INFLATION
The Consumer Price Index (CPI) rose 0.3% in November. The core CPI, excluding food and energy, also rose 0.3%. Year-over-year, consumer prices are up 2.7% while core CPI has risen 3.3%. Producer prices (PPI) were up 0.4% in November and are up 3.0% over the last twelve months.
Our Take: The headline PPI came in unexpectedly higher due to the effect of avian flu outbreaks on egg prices. Otherwise, inflation reports were as expected. The Fed is likely to cut rates by 25 basis points (bps) next week but is also likely to indicate a slowdown in projected 2025 rate cuts as inflation remains stubbornly above their 2% target.
FRANCE
French President Emmanuel Macron named his centrist ally Francois Bayrou as Prime Minister. Both the left- and right-wing blocs that voted together to bring down the previous government said that they would give Bayrou a chance to develop a budget that is acceptable to them. Spreads on French bonds relative to German bonds tightened slightly but remain at elevated levels.
Our Take: Bayrou will find himself in the same position as his predecessor in that he will likely be unable to deliver a budget that significantly moves France towards compliance with EU fiscal rules. Failure to pass a budget will result in significant fiscal tightening and disruption in France, while a budget that does not meet EU rules will undermine the credibility of the “fiscal compact” that was crucial to keeping the Eurozone together during the debt crisis.
CHINA
The Chinese government announced a higher fiscal deficit target for 2025 and indicated that fiscal stimulus would be aimed at increasing domestic consumption.
Our Take: The Chinese Communist Party (CCP) is aiming to cushion the blow to growth from the expected trade policies of the incoming Trump administration. While fiscal stimulus can provide a short term boost to domestic consumption, sustaining strong domestic growth will likely require structural reforms that the CCP under Chinese President Xi Jinping is unlikely to implement.
EUROPEAN CENTRAL BANK
The European Central Bank (ECB) cut rates by 25bps for the fourth time this year and indicated that it will continue cutting at this pace at its next two meetings.
Our Take: The ECB is seeing inflation move towards its 2% target but is also seeing economic weakness in many of its key economies. This gives the ECB less ability than the Fed to wait for more clarity before easing policy further.
MUNICIPALS
The Orlando Aviation Authority tapped the municipal bond market to fund capital improvements at the Orlando International Airport. The nearly $805 million deal will fund projects in Terminal C along with upgrades to other areas of the airport. The Orlando Aviation Authority has a $5.4 billion five-year plan which includes an expansion of Terminal C, which opened in 2022, rental car expansion, baggage handling improvements and other infrastructure projects.
Our Take: Airport expansion and improvements are necessary to keep up with growing demand. The Orlando International Airport has experienced two years of record passenger travel. The Orlando-Kissimmee-Sanford area continues to see an increase in population and economic growth.