June 24, 2022

HEW: Activity Crashing Hawkish Party

  • Over the past week, activity data broadly disappointed by substantial margins. The Euro area PMI caught the global cold, while the US suffering deepened and UK consumers retrenched, despite not splurging as previously reported.
  • Next week is the relatively quiet month-end, where the flash EA inflation release dominates our calendar. We are a tenth above the current consensus in forecasting a rise to 8.4% y-o-y, driven by energy and Spain punching above its weight.

By Philip Rush

June 23, 2022
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EA Activity Catches Global Cold

  • The Euro area’s relative resilience lasted only a month as its services PMI crashed in June, while the US extended its trend decline.
  • Consumer confidence remains far gloomier than businesses amid squeezed real incomes. Unemployment may be turning higher, but the vacancy backlog should prevent a spike.
  • Monetary policymakers are fixated on the risk of high coincident inflation and will keep hiking into weaker activity. They overdid stimulus and now risk overdoing tightening.

By Philip Rush

June 22, 2022
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UK: Inflation Loses Some Core Support

  • UK CPI inflation matched forecasts by rising slightly to 9.1% amid relatively small offsetting surprises, although the RPI was more adversely affected and rose to 11.7%.
  • Strength in food and energy is masking an easing of core pressures under most definitions. It’s too early to say if that’s a genuine turn or a mere lull.
  • Inflation remains too high, even if it’s not matching BoE fears, so ongoing rate hikes are necessary. FX pressure is encouraging potentially inappropriate aggression from some.

By Philip Rush