US Dollar Continues to Strengthen on Strong Economic Data

The US dollar index climbed over 96 on Wednesday, reaching levels previously seen in July 2020, after economic data revealed that US retail sales grew more than anticipated, putting further pressure on the Federal Reserve to raise interest rates sooner. Retail sales increased 1.7 percent month on month in October, the largest increase since March and quicker than markets anticipated, suggesting robust consumer spending and also price-inflationary spillover impacts.

Furthermore, St. Louis Federal Reserve Bank President James Bullard stated Tuesday that the central bank should herald a more hawkish stance in the coming meetings to gear up for a longer-than-expected period of inflation, and he retained his forecast that the Fed will have to lift rates twice in 2022.

The NAHB housing market index in the United States increased three points to 83 in November 2021, the highest level in six months, above market expectations of 80 as demand for houses continues robust despite rising prices and lengthier wait periods. The present single-family sub-index rose to 89 from 86 the earlier month, while the house sales in the upcoming six months sub-index remained stable at 84. Prospective buyer sentiment increased to 68 from 65.

Manufacturers’ and trade inventories in the United States increased 0.7% m-o-m in September 2021, after an upwardly amended 0.8% increase in August and matching market forecasts. Stocks increased the greatest among merchant wholesalers (1.4 percent vs. 1.3 percent in August) and manufacturers (0.8 percent vs. 0.7 percent), while retailer stockpiles decreased (-0.2 percent vs 0.2 percent). Business inventory increased by 7.5% year on year.

In October 2021, industrial output in the United States increased 1.6 percent from the previous month, recovering after a 1.3 percent loss in September and above market estimates of a 0.7 percent gain. It was the largest monthly increase in industrial activity since March, with half of the increase representing a rebound from Hurricane Ida’s impacts. In October, manufacturing output climbed by 1.2 percent; with the exception of a huge rise in the manufacture of motor vehicles and components, factory output rose by 0.6 percent. Utilities production increased by 1.2 percent, while mining output increased by 4.1 percent. Pertaining to over-the-counter interbank rate quotations for this government bond term, the US 10 Year Note Bond Yield was 1.64 percent on Wednesday, November 17.

In October 2021, US retail sales increased by 1.7 percent, above an upwardly revised 0.8 percent increase in the earlier month and exceeding market expectations of 1.4 percent. It is the largest jump since March, as consumers increase their spending on early Christmas shopping and fuel. Non-store retailers saw the greatest increase (4%), followed by gasoline stations (3.9%), electronics and appliance stores (3.8%), miscellaneous store retailers (2.8%), building materials and garden equipment (2.8%), motor vehicle dealers (1.8%), sporting goods, hobby, musical, and book stores (1.5%), food and beverages (0.9%), general merchandise stores (0.8%), and furniture stores (0.8%). (0.4 percent ). Sales at food services and drinking establishments, on the contrary, were unchanged, while apparel shop sales fell 0.7 percent and health and personal care sales down 0.6 percent. Sales were up 1.7 percent excluding automobiles and 1.5 percent ignoring fuel.

In October 2021, the price index for US imports increased 1.2 percent from the earlier month, increasing from a 0.4 percent growth in the prior month and above market estimates of a 1% gain. It was the biggest monthly gain since a 1.3 percent increase in May. Import fuel costs increased 8.6 percent after increasing 3.9 percent the previous month, mainly mostly to rising petroleum and natural gas prices. In the meantime, non-fuel import prices rose 0.4 percent in October, after a 0.1 percent increase in September, owing to increased costs for non-fuel industrial supplies and materials, automotive vehicles, meals, feeds, and drinks, and consumer products.

Import prices increased 10.7% year on year in October, the highest year on year rise since June 2021. Prices for US exports increased 1.5% over a month earlier in October 2021, building on an upwardly amended 0.4 percent gain in September and above market estimates of a 0.9 percent rise. It was the 17th consecutive monthly increase in export prices, but it was the quickest since May.
Non-agricultural export charges increased for the 12th consecutive month (1.5 percent vs. 0.6 percent in September), led by industrial supplies and materials, capital goods, motor vehicles, consumer products, and non-agricultural foods. Higher agricultural product costs (1.0 percent versus -1.5 percent) also exerted upward pressure, as wheat, other animal feeds, cotton, meat, and dairy goods more than outweighed decreased soybean prices. Export prices increased 18.0 percent year on year, after an upwardly amended 16.5 percent increase in September.