U.S. SERVICE SECTOR prices rose at an annualised rate of 6.4% over the three months ending in November. Service sector output is more labour-intensive than manufacturing and prices tend to be more sticky. Services inflation has decelerated from 9.9% in the three months ending in June, but it is still three times faster than the central bank’s target of a little over 2%:
U.S. FINANCIAL CONDITIONS have tightened as lenders adopt more conservative policies and higher prices for credit, risk and leverage. The Federal Reserve Bank of Chicago’s national financial conditions index has is in the 87th percentile for all months since 1990 up from the 24th percentile a year ago:
EUROPE’s gas futures prices have slumped for nearby delivery months as storage facilities near their maximum capacity but inventories continue to build rapidly. Calendar spreads from November through January have slumped into contango as storage is maxed out:
China plans big increase in wind and solar (trans.)
BRENT spot prices and calendar spreads have surged as traders anticipate EU sanctions on Russia’s exports will increase the shortage of oil. Both have returned to levels last seen in March in the immediate aftermath of Russia’s invasion of Ukraine. The six-month calendar spread is at a near-record backwardation of $16 per barrel, signalling inventories are expected to fall further in the rest of the year, leaving the market critically tight:
BRENT’s inter-month spreads for the rest of 2022 and 2023 have moved into an increasingly large backwardation over the last two months as the prospect of EU sanctions is expected to tighten the market and leave it short of both crude and fuels:
CHINA’s manufacturers reported a continued contraction in business activity in May but the downturn was less widespread than in April. The official purchasing managers’ index increased to 49.6 (10th percentile) up from 47.4 (1st percentile) the previous month:
CHINA’shydro-electric generation increased to a record 313 TWh in the first four months of the year, surpassing the previous peak of 299 TWh in 2019, and sharply reducing coal consumption:
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