Euro Area Interest Rate
European Central Bank opted for the ninth consecutive occasion to elevate interest rates by 25 basis points. This ongoing streak of rate hikes comes as a response to the persistently elevated inflation levels, which the bank believes will remain stubbornly high despite the recent deceleration. Consequently, the benchmark rate for main refinancing operations was adjusted to 4.25%, a pinnacle unseen since October 2008. Additionally, the deposit facility rate reached an extraordinary peak of 3.75%, marking its loftiest point in over 22 years.
The ECB's stance is firmly rooted in a commitment to a "data-dependent approach" for future rate determinations. This strategy hinges on maintaining rates at a notably restrictive stance for as long as needed to steer inflation back towards its targeted 2%. This resolute approach to monetary policy has resulted in a remarkable 425 basis point upswing in rates since the inception of the central bank's tightening cycle in July 2022. This speedy sequence of rate adjustments represents an unparalleled rate-tightening pace in the institution's history. Source: European Central Bank
Euro Area Inflation Rate
In July 2023, the Euro Area witnessed a verified consumer price inflation rate of 5.3%, a figure not seen as modest since January 2022. This decline can be primarily attributed to further plunges in energy prices, which registered at -6.1%, a continuation of the previous -5.6% figure. Additionally, costs eased for alcohol and tobacco, recording a rate of 10.8% as opposed to the previous 11.6%, and non-energy industrial goods showed a similar trend with a rate of 5% compared to the previous 5.5%.
In contrast, the pace of inflation for services gained momentum, accelerating from 5.4% to 5.6%. Interestingly, the core inflation rate, which factors out the influence of energy, food, alcohol, and tobacco prices, remained steady at 5.5%. This unique constancy stands out as it now surpasses the headline inflation rate for the first time since 2021.
Comparing the figures to the previous month, the Consumer Price Index (CPI) in the Euro Area saw a marginal decline of 0.1% in June. It's worth noting that the European Central Bank's targeted inflation rate rests at 2%.
Euro Area GDP Growth Rate
During the second quarter of 2023, the Eurozone economy experienced a growth of 0.3%, mirroring the preliminary estimate and marking a rebound from the stagnant performance in the initial quarter. This resurgence in economic activity can be attributed to a moderation in inflationary pressures, which in turn supported an upswing in demand. However, the economy grappled with the dual challenges of elevated interest rates and diminishing confidence, both of which cast shadows over the trajectory of the single currency's economic health.
Within the bloc's major economies, France and Spain showcased resilient growth rates at 0.5% and 0.4% respectively. In contrast, Germany's economy remained at a standstill, while Italy faced an unexpected setback with a contraction of 0.3%.
Examining the year-on-year perspective, the Eurozone's expansion rate stood at 0.6%, representing the most lackluster pace of growth since the recessionary period of 2020-21.
Euro Area Unemployment Rate
In June of 2023, the unemployment rate in the euro area, seasonally adjusted, reached an unprecedented milestone by touching a historic low of 6.4%. This level remained consistent when compared to May 2023 and pleasantly surprised market projections that had expected a slightly higher rate of 6.5%. This positive development gains even more significance considering that just a year prior, the unemployment rate was notably higher, clocking in at 6.7%.
During this period, the number of individuals classified as unemployed saw a reduction of 62,000, bringing the total down to 10.814 million. Simultaneously, the rate of youth unemployment, which measures those under the age of 25 seeking employment, reached an exceptional all-time low of 13.8% in June 2023, showcasing a drop from the previous month's rate of 14%.
Among the Euro Area's largest economies, Germany emerged with the lowest unemployment rate at an impressive 3%. Conversely, Spain held the highest rates of unemployment, recording 11.7%, followed by Italy at 7.4%, and France at 7.1%.
Euro Area Current Account
In May 2023, the Euro Area's current account balance demonstrated a noteworthy improvement, narrowing down to EUR 11.3 billion in deficit. This stands in stark contrast to the same month in the prior year when the deficit was a mere EUR 29 million. This shift was driven by several key factors across various sectors.
In particular, the goods account underwent a substantial transformation, turning the tide to a surplus of EUR 23.9 billion, a significant deviation from the previous year's deficit of EUR 7.8 billion. Simultaneously, the deficit in the secondary income segment also exhibited a decrease, amounting to EUR 8.8 billion compared to the prior EUR 11.4 billion.
However, not all segments experienced such positive shifts. The services surplus witnessed a reduction to EUR 9.4 billion from the previous EUR 14.9 billion, while the primary income deficit expanded significantly, reaching EUR 35.8 billion from the prior EUR 12.4 billion.
Euro Area Government Budget
The government deficit to GDP ratio in the Euro Area fell to 3.6 percent in 2022 from an upwardly revised 5.3 percent in 2021, the first 2023 notification by EU Member States for the application of the excessive deficit procedure (EDP) showed. Amongst the largest Eurozone economies, the largest budget gaps were recorded in Italy (-8.0 percent vs -9.0 percent in 2021), Spain (-4.8 percent vs -6.9 percent) and France (-4.7 percent vs -6.5 percent). Germany posted a smaller 2.6 percent deficit (vs -3.7 percent in 2021), while the Netherlands reported its general government sector being in balance. Considering the European Union as a whole, the government deficit to GDP dropped to 3.4 percent from 4.8 percent.
United States Fed Funds Rate
In July of 2023, the Federal Reserve implemented an anticipated move by raising the target range for the federal funds rate by 25 basis points, reaching the bracket of 5.25% to 5.5%. This decision, aligning with market projections, propelled borrowing costs to their loftiest point since January 2001.
Amidst this decision, policymakers reiterated their commitment to vigilant monitoring of incoming data's implications on the economic outlook. This proactive approach would enable them to make necessary adjustments to the monetary policy stance in case emerging risks could potentially hinder the achievement of both inflation and employment goals. Policymakers emphasized their consideration of a broad spectrum of factors, encompassing labor market conditions, inflationary pressures, inflation expectations, as well as global financial dynamics.
The release of meeting minutes on August 16th revealed that a majority of participants maintained their perspective on considerable upward risks to inflation. This perception suggested a potential requirement for additional tightening of monetary policy.
United States Inflation Rate
In July 2023, the annual inflation rate in the United States picked up momentum, reaching 3.2%, a rise from June's 3%, albeit slightly below the forecasted 3.3%. This shift marked an interruption in the twelve consecutive months of decrease, largely attributed to base effects. Notably, a year prior, inflation had initiated a descent from its peak of 9.1%.
During July 2023, the energy sector saw a decrease of 12.5% in costs, a less pronounced drop compared to June's 16.7%. This decline was less severe for fuel oil (-26.5% compared to -36.6%), gasoline (-19.9% compared to -26.5%), and utility gas service (-13.7% compared to -18.6%). Conversely, the cost of apparel increased by 3.2% (up from 3.1%), along with a larger uptick in transportation services costs, which rose to 9% (compared to 8.2%).
On the other hand, electricity prices experienced a more modest increase of 3%, a decrease from June's 5.4%. Inflation rates decelerated for food (4.9% compared to 5.7%), shelter (7.7% compared to 7.8%), and new vehicles (3.5% compared to 4.1%). Medical services witnessed a decline in cost by 1.5% (as opposed to the previous -0.8%), and prices for used cars and trucks dropped by 5.6% (compared to the previous -5.2%).
Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July from June's 4.8%, slightly below the projected 4.8%.
United States GDP Growth Rate
In the second quarter of 2023, the U.S. economy exhibited a robust annualized growth of 2.4% quarter-on-quarter, surpassing the 2% expansion of the previous period and exceeding market predictions of 1.8%. This revelation emerged from the advance estimate.
A notable driver of this growth was the sharp acceleration in nonresidential fixed investment, which soared by 7.7% (compared to the earlier 0.6%). This surge was led by a notable recovery in equipment investment, which posted a remarkable 10.8% growth (rebounding from the previous -8.9%), and intellectual property products, which increased by 3.9% (up from 3.1%). Additionally, private inventories contributed positively to growth, adding 0.14 percentage points, a notable reversal from the negative contribution of -2.14 in Q1.
In contrast, consumer spending experienced a significant slowdown, registering at 1.6% growth (in contrast to the previous 4.2%). This deceleration, despite surpassing market expectations, reflected a moderation in inflation and continued tightness in the labor market. While spending on goods witnessed a sharp deceleration (0.7% compared to the earlier 6%), expenditure on services remained robust, growing at 2.1% (compared to 3.2%).
Public expenditure increased at a much softer pace, posting a growth of 2.6% (compared to 5%). However, net trade exerted a negative impact on growth, subtracting 0.12 percentage points, primarily due to a 10.8% drop in exports and a comparatively smaller decline of 7.8% in imports. Notably, residential investment continued its downward trajectory, declining by 4.2% (compared to the previous -4%).
United States Unemployment Rate
In July 2023, the unemployment rate in the United States experienced a marginal decline, settling at 3.5%, compared to June's 3.6%. This figure notably surpassed market expectations, which had anticipated a rate of 3.6%. The ranks of the unemployed saw a reduction of 116,000 individuals, bringing the total to 5.841 million. In tandem, employment levels displayed a positive trajectory, rising by 268,000, culminating in a total of 161.262 million employed individuals.
The broader measure of unemployment, encompassing those who desire employment but have ceased searching, as well as those working part-time due to the inability to secure full-time positions, was indicated by the U-6 unemployment rate. This gauge fell to 6.7% in July, a decrease from June's 6.9%.
The labor force participation rate, a key indicator of workforce engagement, remained stable at 62.6%. Importantly, this rate held its ground at the highest level recorded since March 2020.
United States Current Account
In the first quarter of 2023, the United States registered a current account deficit amounting to $219.3 billion. This figure stood higher than the upwardly revised deficit of $216.2 billion noted in the preceding quarter, as well as surpassing expectations of a $217.5 billion deficit. This deficit, equivalent to 3.3% of the current-dollar Gross Domestic Product (GDP), reflects the balance of trade and financial flows.
Examining the components, the secondary income gap expanded to $49.6 billion from the prior $40.7 billion. This shift was propelled by a decrease in receipts attributed to general government transfers, particularly fines and penalties, while payments increased due to a surge in private transfers, primarily insurance-related transfers.
Meanwhile, the primary income surplus narrowed to $31.3 billion, a decrease from the previous $38.1 billion. This shift resulted from a scenario where payments outpaced receipts. The surge in payments was mainly attributed to interest on loans and deposits, owing to elevated short-term interest rates.
In contrast, the goods and services gap contracted to $201 billion from the previous $213.5 billion. This was influenced by a surge in exports, notably of medicinal, dental, and pharmaceutical products, along with goods transferred through the Presidential Drawdown Authority. Imports, on the other hand, experienced a reduction, largely due to a decrease in petroleum and related products, as well as chemicals.
United States Federal Government Budget
In 2022, it is anticipated that the United States will exhibit a Government Budget deficit that corresponds to 5.8% of the nation's Gross Domestic Product.
📈 The scenario I am playing out assumes continue of increases in current week. I do not exclude changing the scenario in case of a sudden change in the market situation. I am aware of the possibility of a correction at any time, this should be taken into account, In case of a change of outlook I will publish an update in the next post
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European Central Bank opted for the ninth consecutive occasion to elevate interest rates by 25 basis points. This ongoing streak of rate hikes comes as a response to the persistently elevated inflation levels, which the bank believes will remain stubbornly high despite the recent deceleration. Consequently, the benchmark rate for main refinancing operations was adjusted to 4.25%, a pinnacle unseen since October 2008. Additionally, the deposit facility rate reached an extraordinary peak of 3.75%, marking its loftiest point in over 22 years.
The ECB's stance is firmly rooted in a commitment to a "data-dependent approach" for future rate determinations. This strategy hinges on maintaining rates at a notably restrictive stance for as long as needed to steer inflation back towards its targeted 2%. This resolute approach to monetary policy has resulted in a remarkable 425 basis point upswing in rates since the inception of the central bank's tightening cycle in July 2022. This speedy sequence of rate adjustments represents an unparalleled rate-tightening pace in the institution's history. Source: European Central Bank
Euro Area Inflation Rate
In July 2023, the Euro Area witnessed a verified consumer price inflation rate of 5.3%, a figure not seen as modest since January 2022. This decline can be primarily attributed to further plunges in energy prices, which registered at -6.1%, a continuation of the previous -5.6% figure. Additionally, costs eased for alcohol and tobacco, recording a rate of 10.8% as opposed to the previous 11.6%, and non-energy industrial goods showed a similar trend with a rate of 5% compared to the previous 5.5%.
In contrast, the pace of inflation for services gained momentum, accelerating from 5.4% to 5.6%. Interestingly, the core inflation rate, which factors out the influence of energy, food, alcohol, and tobacco prices, remained steady at 5.5%. This unique constancy stands out as it now surpasses the headline inflation rate for the first time since 2021.
Comparing the figures to the previous month, the Consumer Price Index (CPI) in the Euro Area saw a marginal decline of 0.1% in June. It's worth noting that the European Central Bank's targeted inflation rate rests at 2%.
Euro Area GDP Growth Rate
During the second quarter of 2023, the Eurozone economy experienced a growth of 0.3%, mirroring the preliminary estimate and marking a rebound from the stagnant performance in the initial quarter. This resurgence in economic activity can be attributed to a moderation in inflationary pressures, which in turn supported an upswing in demand. However, the economy grappled with the dual challenges of elevated interest rates and diminishing confidence, both of which cast shadows over the trajectory of the single currency's economic health.
Within the bloc's major economies, France and Spain showcased resilient growth rates at 0.5% and 0.4% respectively. In contrast, Germany's economy remained at a standstill, while Italy faced an unexpected setback with a contraction of 0.3%.
Examining the year-on-year perspective, the Eurozone's expansion rate stood at 0.6%, representing the most lackluster pace of growth since the recessionary period of 2020-21.
Euro Area Unemployment Rate
In June of 2023, the unemployment rate in the euro area, seasonally adjusted, reached an unprecedented milestone by touching a historic low of 6.4%. This level remained consistent when compared to May 2023 and pleasantly surprised market projections that had expected a slightly higher rate of 6.5%. This positive development gains even more significance considering that just a year prior, the unemployment rate was notably higher, clocking in at 6.7%.
During this period, the number of individuals classified as unemployed saw a reduction of 62,000, bringing the total down to 10.814 million. Simultaneously, the rate of youth unemployment, which measures those under the age of 25 seeking employment, reached an exceptional all-time low of 13.8% in June 2023, showcasing a drop from the previous month's rate of 14%.
Among the Euro Area's largest economies, Germany emerged with the lowest unemployment rate at an impressive 3%. Conversely, Spain held the highest rates of unemployment, recording 11.7%, followed by Italy at 7.4%, and France at 7.1%.
Euro Area Current Account
In May 2023, the Euro Area's current account balance demonstrated a noteworthy improvement, narrowing down to EUR 11.3 billion in deficit. This stands in stark contrast to the same month in the prior year when the deficit was a mere EUR 29 million. This shift was driven by several key factors across various sectors.
In particular, the goods account underwent a substantial transformation, turning the tide to a surplus of EUR 23.9 billion, a significant deviation from the previous year's deficit of EUR 7.8 billion. Simultaneously, the deficit in the secondary income segment also exhibited a decrease, amounting to EUR 8.8 billion compared to the prior EUR 11.4 billion.
However, not all segments experienced such positive shifts. The services surplus witnessed a reduction to EUR 9.4 billion from the previous EUR 14.9 billion, while the primary income deficit expanded significantly, reaching EUR 35.8 billion from the prior EUR 12.4 billion.
Euro Area Government Budget
The government deficit to GDP ratio in the Euro Area fell to 3.6 percent in 2022 from an upwardly revised 5.3 percent in 2021, the first 2023 notification by EU Member States for the application of the excessive deficit procedure (EDP) showed. Amongst the largest Eurozone economies, the largest budget gaps were recorded in Italy (-8.0 percent vs -9.0 percent in 2021), Spain (-4.8 percent vs -6.9 percent) and France (-4.7 percent vs -6.5 percent). Germany posted a smaller 2.6 percent deficit (vs -3.7 percent in 2021), while the Netherlands reported its general government sector being in balance. Considering the European Union as a whole, the government deficit to GDP dropped to 3.4 percent from 4.8 percent.
United States Fed Funds Rate
In July of 2023, the Federal Reserve implemented an anticipated move by raising the target range for the federal funds rate by 25 basis points, reaching the bracket of 5.25% to 5.5%. This decision, aligning with market projections, propelled borrowing costs to their loftiest point since January 2001.
Amidst this decision, policymakers reiterated their commitment to vigilant monitoring of incoming data's implications on the economic outlook. This proactive approach would enable them to make necessary adjustments to the monetary policy stance in case emerging risks could potentially hinder the achievement of both inflation and employment goals. Policymakers emphasized their consideration of a broad spectrum of factors, encompassing labor market conditions, inflationary pressures, inflation expectations, as well as global financial dynamics.
The release of meeting minutes on August 16th revealed that a majority of participants maintained their perspective on considerable upward risks to inflation. This perception suggested a potential requirement for additional tightening of monetary policy.
United States Inflation Rate
In July 2023, the annual inflation rate in the United States picked up momentum, reaching 3.2%, a rise from June's 3%, albeit slightly below the forecasted 3.3%. This shift marked an interruption in the twelve consecutive months of decrease, largely attributed to base effects. Notably, a year prior, inflation had initiated a descent from its peak of 9.1%.
During July 2023, the energy sector saw a decrease of 12.5% in costs, a less pronounced drop compared to June's 16.7%. This decline was less severe for fuel oil (-26.5% compared to -36.6%), gasoline (-19.9% compared to -26.5%), and utility gas service (-13.7% compared to -18.6%). Conversely, the cost of apparel increased by 3.2% (up from 3.1%), along with a larger uptick in transportation services costs, which rose to 9% (compared to 8.2%).
On the other hand, electricity prices experienced a more modest increase of 3%, a decrease from June's 5.4%. Inflation rates decelerated for food (4.9% compared to 5.7%), shelter (7.7% compared to 7.8%), and new vehicles (3.5% compared to 4.1%). Medical services witnessed a decline in cost by 1.5% (as opposed to the previous -0.8%), and prices for used cars and trucks dropped by 5.6% (compared to the previous -5.2%).
Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July from June's 4.8%, slightly below the projected 4.8%.
United States GDP Growth Rate
In the second quarter of 2023, the U.S. economy exhibited a robust annualized growth of 2.4% quarter-on-quarter, surpassing the 2% expansion of the previous period and exceeding market predictions of 1.8%. This revelation emerged from the advance estimate.
A notable driver of this growth was the sharp acceleration in nonresidential fixed investment, which soared by 7.7% (compared to the earlier 0.6%). This surge was led by a notable recovery in equipment investment, which posted a remarkable 10.8% growth (rebounding from the previous -8.9%), and intellectual property products, which increased by 3.9% (up from 3.1%). Additionally, private inventories contributed positively to growth, adding 0.14 percentage points, a notable reversal from the negative contribution of -2.14 in Q1.
In contrast, consumer spending experienced a significant slowdown, registering at 1.6% growth (in contrast to the previous 4.2%). This deceleration, despite surpassing market expectations, reflected a moderation in inflation and continued tightness in the labor market. While spending on goods witnessed a sharp deceleration (0.7% compared to the earlier 6%), expenditure on services remained robust, growing at 2.1% (compared to 3.2%).
Public expenditure increased at a much softer pace, posting a growth of 2.6% (compared to 5%). However, net trade exerted a negative impact on growth, subtracting 0.12 percentage points, primarily due to a 10.8% drop in exports and a comparatively smaller decline of 7.8% in imports. Notably, residential investment continued its downward trajectory, declining by 4.2% (compared to the previous -4%).
United States Unemployment Rate
In July 2023, the unemployment rate in the United States experienced a marginal decline, settling at 3.5%, compared to June's 3.6%. This figure notably surpassed market expectations, which had anticipated a rate of 3.6%. The ranks of the unemployed saw a reduction of 116,000 individuals, bringing the total to 5.841 million. In tandem, employment levels displayed a positive trajectory, rising by 268,000, culminating in a total of 161.262 million employed individuals.
The broader measure of unemployment, encompassing those who desire employment but have ceased searching, as well as those working part-time due to the inability to secure full-time positions, was indicated by the U-6 unemployment rate. This gauge fell to 6.7% in July, a decrease from June's 6.9%.
The labor force participation rate, a key indicator of workforce engagement, remained stable at 62.6%. Importantly, this rate held its ground at the highest level recorded since March 2020.
United States Current Account
In the first quarter of 2023, the United States registered a current account deficit amounting to $219.3 billion. This figure stood higher than the upwardly revised deficit of $216.2 billion noted in the preceding quarter, as well as surpassing expectations of a $217.5 billion deficit. This deficit, equivalent to 3.3% of the current-dollar Gross Domestic Product (GDP), reflects the balance of trade and financial flows.
Examining the components, the secondary income gap expanded to $49.6 billion from the prior $40.7 billion. This shift was propelled by a decrease in receipts attributed to general government transfers, particularly fines and penalties, while payments increased due to a surge in private transfers, primarily insurance-related transfers.
Meanwhile, the primary income surplus narrowed to $31.3 billion, a decrease from the previous $38.1 billion. This shift resulted from a scenario where payments outpaced receipts. The surge in payments was mainly attributed to interest on loans and deposits, owing to elevated short-term interest rates.
In contrast, the goods and services gap contracted to $201 billion from the previous $213.5 billion. This was influenced by a surge in exports, notably of medicinal, dental, and pharmaceutical products, along with goods transferred through the Presidential Drawdown Authority. Imports, on the other hand, experienced a reduction, largely due to a decrease in petroleum and related products, as well as chemicals.
United States Federal Government Budget
In 2022, it is anticipated that the United States will exhibit a Government Budget deficit that corresponds to 5.8% of the nation's Gross Domestic Product.
📈 The scenario I am playing out assumes continue of increases in current week. I do not exclude changing the scenario in case of a sudden change in the market situation. I am aware of the possibility of a correction at any time, this should be taken into account, In case of a change of outlook I will publish an update in the next post
🚀 If you appreciate my work and effort put into this post, I encourage you to leave a like and follow on my profile 🚀
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💲 To keep up to date with all my activities I invite you to visit my Telegram 💲
💲 www.t.me/Investmatez 💲
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