Economic Update

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Summer Doldrums

Both USA CPI and PPI reports showed that inflation fell by more than expected and that then had an impact on markets with a muting of rate rise expectation driving stocks higher and the US$ ending a little weaker, with some commentators tentatively suggesting we have seen peak inflation. One thing is for sure that energy prices drive a good deal of overall inflation and they have seen price drops.

The absence of meaningful data until month end and holidays will leave the markets listless and lacking in direction. Two minor pieces of data do occur this week and will give a snapshot into the mindset of the US consumer against the backdrop of rate rises.

The British pound was the second weakest currency as the economy contracted across all sectors increasing recession fears. CPI is unlikely to allay concerns of further rises if they come in on expected – indeed the futures market is pricing in an 80% chance of 50bps rises next month and as with the US numbers we do have consumer based data at the end of the week.

Commodities were, as seems to be the way of it at the moment, mixed with energy still struggling on fears of global slowdown and the demand destruction that has occurred – the increase in stocks in the US didn’t help either. Metals are a little higher as investors return to them but the recovery is fragile and vulnerable to recession scares.

Date

Country

Figures

Expected

Previous

Aug 16

USA

Housing Starts MM

 

-2%

Aug 17

GBP

CPI YY

9.8%

9.4%

 

USA

Retail Sales MM

0.1%

1%

Aug 18

USA

Initial Jobless Claims

265K

262K

Aug 19

GBP

Consumer Confidence

-42

-41

 

GBP

Retail Sales YY

-3.3%

-5.8%

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