Week Ends Without a Breakthrough in Middle East And Tech Sector Back in Favor
August 14, 2026
Two weeks shy of half-year since the Middle East war’s start, the sides have hunkered down for a game of economic and political attrition. The price of West Texas Intermediate crude oil is slightly up on the day and around 6% higher than a week ago. The dollar fell overnight by 0.7% against its New Zealand counterpart, 0.4% relative to sterling and the loonie, and 0.3% versus the euro, yen, Swiss franc and Aussie dollar. In response to some reassuring corporate earnings reports and U.S. July inflation data that suggest the Fed will again delay hiking interest rates, the Nasdaq is back to outpacing other broad U.S. equity indices. Stock markets in Asia closed down by 1.1% in Hong Kong and 0.5% in Taiwan, up 2.4% in South Korea, 1.6% in Indonesia and 0.6% in Japan, and little changed in China or India. The German DAX is 0.9% higher, while Australia’s stock market closed down 0.8%.
U.S. retail sales unexpectedly contracted 0.6% in July in only the third decline and largest in 14 months. That curbed the 12-month increase to a 4-month low of 5.0% from 6.8% in June and 7.3% in May.
Euroland GDP growth last quarter of 0.4% (not annualized) was left unrevised from the flash estimate reported two weeks ago. GDP had stagnated in the first quarter, weighed down by the initial shock of the conflict in Iran. The year-on-year growth rate doubled to 1.0% but was still below the 1.4% achieved in the prior four quarters that ended in the spring of 2025. Among the bloc’s four largest economies, GDP last quarter was led by a 0.7% advance in Spain but grew just 0.2% in Germany, France and Italy. Irish GDP, which had slumped 7.0% in this year’s first quarter rebounded 3.9%. Employment in the euro area increased by 0.1% in both the first and second quarters and was 0.5% greater on average in the first half of the year than a year earlier.
Among European economies whose GDP had not been included in the estimates reported at end-July, GDP in the second quarter exceeded first-quarter levels by 1.8% in Slovakia, 0.9% in Poland, 0.8% in Cyprus, 0.2% in Slovenia but was unchanged in Bulgaria.
Evidence that Euroland is coping better with the closure of the Strait of Hormuz and U.S. import tariffs could be found in today’s released trade statistics for June. The seasonally adjusted balance had been in deficit three straight months including a 6.1 billion imbalance in May but returned to a EUR 1.8 billion surplus in June. In unadjusted terms, the trade surplus of EUR 8.6 billion in June was 79% larger than a year earlier. Likewise, the first-half surplus of EUR 98 billion exceeded the EUR 82 billion in the first half of 2025.
In other GDP news today, Taiwan reported sizzling on-year growth of 12.9% in last quarter and 14.2% in the first half of this year. No wonder China would love to reabsorb Taiwan. In Hong Kong which returned to Chinese sovereignty in mid-1997, GDP slipped 0.6% on quarter but was 4.3% greater than the level in 2Q 2025. Kazakhstani GDP in the first half of 2026 was 4.1% above a year earlier. Swiss GDP grew 1.5% between 1Q and 2Q, its largest gain in 19 quarters and almost four time faster than growth in the prior quarter.
French consumer price inflation in July was left unrevised at 2.1%, a two month high. German wholesale price inflation backed upward to 5.3% last month from 4.9% in June but was a full percentage point lower than this year’s high point of 6.3% in April.
Wholesale price inflation in India of 9.78% in July was just barely below June’s 42-month high, due mainly to a lower but still elevated 20.1% increase in fuel costs. Among manufactured goods, WPI inflation rose higher to 8.3%.
Consumer price inflation in Kyrgyzstan accelerated by a further half percentage point to 11.5%, a 40-month high.
CPI inflation printed last month at 3.0% in Poland, 2.1% in Finland, 1.5% in Israel and 3.9% in Croatia.
Malaysian GDP revived last quarter after a stagnant first period, rising 2.5% on quarter and 6.0% on year.
As at many other central banks this month, the Central Reserve Bank of Peru left its policy interest rate unchanged at the latest review. Overall Peruvian consumer price inflation of 4.1% is running currently about a percentage point above the target range ceiling and two percentage points above the range midpoint. Peru’s interest rate had been has high as 7.75% from January through mid-September of 2023 but has been at 4.25% since a 25-basis point reduction last September. According to a statement,
Both headline and core inflation are expected to return to the target range and to stabilize around 2 percent over the forecast horizon, as the effects of supply shocks dissipate. However, there is a risk that a more severe El Niño event and geopolitical tensions in the Middle East could have more persistent effects on inflation. The Board reaffirms its commitment to adopt the necessary actions to ensure the return of inflation to the target range over the forecast horizon.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Central Reserve Bank of Peru, Euroland GDP and employment growth, German WPI, Indian WPI, U.S. retail sales
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