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To help you navigate through the economic news, here is a summary of last week’s main events and what to look out for next week.
In the US, the July core CPI reading of +0.3% m/m was above consensus expectations (+0.2%), which pushed the annual reading up to +2.2% y/y, thus matching the highs seen in January. This strength was broadly based across categories and headline annual inflation rate rose to 1.8% from 1.6%. Retail sales growth was stronger than expected also enjoying strength across categories and underscoring the solidity of consumer activity at the moment. In contrast, industrial production growth declined in July (-0.2% m/m) against expectations of a slight increase (+0.1%) after some stabilisation in May and June.
Regional manufacturing surveys remained weak but the Philadelphia Fed manufacturing index decreased by less than expected in August, while the Empire manufacturing index increased against expectations of a decline, despite the recent escalation of the trade war. The NFIB small business optimism reading was also better than expected, reaching its second-highest level since late last year. However, the survey was conducted prior to Trump’s tweet about additional tariffs. Figures on productivity in Q2 also provided positive surprises: it was up 1.8% y/y (vs. only 0.8% (annualised) between 2012 and 2016, and 1.3% in 2017), while compensation rose 4.3% y/y and unit labour costs were up 2.5%, painting a healthy picture of the US economy. The NAHB housing market index rose by 1 point to 66 in August against expectations of a flat reading; this matches the 2019 high and was helped by falling mortgage rates.
Today, housing starts looked weak, but this reflects the volatile multi-family category (-16.2%); single-family starts rose by 1.3%. Moreover, building permits rebounded strongly from June (+8.4%). Finally, the consumer sentiment index (University of Michigan) declined to 92.1, a seven-month low, likely reflecting the recent escalation in the trade war and stock market volatility.
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