US Fed dials back QE

<p>Kia ora,</p><p>Welcome to Thursday’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 that Chinese consumers are wary of what lies ahead in a possible Delta winter, and household preparations are distorting their retail economy.</p><p>But first, at their latest review, the US Federal Reserve has <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20211103a.htm" target="_blank"><strong>announced</strong></a> the start of its tapering program this month. It said that it is reducing the monthly pace of its net asset purchases by -US$10 bln for Treasury securities and -$5 bln for agency mortgage-backed securities. These are modest reductions in their bond buying, but the plan is to end it by June 2022, a key step toward withdrawing pandemic-driven economic support amid a recent inflation surge. Overall, this is generally as expected.</p><p>The October US non-farm payrolls report is due on Saturday (NZT) and a gain of +450,000 is expected following the very we4ak September result. Today the precursor <a href="https://adpemploymentreport.com/2021/October/NER/NER-October-2021.aspx" target="_blank"><strong>ADP Employment report</strong></a> surprised on the upside, showing a rise of +571,000 on top of their September +523,000. In October, every sector they monitor reported good gains.</p><p>If the jobs report comes in as expected, that will be a good result given that their September <a href="https://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf" target="_blank"><strong>factory order data</strong></a> was a very modest improvement over August. But at least it was +14% higher than for September 2020 and +7% over September 2019 pre-pandemic levels.</p><p>The more current services sector activity indexes for October were very strong however. <a href="https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business