EM LATAM CREDIT: Adecoagro (AGRO): Ratings downgrade

The focus this week will be on Wednesday’s new complete monthly CPI data. A partial basket has been published for a while but the focus remained on the quarterly series as they contained updates for all components. RBA Governor Bullock said that the Board will continue to concentrate on quarterly CPI for now as it assesses the trends in the new monthly CPI and allows time for seasonal factors to emerge for the trimmed mean.

• Bloomberg consensus expects October headline CPI to rise 3.6% y/y up from 3.5%. This continues to be distorted by the timing of government electricity rebates. The trimmed mean is forecast to increase to 2.9% from 2.8%.
• Q3 data that feed into GDP, to be released on 3 December, begin to print this week. Construction is out on Wednesday and expected to rise 0.3% q/q after Q2’s 3.0%. Private capex is released on Thursday and forecast to be up 0.5% q/q after 0.2%. Inventories, net exports and public demand will be published next Monday and Tuesday respectively.
• Private credit for October is on Friday and forecast to rise 0.6% m/m again. In September it rose 7.3% y/y. The RBA is watching closely the impact of 2025’s 75bp of easing on financial conditions.
• The RBA’s Head of International Department Smith speaks on Wednesday at 1305 AEDT.  

There has been quite a lot of conversion on X revolving around an article written by Michael Green(@profplum99) on his substack which he has made available outside of his paywall. It is a fascinating read and tries to answer the question of why the average middle class American continues to feel poorer year over year. Below are some excerpts and attached is the link to the article if you are interested. https://www.yesigiveafig.com/p/part-1-my-life-is-a-lie. This also comes as headlines crossed from the weekend and earlier today from US President Trump that a plan to lower health care costs could be announced as soon as today (US time Monday). Cost of living issues are likely to remain an election issue right up to next year’s mid terms.

• “The Poverty Line: I came across a sentence buried in a research paper: “The U.S. poverty line is calculated as three times the cost of a minimum food diet in 1963, adjusted for inflation.”
• “The formula was developed by Mollie Orshansky, an economist at the Social Security Administration in 1963. But everything changed between 1963 and 2024. Housing costs exploded. Healthcare became the largest household expense for many families. Employer coverage shrank while deductibles grew. Childcare became a market, and that market became ruinously expensive. College went from affordable to crippling. Transportation costs rose as cities sprawled and public transit withered under government neglect.”
• “The composition of household spending has transformed completely. In 2024, food-at-home is no longer 33% of household spending. For most families, it’s 5 to 7 percent. Housing now consumes 35 to 45 percent. Healthcare takes 15 to 25 percent. Childcare, for families with young children, can eat 20 to 40 percent. If you keep Orshansky’s logic—if you maintain her principle that poverty could be defined by the inverse of food’s budget share—but update the food share to reflect today’s reality, the multiplier is no longer three. It becomes sixteen.” 
• “Which means if you measured income inadequacy today the way Orshansky measured it in 1963, the threshold for a family of four wouldn’t be $31,200. It would be somewhere between $130,000 and $150,000.” 

The focus of the week will be firmly on Wednesday’s RBNZ decision which will be accompanied by updated staff forecasts and a press conference, the last from acting governor Hawkesby. A 25bp rate cut to 2.25% is widely expected with only 2/24 analysts on Bloomberg forecasting 50bp. The new governor, Anna Breman from Sweden’s Riksbank, takes over from 1 December. 

• The RBNZ decision is usually followed by a number of public appearances from MPC members. The schedule is yet to be released.
• Q3 real retail sales print on Thursday and are forecast to follow Q2’s 0.5% q/q rise with +0.6%.
• November ANZ business confidence and business activity outlook are also out on Thursday. The survey has been consistent with a gradual recovery and while the price/cost components are elevated they have stabilised.
• On Friday, ANZ November consumer confidence is released. It fell 2.3% in October and has not been able to hold a move above the breakeven 100-mark for more than a month since Q3 2021.
• October filled jobs are also on Friday and will be the first data on the labour market for Q4. It signalled that employment had stabilised in Q3 but the RBNZ will be looking for it to improve to begin absorbing excess capacity in the labour market.