Eurozone unemployment rate dropped to 7.6% in July, down from 7.8%, matched expectations. EU unemployment rate dropped to 6.9%, down from 7.1%.
Compared with June 2021, the number of persons unemployed decreased by 430 000 in the EU and by 350 000 in the euro area.
UK PMI Manufacturing was finalized at 60.3 in August, a tick down from July’s 60.4. Market said output growth slowdown exacerbated by input supply issues. Input cost and selling price inflation remained close to survey records.
Rob Dobson, Director at IHS Markit, said: “Severe disruptions to supply chains and raw material shortages eroded the growth momentum of UK manufacturing in August…. With all of these factors likely to persist for the foreseeable future, manufacturing could well see a further growth slowdown in the coming months…. The impact of supply issues is also feeding through to rapid price inflation… Business confidence remained elevated despite the widespread shortages as firms focused on the longer-term outlook and brought back furloughed workers.”
Eurozone PMI Manufacturing was finalized at 61.4 in August, down from July’s 62.8. Markit said output and new orders sub-indices fell further from survey highs in March. Inflationary pressures eased, but remained substantial.
Looking at the member states, readings remained generally strong: Netherlands (65.8), Ireland (62.8), Germany (62.6), Austria (61.8), Italy (60.9), Spain (59.5), Greece (59.3), France (57.5).
Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturers reported another month of buoyant production in August, continuing the growth spurt into its fourteenth successive month. The overriding issue was again a lack of components, however, with suppliers either unable to produce enough parts or are facing a lack of shipping capacity to meet logistics demand.
“These supply issues were the primary cause of a shortfall of manufacturing production relative to orders of a magnitude not previously recorded by the survey, surpassing the 24-year record deficit seen in July.”
Germany PMI Manufacturing was finalized at 62.6 in August, down from July’s 65.9. Markit said suvery’s output index fell to its lowest level since August 2020. New orders continued to rise sharply, albeit also at a slower pace. Cost pressures remained historically elevated.
Phil Smith, Associate Economics Director at IHS Markit, said:
“While we continue to see strong demand for German goods, with growth in new orders still among the highest on record, production levels are being constrained as manufacturers grapple with supply chain problems. According to August’s data, growth in output has now fallen behind that of new orders to an extent previously unseen in over 25 years of data collection.
“Supply-demand imbalances continue to push up costs at a historically elevated rate, and concerns that higher prices could discourage customers is one of the factors that has seen manufacturers’ expectations for future output fade to the lowest since last October.
“Still, many goods producers are hopeful that conditions will have improved come next summer, and a further steep rise in employment levels shows that efforts are still being made to expand capacity and prepare for higher output in the future.”
France PMI Manufacturing was finalized at 57.5 in August, down slightly from July’s 58.0. Markit said growth momentum eased as supply chain issues persisted. New orders rose at softest rate since January. Business confidence slides amid concerns about cost inflation.
Joe Hayes, Senior Economist at IHS Markit, said:
“Economic conditions in France’s manufacturing sector remain strong as we head towards the end of the third quarter, although further slowdowns in the rate of output and new order growth suggest we’re well past the peak.
“Given the immense supply-side challenges being thrown at goods producers too, we can hardly be surprised to see production growth slowing, although during this time we’ve also seen backlogs of work accumulate at some pretty hefty rates. It’s likely that firms have sufficient work in the wings to keep producing at a decent rate. They’re certainly gearing for it, as employment growth is strong and accelerated in August, and purchasing activity continues to rise.
“Fears are however starting to mount as to when the material shortages, delivery delays and intense price pressures will take their toll. Surveyed businesses cited all of these as threats to the outlook and business confidence subsequently slipped to a nine-month low.”
ECB Vice President Luis de Guindos told a Spanish newspaper, “the economy is performing better in 2021 than we expected, and this will be reflected in the projections that will be published in the coming days.”
“If inflation and the economy recover, then there will logically be a gradual normalization of monetary policy, and of fiscal policy too,” he added.
BoJ Deputy Governor Masazumi Wakatabe said in a speech, the Japan economy has remained in a “severe state”. But the bank judged that “pick-up trend in the economy as a whole has been maintained, supported by positive developments in the corporate sector on the back of a firm recovery in overseas economies”.
“Positive developments are likely to spread from the corporate sector to the household sector as the impact of COVID-19 wanes gradually, mainly due to progress with vaccinations,” he added. “The economic recovery is expected to become clear.”
The key to realizing the positive outlook is “whether a virtuous cycle operates firmly”. That is, “whether an increase in domestic and overseas demand expands household income and corporate profits, and in turn leads to a further rise in spending”.
China Caixin PMI Manufacturing dropped to 49.2 in August, down from 50.3, below expectation of 50.2. That’s the first contraction reading since April 2020. Caixin said output and new orders both declined modestly. Supply chain delays worsened amid uptick on COVID-19 cases. Companies trimmed purchasing activity and stagging levels.
Wang Zhe, Senior Economist at Caixin Insight Group said: “The latest Covid-19 resurgence has posed a severe challenge to the economic normalization that began in the second quarter of last year… Official economic indicators for July were worse than the market expected, indicating mounting downward pressure on economic growth. Authorities need to take a holistic view and balance containing Covid-19, stabilizing the job market, and maintaining stability in supply and prices.”
Japan PMI Manufacturing was finalized at 52.7 in August, just slightly down from July’s 53.0. Markit said output and new orders increased and slower rates. Export orders declined for the first time in seven months. Lead times lengthened to greatest extent in a decade amid ongoing disruption.
Usamah Bhatti, Economist at IHS Markit, said: “Latest PMI data pointed to a sustained expansion in the Japanese manufacturing sector midway through the third quarter…. A sharp rise COVID-19 cases in South East Asia was among the key factors listed by Japanese manufacturers for the easing in demand, both domestically and externally… Concurrently, severe supply chain disruption partly caused by pandemic restrictions and raw material shortages remained a dampener on production and orders.”
Australia AiG Performance of Manufacturing dropped sharply from 60.8 to 51.6 in August. Looking at some more details, production dropped from -11.6 pts to 50.2. Employment dropped -9.4 to 51.4. New orders dropped -5.4 to 57.1. Supplier deliveries dropped -18.3 to 41.3. Exports dropped -8.5 to 45.1.
Ai Group Chief Executive Innes Willox said: “August saw a steep retreat from the healthy expansion in manufacturing performance that has characterised most of this year. Lockdowns across the country, particularly in NSW and Victoria were the major detractor from performance with ongoing strength outside of these states sufficiently strong to maintain the national performance in positive territory (although by a slim margin).
Australia GDP grew 0.7% qoq in Q2, above expectation of 0.5% qoq. Over 2020-21, the economy grew 1.4%. Head of National Accounts at the ABS, Michael Smedes said: “Domestic demand drove growth of 0.7 per cent this quarter which saw continued growth across household spending, private investment and public sector expenditure. Lockdowns had minimal impact on domestic demand, with fewer lockdown days and the prolonged stay at home orders in NSW only commencing later in the quarter”.
ECB Governing Council member Klass Knot said he’d expects a decision in next week’s meeting that “should not be incompatible” with ending the PEPP in March. And, “that would imply a reduction in the purchase pace.”
Knot explained that “PEPP has a clearly delineated objective — repairing the damage that the coronavirus has inflicted on the inflation outlook.” And, “the stars are much better aligned than they have been for a long time for the return of inflation back to 2%.”
Though, he added, “I can understand that next week we may want to maintain some optionality, also to see how the delta variant will play out.”
US Conference Board Consumer Confidence dropped from 125.1 to 113.8 in August, missed expectation of 123.3. Present Situation Index dropped from 157.2 to 147.3. Expectations Index dropped from 103.8 to 91.4.
“Consumer confidence retreated in August to its lowest level since February 2021 (95.2),” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
“Concerns about the Delta variant—and, to a lesser degree, rising gas and food prices—resulted in a less favorable view of current economic conditions and short-term growth prospects. Spending intentions for homes, autos, and major appliances all cooled somewhat; however, the percentage of consumers intending to take a vacation in the next six months continued to climb. While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead.”
Canada GDP grew 0.7% mom in June, matched expectations. Total economic activity was -1.5% below February 2020’s pre-pandemic level. Overall, 15 of 20 industrial sectors were up. Services-producing industries rose 0.7% mom while goods-producing industries rose 0.9% mom.
Statistics Canada said preliminary information indicates an approximate -0.4% decline in real GDP for July. The main decreases were in manufacturing, construction and retail trade.
ECB Governing Council member Robert Holzmann said in an interview, “we are now in a situation where we can think about how to reduce the pandemic special programs — I think that’s an assessment we share.””We have the opportunity to discuss how do we close the pandemic part and focus on the inflation part,” he added.
“If enough people share my opinion, we will certainly advise the Executive Board to slow down purchases in the fourth quarter and more so in the first,” Holzmann said. “We will spend as much as needed.”
Eurozone CPI accelerated to 3.0% in August, up sharply from 2.2% yoy, above expectation of 2.8% yoy. CPI core rose to 1.6% yoy, up from 0.7% yoy, above expectation of 0.5% yoy.
Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in August (15.4%, compared with 14.3% in July), followed by non-energy industrial goods (2.7%, compared with 0.7% in July), food, alcohol & tobacco (2.0%, compared with 1.6% in July) and services (1.1%, compared with 0.9% in July).
France consumer spending dropped -2.2% mom in July, below expectation of 0.7% mom rise. This decrease came from the fallback in purchases of manufactured goods (–2.7%) and the sharp drop in food consumption (–2.9%). Energy expenditure, meanwhile, increased moderately (+1.0%).
GDP grew 1.1% qoq in Q2 in volume term better than expectation of 0.9% qoq. GDP closed one quarter of the gap to is pre-crisis level at the end of 2020. It stood -3.2% below its level in Q4 2019.
Japan industrial production dropped -1.5% mom in July, better than expectation of -2.5% mom. The overall output was back below pre-pandemic levels already. The Ministry of Economy, Trade and Industry expects, however, a bounce back of 3.4% in production in August, and 1.0% in September.
Unemployment rate ticked down to 2.8%, better than expectation of 2.9%.
China’s official PMI Manufacturing dropped slightly from 50.4 to 50.1 in August, below missed expectation of 50.2. PMI Non-Manufacturing dropped sharply from 53.3 to 47.5, well below expectation of 52.8, back in contraction for the first time since Q1 last year.
“This epidemic in multiple provinces and locations was a fairly big shock to the services industry, which is still in recovery,” said Zhao Qinghe, of China’s National Bureau of Statistics.
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ECB Stournaras: Recent jump in inflation is due to temporary factors
ECB Governing Council member, Bank of Greece Governor, Yannis Stournaras told Bloomberg, “according to most estimates, the recent jump in inflation is due to temporary factors related to various supply-side bottlenecks caused by the pandemic.”
“Wage developments and unit labor costs which determine the core of inflation do not show the same volatility as headline inflation,” he added. “On this evidence, I would advise caution regarding the course of inflation relative to our medium-term target.”