Overview of the week commencing 5 December

Blog  |     |   by Graham Cross

Graham Cross, CEO

Graham Cross, CEO


The week beginning 28 November saw two key international indicators – Chinese manufacturing PMIs and the US non-farms payroll report – give encouraging signs.


There’s good news out of China in the form of a sustained not-too-hot, not-too-cold pace of growth across the manufacturing sector. New orders are expanding nicely and there is some welcome evidence to suggest that domestic demand is increasingly significant.


On US non-farms payroll, there is nothing in this employment report that we can see to delay a Federal Reserve rate rise in December. 178,000 is more or less in line with consensus expectations. And while a 0.1 percent month-on-month fall in hourly wages confounded an anticipated 0.2 percent gain, that is certainly not enough to put the Fed off. What really matters from here on though, is how fast and how far the current round of tightening progresses.


Actually, subdued wage growth persist alongside what is, by historical standards, a tight labour market. That will not be comfortable reading for those betting on ‘high’ inflation. Inflation is headed higher, but we are yet to be convinced that inflation, not just in the US but in western Europe and Japan too, is likely to exceed the target range for anything other than a short period of time.


Next week brings an update on the state of British trade, but not before the Governing Council of the European Central Bank sits to decide what, if anything, needs to be done to bring inflation in the Euro Area back toward target.



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