Weak growth has the market unimpressed

In his speech last night, Jerome Powell might be backing off the idea of a Fed cut in December. October CPI and PPI data imply that the core PCE deflator increased by 0.30%, the most since March, indicating that US inflation remains sticky. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in Dallas. The December Fed meeting may decide to hold off; more likely, the January cut may come off the table.

Some recent US employment data has indicated weakness in the labour market, which is a possible signal of a broader slowdown or impending recession in the US economy. The latest jobless claims data recorded that the number of Americans filing new applications for unemployment benefits fell last week. Maybe there is evidence that the labour market continued to chug along okay.

Bailey and Reeves gave their annual addresses to the Mansion House last night. Bailey appeared to talk mostly about improving ties with Europe after Brexit, and Reeves talked about reforming the pension scheme, which will unleash 80 billion pounds to help support economic growth. You do not have to spend too much time googling the risk implications of this move. In the 1980s, a typical pension fund owned 80% blue chip equities and 20% bonds; now, it’s almost the reverse, as fund managers were encouraged to match their liabilities with their assets. Using other people’s money to drive growth in what will most likely be illiquid assets feels very risky, and who will pick up the bill if it goes wrong? I am happy to be managing my pension. Thank you very much. Another initiative to invigorate the private markets includes the establishment of PISCES, which I know it sounds fishy, a regulated market for trading private shares. The government will make share transfers exempt from stamp duty, now that bit is a good idea. The idea of making illiquid markets liquid is excellent in theory, and it has been tried for many, many years, and for all the obvious reasons, it never works, but we shall see.

The latest GDP data was released this morning. Quarter-on-quarter and month-over-month growth came in below expectations, while year-over-year growth was about in line with expectations. According to the report, industrial and manufacturing also fell month over month, as was the case year over year, by more than expected. The general picture is that growth has slowed over the summer, I guess partly as businessmen waited to see what the budget brought forth. The full impact of the changes to NI has yet to be felt on economic activity yet. This week’s pay report shows wages growing at almost 5% year over year and a slowdown in growth; this will make Mr Bailey’s job even harder at the next rate-setting meeting.The FTSE 100, which has been a dog, as the old saying goes, in the past month or so, will open lower today, testing the 8000 mark. , the pound back below 1.27 to the dollar.