Canada retail sales rose 1.1% mom to CAD 63.1B in June, above expectation of 0.4% mom. That’s also the sixth consecutive monthly increase. Sales were up in 8 of 11 subsectors, representing 76.8% of retail trade. Core retail sales, excluding gasoline stations and motor vehicle and parts, rose 0.2% mom.
In the advance estimate, retail sales dropped -2.0% mom in July.
In volume term, UK retail sales rose 0.3% mom in July, better than expectation of -0.2% mom. Ex-auto sales rose 0.4% mom. Comparing to a year ago, retail sales dropped -3.4% yoy while ex-auto sales dropped -3.0% yoy.
In value term, retail sales rose 1.3% mom, 7.8% yoy. Ex-auto sales rose 1.4% mom, 5.7% yoy.
UK Gfk consumer confidence dropped from -41 to -44 in August, hitting another record low. Personal financial situation over the next 12 months dropped from -26 to -31. General economic situation over the next 12 months dropped from -57 to -60, setting a new record low.
Joe Staton, Client Strategy Director, GfK says: “The Overall Index Score dropped three points in August to -44, the lowest since records began in 1974. All measures fell, reflecting acute concerns as the cost-of-living soars. A sense of exasperation about the UK’s economy is the biggest driver of these findings.”
New Zealand goods exports rose 16% yoy to NZD 6.7B in July. Goods imports rose 26% yoy to NZD 7.8B. Trade deficit came in at NZD -1.1B, comparing expectation of NZD 105m surplus.
China led the monthly rise in exports, up 13%. Exports to Australia was down -1.1%, USA up 5.8%, EU up 7.5%, Japan up 18%. Imports from China was up 19%, EU up 3.0%, Australia up 16%, USA up 34%, and Japan up 54%.
Japan headline CPI rose from 2.4% yoy to 2.6% yoy in July, above expectation of 2.2% yoy. CPI core (all items ex-fresh food) rose from 2.2% yoy to 2.4% yoy, matched expectations. CPI core-core (all items ex-food, energy) rose from 1.0% yoy to 1.2% yoy, above expectations of 0.6% yoy.
Core inflation has now exceeded BoJ’s 2% target for four straight months, and hit the highest level since December 2014. The core-core reading was also the fastest since December 2015, while the headline reading was the strongest since 2008.
Both Prime Minister Fumio Kishida and BoJ Governor Haruhiko Kuroda have called for robust wage gains to ensure that inflation is sustainable. But the markets are expecting some pressure on the BoJ for acting on monetary policy if CPI hits 3%.
St. Louis Fed President James Bullard told WSJ, “we should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation” and “I don’t really see why you want to drag out interest rate increases into next year.”
Bullard also indicated that he backs another 75bps rate hike in September. He also reiterated he preference to have federal funds rate at 3.75-4.00% by the end of the year, from current 2.25-2.50%.
Kansas City Fed President Esther George said yesterday that “the case for continuing to raise rates remains strong” and “the direction is pretty clear”.
But, “the question of how fast that has to happen is something my colleagues and I will continue to debate,” she added.
“We have done a lot, and I think we have to be very mindful that our policy decisions often operate on a lag. We have to watch carefully how that’s coming through,” she warned.
US initial jobless claims dropped -2k to 250k in the week ending August 13, below expectation of 261k. Four-week moving average of initial claims dropped -2750 to 247k.
Continuing claims rose 7k to 1437k in the week ending August 6. Four-week moving average of continuing claims rose 13k to 1413.
ECB Executive Board member Isabel Schnabel said in an interview that there was a “strong indication that growth is going to slow”. She would not rule out a technical recession in Eurozone, “especially if energy supplies from Russia are disrupted further”. Downside risks also increased due to “additional supply-side shocks, caused by droughts or the low water levels in major rivers.”
Regarding inflation she said the increasing inflation rates are a “broad-based development”. “Inflationary pressures are likely to be with us for some time; they won’t vanish quickly,” she added. “I would not exclude that, in the short run, inflation is going to increase further…. it’s very difficult to predict when inflation is going to peak.”
Regarding September meeting, Schnabel said that “the concerns we had in July have not been alleviated”. Back in July, ECB raised interest rate by 50bps. “At the moment I do not think this outlook has changed fundamentally,” she added.
Eurozone CPI was finalized at 8.9% yoy in July, comparing with June’s 8.6% yoy. CPI ex-energy, food, alcohol, and tobacco was finalized at 5.4% yoy (up from June’s 4.9% yoy). The highest contribution to the annual Eurozone inflation rate came from energy (+4.02%), followed by food, alcohol & tobacco (+2.08%), services (+1.60%) and non-energy industrial goods (+1.16%).
EU CPI was finalized at 9.8% yoy, up from June’s 9.6% yoy. The lowest annual rates were registered in France, Malta (both 6.8%) and Finland (8.0%). The highest annual rates were recorded in Estonia (23.2%), Latvia (21.3%) and Lithuania (20.9%). Compared with June, annual inflation fell in six Member States, remained stable in three and rose in eighteen.
Australia employment contracted -40.9k in July, much worse than expectation of 25.0k growth. Full time jobs decreased by 86.9k while part time jobs rose 46k.
Unemployment rate dropped from 3.5% to 3.4%. Participation rate dropped notably from 66.8% to 55.4%. Monthly hours worked in all jobs dropped -16m hours, or -0.8% mom.
“The fall in unemployment in July reflects an increasingly tight labour market, including high job vacancies and ongoing labour shortages, resulting in the lowest unemployment rate since August 1974,” Bjorn Jarvis, head of labour statistics at the ABS, said.
RBNZ Governor Adrian Orr told a parliamentary committee, “our core inflation is too high and that suggests at some point monetary policy was too loose for a period.”
“I have already apologized for the current level of inflation. I have already said that the Reserve Bank was party to that,” he added.
However, “the worst mistake we could be having would be fighting deflation, unnecessary unemployment and economic collapse,” he said. “We have ended up with the better problem — but it is a problem — which is inflation, core inflation of 4-6% that we need to put back in the bottle.”
US retail sales rose 0.0% mom to USD 682.8B in July, below expectation of 0.2% mom. Ex-auto sales rose 0.4% mom, above expectation of 0.1% mom. Ex-gasoline sales rose 0.2% mom. Ex-auto, gasoline sales rose 0.7% mom.
Also total sales were up 10.3% yoy comparing with July 2021. Total sales for the May through July 2022 period were up 9.2% from the same period a year ago.
UK CPI rose 0.6% mom in July, largest monthly rise between June and July since the start of the series in 1988. The food and non-alcoholic beverages, and transport divisions made the largest upward contributions.
For the 12 month period, CPI accelerated from 9.4% yoy to 10.1% yoy, above expectation of 9.8% yoy. Indicative models suggest that CPI was last high in 1982, estimated at around 11%. Core CPI accelerated from 5.8% yoy to 6.2% yoy, below expectation of 6.4% yoy.
RPI rose 0.9% mom, 12.3% yoy, versus expectation of 0.8% mom, 12.9% yoy. PPI input came in at 0.1% mom, 22.6% yoy, versus expectation of 1.0% mom, 24.8% yoy. PPI output was at 1.6% mom, 17.1% yoy, versus expectation of 1.6% mom, 17.6% yoy. PPI core output was at 1.0% mom, 14.6% yoy, versus expectation of 0.0% mom, 15.9% yoy.
Japan exports rose 19.0% yoy to JPY 8753B in July, with gains led by auto shipments to US and chips to China. Imports rose 47.2% yoy to JPY 10190B, driven by higher costs of crude oil, coal and liquid natural gas. Trade deficit came in at JPY -1437B. July’s figure marked a full straight year of monthly trade deficits, the longest streak since the 32-month run to February 2015.
In seasonally adjusted terms, exports rose 2.1% mom to JPY 8437B. Imports rose 3.5% mom to JPY 10570B. Trade deficit widened to JPY -2133B.
NZD/USD recovers notably after RBNZ rate hike, but stays in range below 0.6467 temporary top. Outlook is staying bullish for now, as NZD/USD is trying to draw support from head and shoulder neckline (ls: 0.6195, h: 0.6059, rs: 0.6211), as well as 55 day EMA (now at 0.6323). Another rise is in favor through 0.6467, sooner rather than later.
Either as a corrective rebound, or part of an up trend, rise from 0.6059 should target 0.6575 resistance zone, which is close to 38.2% retracement of 0.7463 (2021 high) to 0.6059 at 0.6595.
However, another decline, and sustained trading below 55 day EMA will invalidate this view and bring retest of 0.6059 low instead.
RBNZ raises the Official Cash Rate by 50bps to 3.00% as widely expected, as “core consumer price inflation remains too high and labour resources remain scarce”. It also maintains hawkish bias as “committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1-3 percent per annum target range.”
The central bank noted domestic spending has “remained resilient”, supported by a “robust employment level, continued fiscal support, an elevated terms of trade, and sound household balance sheets in aggregate.” Production is being “constrained by acute labour shortages”, heightened by seasonal illnesses and COVID-19. Spending and investment continues to “outstrip supply capacity”. Wage pressures are “heightened”. A range of indicators highlight broad-based domestic pricing pressures.
Canada CPI slowed from 8.1% yoy to 7.6% yoy in July, matched expectations. Excluding gasoline, prices accelerated from 6.5% yoy to 6.6% yoy. Gasoline prices slowed sharply from 54.6% yoy to 35.6% yoy.
For the month, CPI rose 0.1% mom, lowest since December. Gasoline prices dropped -9.2% mom, largest monthly decline since April 2020.
CPI common rose from 4.6% yoy to 5.5% yoy, above expectation of 4.7% yoy. CPI median rose from 4.9% yoy to 5.0% yoy, above expectation of 4.9% yoy. CPI trimmed slowed from 5.5% yoy to 5.4% yoy, matched expectations.
Eurozone exports of goods to the rest of the world rose 20.1% yoy to EUR 252.2B in June. Imports rose 43.5% yoy to EUR 276.8B. Trade balance came in at EUR -24.6B deficit. Intra-eurozone trade rose 24.2% yoy to EUR 236.4B.
In seasonally adjusted term, exports dropped -0.1% mom to EUR 241.8B. Imports rose 1.3% mom to EUR 272.7B. Trade deficit widened from EUR -27.2B to EUR -30.8B, versus expectation of EUR -20.0B. Intra-eurozone trade was unchanged at EUR 224.1B.
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Bundesbank Nagel: Further interest rate hikes must follow
Bundesbank President Joachim Nagel told Rheinischen Post, “the probability is rising that inflation will be higher than previously forecast and will average six point something next year.” That compares with Bundesbank’s prior projection of 4.5% inflation in 2023. “With the high inflation rates, further interest rate hikes must follow,”he added.
Nagel also admitted that the German economy is “likely” to suffer a recession over winter, if energy crisis continues to deepen, as it’s among the most exposed to Russian gas disruptions.