Macro and Politics

* The unadjusted Real Sector Confidence Index (RSCI) rose from 100.2 to 100.8 in October, while the seasonally adjusted index increased from 100.8 to 102. Meanwhile, the Capacity Utilization Rate (CUR) inched up from 74.0% to 74.2%, and the seasonally adjusted CUR rose from 73.8% to 74.0%. An analysis of the subcomponents of the RSCI indicates that assessments regarding current inventories of final goods, current order levels, employment and production expectations for the next three months, overall business sentiment, investment spending, and export orders contributed positively to the index. On the other hand, weaker assessments concerning total orders over the past three months exerted a modest downward impact. Overall, the data suggests that firms remain cautiously optimistic about the near-term outlook, with mild signs of recovery in production and employment expectations. Evaluations regarding the past three months point to a strengthening trend in production activity and a rebound in export orders. The convergence of current order levels toward seasonal norms and a decline in inventory levels imply that the slowdown in domestic demand has been partially offset. Meanwhile, although expectations for future production and orders remain somewhat guarded, the improvement in investment spending intentions signals a modest revival in investment appetite. Please recall that we have recently revised our 2025 year-end GDP growth forecast upward from 3.1% to 3.4%.

* The adjusted unemployment remained unchanged at 8.6% in September, while the rate of composite measure of labor underutilization – consisting of time-related underemployment, potential labor force and unemployment– decreased from 29.8% to 28.6%. Moreover, within the components, the combined rate of time-related underemployment and unemployment edged down from 19.4% to 18%, while the combined rate of unemployment and potential labor supply increased from 20.3% to 20.5%. The decline in the underutilized labor rate in September appears to have been driven by the improvement in time-related underemployment and unemployment. Yet, despite the decrease in September, the indicator remains above 28%, signaling that labor market conditions are still weaker than what the headline unemployment figure suggests. The leading indicators in respect to the employment sector have been continuing to give negative signals. PMI’s related sub-components, the CUR level as well as the recent path of the survey about expectations for number of people unemployed over the next 12-months stand unsupportive for the unemployment rate in the near term.