Inflation Stays in the Spotlight

August 13, 2021

Quite a few indicators of inflation were released this Friday, among which July U.S. import prices caught the most attention. Import prices had posted monthly advances of at least 0.9% in each of the previous seven months but went up just 0.3% in July. This reduced year-on-year import price inflation by a full percentage point to a four-month low of 10.2%. Imported fuel went up 2.9% on month, down from June’s 5.5% advance, and all other import prices collectively remained steady compared to 0.7-0.9% increases in the previous four months. Seemingly pushing out the imminence of Fed tapering, news that import prices may be cresting depressed the dollar by 0.3% against the euro, yen and its DXY weighted index and by 0.4% relative to the Swiss franc and peso.

Stocks in Asia had closed mostly down, including drops of 1.2% in South Korea and 1.4% in Taiwan, but the DOW initially opened higher, and European markets are thus far mostly a bit higher.

Ten-year U.S. Treasury and and British gilt yields have slipped by two and one basis points.

The price of gold, which often moves inversely with the dollar, strengthened 0.8%, and that of WTI oil remains unchanged on balance.

Among today’s other price data releases,

  • Switzerland’s combined PPI and import price index went up 0.5% in July, lifting the 12-month rate of increase to a 35-month high of 3.3%. Import prices and domestic producer prices were respectively 5.9% and 2.1% greater than a year earlier, and those gains were each greater than ones in June.
  • German wholesale prices, which have a large import price component, jumped 1.1% in July, accelerating their on-year inflation pace to 11.3%, most since the first OPEC oil price shock in 1974 and up from 10.7% in June and 7.2% in April.
  • French CPI inflation in July was confirmed at the preliminary indication of 1.2%, down from 1.5% in June and a 3-month low. Core CPI inflation slid to 0.8%.
  • Polish CPI inflation accelerated to a 122-month high of 5.0% in July from 4.4% in June and 2.4% last February.
  • Finnish CPI inflation slowed another 0.1 percentage point to a 4-month low of 1.9% in July.
  • Spanish CPI inflation, by contrast, rose 0.2 percentage points additionally to a 53-month high of 2.9% last month.
  • Swedish total and core CPI inflation ticked up 0.1 percentage point in July to 1.4% and 1.7%, respectively.
  • Canadian producer prices only ticked up 0.1% on month in July, trimming their 12-month increase to a a 3-month low of 16.2% versus 17.4% in June.

An interest rate hike surprise has been sprung by officials at the Central Reserve Bank of Peru. With inflation accelerating there more than half a percentage point to 3.8% in July, monetary policymakers doubled their policy interest rate to 0.5%. This increase was the first change since a pair of 100-basis point reductions in March and April of 2020. “. Inflation is expected to return to the target range in the next twelve months and remain within that range for the rest of next year, due to the reversal of the effects of transitory factors on the inflation rate.” Core inflation remains aligned with the middle of the inflation target, and spare resource capacity will persist over the coming years, but officials had also observed a rise in the 1-year expected inflation rate to the top of the central bank’s medium term target corridor.

Australian new home sales continued to trace an erratic path in July, plunging 20.5% after back-to-back increases of 15.2% in May and 14.8% in June.

New Zealand’s manufacturing purchasing managers index climbed to a 4-month high and even more robust 62.6 reading in July.

Euroland’s seasonally adjusted June trade surplus of EUR 12.4 billion was the smallest in a year. The seasonally adjusted surplus averaged EUR 13.2 billion last quarter, down from EUR 23.0 billion per month in 1Q. The unadjusted first-half 2021 surplus of EUR 102.5 billion was 19.2% wider than a year earlier.

On-year GDP growth last quarter was 7.6% in Hong Kong, 7.4% in Taiwan, and 10.9% in Poland.

Just in: Another U.S. data surprise saw the U. Michigan/Reuters monthly index of consumer confidence slumped over ten index points in August to a reading of 70.2, lowest since early 2013.

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

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