AUSTRALIA DATA: Inflation Expectations Below 4%
Australian Melbourne Institute consumer inflation expectations are heading in the right direction with the November reading moderating 0.2pp to 3.8%, the lowest since the pandemic-impacted February 2021 and they were trending higher at that point. After struggling to break below 4%, expectations now appear to be trending lower. They peaked at 6.7% in June 2022, the month after the first hike this cycle, and started 2024 at 4.5%. Headline inflation at 2.8% in Q3, despite its temporary nature, and lower petrol prices plus the RBA’s resoluteness have likely helped to bring inflation expectations down below 4%.
Australia CPI y/y% vs MI consumer inflation expectations y/y%
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EQUITIES: Japan's Nikkei Back Above 40,000 With Tech Outperforming
- Japanese equities are edging higher this morning, with the Nikkei up over 1% and trading back above 40,000 for the first time since July 19th. The move higher follows gains on Wall Street and optimism over corporate earnings. The weaker yen is also supporting local stocks as it remains near the key 150, a psychological marker that it has not crossed since early August. Early moves are being driven by tech stocks with Tokyo Electron up over 2%.
- Elsewhere, there was strong demand for Tokyo Metro's IPO, this was Japan’s largest in six years and raised ¥348.6b ($2.3b), reflecting investor optimism. JGB futures are down slightly, with the benchmark 10-year yield holding steady at 0.945%
- Later today we have August Industrial Production
NEW ZEALAND: Inflation Likely To Be In Band For First Time In Over 3 Years
Q3 CPI prints on Wednesday and is widely forecast to return to the RBNZ’s 1-3% target band for the first time since Q1 2021. Bloomberg consensus is forecasting headline CPI to rise 0.7% q/q bringing the annual rate down to 2.2% from 3.3% but the improvement will be driven by tradeables with the quarterly rise in non-tradeables expected to pick up. The RBNZ forecast Q3 CPI at 0.8% q/q and 2.3% in August.
- The RBNZ said in its October meeting statement that it felt that “restraint” could be lessened as inflation is “within” the band. The Q3 data is unanimously expected to be consistent with this. The RBNZ’s measure of core also prints.
- Most estimates for headline inflation are around 0.7-0.8% q/q and so close to the RBNZ’s forecast. Westpac and ASB are at consensus, while BNZ, Kiwibank and ANZ are slightly higher at 0.8% q/q and 2.3% y/y. Food prices, council rates and insurance are expected to make positive contributions to the quarterly change, while petrol and consumer durables are likely to detract.
- The range of forecasts for the domestically-driven non-tradeables component is between +0.9% and 1.5% q/q with ASB, Kiwibank and Westpac at consensus’ +1.3% and BNZ and ANZ higher at 1.4% and 1.5% respectively. Only 7 economists submitted forecasts.
- Tradeables forecasts are between -0.3% and 0% q/q with consensus at -0.1%.
- Westpac believes that lower fuel prices should result in headline inflation coming in just below the RBNZ’s forecast. It also thinks the risks to the outcome are in both directions with weak consumption possibly resulting in some lower prices but there are upside risks from insurance and council rates.
CHINA DATA: Commodity Imports Mixed In Sep, Volume Trends Mostly Steady
China aggregate imports for September were nearly flat in y/y terms, little changed from where we were in August. This is below the trend pace of around 2% y/y for the past 12 months.
- In terms of commodity import volumes, trends were mixed. Coal was stronger in m/m terms, while iron ore also rose in the month. Copper ore and concentrates were down in m/m terms. The coal trend has been running stronger compared to other commodity imports through 2024, see the first chart below.
Fig 1: China Commodity Import Trends - Iron Ore, Copper, Coal y/y% 3-month ma
Source: MNI - Market News/Bloomberg
- Crude imports were down m/m and are also down in ytd y/y terms. The trend appears to be improving from a low base though, see the second chart.
- LNG imports were up slightly in the month, but the trend has softened through the course of the year.
- Overall these trends suggest an economic picture that is mixed at best, we get more updates on the economy this Friday, with Sep activity figures and Q3 GDP out.
Fig 2: China Commodity Import Trends - Oil, LNG y/y% 3-month ma
Source: MNI - Market News/Bloomberg
