Growth concerns rise after Chinese figures

August inflation data in the US came in slightly below expectations, but headline and core inflation remain strong at +5.3% and +4% yoy respectively. In detail, it is not so clear that a downward turn is really underway and the reaction of the markets (equities and bond yields down, USD finally slightly up) seems to show that it is mainly a concern about the consequences of the pandemic that came out of these figures. For more details, see our News published yesterday.

China’s activity statistics published last night will not reverse the trend: if the growth rates of industrial production and investment have slowed, they came out just below expectations at +5.3% and +8.9% yoy respectively. However, retail sales growth fell sharply from +8.5% to +2.5% yoy, confirming fears arising from the plunge in services PMIs. The measures taken to counter the pandemic are obviously responsible for this.

This glimpse of stagflation is reinforced this morning by the stronger-than-expected rebound in UK inflation (+3.2% for headline inflation and +3.1% for core inflation). Producer prices continue to accelerate in parallel.

Today, we are expecting a rebound in industrial activity in July in the euro zone and statistics in the United States: foreign trade prices and industrial production in August. The markets will probably be more interested in the retail sales published tomorrow, but import prices are to be watched.