Senate Majority Leader Schumer and GOP counterpart McConnell sealed a deal to raise the statutory debt ceiling by $480bn. The amount would support the treasury to meet obligations through December 3rd, matching the same day that the current temporary government spending bill runs out. While it averts an immediate crisis, it rests assured that the bipartisan battle over the debt will be again on the calendar just as Congress confronts the deadline to keep the government open. At that time, Democrats will likely try to get an infrastructure bill as well as a tax and spending plan through the House and Senate. If we add the decision on Fed’s Chair Powell reappointment, it will be an eventful end of the year.
The US economy added 194k jobs in September, below consensus 500k forecast. Notable job gains occurred in leisure and hospitality, in professional and business services, in retail trade, and in transportation and warehousing. Employment declined in public education over the month (employment decreased by 144k in local government education and by 17k in state government education). August was revised higher, from 235k to 366k, putting the two-month average at ~280k. The unemployment rate dropped to 4.8% (vs. consensus of 5.1% and down from 5.2% in August), while the participation rate fell to 61.6% vs. consensus of 61.7%. Wages rose 0.6% m-o-m, above +0.4% consensus. The workweek inched up to 34.8 hours (vs. consensus of 34.7 hours).
The Reserve Bank of New Zealand announced a rate hike of 25bps to 0.5%, the first in seven years. Economists expect the benchmark rate to reach 1.50% by the end of 2022 and 1.75% by the end of 2023, according to a Reuters poll. Poland’s Central Bank unexpectedly raised rates by 40bps to 0.50% for the first time in 9 years. The move follows Czech Republic, Hungary and Romania. Inflation in Poland hit 5.8% y-o-y in Sept., its highest rate for 20 years.
The revised Euro Area composite PMI came in at 56.2, in line with the Flash release but with input prices rising the fastest on record. In the US, ISM Non-Manufacturing PMI came out at 61.9 vs. 60.0 forecast, while the composite PMI came out at 55. In the UK the Services PMI came out stronger than forecast at 55.4 vs. 54.6. China’s Sept. Caixin services PMI was strong, coming in at 53.4 (ahead expectations at 49.2 and up from 46.7 in Aug.). German industrial production fell by 4% in August m-o-m, with the production of autos declining by a significant 17.5%, underlining the supply difficulties facing the industry. Overall, industrial output in August was 9% below pre-pandemic levels. Industrial production in France was more solid, rising by 1% m-o-m in August, but was still 3.9% below pre-pandemic levels.