Nov. 2024’s Global Economic Updates: Inflation, Rates & More

Despite the shortened trading week due to the Thanksgiving holiday, followed by Black Friday, the week of 24 November was packed with significant data releases that impacted the markets. 

From the United States to New Zealand and Germany, here are the key economic highlights from this week across the world’s largest economies:

US PCE: Is Inflation Still Taking a Toll on the World’s Largest Economy?

The Federal Reserve’s favourite inflation gauge, the Personal Consumption Expenditure (PCE), was released on Wednesday, 27 November, and showed that despite the Fed’s numerous attempts to tame inflation and get it to the 2% target range, it is still stubbornly high, and far from that target.

The Main Figures:

• MoM Core PCE (excluding food and energy): Rose 0.3% from the prior month (October). This matched Wall Street expectations and the previous month's increase (September). 

• YoY Core PCE: Increased by 2.8%, also aligning with expectations. However, it was slightly above the previous year's increase of 2.7% (September). 

• Overall YoY PCE: Increased by 2.3%, up from 2.1% in September.

Nonetheless, the results should not come as a surprise to avid market watchers, given that the Consumer Price Index (CPI), another measure of inflation, was released earlier this month, showing that core CPI (which excludes volatile food and gas prices) rose by 3.3% YoY in October (the third consecutive month of increase). Additionally, the Producer Price Index (PPI) also indicated higher prices in October.

Besides this, traders and consumers alike may want to note that Federal Reserve members, including Governor Michelle Bowman, recently expressed concerns about the pace of inflation and the fact that it remains far from the central bank’s target range. She also added that the Fed should approach any interest rate cuts “cautiously.”

What Do Market Experts Think?

To better understand the current economic landscape, it would be helpful to hear what the experts have to say about it.

According to some experts, like S&P Global Ratings' global chief economist Paul Gruenwald, “Core PCE has been going sideways for the last couple of months,” adding that, “if you think the Fed is on a declining rate path, which we do, that's probably leaning toward the pause [cutting interest rates] camp.” In other words, Gruenwald believes that the Fed won’t cut interest rates any time soon unless a “more convincing decline” materialises. (Source: Yahoo Finance)

Still, only time will reveal the Fed’s monetary policy path in its final rate decision of the year on 17-18 December. 

How Did the Markets React?

Given the US’ prowess and economic status, it is not surprising that the markets reacted to yesterday’s data release. 

Wall Street indices like the S&P 500 (ES), Dow Jones Industrial Average (YM), and the tech-heavy Nasdaq 100 (NQ) respectively slid 0.4%, 0.3%, and 0.6% as investors and traders digested the news.

RBNZ Rate Decision: Cut Rates Take Place

Across the globe, in the Southwestern Pacific Ocean, as inflation seemed to reach the Reserve Bank of New Zealand’s (RBNZ) target range, the central bank cut rates by 50 basis points on Wednesday. This marked the 125th cut in this cycle. Moreover, the RBNZ signalled the possibility of further rate cuts next year if inflation remains in check.

How Did the NZD/USD React?

While the rate cut is typically negative for the NZD, which has already declined by more than 9% against the US dollar since October, the NZD/USD rose by over 1% following the announcement. It remains uncertain whether this momentum can be sustained.

German Consumer Confidence: Is EU’s Biggest Economy Struggling?

Data released on Wednesday, 27 November, revealed a notable decline in consumer confidence in Germany, with the Gfk Consumer Climate Indicator dropping by 4.9 points to -23.3, marking its lowest level in seven months. This downturn reflects increasing economic uncertainty, including job losses in the automotive sector and broader concerns about the economy. 

Moreover, private consumption, which constitutes half of Germany's Gross Domestic Product (GDP), is also expected to decrease due to reduced income expectations, a decline in purchasing willingness, and a growing inclination to save. 

These factors are contributing to fears of a potential recession and challenges in the export sector, further complicated by the possibility of trade tariffs under the new US administration. 

However, this trend is not only evident in Germany as it seems to have extended to other European countries, with French consumer confidence slipping. The INSEE index dropped to 90 points in November, falling below the long-term average. French households are concerned about rising prices, worsening financial situations, and increasing unemployment, with a growing fear of a lower standard of living. 

Will Germany, Europe's largest economy, recover its momentum? Only time will tell.

Conclusion

In conclusion, the week of 24 November saw key economic developments across major global economies. 

In the US, inflation remains stubbornly high despite the Fed’s efforts, causing market uncertainty. Meanwhile, New Zealand's rate cut showed a cautious approach to inflation, though the NZD’s response was mixed. In Europe, falling consumer confidence in Germany and France raised concerns over economic growth, with potential recessions looming. 

These trends highlight ongoing global challenges in managing inflation and economic uncertainty as the new year approaches.