13 October 2023
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US inflation above expectations in September

US inflation above expectations in September

By Daniel Richards

US CPI inflation came in modestly above expectations for September at 3.7% y/y, in line with the previous month and higher than the predicted 3.6%. More positively, core inflation was down to 4.1%, in line with predictions and slower than the 4.3% recorded in August. Headline prices were 0.4% higher than a month earlier, while core was up 0.3% m/m. The higher-than-expected headline figure, following on from the upside surprise in jobs last week, has left bets of one more rate hike from the Fed in play, but with annual core inflation slowing as expected we hold to the view that the rate hiking cycle has completed. For the week to October 7, initial jobless claims were at 209,000, just lower than the predicted 210,000 and in line with the previous week.

China’s CPI inflation was flat at 0.0% y/y in September, down from 0.1% in August and lower than the predicted 0.2%. The downside surprise is evidence that demand is still weak in China, despite a series of piecemeal stimulus measures implemented over the past several months. Core inflation was at 0.8%. Meanwhile, factor gate prices continued to fall as the PPI inflation index was down 2.5% y/y, although this was a more modest contraction than August’s 3.0% fall.The UK recorded real GDP growth of 0.2% m/m in August, in line with consensus projections and compared with a 0.6% contraction in July. A lack of large-scale industrial action in August contributed to the recovery as compared with the slump in the July when a teacher strike in particular weighed on output. As a result, services expanded 0.4% m/m in August. However, manufacturing declined 0.8% and construction 0.5%.

India’s CPI inflation was 5.0% y/y in September, down from 6.8% in August and lower than the predicted 5.4%. The slowdown was driven by slowing food prices, which were up 6.6% y/y compared with 9.9% the previous month. The headline figure is now more comfortably within the RBI’s target 2%-6% target range. Meanwhile, industrial production was up 10.3% y/y in August, accelerating from 6.0% in July.

Today’s Economic Data and Events

  • 18:00 US University of Michigan consumer sentiment index, October. Forecast: 67.1

Fixed Income

  • The uptick in inflation for September in the US helped to sink US Treasuries overnight. Yields on the 2yr UST added almost 9bps to close at 5.0687% while the 10yr yield added 14bps to 4.6969%. That helped to flatten the curve by another 5bps to -37bps overnight while market pricing of a final 25bps hike this year has also increased since the start of the week.
  • Bond markets generally closed heavy across all regions. Yields across major benchmark European bonds closed higher—bund yields added 7bps to 2.782%—while emerging market bonds were also weaker. Local currency bond yields in Turkey added 9bps to 25.46% while South African yields closed near flat.
  • Egypt’s finance minister said the country would raise USD 1.5bn in borrowing via issues in CNY, JPY and financing from banks.


  • The stronger CPI print from the US helped to sink currencies against the US dollar. EURUSD dropped almost 0.9% to 1.0528 while GBPUSD gave up more than 1% to close at 1.2175. USDJPY also pushed higher to 149.81, up by 0.4%.
  • Commodity currencies were substantially weaker with AUDUSD and NZDUSD both down more than 1.5% to 0.6314 and 0.5927 respectively. USDCAD added 0.7% to settle at 1.369.


  • The higher inflation print weighed on equities yesterday. In the US, the Dow Jones dropped 0.5% while the S&P 500 and the NASDAQ both closed 0.6% lower.
  • Locally, the DFM and the ADX both ended the day down 0.6%.


  • Oil prices closed mixed overnight with Brent up 0.2% at USD 86/b while WTI dropped by 0.7% to USD 82.91/b. The EIA reported a massive stock build of more than 10m bbl last week alongside drops in gasoline and distillate inventories. US oil production did push higher to 13.2m b/d, up 300k b/d.
  • The IEA left its oil supply and demand forecasts for the rest of 2023 unchanged in its October monthly oil market report, expecting oil consumption to hit 102.6m b/d by Q4 2023. For 2024, the agency nudged its demand expectation downward marginally though still expects a record high of almost 104m b/d by the end of next year. The IEA did note some “large-scale demand destruction” in economies that are enduring high energy prices along with currency volatility as well as a slowdown in oil demand in markets like the US. Supply is forecast to expand by 1.7m b/d in 2024 thanks to increased output from the US, Brazil, Guyana and Canada according to the IEA.


Written By

Daniel Richards Senior Economist

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