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Eurozone July final consumer confidence -4.4 vs -4.4 prelim

  
Analysis, Economy

Latest data released by Eurostat – 29 July 2021

  • Economic confidence 119.0 vs 118.5 expected
  • Prior 117.9
  • Services confidence 19.3 vs 19.9 expected
  • Prior 17.9
  • Industrial confidence 14.6 vs 13.0 expected
  • Prior 12.7

Euro area economic confidence reaches an all-time high as the upbeat mood is helped by the summer optimism. That said, the increase is a shallow one which could suggest that the indicator is nearing its peak for the time being.

Industrial confidence also increased for an eighth consecutive month, recording its own all-time high, while services confidence is seen picking up for a sixth straight month as it touches its highest level since August 2007.

IMF leaves 2021 global GDP forecast at +6.0% with stronger US growth but weaker EM

  
Analysis, Economy

The latest growth estimates from the IMF

IMF leaves 2021 global GDP forecast
  • 2021 will be the strongest year since 1976
  • 2022 GDP to 4.9% from 4.4%
  • US growth to 7.0% vs 6.4% in April forecast; 2022 at 4.9% vs 3.5% prior
  • Eurozone growth 4.6% vs 4.4% in April forecast; 2022 at 4.3% vs 3.8% prior
  • Japan 2.8% vs 3.3% in April; 2022 3.0% vs 2.5% prior
  • Canada 6.3% vs 5.0% prior; 2022 4.5% vs 4.7% prior
  • China 8.1% vs 8.4% in April; 2022 at 5.7% vs 5.6% prior
  • India 9.5% vs 12.5% in April; 2022 at 8.5% vs 6.9% prior
  • UK 7.0% vs 5.3% in April; 2022 at 4.8% vs 5.1% prior
  • Recent prices pressures reflect pandemic-related developments and transitory supply-demand mismatches
  • New variants and lockdowns could shave 0.8 pp form 2021 and 2022 GDP growth
  • Risks around the global baseline are to the downside due to vaccines rollout and inflation
  • Full report
The IMF said divergences in developed and emerging economies primarily reflects access to vaccines and continued fiscal support. The headline from the report was ‘fault lines widen in the global recovery’.
Here’s a comment on inflation:
Despite a recent uptick in wage growth in the United States, wages of individuals-observed 12 months apart in the Atlanta Federal Reserve’s Wage Growth Tracker-do not indicate broader pressure in the labor market. Data from Canada, Spain, and the United Kingdom show similar patterns of broadly stable wage growth this year
They see three reasons that inflation will diminish:
  1. labor market slack remains substantial
  2. Inflation expectations are well anchored
  3. Structural factors

Eurozone July flash services PMI 60.4 vs 59.5 expected

  
Analysis, Economy

Latest data released by Markit – 23 July 2021

  • Prior 58.3
  • Manufacturing PMI 62.6 vs 62.5 expected
  • Prior 63.4
  • Composite PMI 60.6 vs 60.0 expected
  • Prior 59.5

A solid bump in business activity with the strongest rise in over 15 years observed in the services sector. Supply chain disruptions dampened manufacturing output but overall conditions are still relatively robust to start Q3.

Prices for goods and services continue to run at a record pace, reaffirming higher cost inflation pressures. Meanwhile, backlog of work rose at a joint-survey record amid capacity constraints. Markit notes that:

“The eurozone is enjoying a summer growth spurt as the loosening of virus-fighting restrictions in July has propelled growth to the fastest for 21 years. The services sector in particular is enjoying the freedom of loosened COVID-19 containment measures and improved vaccination rates, especially in relation to hospitality, travel and tourism.

“Supply chain delays remain a major concern for manufacturing, however, constraining production and pushing firms’ costs higher. These higher costs have led to a near record increase in average selling prices for goods and services, which is likely to feed through to higher consumer prices in coming months.

“The survey also highlights how the delta variant poses a major risk to the outlook. Not only have rising case numbers led to a slide in business optimism to the lowest since February, further covid waves around the world could lead to further global supply chain delays and hence ever higher prices.”

Germany says that supply bottlenecks don’t affect positive dynamics of overall economy

  
Analysis, Economy

The German economy ministry brushes aside concerns from the impact of supply chain disruptions globally

  • Outlook for the industrial sector as a whole remains positive
  • Supply bottlenecks for intermediate products have dampening effect
  • But it does not affect positive dynamics of overall economy
  • German economic recovery seen to be at full swing at the end of Q2
This fits with the argument that most policymakers and lawmakers are stating for now, in that all of this is going to be ‘transitory’ and will work itself out once demand conditions pick up globally as the virus situation recedes.
That said, the environment remains challenging for emerging markets and that in itself cannot be underestimated as there is a ripple effect to the rest of the globe.
Anyway, speaking of supply issues, euro area industrial production for May is estimated to surprise downward because of that. Economist, Christophe Barraud, highlights the case for that in his post here leading up to the report later.
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