Whilst events like this certainly have the potential to move the G10 interest rate markets, this time they were focused firmly on the Federal Reserve’s policy meeting. Chair Powell’s post meeting comments can be summarised as “Look at payrolls, not at Cpi”, his point being that both labor market progress and persistently high inflation will be driven by this data set’s improvements.
Headline Jun CPI printed +3.1% YoY (3.2% exp., 3.6% prev.) and the Core-Trimmed at 2.6% YoY (2.6% exp., 2.7% prev.)
The Richmond Fed and Conference Board’s survey measures all increased. Retail inventories unexpectedly expanded +0.3% MoM (-0.5% exp., -0.8% prev.) but wholesale inventories were lower at +0.8% MoM (1.1% exp., 1.3% prev.) 2Q GDP disappointed at +6.5% QoQ (8.4% exp., 6.4% prev.) the all-important core PCE deflator was not as worrisome as expected, at +0.4% MoM (0.6% exp., 0.5% prev.) and +3.5% YoY (3.7% exp., 3.4% prev.)
The FOMC met and kept policy rates unchanged 0.0% (0.0% exp., 0.0% prev.) with the following press conference focussing on labor market progress – some way away from goal of maximum employment; Inflation – upside risk, but transitory; tapering – MBS very unlikely to be tapered first.
Zone wide data was generally more optimistic. The unemployment rate moved lower to 7.7% (7.9% exp., 7.9% prev.). Core CPI improved a little, to -0.1% MoM (-0.3% exp., 0.3% prev.) and +0.7% YoY (0.7% exp., 0.9% prev.) 2Q GDP was better than expected, at +2.0% QoQ (1.5% exp., -0.3% prev.) and 13.7% YoY (13.2% exp., -1.3% prev.) Confidence indicators printed at or above expectations.
French consumer spending disappointed a little, and harmonized CPI was not as strong as previous months, at +0.1% MoM (-0.1% exp., 0.2% prev.) +1.6% YoY (1.4% exp., 1.9% prev.) but 2Q GDP was a little stronger at +0.9% QoQ (0.8% exp., -0.1% prev.) and +18.7% YoY (17.5% exp., 1.2% prev.) German unemployment was strong, at -91.0k (-29.0k exp., -38.0k prev.) bringing the claims rate to +5.7% (5.8% exp., 5.9% prev.). The IFO survey was a little weaker and harmonized CPI a little higher, at +0.5% MoM (0.4% exp., 0.4% prev.) and +3.1% YoY (2.9% exp., 2.1% prev.). 2Q GDP was lower at +1.5% QoQ (2.0% exp., -1.8% prev.) and +9.2% YoY (9.6% exp., -3.1% prev.), but may well get revised higher. Italian consumer, manufacturing and economic sentiment indexes ticker higher. 2Q GDP was stronger, at +2.7% QoQ (1.3% exp., 0.1% prev.) and +17.3% YoY (15.6% exp., -0.8% prev.). Harmonized CPI was negative, as expected, at -1.1% MoM (-1.1% exp., 0.2% prev.) and +0.9% YoY (1.0% exp., 1.3% prev.)
Norwegian core retail sales printed at -0.1% MoM (5.8% prev.) and the unemployment rate rose to 3.1% (2.9% prev.)
Swedish 2Q GDP printed higher, at +0.9% QoQ (0.7% exp., 1.1% prev.) but surveys of economic and consumer confidence were mixed. Retail sales printed lower than last month at -0.3% MoM (2.3% prev.) and +8.5% YoY (10.3% prev.) and the unemployment rate ticked up, to +10.3% (9.8% prev.)
June’s measures of unemployment and retail sales made small improvements, with industrial production also ticking higher. July’s delta variant and Olympic affected data will not be available until later in the month.
Headline 2Q CPI printed higher, at +3.8% YoY (3.7% exp., 1.1% prev.) but with the Trimmed Mean coming in at 1.6% YoY (1.6% exp., 1.1% prev.) and the recent outbreak of the delta variant the central bank will be in no hurry to change its policy at this week’s meeting.