US Core CPI

After four consecutive 75bp hikes, we expect the Fed will likely slow the pace of rate hikes from December, looking at 50bps.

The key US data that will be released this week is month-on-month core CPI, which we expect to be 0.5%. Looking at the past six months, we have had one 0.7%, four 0.6% and one 0.3% print. We need to see numbers closer to 0.2% to bring the annual rate down toward the 2% target over time.

Other data that will be released are consumer credit and confidence data. They would be overlooked by the mid-term elections on Tuesday.

US Mid-term Elections

Opinion polls appears to show momentum is building for Republican party candidates with a majority in both the House and the Senate now looking like the most likely outcome.

Should the Republicans gain control of Congress, President Joe Biden’s ability to pass legislation will be severely curtailed. And there is far less probability of any fiscal support for the economy through the recession as the Republicans are likely to block it.

If the Democrats lose, then it is more likely that we will see interest rate cuts in 2H23 to provide the stimulus to help the economy rebound, rather than if they win where fiscal policy would likely do more of the heavy-lifting and interest rates stay higher for longer to offset any inflation impulse.

China’s Trade Data

China would likely report a slowing global trade. We expect a slower export growth and import growth should however slow even faster than exports resulting in larger trade surpluses, which would help GDP growth.

Meanwhile, inflation in China is expected to slow. The PPI inflation report from China could be a market mover as it could post a contraction by 1.6% y/y, reflecting the weakness of the economy.

3Q22 GDP From Indonesia & Philippines

Indonesia is expected to post a 5.5% y/y expansion, helped by strong exports and robust manufacturing activity.

For the Philippines, growth for 3Q22 GDP will likely settle at 5.2% y/y, which is a slowdown from the previous quarter after the boost from the May presidential election fades. Surging inflation likely dampen household spending, although the recent pickup in bank lending could offset the consumption slowdown.

Source: AmInvest Research - 7 Nov 2022