Daily Brief

Sterling survives GDP downfall

Inflation three ways

The auction going on at Christies in New York today is further evidence that quantitative easing and fiscal stimulus can inflate asset prices. The organisers expect someone to invest more than half a million bucks in a pair of old trainers. Yet US inflation remains at a lowly 1%.

The official inflation stories from elsewhere were not markedly different. In Sweden it slowed from 0.7% to 0.5%. In Italy, where they do things a little differently, inflation was either -0.4% or +0.8%. The first number is the legacy NIC national inflation measure; the second is the Euro-standard HICP Harmonised Index of Consumer Prices.

Coming at the subject from a different angle, Wednesday morning’s Australian wage price index went up by a lowly 0.2% in the second quarter, not altogether surprising in view of the parlous employment situation. The number is not inconsistent with Australia’s -0.3% rate of inflation in June. However, this morning’s survey result from the Melbourne Institute paints a wildly different picture. Consumers expect inflation to accelerate to 3.3% in the next 12 months. It is that sort of thinking that drives the second-hand sneaker market.


Recovery looms

As promised, there was statistically little beyond Britain’s GDP and the various inflation measures to energise investors on Wednesday. Even the numbers that did appear had minimal impact on exchange rates. For example, an unexpectedly large 7.5% annual decline in South African retail sales did no harm to the rand.

The NIESR estimates that UK gross domestic product will expand by 15% in the third quarter, taking up the baton from 8.7% growth in June alone. With UK residential property, estate agents at the RICS have come up with another good-news-bad-news story. While a net 12% of them saw prices rising in July (in June a net 13% saw falls), 10% expect a decline in sales over the next 12 months as government support measures are phased out.

Sterling has taken all of it in its stride. Following a modest uptick after the Q2 GDP numbers yesterday morning it managed to remain in the front half of the pack, strengthening by an average of 0.4%. It lost half a euro cent and added a third of a US cent.


Euroland GDP

The key ecostats between now and the end of the week are second quarter gross domestic product for the eurozone and US retail sales in July. Both of them appear on Friday. There are no UK data on the agenda.

This morning’s Australian employment figures were better than expected, with almost 115k new (or reactivated) jobs and unemployment up by less than forecast at 7.5%. The AUD shared third place with the EUR and CAD behind the Northern Scandinavian crowns. German HICP inflation was zero and in Spain it was -0.7%. The other important ecostats today are US weekly jobless claims, with more than a million new claims expected once again.

Friday begins with Chinese house prices, industrial production and retail sales, all significant indicators for the global economy. The eurozone reports on jobs and growth for the second quarter: a quarterly 1.7% fall in employment is expected and a 12.1% quarterly contraction is GDP is likely to be confirmed. US retail sales are pencilled in for a 1.9% monthly rise and industrial production is expected to have risen by 3%, both for July.

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