Mixed Inflation Data

July 13, 2021

Shortly before the release of U.S. June consumer price figures, the dollar had risen overnight by 0.3% against sterling, 0.2% relative to the euro, loonie, peso, and DXY weighted index, and 0.1% versus the New Zealand dollar. There was no net change against the Aussie dollar and a dip of 0.2% relative to the Swiss franc.

Ten-year sovereign debt yields had fallen two basis points in Spain, Italy and France and by one basis point in the United States, U.K. and Germany.

Stock market action is focused on second-quarter corporate earnings. Share prices rose in the Pacific Rim but have been mostly flat in Europe and U.S. futures trading.

Oil and gold prices edged up 0.1% apiece. The bigger news among commodity prices was lumber‘s continuing slide to significantly less than half the early-May peak.

Several other countries reported price data before the U.S. release of CPI:

  • A smaller 0.1% monthly uptick in French consumer prices didn’t prevent the 12-month rate of increase from accelerating 0.1 percentage point to an 18-month high of 1.5%.
  • German CPI inflation was confirmed at the preliminary estimate of 2.3%, down from May’s 116-month high of 2.5%.
  • Romanian consumer prices recorded a smaller month-on-month rise, but on-year CPI inflation rose 0.1 percentage point to an 18-month high of 3.9%, surpassing forecasts.
  • New Zealand food prices soared 1.4% on month and jumped a full percentage point in year-on-year terms to 2.8%.
  • Czech CPI inflation slowed to a 3-month low in June of 2.8%, having touched a 7-month high two months earlier in April of 3.1%.
  • Switzerland’s combined PPI/import price index recorded a 0.3% monthly rise in June, down from advances of 0.6% in March, 0.7% in April and 0.8% in May. Its 12-month rate of increase dropped from a 33-month peak of 3.2% in May to 2.9%. The on-year rise of import prices slowed from 6.4% to 5.6%, while domestic PPI inflation ticked up 0.1 percentage point to 1.7%.

In other data reported Tuesday, China’s June trade surplus of $51.53 billion was the largest in five months, reflecting a faster 32.2% on-year advance of exports along with a much slower 36.7% increase in imports. The surplus had totaled $44.8 billion in June 2020 and rose from $164 billion in the first half of 2020 to $252 billion in the first half of this year.

Turkish industrial production and retail sales each recorded monthly declines in May for the second month in a row, but their year-on-year increases were strongly positive at 40.7% and 27.0%.

National Australia Bank’s monthly indices of that economy business ‘s confidence and business conditions retreated to six- and three month lows in June of +11 and +24 from readings of +20 and +37 in the prior month. New home sales in Australia advanced 14.8% in June and by 15.3% on average in the second quarter.

British same-store sales (+6.7% on year after 18.5% and 39.6% in the previous two months) rose the least in June since December.

An 8.5% monthly plunge in Romanian industrial production halved its on-year increase to 30.5%.

U.S. small business sentiment improved 2.9 index points in June to an eight-month high.

Tuesday’s biggest price data surprise came from the U.S. CPI report in which inflation moved up another 0.4 percentage points instead of dipping marginally as analysts had been anticipating. At 5.4%, the 12-month rate of rise was the most since 5.6% in July 2008. Note that peak occurred during the Great Recession and just shortly before the permitted failure of Lehman ignited a backdraft of unemployment. In today’s report, used car prices were the main driver of inflation, underscoring the supply-side nature of this year’s inflation spike. On top of month-on-month used car price increases of 10.0% in April and 7.3% in May, such leaped another 10.5% in June to 45.2% above their year-earlier level. In June, new car prices rose 2.0% on month, most in 40 years, and 5.3% from a year earlier. Food price inflation accelerated to 2.4% from 2.0%, while energy price inflation slid back to 24.5% from 38.3%. Core inflation rose 1.5% on month and by the most (4.5%) since September 2011 on a year-on-year basis.

Initial dollar reaction to the CPI report has been upward. The ten-year Treasury yield rose too, and stock market futures fell.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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