Yet Another Higher-than-Assumed U.S. Inflation Number and Other Disappointing Data

August 12, 2021

The dollar has edged up 0.1% against the euro, loonie, Swissie, yuan and its weighted DXY index. The dollar climbed 0.5% relative to the Australian and New Zealand dollars but is unchanged so far today versus the Japanese yen.

Asian equity markets mostly lost modest ground Thursday, and U.S. share prices are a bit lower too. The German Dax has risen 0.7%, however.

And ten-year sovereign debt yields are higher, too, by three basis points in the United States and a basis point each in Germany and Great Britain. Commodity price movements have been inconsequential.

U.S. producer prices increased 1.0% for a second straight month in July. That was almost twice the expected monthly increase, and resulted in a 0.5 percentage point acceleration of the 12-month rate of PPI inflation to 7.8%, most in at least over a decade. Core PPI inflation rose to 6.2% due in large part to upward pressure on auto and auto parts services.

Industrial production in the euro area fell 0.3 in June. A  drop had not been expected, and it was a second straight decrease in a row after a slide of 1.1% in May. While output rose on month in France, Italy, Spain and the Netherlands, such slumped 1.0% in Germany. In year-on-year comparisons, production growth slowed to 9.7% from 20.6% in May and 39.7% in April.

Japanese domestic producer prices increased 1.1% in July and lifted the 12-month advance to a 131-month high of 5.6%. Export prices and import prices were 11.2% and 8.8% greater than in July 2021.

British industrial production fell 0.7% in June, resulting in an 8.3% 12-month increase, down from 20.7% in May and 27.4% in April.

Britain also reported is largest goods and services trade deficit (GBP 2.514 billion) in half a year during June, which included a goods-only deficit of GBP 11.99 billion. And construction output during June in the U.K. slumped 1.3%, its third straight monthly decline. On a brighter note, real GDP rebounded 4.8% in the second quarter and scored its first on-year advance since the final quarter of 2019.

Irish CPI inflation accelerated 0.6 percentage points to 2.2% in July, a 112-month high.

The Filipino central bank retained a record low 2.0% overnight repo rate. That level had been reached in November after five cuts dating back to February and totaling two full percentage points. New Covid restrictions have become necessary in the Philippines, and inflation is expected to settle into the middle of its 2-4% target range by next year.

The National Bank of Serbia‘s policy interest rate was likewise kept at its record low of 1.0%. Four cuts last year and most recently in December had totaled 125 basis points.

Officials at the Central Bank of Turkey maintained their one-week repo rate at 19.0%, its level since a 200 basis point increase in March of this year. That had followed a trio of rapid jumps of 200 bps in September 2020, 475 bps in November and 200 bps in December. Turkey has been in the grip of a vicious cycle of currency depreciation and domestic price inflation, and officials want to be sure that significant reductions in inflation and expected inflation are underway sufficient to make their 5% medium-term inflation target reasonably achievable.

Turkish data released today showed retail sales growth slowing to a 5-month on-year low of 17.4% and the 12-month rise of industrial production dropping to a 3-month low of 23.9%.

On-year growth  in Indian industrial production slowed to 13.6% in June from 28.6% in May and 134.6% in April. This was the smallest in a string of four straight year-on-year increases.

New U.S. jobless insurance claims fell to a four-week low last week of 375k.

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


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