US inflation turns the corner

<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 energised by some key American data.</p><p>First up today, there has been <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>a surprise improvement in the US CPI inflation rate</strong></a>. And that has induced some sharp market reactions. Their rise in consumer prices slowed for a 4th month to 7.7% in October, the lowest since January, and below forecasts of 8%. It is down from 8.2% in September.</p><p>Equity markets took off higher. Bond yields dived. And the US dollar retreated as risk appetites swelled. Markets are signaling a landscape change on this data, which seems a bit of an over-reaction.</p><p>However, the change between September and October is below +5%, so that indicates that recent improvements are better than the year-on-year headline numbers. "Core inflation" was up even less. Markets are betting the Fed will be pleased, and that the next rate hike from them won't have to be as high a +75 bps. Markets have now priced in a +50 bps December hike.</p><p>Meanwhile, <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20222167.pdf" target="_blank"><strong>US jobless claims rose</strong></a> marginally last week to +205,000 and taking the number of people on these benefits to 1.26 mln. While that is still near historic lows, it is a noticeable rise and maybe an indication the heat is going out of their tight labour market. Certainly there is now a steady stream of daily job cut announcements coming out of the tech sector. They will probably spread from there. The question is, how fast and how hard. But there are no alarming signs just yet and clearly today Wall Street is betting it will be minor.</p><p>In Canada, a liquidity crunch has hit a large private mortgage investment fund. Real estate lender Romspen In