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What happened last week?


  • US ecommerce sales hit new records on Black Friday and Cyber Monday.
  • The OECD predicted the Federal Reserve (the Fed) will keep interest rates higher for longer than investors expect.


  • The European Central Bank (ECB) issued a warning about the region’s banks.
  • Bank lending to businesses in the eurozone fell for the first time in eight years.
  • Inflation in the bloc fell far more than expected in November.


  • Business activity in China’s manufacturing and services sectors shrank in November.


What does all this mean?

In a boost for retailers that’ve been grappling with tepid sales projections for the holiday season, Black Friday saw US online sales reach a record $9.8 billion – a 7.5% increase over last year, according to Adobe Analytics. Adding to the good news, Adobe said online sales on Cyber Monday hit $12.4 billion, growing 9.6% from last year and also setting a new record. Taken together, “Cyber Week” – the five days from Thanksgiving through Cyber Monday – generated $38 billion in total sales, up 7.8% from last year.

In its just-released global outlook, the OECD said lingering inflation pressures will force central banks in the US and Europe to keep interest rates higher for longer than investors are prepared for – despite some of the weakest economic growth rates since the global financial crisis. The OECD predicts that rate cuts will begin in the US in the second half of 2024, and across the eurozone in the spring of 2025. That’s considerably later than what investors are banking on: they’re looking for cuts as early as next April for the US and May for Europe.

In its twice-yearly stability review, the ECB warned that the region’s banks are showing early signs of stress, with a notable rise in souring loans. Both companies and individuals are experiencing rising default rates and an increasing proportion of overdue loans. The good news is that the ECB says it’s confident the banking system can handle a worsening of its asset quality, thanks to its stronger capital and liquidity position. But the bad news is that an increase in loan defaults, coupled with a big drop in lending volumes and increased funding costs as banks pass on higher interest rates to depositors, will be a major headwind for banks’ profitability.

Speaking of which, bank lending to non-financial corporations in the eurozone shrank by 0.3% in October from the same time last year, marking the first contraction since 2015. Lending growth to households, meanwhile, slowed to 0.6% in October, from 0.8% the month before – the quietest pace since early 2015, when the bloc was just beginning to recover from its debt crisis. That’s the latest sign that the ECB’s steep interest rate hikes are starting to hobble the region’s economy. Some people now fear that the central bank has gone too far and that lending is becoming so restrictive that it could lead to a nasty economic downturn.

But at least the ECB’s rate hikes are working as intended to tame inflation. Case in point: consumer prices in the eurozone rose by a less-than-expected 2.4% in November from a year ago – a sharp drop from the previous month’s 2.9% pace and the smallest increase since July 2021. Falling energy prices and lower growth in food and services prices were the main culprits behind the slowdown. But even core inflation, which excludes volatile food and energy items, slowed for a fourth consecutive month, to a less-than-expected 3.6%.

Business activity in China’s manufacturing and services sectors shrank in November, highlighting a loss of momentum in the world’s second-biggest economy, despite intensified government efforts to boost growth. The official manufacturing purchasing managers index (PMI) fell to a lower-than-expected 49.4 in November. It was the second consecutive month that the index came in below the crucial 50-mark that separates expansion from contraction. A measure of services activity, meanwhile, fell to 49.3 from 50.1 in October, for that gauge’s first contraction this year.

This week’s focus: Consumers are already spending big

Some sceptics would argue that the burly year-over-year Black Friday and Cyber Monday ecommerce sales growth is due to the base effect. Last year’s holiday season, after all, was dampened by high inflation and its effect on consumer spending. But others would argue that the record buying this year demonstrates shoppers’ willingness to spend – despite dwindling pandemic-era savings and the highest interest rates in over two decades. In fact, looking to the US, the resilience of consumers has surprised forecasters all year. Strong retail spending, for example, helped the US economy grow at a much-faster-than-expected 5.2% annualised pace in the third quarter.

To be sure, shoppers are still cost-conscious and trying to find their way around tighter budgets. Some proof of that: the Adobe survey revealed that $79 million in Black Friday sales were generated by customers choosing the “buy now, pay later” (BNPL) option, which lets shoppers make payments over time, usually without interest. That was a 47% increase over last year. Cyber Monday was a similar story, with shoppers using BNPL for an estimated $940 million of sales – up 42.5% from last year. What’s more, you can expect a lot of the spending over Cyber Week to have been charged on credit cards. This is happening even as the number of delinquencies – that’s debt payments that are over a month late – sit at highs last seen back in 2012. That could be a sign that consumers are spending way beyond their means.

The week ahead

  • Monday: Eurozone sentix economic index (December), US factory orders (October).
  • Tuesday: US job openings and labor turnover survey (October), eurozone producer price index (October).
  • Wednesday: Eurozone retail sales (October), US trade balance (October), Bank of Canada interest rate announcement.
  • Thursday: China trade balance (November).
  • Friday: China loan growth (November), US labor market report (November), Japan household spending (October).
  • Saturday: China inflation (November).

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