while the service industry has been below 50 for five consecutive months, and the trend of shrinking enterprise activity has not changed significantly.
At the Council of the European Central Bank (ECB) on December 14th, the main policy interest rate remained unchanged for the second consecutive time. However, regarding the Pandemic Emergency Purchase Plan (PEPP), the ECB has decided to reduce the reinvestment amount after July 2024 and stop reinvestment by the end of 2024. Although employee economic forecasts show a downward outlook on growth and inflation rates for 2024, ECB President Lagarde has made it clear that they have not discussed interest rate cuts, indicating a cautious attitude towards early cuts.
■The European economy >> Continues to experience sluggish corporate activity.
In the Consumer Price Index (CPI) for November, the core CPI excluding food and energy (up 4.0% year-on-year and 0.3% month-on-month) had a similar year-on-year growth rate compared to the previous month, but the rate of increase accelerated month-on-month. The reasons for the month-on-month increase include the accelerated growth rate of the largest component of housing costs, as well as the rise in second-hand car prices starting five months later.
Retail sales in November (month-on-month growth of 0.3%) have increased for two consecutive months, and the basic data of personal consumption in GDP statistics, including core sales of automobiles, catering, building materials, and excluding gasoline (month-on-month growth of 0.4%), have also increased for eight consecutive months. The significant increase in sales without storefronts indicates a good performance in the early stages of the year-end business war. Although the momentum has slowed down, the growth trend continues, and the firmness of personal consumption has been confirmed.
At the Federal Open Market Committee (FOMC) meeting held on December 13th, policy rates remained unchanged for the third consecutive meeting. In the Summary of Economic Projection (SEP), the policy interest rate outlook (median) for participants related to the end of 2024 is 0.75% lower than the current level, indicating a cautious policy stance since September. Federal Reserve Chairman Powell acknowledged that he has discussed next year's interest rate cut and has begun communication-related to the cut, which has become clear.
In October, industrial production in the Eurozone (down 0.7% month-on-month) declined for two consecutive months. Among various commodities, capital goods, non-durable consumer goods, and intermediate goods are all declining, and these downward trends continue to exist. In addition, the decline in Germany and the Netherlands is more pronounced, and Italy is also showing a downward trend, but the trend in France and Spain is relatively stable.
The initial PMI for the Eurozone in December was for the manufacturing sector (44.2, the same as the previous month), which was comparable to the previous month, while the service sector (48.1, up 0.6 points) experienced a second consecutive month of decline. The activity level of the manufacturing industry is far below the expansion/contraction benchmark of 50, maintaining a low and stable level, while the service industry has been below 50 for five consecutive months, and the trend of shrinking enterprise activity has not changed significantly.
At the Council of the European Central Bank (ECB) on December 14th, the main policy interest rate remained unchanged for the second consecutive time. However, regarding the Pandemic Emergency Purchase Plan (PEPP), the ECB has decided to reduce the reinvestment amount after July 2024 and stop reinvestment by the end of 2024. Although employee economic forecasts show a downward outlook on growth and inflation rates for 2024, ECB President Lagarde has made it clear that they have not discussed interest rate cuts, indicating a cautious attitude towards early cuts.