Central bank resolve spooks markets

<p>Kia ora,</p><p>Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news we have a big sell-off underway, induced by markets fearful of a united central bank resolve, who all remain focused on tackling inflation, and a growing understanding that this may require an economic recession to achieve that outcome.</p><p>The trigger from both the US and EU is that policy makers have indicated interest rates may have to go much higher before the inflation battle is won.</p><p>In the US, their data releases aren't helping the investor mood either. <a href="https://www.census.gov/retail/marts/www/marts_current.pdf" target="_blank"><strong>American retail sales</strong></a> fell in November from October and by much more than expected. Car sales were the big problem here. The year-on-year rise is down to +6.5%.</p><p><a href="https://www.federalreserve.gov/releases/g17/current/default.htm" target="_blank"><strong>American industrial production</strong></a> came in lower than expected in November too, falling from October when a rise was expected. The year-on-year gain is down to +2.5%.</p><p><a href="https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf" target="_blank"><strong>Inventories</strong></a> however didn't surprise with a small rise in wholesale stocks as expected and a small fall in retail stocks, also as expected. But wholesale inventories are +14% above year-ago levels, and retail inventories are a massive +20% above on the same basis. This is very much more than can be accounted for by inflation.</p><p>In the regions, the <a href="https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-data/mbos/2022/bos1222.pdf?la=en&hash=1D4F5E6CA0788025CC3AC3E628FA43AD" target="_blank"><strong>Philly Fed factory survey</strong></a> stayed quite negative, while the <a href="https://www.newyorkfed.org/medialibrary/media/survey/empire/empire2022