Rishi Sunak became prime minister of the UK on 25th October after meeting with King Charles III at Buckingham Palace. October has been a challenging month for UK politics, as the previous PM Liz Truss had to backtrack on key tax measures announced by then Chancellor Kwasi Kwarteng in mini-budget delivered on 23rd September. Truss fired Kwasi Kwarteng as chancellor, prior to her departure. Meanwhile, China’s President Xi Jinping secured a historic third term as the Communist Party’s leader.
Global equity markets recovered slightly during October after a negative performance in September. Equity markets still remain in negative territory on a yearly basis as monetary policy tightening continues. Federal Reserve and Bank of England both raised the interest rates by 75bps during its November 2022 meeting.
News & Key Events in October
• The annual inflation rate in the UK rose to 10.1% in September of 2022 from 9.9% in August, returning to the 40-year high hit in July. The annual core rate, which excludes energy, food, alcohol, and tobacco, rose to a record-high of 6.5%. On a monthly basis, consumer prices rose by 0.5% in September, unchanged from the previous month.
• Retail sales in the UK dropped 1.4% month-over-month in September of 2022, following a revised 1.7% decline in August. Year-on-year, retail sales dropped 6.9%. Compared with the pre-coronavirus level in February 2020, total retail sales were 1.3% lower.
• The British economy contracted by 0.3% month-over-month in August of 2022, following a downwardly revised 0.1% rise in July.
• In the 2022 fiscal year, the US budget deficit reached $1.375 trillion, compared with the $2.772 trillion reported in 2021. The $1.397 trillion reduction in the deficit was the largest-ever single-year improvement in the US fiscal position as receipts jumped 21% to a record of $4.896 trillion. Meanwhile, outlays for fiscal year fell by a record $550 billion, or 8% to $6.272 trillion as Covid-19-related spending declined.
• The US economy grew an annualised 2.6% on quarter in the three months to September of 2022, rebounding from a contraction in the first half of the year, which saw the GDP shrink by 0.6% in Q2 and 1.6% in Q1.
• Annual inflation rate in the Euro Area continued to break record high levels and jumped to 10.7% in October of 2022 from 9.9% in September.
• Germany’s economy grew by 0.3% on quarter in the three months to September 2022, following a 0.1% expansion in the previous period. On a yearly basis, German GDP advanced by 1.2% in the third quarter.
• The Euro Area economy expanded 0.2% on quarter in the three months to September of 2022, following a 0.7% growth in Q2. It was the weakest GDP growth since the rebound from Covid-19 restrictions in Q2 2021. Year-on-year, Euro Area’s GDP advanced by 2.1%.
• The Chinese economy advanced 3.9% year-on-year in Q3 of 2022, exceeding market consensus of 3.4% and picking up from a 0.4% growth in Q2, boosted by various measures to revive economic activity. For the first nine months of the year, China’s GDP grew by 3%.
• Russian president Putin announces Russian annexation of four Ukrainian r• The Bank of Canada raised the target for its overnight rate by 50bps to 3.75% in its October 2022 meeting. This marks the sixth consecutive rate hike, pushing borrowing costs to their highest since 2008.
• The annual inflation rate in Australia climbed to 7.3% in Q3 of 2022 from 6.1% in Q2, above market forecasts of 7%.
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