Bundesbank: Inflation should move into double digits in the next few months

    Bundesbank said in the monthly report that there are “increasing signs that the German economy is slipping into a recession”. It added, “the high inflation and the uncertainty regarding the energy supply and its costs affect not only the gas and electricity-intensive industry and its export business and investments, but also private consumption and the service providers dependent on it.”

    Gas supply situation is expected to “remain extremely tense in the coming month”. For Q4 and Q1, economists expect a “noticeable decline in economic output”, and outlook is “extremely uncertain”.

    Regarding inflation, Bundesbank said the fiscal relief package will only be reflected in consumer prices at the beginning of next year. “The bottom line is that the inflation rate should move into the double digits in the next few months,” it added.

    Full release here.

    NZ BusinessNZ services rose to 58.6, bouncing for how long?

      New Zealand BusinessNZ Performance of Services Index rose from 54.4 to 58.6 in August. Looking at some details, activity/sales rose from 54.4 to 67.1. Employment rose from 49.3 to 50.8. New orders/business rose from 53.4 to 66.5. Stocks/inventories rose from 53.8 to 59.6. Supplier deliveries rose from 47.6 to 49.6.

      BNZ Senior Economist Doug Steel said that “overall, combining August’s strong PSI with last week’s firmer PMI yields a composite index (PCI) that suggests annual GDP growth up toward 5% in Q3 2022.  We currently forecast 5%+ for that period but that strength is mostly a function of the very weak base period. If the PCI is truly bouncing, the key question is for how long?”

      Full release here.

      ECB Lane: Tightening is not pain free

        ECB Chief Economist Philip Lane said in a conference over the weekend, monetary tightening is “going to dampen demand”, and “we’re not going to pretend this is pain free”.

        “Demand is now a source of inflation pressure, it was not six or nine months ago in the same way it now is,” he added.

        While rate hikes could continue at each remaining meeting of the year, and extend to early next year, Lane said ECB is open mind on where to stop with a meeting-by-meeting approach.

        On the economy, Lane said separately in an RTE interview, “If we think our base case is to barely grow, a technical recession – falling into a mild recession – cannot be ruled out.”

        Bundesbank Nagel: We have to be determined, in October and beyond

          Bundesbank President Joachim Nagel said on Sunday, “If the data trend continues, more interest-rate increases have to follow — that’s already agreed in the Governing Council. We have to be determined, in October and beyond.”

          Nagel added that interest rates are still “somewhat off the levels” to curb inflation. “We must bring inflation back under control,” he said. “We mustn’t let up, even if the economy worsens.”

          On the German economy, he said that momentum will likely slow in Q3 and Q4, but he’s confident that it could avoid a steep slump.

          ECB de Guindos hopes recent depreciation in Euro is reversed in near future

            ECB Vice President Luis de Guindos told a Portuguese newspaper Expresso, “the slowdown of the economy is not going to ‘take care’ of inflation on its own.”

            “The slowdown of the economy will reduce demand pressures, which will lower inflation,” he added. “But, simultaneously, we have to act from the monetary policy standpoint to keep inflation expectations anchored and avoid second-round effects.”

            “We need to continue the normalization of monetary policy,” he said. “More hikes might come in the next few months — how many times and by how much will depend fundamentally on the data — and we underscore our full determination to make inflation converge toward our definition of price stability”

            “Further depreciation of the euro could be detrimental to inflationary pressures. On the contrary, if the euro stopped depreciating, this could be positive and support the fight against inflation. I hope that the recent depreciation trend is reversed in the near future”, he also noted.

            Canada wholesale sales dropped -0.6% mom in Jul, led by personal and household goods

              Canada wholesale sales dropped -0.6% mom in July to CAD 80.2B, worse than expectation of -0.4% mom. That followed two consecutive months of record-high sales in May and June.

              Declines in the personal and household goods subsector led the losses for July, followed by the building material and supplies, and the motor vehicle and motor vehicle parts and accessories subsectors. Sales fell in five of seven subsectors, which represented 63% of wholesale sales.

              Full release here.

              Eurozone CPI finalized at 9.1% yoy in Aug, core CPI at 4.3% yoy

                Eurozone CPI was finalized at 9.1% yoy in August, up from 8.9% yoy in July. A year earlier, the rate was only 3.0% yoy. CPI core (all item ex-energy, food, alcohol and tobacco) was finalized at 4.3%, up from prior month’s 4.0% yoy. The highest contribution to the annual Eurozone inflation rate came from energy (3.95%), followed by food, alcohol & tobacco (2.25%), services (1.62%) and non-energy industrial goods (1.33%).

                EU CPI was finalized at 10.1%, up from 9.8% a month ago. The lowest annual rates were registered in France (6.6%), Malta (7.0%) and Finland (7.9%). The highest annual rates were recorded in Estonia (25.2%), Latvia (21.4%) and Lithuania (21.1%). Compared with July, annual inflation fell in twelve Member States and rose in fifteen.

                Full release here.

                UK retail sales volume dropped -1.6% mom in Aug, sales value also down -1.7% mom

                  UK retail sales volume dropped -1.6% mom, -5.4% yoy in August, worst than expectation of -0.6% mom, -4.2% yoy. Ex-fuel sales volume dropped -1.6% mom, -5.0% yoy, versus expectation of -0.7% mom, -3.4% yoy.

                  Retail sales value also dropped -1.7% mom while ex-fuel sales value dropped -1.4% mom. On a year earlier, headline sales value rose 5.4% yoy while ex-fuel sales value rose 3.7% yoy.

                  Full release here.

                  China data beat, but USD/CNH stays above 7

                    China industrial production rose 4.2% yoy in August, above expectation of 4.0% yoy. Retail sales rose 5.4% yoy, above expectation of 3.2% yoy. That’s the fastest pace since January-February period this year. Fixed asset investment rose 5.8% ytd yoy, above expectation of 5.6%.

                    “The economy held out against multiple unexpected headwinds in August and showed a positive recovery with the help of more additional supportive policies,” the NBS said in a statement. “The manufacturing needs are steady and rising, employment and prices are stable, most indices are better than last month.”

                    The set of better than expected data provided little support to the decline Yuan, with USD/CNH breaking through 7 psychological resistance this week. There is no sign of topping in the pair yet. USD/CNH is on track to 61.8% projection of 6.3057 to 6.8372 from 6.7159 at 7.0444. Firm break there will set the stage for pandemic high at 7.1961.

                    NZ BusinessNZ manufacturing rose to 54.9, improving tone around underlying growth

                      New Zealand BusinessNZ Performance of Manufacturing Index rose slightly from 53.5 to 54.9 in August. Production rose from 50.8 to 54.6. Employment rose from 52.9 to 53.6. New orders rose from 50.8 to 59.2. Finished stocks rose from 48.7 to 50.8. Deliveries rose from 50.1 to 53.7.

                      BNZ Senior Economist, Craig Ebert stated ” that manufacturing production, in general, was holding its own in Q2, rather than drooping, was portrayed in the PMI readings for April May and June. And in July and August the PMI has moved on to suggest an improving tone around underlying growth.”

                      Full release here.

                      RBA Lowe: Rate at 2.35% is still too low

                        RBA Governor Philip Lowe told the House of Representatives Standing Committee on Economics, interest rate at 2.35% is “still too low”. He added that over the longer term, the cash rate “should at least average the mid point of the inflation target”, which is 2.5%, if not a bit higher. Also, an average interest rate of about 3% was “possible”, and we’ll cycle around some number between 2.5 and 3.5.”

                        Lowe also warned that the longer inflation stays above 3%, “the more difficult it’s going to become” for Australians. If that. happens “then we have higher interest rates and a recession, which is damaging. “So we’ve got two difficult kind of positions at the moment: some pain now and hopefully real wages start rising again next year against the risk of not doing anything, just sitting on our hands and having inflation stay higher.”

                        US initial jobless claims dropped to 213k

                          US initial jobless claims dropped -5k to 213k in the week ending September 10, below expectation of 227k. Four-week moving average of initial claims dropped -8k to 224k.

                          Continuing claims rose 2k to 1403k in the week ending September 3. Four-week moving average of continuing claims dropped -7.75k to 1413k.

                          Full release here.

                          US retail sales rose 0.3% mom in Aug, ex-auto sales down -0.3% mom

                            US retail sales rose 0.3% mom to USD 683.3B in August, above expectation of 0.0% mom. Ex-auto sales dropped -0.3% mom, below expectation of 0.0% mom. Ex-gasoline sales rose 0.8% mom. Ex-auto, ex-gasoline sales rose 0.3% mom.

                            Comparing with a year ago, total sales rose 9.1% yoy. Total sales for June through August were up 9.3% from the same period a year ago.

                            Full release here.

                            Eurozone exports rose 13.3% yoy in Jul, imports surged 44.0% yoy

                              Eurozone exports of goods rose 13.3% yoy to EUR 235.5B in July. Imports rose 44.0% yoy to EUR 269.5B. Trade deficit with the rest of the world came in at EUR -34B. Intra-Eurozone trade rose 24.0% yoy to EUR 224.8B.

                              In seasonally adjusted term, Eurozone exports dropped -1.7% mom to EUR 236.7B. Imports rose 1.5% mom to EUR 277.0B. Trade deficit widened to EUR -40.3B, larger than expectation of EUR -32.5B. Intra-Eurozone trade rose from EUR 225.1B to EUR 229.3B.

                              Full release here.

                              ECB de Guindos: Determined action essential to keep inflation expectations anchored

                                ECB Vice-President Luis de Guindos said in a speech, “monetary policy needs to be focused on price stability and on delivering our inflation target over the medium term. Determined action is essential to keep inflation expectations anchored, which in itself contributes to delivering price stability and avoids second-round effects in inflation. The main asset that central banks have is credibility, and this asset becomes even more important in times of high uncertainty.”

                                On the economy, de Guindos said, “A period of heightened uncertainty is here to stay for a while, rendering decision-making more complex. Output growth is slowing down substantially and is expected to stagnate around year-end and remain low next year at less than 1%, while risks have intensified on the downside. This is set against a deteriorating inflation outlook with record-high inflation rates expected to stay elevated, well above our target, with risks primarily on the upside.”

                                Full speech here.

                                Japan reports record monthly trade deficit, on record increase in imports

                                  Japan exports rose 22.1% yoy to JPY 8062B in August, driven by shipments of auto and chip-related equipment. Imports rose 49.9% yoy to JPY 10879B. That’s the largest increase by value on record, since data became available back in 1979. The rise was driven by higher prices for energy including crude oil, coal, and LNG.

                                  Trade deficit came in at JPY -2817B. That’s the largest monthly trade deficit on record. That’s also the 13th straight month of year-on-year trade shortfalls.

                                  In seasonally adjusted term, exports dropped -0.7% mom to JPY 8379B. Imports rose 1.5% to JPY 10750B. Trade deficit came in at JPY -2371B.

                                  Australia employment rose 33.5k in Aug, unemployment rate ticked up to 3.5%

                                    Australia employment rose 33.5k in August, slightly smaller than expectation of 35.5k. Full-time jobs rose 58.8k while part-time jobs decreased -25.3k.

                                    Unemployment rate ticked up from 3.4% to 3.5%, above expectation of 3.4%. Participation rate rose 0.2% from 66.4% to 66.6%. Monthly hours worked rose 0.8% mom.

                                    Full release here.

                                    New Zealand GDP grew 1.7% qoq in Q2, driven by services

                                      New Zealand GDP grew 1.7% qoq in Q2, above expectation of 1.0% qoq, following a -0.2% qoq decline in Q1. Service industries rose 2.7% but goods producing industries dropped -3.8%. Primary industries rose 0.2%.

                                      “The reopening of borders, easing of both domestic and international travel restrictions, and fewer domestic restrictions under the Orange traffic light setting supported growth in industries that had been most affected by the COVID-19 response measures,” national accounts – industry and production senior manager Ruvani Ratnayake said.

                                      “In the June 2022 quarter, households and international visitors spent more on transport, accommodation, eating out, and sports and recreational activities.”

                                      Full release here.

                                      ECB Lane: Larger increment of interest rates appropriate

                                        ECB Chief Economist Philip Lane said in a speech that risks to the inflation outlook are “primarily on the upside”. Major short term risk is a “further disruption of energy supplies”. Over the medium term, inflation may turn out to be higher than expected because of a “persistent worsening of the production capacity”, further increases in “energy and food prices”, and rise in “inflation expectations above our target” or higher “anticipated wage rises.

                                        “In the context of a long projected period with inflation far above target, the net upside risks to inflation and taking into account that the current setting of the key policy rates is still highly accommodative, it was appropriate to take a major step that frontloads the transition from the prevailing highly-accommodative level of policy rates towards levels that will support a timely return of inflation to our target,” he said, about last week’s 75bps rate hike”.

                                        “In calibrating a multi-step transition path, the appropriate size of an individual increment will be larger, the wider the gap to the terminal rate and the more skewed the risks to the inflation target, he added.

                                        Full speech here.

                                        US PPI down -0.1% mom, up 8.9% yoy in Aug

                                          US PPI for final demand dropped -0.1% mom in August, matched expectations. The decreased is attributable to a -1.2% mom decline in prices for goods, while prices for services rose 0.4% mom. For the 12 months ended in August, PPI slowed from 9.8% yoy to 8.7% yoy, below expectation of 8.9% yoy.

                                          PPI for final demand less foods, energy and trade services rose 0.2% mom, 5.6% yoy.

                                          Full release here.