Standing at the critical moment of the switch between interest rate hikes and interest rate cut cycles, the market can't wait for the arrival of interest rate cuts, but last Friday's non-farm payrolls exceeded expectations to suppress this expectation, and will tonight's blockbuster CPI data continue to slow down as expected, supporting the expectation of interest rate cuts next spring?
At 21:30 Beijing time on Tuesday night, the U.S. Department of Labor will release the CPI inflation data for NovemberThe market generally believes that the downward trend of inflation has not changed, and the major investment banks have less divergence on the November CPI**
The headline inflation CPI in November was 31% vs. 32%, 0% month-on-month, unchanged from the previous period;The analysis pointed out that similar to the inflation trend of the previous month, the decline in energy** will drag down the overall inflation, while the core CPI growth rate may be somewhat**, driven by inflation in housing rents, air tickets and other services. José Torres, senior economist at Interactive Brokers, said that overall inflationary pressures are weakening significantly, and it is expected that the decline in car, electricity and heating costs, as well as gasoline**, will further reduce the headline inflation data in November, while the tricky service sector inflation will be the focus of follow-up, and the slowdown in housing** proves that service sector inflation is likely to decelerate in the future, and inflation in transportation and catering will also slow down.The core CPI, which the Fed is more concerned about, remained at 4% year-on-year, from 02% acceleration to 03%；
The Federal Reserve will announce its last interest rate decision of the year on Thursday after the November CPI release, and the recent decline in inflation has prompted the Fed to pause interest rate hikes and even start signaling that it may cut ratesUnless the CPI is significantly higher than expected, it will be difficult to reverse the Fed's near-term policy outlook.
For U.S. stocks, some analysts pointed out that in the frenzy of November**, U.S. stocks have already factored in some interest rate cut expectations, if the key core CPI growth rate exceeds 03%, then U.S. stocks may quickly adjust their expectations, and the rally of the past few weeks may come to an abrupt halt.
Headline inflation has slowed down recently under the pressure of energy**, and analysts believe that this trend will continue to be reflected in the November CPI.
Barclays noted that retail gasoline** is expected to decline 7% month-on-month and about 6% on a seasonally adjusted basis, as energy** continues to drag it down0%。Heating oil** will also drop slightly, but gas and electricity costs are expected to be**.
Specifically, Barclays expects energy to lead to a 0.m/m decline in CPI in November2 percentage points, up from 0 in October18 percentage points decrease. In addition, food inflation will rise slightly by 01%, a slight slowdown from the recent pace, and a year-on-year increase from 33% fell slightly to 32%。
Core inflation is expected to be "hot and cold", with commodity deflation making a comeback, smoother chains and more constrained spending slowing commodities such as furniture and automobiles likely to continue to fall.
Services inflation continued to remain stubborn, with services** cooling to a lesser extent as the labor market remained generally strong and demand persisted due to wage growth. Barclays expects the core services sector to grow by 043%, offsetting a 0.0% month-on-month decline in core goods08%。
In terms of subdivided items, analysts generally believe that: 1. Housing inflation maintains a stable growth rate and is the main driver of service inflation;2. Used cars and new cars** will continue to decline, driving down core goods inflation.
First of all, housing is an important part of the CPI index, and the analysis predicts that the slowdown in rent growth will be weakened.
Barclays expects housing inflation to be close to 04%, up from 0.0 in October3% is slightly faster, which is based on the fact that out-of-home inflation fell by 2 in OctoberAfter 5%, growth will be flat this month, compared to a decline in out-of-home inflation in four of the previous five months.
Goldman Sachs and UBS believe that the growth rate of housing inflation will be the same as the previous month. Goldman Sachs expects **046%, UBS expects the owner's equivalent rent (OER) to remain at 04%—0.45% growth rate.
In addition, data from companies such as Zillow shows that rental inflation has eased this year, with year-on-year increases in rents and home prices falling to pre-pandemic levels, but it may take a few months to be reflected in the CPI index.
Further, the acceleration in core services inflation mainly reflects the flattening of housing inflation, while "super-core inflation" excluding rents is likely to remain stable, with Barclays expecting super-core inflation to remain at 04% month-on-month growth.
Among them, air tickets **have**, Goldman Sachs expects that air tickets ** in November will be **4% after seasonal adjustment;The growth rate of medical services** will remain stable, and Nomura expects a month-on-month growth rate of 05%。In addition, Goldman Sachs also expects auto insurance inflation to decelerate to 11% because premiums almost catch up with repair and replacement costs.
Finally, new and used vehicles**, which account for the highest core CPI weighting, are expected to continue to decline.
Goldman Sachs expects used cars** to fall by 09%, and new cars** will drop by 03%, which reflects a decline in incentives and used car auctions in November.
Barclays noted that according to Mannheim and JD Power, which are commonly used to wholesale used cars, will go further. With the end of the U.S. auto industry strike, the potential upside risks for automobiles have receded. Producers have enough inventory ahead of the strike, helping to ease the pressure.
Looking ahead, Goldman Sachs expects core CPI inflation to remain at 0around 3%, but slowdowns in the auto, home rental and labor markets are expected to lead to further lower inflation in 2024, offset by a delayed acceleration in the healthcare market. Goldman Sachs** core CPI inflation will fall to 2 in December 20247%。
Analysts generally believe that the November CPI report is unlikely to have a substantial impact on the Fed's near-term policy outlook. The recent downside surprise in inflation has prompted the Federal Reserve to keep interest rates unchanged and even started signaling a possible rate cut。A modest acceleration in November will be a "roadblock" to the fight against inflation, but the upside is likely to be driven by volatility and has little to do with the forward-looking inflation outlook.
The Federal Reserve** recently said that they are concerned about the underlying trend in inflation. Fed Governor Waller suggested that he might consider easing policy if inflation data for the next three to five months turned out to be good. Powell also mentioned 6-month and 12-month inflation, which is likely to continue to improve in the fourth quarter and early 2024, leaving room for the Fed to consider a preemptive rate cut next year.
UBS noted:
The November CPI may not change the FOMC's targetIf our ** is correct, then CPI does not change the trajectory of the FOMC. Inflation is slowing significantly faster than the FOMC expected in the summer, and changing that will require much more than a strong CPI report, while the FOMC will not cut rates faster than the rate cuts indicated in March.Nomura said:
After November, the credit crunch in the auto loan market and the slowdown in the housing rental market are likely to affect core inflation in the coming months, thus maintaining the inflation trend. If the November CPI report is in line with our expectations, then the impact on the near-coin policy outlook should be limited, and the Fed is unlikely to react strongly to the single-month data.The current market expectation that inflation will cool and headline inflation will be lower as energy** eases, which somewhat supports the view that the Fed may cut rates before the spring.
Tonight's CPI will have little impact on the Fed, how much volatility will it bring to U.S. stocks?Goldman Sachs speculates that the trend of U.S. stocks tonight is as follows:
Ken Polcari, managing partner at Kace Capital Advisors, expects the CPI report to likely keep US stocks on track for the recent move, but if the CPI data softens softer than expected, it would be quite bullish, suggesting that inflation is slowing, just like the Goldilocks economic scenario.
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