© Reuters. Huatai Securities: Inflation fell more than expected in December and the Federal Reserve issued a signal to cut interest rates.
Zhitong Finance APP was informed that Huatai Securities released a research report stating that December data showed a marginal slowdown in U.S. growth, and the overall fourth quarter was significantly weaker than the third quarter; Christmas consumption may be weak, and real estate has improved slightly due to the fall in mortgage interest rates but is still at a low level , the margin of corporate investment weakened. In November, PCE inflation fell more than expected. In December, the Federal Reserve FOMC released a signal to cut interest rates, and market expectations for interest rate cuts increased significantly. The market’s implied timing for the first interest rate cut has been advanced to March, and expectations for a full-year interest rate cut in 2024 have increased by 45bp to 156bp. Looking forward, focus on new non-farm employment and inflation trends in December.
The main views of Huatai Securities are as follows:
increase:12Monthly growth slowed marginally, and Christmas holiday consumption data was overall weak
United States 12Monthly growth momentum has slowed down marginally, with consumption weakening and real estate improving slightly but at a low level.. The Atlanta Fed’s GDPNow model indicates that growth momentum slowed to 2.3% in the fourth quarter, significantly lower than in the third quarter. In terms of consumption, Christmas holiday consumption data is overall weak. Mastercard credit card data shows that the combined growth of online and offline retail sales during the Christmas consumption season (November 1 to December 24) is 3.1%, the lowest since 2021; as of December In mid-month, BEA card consumption and Redbook retail index both showed a marginal decline in retail growth in December. In real estate, existing home sales and mortgage applications improved slightly. Affected by the fall in long-term U.S. bond interest rates, the 30-year fixed mortgage interest rate fell back to 6.7%. Existing home sales and mortgage application volumes rebounded slightly from lows, but Redfin data indicates that home sales may continue to fall in December. In terms of investment, both core capital goods orders and the local Fed’s PMI capital expenditure plan fell back in November, indicating that corporate investment may still be under pressure.
Financial conditions:12Goldman Sachs Financial Conditions Index (FCI) Relax48basis points
12Since the beginning of the month, the stock market has risen, U.S. bond interest rates have fallen, and the U.S. dollar has weakened, leading to a significant loosening of financial conditions.The Fed’s December FOMC shift has led to a significant increase in interest rate cut expectations. The 10-year U.S. bond interest rate has fallen sharply. From December 1 to 26, it has fallen by 43bp to 3.90%, and the 2-year U.S. bond has fallen by 33bp to 4.35%. During the same period, U.S. stocks rose, the U.S. dollar fell, and interest rate spreads narrowed. The S&P 500 and Nasdaq indexes rose 4.5% and 6.0% cumulatively, the U.S. dollar index fell 2.0% to 101.5, and the investment-grade corporate bond interest rate spread narrowed 6bp to 1.33. %. The Goldman Sachs Financial Conditions Index has eased by 48bp since December, the loosest level since 2023. Among them, long-term interest rates, stock markets, exchange rates and credit spreads contributed -22bp, -19bp, -8bp and 1bp respectively.
Inflation: It may decline faster in the future
11moon coreCPISlightly rebounded but did not change the downward trend, the corePCELower than expected, medium and long-term inflation expectations have dropped significantly.In November, U.S. CPI and core CPI both rebounded slightly by 0.1pc to 0.1% and 0.3% month-on-month, but the rebound may be difficult to sustain. Among them, core commodities are generally weak, and the Manheim index indicates that the CPI used car sub-item may still be sluggish month-on-month: Zillow and Apartmentlist rental index indicate that the overall rent is still on a downward trend. Core PCE inflation in November was 0.1% month-on-month, lower than Bloomberg consensus expectations, and the six-month annualized growth rate fell back to 1.9%. In terms of inflation expectations, due to PCE inflation falling faster than expected, the 5-year break-even inflation rate fell nearly 30bp from the November high to 2.5%.
Labor market: Rebalancing is in progress, and the overall temperature continues to cool
11Monthly new non-farm employment rebounded, mainly boosted by one-time factors such as strikes; the job market continues to cool.In November, new non-farm employment in the United States rose by 49,000 to 199,000 from October, but after excluding the impact of strikes, new non-farm employment fell; the unemployment rate fell by 0.2pct to 3.7%, mainly due to the previously weak performance of the household survey. Employment is strong; the labor force participation rate has risen to 62.8%. Job vacancies fell more than expected, and the labor market continued to cool. The job vacancy data in October fell more than expected, and the voluntary turnover rate remained at a low level; the Conference Board’s job opportunity adequacy rate indicator and the NFIB recruitment difficulty indicator from November to December both show that the U.S. job market continues to cool, and the unemployment rate may rise again in the future. Looking forward, pay attention to the new non-agricultural data in December (January 5) and December CPI data (January 11) as well as the statements of Federal Reserve officials on the prospects for interest rate cuts.
risk warning:U.S. growth has slowed more than expected and global geopolitical risks have escalated.
2023-12-31 01:19:00
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