Market insight

US: Empire manufacturing (Sep): 19 vs 23 expected (prior: 25.6)

• The decline was mainly due to shipments, which felt considerably (-11.4pt to +14.3). New orders slightly decreased (-0.6pt to 16.5) and the employment index increased (+0.2pt to +13.3).
• Overall, the August report continues to suggest expansion in the New York region's manufacturing sector.

Eurozone: CPI estimate (Aug F): 2% y/y as expected (prior: 2.1%)

• CPI core y/y: 1% as expected (prior: 1.1%)
• The final breakdown for August confirmed that the decline was largely due to erratic components and doesn't suggest deterioration of underlying inflation prospects.
• Inflation remains close to ECB's target, but core inflation remains low.
• On the short run, the ECB should not change its planned strategy.

Turkey: Industrial production (Jul): 3.5% m/m vs -1% expected (prior: -2.1% revised from -2%)

• On a y/y basis: 5.6% vs 1.2% expected (prior: 2.8% revised from 3.2%)
• Intermediate goods price rose by 2.5% m/m, while energy prices increased by 2% m/m.

US: Retail sales (Aug.): 0.1% m/m vs 0.4% expected (prior: 0.7% revised from 0.5%)

• The growth pace of sales ex autos, gas and building material has slowed down from 0.8%m/m in July (revised up from 0.5% m/m) to 0.1% m/m; on a 3-month annualized view, these sales were up by 5.4% after 6.8% the prior month.
• The slowdown over the month was due to autos, furniture and clothes; internet sales stayed dynamic (0.7% m/m).
• After booming consumption on Q2, some moderation is expected by Q3, but growth should remain around 3%qoq.

US: Industrial production (Aug.): 0.4% m/m vs 0.3% expected (prior: 0.4% revised from 0.1%)

• Manufacturing production has rebounded thanks to the auto sector and production of electricity.
• Capacity utilization has increased from past month.

US: Consumer confidence (Michigan) (Sept.): 100.8 vs 96.6 expected (prior: 96.2)

• Expectations and views on current situation have both rebounded from the prior month.
• Sentiment on personal financial situation, economy and about "government doing a good job" has strongly rebounded and was back to its previous highs.
• Willingness to buy large items has increased again, boding well for future consumption.

US: Business inventories (July): 0.6% m/m as expected (prior: 0.1%)

• Inventories have increased in auto sector; sales were up by 0.2% m/m; the inventory to sales ratio has slightly increased for wholesalers and manufacturers.

Sweden: CPI (Aug.): -0.2% m/m vs 0% expected (prior: 0.5%)

• Inflation has moderated from 2.1% y/y to 2% y/y. Core inflation was on a stable trend (2.2% y/y).

Russia: The central bank has increased its key rates from 7.25% to 7.50%

• As inflation has come back to 4% more rapidly than expected, the central bank has surprisingly increased its key rates and said it will consider further rate hikes according to future inflation and growth developments.

Turkey: Current account (July): -1.75bn USD vs -1.8bn expected (prior: -3.04bn revised from -2.97bn)

• Balance of services in surplus has reduced widening trade deficit on goods.

US: Initial jobless claims (Spept. 8): 204k vs 210k expected (prior: 205k revised from 203k)

• Continuing claims: 1696 k after 1711 k past week.

US: CPI (Aug.): 0.2% m/m vs 0.3% expected (prior: 0.2%)

• Core CPI: 0.1 % m/m vs 0.2 % m/m; headline inflation has moderated from 2.9% y/y to 2.7% y/y and core inflation from 2.4% y/y to 2.2% y/y.
• While energy prices have rebounded by 1.9% m/m, and rents were up by a regular 0.3% m/m (3.3% y/y), prices of apparels, medical and of leisure eased during the month.
• Trend in inflation should continue to moderate in coming months, in absence of shocks, but staying above the 2% mark.

UK: BoE has left key rates unchanged at 0.75%.

• The Bank remained confident on growth and a rebound is expected on Q3. Slack in the economy looks at a low level, which could generate future upside pressures on domestic costs.
• The Bank mentioned it expects a smooth transition with the EU; a tightening bias remains in place.

Eurozone: The ECB has not changed its strategy

• Statement on strategy has not changed: QE will be reduced from EUR 30 bn to EUR 15 bn in October and should end in Dec. if medium-term inflation outlook stays in line with ECB’s target. Interest rates should not move before Q3-19.
• The ECB has revised down its growth outlook by 0.1 pp for 2018 and 2019 at 2% and 1.8% respectively (1.7% expected in 2020). Inflation forecasts were maintained at 1.7% for the period 2018-2020.
• No debate about reinvestment rule or any twist operation; capital rule remains the key principle.
• QE and Italy: QE is used to restore medium-term inflation and not to help one country or sector to secure its refinancing, said Draghi.
• Rising risks since last meeting. The main risk is protectionism.

Turkey: Central Bank has increased its key rates from 17.75% to 24%.

• Despite M. Erdogan called for an easing in rates, the bank has increased its rates, slightly more than consensus expectations (21%).
• The statement from the bank justified a strong tightening due to a high inflation despite weaker demand and it mentioned this tightening will remain in place as long as inflation has not eased.

Switzerland: PPI-import prices (Aug.): 0% m/m as expected (prior: 0.1%)

• Import prices were flat over the month; the yearly trend has moderated from 6.9% y/y to 5.7% y/y; producer prices were up by 0.1 % m/m, up by 2.2% y/y. Prices of food and of some raw materials have moderated over the month.

Sweden: GDP (Q2-18): 0.8% q/q vs 0.9% expected (prior: 0.5%)

• Q2 estimate has been revised down from previous 1% q/q; the rebound in Q2 was mainly driven by consumption and inventories while investment and net trade were negative.

France: CPI (Aug.): 0.5% m/m vs 0.6% expected (prior: 0.6%)

• Final data confirmed the rebound in Aug., driven by prices of clothes. Inflation was up by 2.6% y/y.

Germany: CPI (Aug.): 0% m/m as expected (prior: 0%)

• Prices of clothes and energy were up during the month, balanced by lower education and leisure prices.

UK: RICS house price balance (Aug.): 2% as expected (prior: 4%)

• Balance of opinions on housing has moderated after a rebound in July; outlook on prices, sales and demand has deteriorated.

Brazil: Retail sales (July): -0.5% m/m vs 0.3% expected (prior: -0.4% revised from -0.3%)

• Trend remained negative, with some rotation across sectors; the monthly fall was fueled by clothes, personal items and furniture.

US: PPI (Aug.): -0.1% m/m vs 0.2% expected (prior: 0%)

• Prices of food and trade services (air fares) have decreased over the month.; the yearly trend has moderated from 3.3% y/y to 2.8% y/y. Core PPI were up by 0.1% m/m and up by 2.9% y/y.
• Moderate commodity prices and firm USD have moderated inflation. Core service prices were up by 0.3% m/m and up by 3% y/y. This may fuel further rises in core PCE and justifies the rate hike expected from the Fed in H2-18.

Sweden: Unemployment rate (Aug.): 3.9% (prior: 3.8%)

• A return to the level seen in Q1-18.

Eurozone: Industrial production (July): -0.8% m/m vs -0.5% expected (prior: -0.8% revised from -0.7%)

• While production of energy and of capital goods was up by 0.7% m/m and 0.8% m/m respectively, production fell sharply in other sectors, including consumer goods in July.
• From the supply side, the stabilisation expected in Q3 looks at risk.

Italy: Industrial production (July): -1.8% m/m vs -0.3% expected (prior: 0.3% revised from 0.5%)

• A sharp fall in all sectors over the month, particularly for durable consumer goods.