Key themes for the week ahead – US inflation, Fed taper signalling, and rates.
Despite the headline disappointment, US payrolls growth was interpreted as good enough to keep a possible taper announcement on track for Nov (FOMC 3 Nov 2021). This week, we’ll watch the Sept FOMC Minutes and Fed speeches for important signalling on the payrolls result, inflation, and a taper announcement. US inflation for Sep will also be important this week. US and global rates are likely to remain in focus.
The headline US non-farm payrolls last week disappointed to the downside. “Reasonably good” growth in private payrolls (+317k) was offset by a decline in public payrolls (-123k). The decline in education payrolls (state and local levels) accounted for all the public sectors decrease with lingering Covid issues disrupting back to school activity. In the private sector, the growth in Leisure and Hospitality payrolls was muted compared to prior months and this trend is consistent with the outbreak in late 2020.
The prior two months’ payrolls were revised higher and the monthly average payrolls growth over the last four months now sits at +653k/month.
US labour supply is still an issue with participation declining in Sep. This partly explains the much larger decrease in the unemployment rate in Sep. In the broader 16yrs+ group, the combination of growth in employment and a decrease in participation resulted in a notable decrease in the unemployment rate from 5.2% in Aug to 4.8% in Sep. In the core working-age group of 24-54yrs, most of the decline in the unemployment rate was due to the fall in participation.
The US CPI data for Sep will be a key focus this week. Headline CPI growth is expected to remain at +5.3% and core CPI growth is expected to remain at +4%.
US retail sales for Sep will be released and a slight decline of -0.2% is expected, but ex-Autos, growth of +0.4% (MoM) is expected. The University of Michigan consumer sentiment data (prelim) for Oct will also be released – a slight improvement is expected.
In Aus, the labour market data for Sep will be released. Employment is expected to decline by -120k (prior -146k). Vaccination rates are at least on-target for a staged easing of restrictions (so far NSW, with Vic to start at the end of Oct).
Chinese data (trade, inflation, and retail sales) for Sep will also be released.
This week, the US Treasury will settle approx. $309bn in ST Bills, Notes, and Bonds raising approx. $84bn in new money. The US Treasury will auction and settle the 3yr and 10yr Notes (before CPI) and the 30yr Bond this week. There has been a shift in timing for debt ceiling negotiations and this is reflected in the (higher) 8-week Bill. Approx. $26bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet this week and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf or scroll through the file below.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
