Archive

EA: Re-Balance Of Payments

• An end to the Euro’s bullish trend is now revealed to have coincided with a reversal of two critical supports. Frontloaded export levels have normalised without payback.
• International portfolio investment into the EA during April fully unwound between May and June, revealing no investor appetite to hold higher allocations to EA assets.
• The Euro is not benefiting from a structural shift towards it, so we doubt the bullish trend will resume. Belated payback in goods inventories could also eventually weigh.

By Philip Rush

EA: Resilient Retail Rebound

• Consumers need to drive activity growth as tariffs and Euro strength harm export competitiveness. Reassuringly, retail sales returned to their trend after a trimmed fall.
• Growth was broad across countries and categories, taking the annual pace 0.5pp above consensus expectations. Non-food retail is critical and the strongest of them all.
• Surveys are gloomier, especially about the future, but rarely right. Resilient real wage and employment growth can sustain brisk retail trends, preserving economic expansion.

By Philip Rush

HEM: One-Touch Easing

• Payrolls revisions challenge the rolling resilience seen in most other hard data releases, but seem over-weighted.
• Underlying price and wage inflation mostly track >2%, especially in the UK, which doesn’t need more rate cuts.
• Policymakers biased to ease will deliver it on a batch of bad outcomes, even if the evidence proves fleeting.

EA: Sticky Summer Inflation

• The ECB’s victory party can continue for another month, as inflation proved surprisingly sticky at the target. But the hangover is disappointing, amid broad-based upside news.
• Two-thirds of national outcomes exceeded our expectations, with a slight skew higher, and pressures concentrated in services. Seasonal travel parts would be payback-prone.
• Another upside surprise to the ECB’s forecast makes the profile likely to shift higher in September. The news is the opposite of what is needed for another rate cut.

By Philip Rush