Daily macro update
German inflation unexpectedly slowed
Germany: CPI (Jun P): 0.1% m/m vs 0.3% expected (prior: 0.2%)
- Germany experienced an unexpected slowdown in inflation, primarily due to declining food prices and certain core categories, which outweighed rising road fuel costs.
- According to both the EU-harmonised HICP and the national CPI measure, consumer prices rose 2.0% y/y in June after 2.1% in May.
- Looking forward, eurozone inflation should remain in a 1.9%-2.0% range over the next months and ECB should consider maintaining interest rates steady until the end of the year, with a potential rate cut in December.
Italy: CPI (Jun P): 0.2% m/m vs 0.3% expected (prior: -0.1%)
- In June, Italy's inflation rate slowed more than anticipated. Rising fuel costs, driven by Middle East tensions, were offset by a decrease in utility bills. On an annual basis, inflation remained steady at 1.9%.
Eurozone: M3 (May): 3.9% y/y vs 4.0% expected (prior: 3.9%)
- M3 growth remained stable at 3.9%, slightly below expectations. Credit growth to the private sector held steady at 2.8% y/y.
- Notably, loans to non-financial corporations decreased by 0.1pp. to 2.5% y/y, while household loans increased by 0.1 pp. to 2% y/y.
- Overall, the recovery in credit growth seems to have lost momentum in May.
Weaker-than-expected US consumer spending in May
US: Personal income (May): -0.4% m/m vs 0.3% expected (prior: 0.8% revised from 0.7%)
- Largest fall since 2021, which is partly explained by a decrease in Social Security payments.
- However, wages continued to rise solidly, up 0.4% m/m.
US: Personal spending (May): -0.1% m/m vs 0.1% expected (prior: 0.2%)
- After the downward revisions to Q1 GDP yesterday, this fall in personal consumption suggests that domestic demand was weaker than previously thought in the first part of the year.
- Spending on transportation services, meals out and accommodation all fell in May. Motor vehicle purchases declined by 6%, reversing the surge ahead of tariffs.
US: Core PCE deflator (May): 0.2% m/m vs 0.1% expected (prior: 0.1%)
- Y/y: 2.7% vs 2.6% expected (prior: 2.6% revised from 2.5%)
- Core inflation slightly accelerated from the previous month but remains contained.
US: Consumer confidence (Michigan) (June F.): 60.7 vs 60.5 expected (prior: 52.2)
- This final release confirms that consumer confidence improved in June, but sentiment remains below the levels of the past two years.
- One of the main reasons is the decline in inflation expectations. However, they remain close to a 30-year high (5.0% over the next year, 4.0% in the medium term).
Eurozone: Economic confidence (June): 94.0 vs 94.8 expected (prior: 94.8)
Eurozone: Industrial confidence (June): -12.0 vs -10.0 expected (prior: -10.4)
- The decline in industrial confidence is due the export order books component, most probably due to the end of the US stockpiling and the looming increase in tariffs.
Eurozone: Services confidence (June): 2.9 vs 1.6 expected (prior: 1.5 revised from 1.8)
France: CPI (June Prel): 0.4% m/m vs 0.2% expected (prior: -0.2%)
- CPI y/y: 0.8% vs 0.7% expected (prior: 0.6%)
- Inflation edged higher in June after having reached a 5-year low in May.
France: Consumer spending (May): 0.2% m/m vs 0.1% expected (prior: 0.5% revised from 0.3%)
- Consumer spending is down 0.5% y/y.
Spain: CPI (June Prel.): 0.6% m/m as expected (prior: 0.0%)
- CPI y/y: 2.2% as expected (prior: 2.0%)
Rising US recurring jobless claims
US: Initial jobless claims (June 21): 236k vs 243k expected (prior: 246k revised from 245k)
- Initial jobless claims declined last week, but continuing claims for unemployment benefits rose to the highest level since November 2021.
- This signals that more people are staying out of work for longer, adding to signs that employers are becoming slightly more cautious on hiring, but holding onto their existing workers.
US: Durable goods orders (May Prel.): 16.4% m/m vs 8.5% expected (prior: -6.6% revised from -6.3%)
- Ex transportation: 0.5% m/m vs 0.0% expected (prior: 0.0% revised from 0.2%)
- Strong rebound, but the strength is largely due to aircraft orders. Orders for other types of goods rose more modestly.
- Since the start of the year, the trend is broadly sideways.
US: Pending home sales (May): 1.8% m/m vs 0.1% expected (prior: -6.3%)
- Y/y: -0.3% vs -0.4% expected (prior: -3.6%)
- Pending home sales recovered in May after a sharp decline in April, but the absolute number remains weak due to high mortgage rates and prices.
US: GDP (1Q T.): -0.5% q/q vs -0.2% expected (prior: 2.4%)
- The third GDP revision shows that US consumer spending rose in the first quarter at the lowest pace (+0.5% vs 1.2% initially reported) since the start of the pandemic.
- Spending on services (in particular recreation and travel) were particularly weak, generally being the most sensitive to shocks in consumer sentiment.
US: Wholesale inventories (May Prel.): -0.3% m/m vs 0.2% expected (prior: 0.1% revised from 0.2%)
- Retail inventories were up 0.3% in May (vs -0.1% expected) after a flat reading in April.
US: Trade balance (May): -96.6 bn USD vs -86.1 bn expected (prior: -87.0 bn)
- The trade deficit unexpectedly widened 11% due to a 5.2% decline in exports and little change in imports.
- This means that trade may contribute less to Q2 GDP growth than initially expected.
Germany: GFK consumer confidence (July): -20.3 vs -19.2 expected (prior: -20.0 revised from -19.9)
- Consumer confidence remained basically stable over the last month.
Slowing US new home sales
US: New home sales (May): 623k vs 693k expected (prior: 722k revised from 743k)
- New homes sales dropped markedly in May (-13.7% m/m), adding to evidence that affordability is still a problem for the "median" buyer.
- Demand is likely to remain weak amid still elevated mortgage rates. Rising inventories could put home prices under some pressure.
France: Consumer confidence (June): 88 vs 89 expected (prior: 88)
- Consumer sentiment remained steady this month.
German IFO rises to a one-year high, lower US consumer confidence
US: Consumer confidence (CB) (June): 93.0 vs 99.8 expected (prior: 98.4 revised from 98.0)
- Unexpected decline in consumer sentiment (below all consensus estimates), with both the gauges on present situation and expectations falling in tandem.
- This reflects concerns about prospects for the economy, labor market and personal finances.
- On the positive side, median inflation expectations declined to 4.9% from 5.2% in May.
US: Richmond Fed manufacturing (June): -7 vs -10 expected (prior: -9)
- The index remained pretty much stable in June, with prices paid and prices received slightly higher.
- Encouragingly, the new order gauge on a 6-month horizon improved for a second consecutive month, now just into positive territory.
US: House price Index MoM (FHFA) (April): -0.4% m/m vs 0.0% expected (prior: 0.0% revised from -0.1%)
US: S&P CoreLogic CS 20-City (April): 3.4% y/y vs 3.9% expected (prior: 4.1%)
- According to this measure, home prices fell by 0.3% m/m (vs 0.0% expected) after -0.2% in March.
- These two indicators show that some house price relief is materializing.
- Sustained declines would support future home affordability and home purchases.
Germany: IFO (June): 88.4 vs 88.0 expected (prior: 87.5)
- Current assessment: 86.2 vs 86.5 expected (prior: 86.1)
- Expectations: 90.7 vs 89.9 expected (prior: 89.0)
- The headline index rose to a one-year high, led by better expectations.
- This potentially reflects reduced concerns about an escalation of trade tensions with the US, combined with optimism regarding the forthcoming fiscal spending in Germany, as suggested by a strong rise in confidence in construction.
- The services-related sectors also showed significant improvements while manufacturing declined slightly after a large gain in May.