20170817-穆迪服务-Jobless_Rate_s_Waning_Influence_on_Inflation_and_the_Fed_25页_835kb

Moody's Weekly Market Outlook Summary

Core Content

This report from Moody's Analytics discusses the evolving relationship between the jobless rate and inflation, particularly in the context of the U.S. Federal Reserve's monetary policy decisions. It highlights how the traditionally strong correlation between lower unemployment and higher inflation is weakening due to factors like globalization, technological advancements, and subdued wage growth. The report also covers upcoming economic data and market outlooks for the U.S., UK/Europe, and Asia-Pacific regions.

Main Points

The Jobless Rate's Waning Influence on Inflation

• The U.S. unemployment rate has fallen to a 16-year low of 4.3%, yet core PCE price index inflation has not risen significantly.
• This suggests that the jobless rate's ability to drive inflation is diminishing, possibly due to globalization and technology reducing pricing power for businesses.
• The Fed's concern over persistently low inflation despite high resource utilization indicates a shift in monetary policy focus.

The Fed's Policy Outlook

• Fed funds futures suggest only a 44.4% chance of raising rates above 1.125% by year-end 2017.
• The Fed is more concerned with growth and labor market conditions than inflation, but inflation must improve for further rate hikes.
• The next rate hike is unlikely before December 2017.

Credit Market Metrics

• Credit Spreads:
  • Investment Grade: Expected to exceed 112 bp by year-end 2017.
  • High Yield: Projected to rise to 450 bp by year-end 2017.
• Defaults:
  • The U.S. HY default rate is forecast to average 2.9% in Q2 2018, down from 3.8% in June 2017.
• Issuance:
  • IG bond issuance in 2017 is expected to reach $1.528 trillion, up 8.2% from 2016.
  • HY bond issuance is projected to rise by 24.6% to $425 billion, still below the 2014 record high.

Industrial Capacity Utilization

• Industrial capacity utilization in the U.S. is at 76.7%, the lowest in nine years of an upturn.
• This low utilization rate is counteracting the upward pressure on prices from a low unemployment rate.
• The 4.3% unemployment rate is not as tight as it appears due to lower labor force participation and payroll-to-working-age population ratios.

Global Inflation Trends

• Low global capacity utilization is intensifying downward pressure on internationally traded goods prices.
• Consumer durable goods price deflation has persisted for 22 years, attributed to excess capacity and technological progress.
• The U.S. personal savings rate has dropped to 3.9%, making consumers less able to absorb price increases, which could limit inflationary pressures.

Other Economic Indicators

• Unemployment Rate: The 4.3% rate overstates labor market tightness due to low participation and underutilized workforce.
• Wage Growth: Slower wage growth in recent years compared to the 1990s, due to increased global competition.
• Inflation Expectations: Remain subdued, with the University of Michigan's 5- to 10-year inflation expectations at 2.6% in July.

Key Information

• U.S. Economic Outlook:

  • Retail sales are expected to rise by 0.4% in July, but the impact of Amazon's Prime Day adds uncertainty.
  • Manufacturing production is forecast to increase by 0.2% in July, with auto retooling likely to suppress growth.
  • Housing starts are expected to decline slightly in July due to weather and supply constraints.

• U.K. Economic Outlook:

  • Retail sales are projected to rise only 0.2% m/m in July, with weak wage growth and weather impacts.
  • Inflation is expected to remain around 2.7% in July, with food and energy prices rising.
  • The trade surplus is forecast to expand to €25 billion in June, but the euro's strength may limit export performance.

• Asia-Pacific Economic Outlook:

  • Japan: Trade surplus is expected to widen to ¥150 billion in July, driven by strong global demand for electronics.
  • Singapore: Non-oil domestic export growth is forecast to rise to 9% y/y in July.
  • Australia: Unemployment rate is likely to remain at 5.6%, with the underemployment rate expected to fall.
  • Malaysia: GDP growth is expected to slow to 5.1% in Q2 2017 due to weak manufacturing and export performance.
  • Philippines: GDP growth is projected to accelerate to 6.8% in Q2 2017, driven by exports and domestic demand.
  • Taiwan: GDP growth is forecast to rise to 2.4% in Q2 2017, with strong tech exports and industrial production.

Conclusion

The report emphasizes that the traditional Phillips Curve relationship between unemployment and inflation is weakening, with the U.S. labor market's impact on price inflation diminishing. This is due to global competition, technological change, and subdued wage growth. As a result, the Fed is likely to remain cautious in raising interest rates, and credit markets are expected to remain stable despite low capacity utilization. The upcoming economic data will be crucial in assessing the health of the U.S., U.K., and Asia-Pacific markets.