GlobalFollowing this week’s policy decision from the ECB, investors will likely remain focused on central banks in the coming days with the Fed, the BoJ and the BoE all due to meet next week. With that in mind, we look at some of the key considerations for these policymakers in our charts this week. To kick off we look at the impact of tighter monetary policy – and quantitative tightening policies in particular – on longer-term real yields in the United States (chart 1). We turn next to some perspectives on the global growth and inflation consensus for 2024 from our latest Blue Chip survey of economic forecasters (in charts 1 and 2). Given its significance for the world economy, China’s slowdown and the impact on its major trading partners is then given some airtime (in chart 4). For the BoE more specifically, we look next at the evidence that’s been accumulating to suggest the UK labour market is feeling some strain (chart 5). Finally, and with much discussion doing the rounds about the potential impact of a new currency for the so-called group of BRICS economies, we look at the still-high weight of the US dollar in the reserve holdings of the world’s central banks (in chart 6).
USA| Sep 14 2023U.S. Retail Sales Rise in August, Led by Gasoline Sales
- Sales of core goods increase minimally.
- Online buying is little changed.
- Gasoline sales rise sharply with higher prices.
by:Tom Moeller
|in:Economy in Brief
USA| Sep 14 2023U.S. PPI Jumped in August, Driven by Gasoline Prices
- Larger-than-expected 0.7% m/m increase in August.
- About 50% of overall increase attributable to 20% m/m surge in gasoline prices.
- PPI excluding food and energy prices rose just 0.2% m/m.
by:Sandy Batten
|in:Economy in Brief
USA| Sep 14 2023U.S. Business Inventories Hold Steady in July While Sales Rise
- Retail inventories rise modestly but wholesale inventories decline.
- Retail, wholesale & factory sales strengthen.
- Business sector inventory-to-sales ratio eases.
by:Tom Moeller
|in:Economy in Brief
- Initial claims increase for the first time since the August 5 week.
- Continuing claims climb to a three-week high.
- Insured unemployment rate holds steady at 1.1%.
Europe| Sep 14 2023Inflation in EMU Accelerates…Despite This Chart…
EMU inflation (month-to-month annualized) advanced at a 7.5% annual rate in August, up from a 5.7% pace in July. The year-on-year pace is at 4.2%. Countries showing the year-on-year pace of inflation faster than the overall EMU pace monthly are France, Germany, Italy, Portugal, and Ireland.
Inflation HAS broadly decelerated Inflation broadly decelerates over 12 months compared to its pace of 12-months ago. Every country in the table shows deceleration on this basis. The deceleration of inflation on this basis is -5.7 percentage points for the EMU overall; the median deceleration across members in the table is -6.1 percentage points. The greatest deceleration on this timeline is the -16.5 percentage-point drop off in the Netherlands, followed by a -11.1 percentage-point drop in Belgium, and a -10.5 percentage-point drop in Greece.
Compared to a year ago, the drop of in inflation is terrifically large. But that now seems to be a trend of the past that is withering.
The road ahead has more twists and turns Economists warn that the hard part of inflation reduction lies ahead. When oil prices fall, they can unwind inflation substantially, broadly, and quickly. But once inflation has been high for a while, other prices begin to trend with it and the higher inflation rate becomes entrenched. A dropping inflation rate is good news; however, at some point, the pace of inflation needs to be the focus rather than just the change in the pace. The focus on other prices that become sticky if inflation lingers too high for too long, is usually a spotlight on wages, since labor seeks to get back the compensation it loses when inflation rises. So, wage gains rise at a faster pace and then policy is pushing to reduce both wage and price inflation.
Inflation progress is slowing…down…does anyone care? Over six months, prices decelerate in the EMU by -0.9% at an annual rate compared to their 12-month pace. But deceleration only occurs for five of the twelve economies in the table (the EMU pace represents all EMU countries and is formed using weights reflecting the size of member economies). The median deceleration for 6-months compared to 12-months for reporting members in the table is not for a deceleration at all but for an acceleration of 2.7 percentage points.
Over 3 months, EMU inflation rises to 5.2% annualized from 3.3% over six months, an acceleration of 1.9 percentage points. Among table members, there is, nonetheless, an average deceleration of 0.3 percentage points (annualized). That would become 1.2 percentage points if the pace held for one year. Over 3 months, six of twelve members show deceleration.
USA| Sep 13 2023U.S. Government Runs Unexpected Budget Surplus in August
- Year-to-date, the deficit remains increased versus FY’22.
- Revenues continue to decline as individual tax receipts fall.
- Outlay growth slows with lower health program payments.
by:Tom Moeller
|in:Economy in Brief
USA| Sep 13 2023U.S. CPI Strengthens in August; Core Price Rise Picks Up
- Energy price jump fuels increase while food prices rise modestly.
- Core goods prices slip, but services prices gain steadily.
- Used car prices fall but rents & medical care costs rise.
by:Tom Moeller
|in:Economy in Brief
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