US: earlier than expected normalization in inflation pattern
US: CPI (July): 0.6% m/m vs 0.3% expected (prior: 0.6%)
- A larger than expected rebound in inflation due to energy and services over the month.
- Energy prices were up by 2.5% m/m (motor fuel up by 5.5% m/m), apparel prices up by 1.1% m/m (2.3% m/m on used cars), services were up by 0.6% m/m, fueled by medical care (0.5% m/m) and communication (1.1% m/m). Food prices were down by 0.4% m/m.
- Yearly trend has rebounded on headline index from 0.6% y/y the prior month to 1% y/y, and core inflation from 1.2% y/y to 1.6% y/y.
- This represents a normalization in the inflation pattern earlier than expected (with parallel normalization in inflation expectations), due to reversal in food and energy prices from the trend seen during the lockdown, and a larger but temporary rebound in some sectors with the reopening of the economy.
- The decline in inflation has favored purchasing power in Q2, which is no longer the case.
- These data should comfort the Fed to adopt rapidly an “average inflation” target in its forward guidance policy on rates.
UK: GDP (Q2-20): -20.4% q/q vs -20.7% expected (prior: -2.2%)
- A large fall in all GDP components with the lockdown in place; consumption was down by 23% q/q, investment down by 25% q/q and trade (exports and imports) has fallen in parallel. Public consumption has also fallen by 14% q/q during the period.
- Separately, monthly proxy of GDP has pointed to progressive recovery (2.4% m/m in May, 8.7% m/m in June), thanks to rebound in domestic demand and in industrial activity with the end of the lockdown.
Sweden: CPI (July): 0.2% m/m vs -0.1% expected (prior: 0.6%)
- Food, transport-energy and leisure prices have rebounded over the month.
- Yearly trend has declined from 0.7% y/y the prior month to 0.5% y/y; core inflation has regained from 1.3% y/y the prior month to 1.5% y/y.
Eurozone: Industrial production (June): 9.1% m/m vs 10% expected (prior: 12.3% revised from 12.4%)
- The rebound in activity has continued with the end of the lockdown and all sectors have shown a rebound in production, even at a slower pace than in May. The rebound was the most pronounced in sectors hit by the lockdown.
- The total index stayed 13% below its pre-COVID level.
Brazil: Retail sales (June): 12.6% m/m vs 6.7% expected (prior: 19.2% revised from 19.6%)
- The rebound in consumption continued in June, driven by all sectors except food. Largest rebound was seen in clothes and leisure goods.
- On a yearly basis, sales were up by 0.5% y/y from -6.4% y/y the prior month.