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LGT Navigator: Latest data cannot dispel inflation worries

September 15, 2021

Yesterday, stock indices initially benefited from a slight decline in consumer price inflation in the US. However, this did not allay investors' concerns about an uncontrolled overshooting of inflation, and the mood turned negative by the close of trading in New York. Fears of an imminent reduction of the stimulus measures of the Federal Reserve persist. In addition, weaker than expected economic data from China weighed.

Latest data cannot dispel inflation worries

Although the rise in consumer prices in the US slowed slightly in August from a high level, it was too small to calm inflation concerns. As a result, indices on Wall Street fell across the board after initial gains. The Dow Jones Industrial fell -0.84% to 34'577.57 points, the lowest level in almost two months. The S&P 500 -lost -0.57% and exited the day's trading at 4'443.05 points. On the tech exchange Nasdaq, the indices also fell by about -0.4%.

This trend continued for the most part in Asia this morning. A slew of data from China showed companies struggling with the impact of local closures following renewed sporadic Covid-19 outbreaks, supply shortages and high raw material costs. Chinese retail sales increased, but at the slowest pace since August 2020 and fell short of analysts' expectations. Industrial production also rose at a weaker pace than in July, underscoring recent signs of slowing economic momentum in China and reinforcing expectations that Beijing will take further stimulus measures in the coming months

No real impetus was provided by Apple shares, which also exited the trading session weaker. On the presentation of new products, the new iPhone 13 was presented with improved features, but this had been expected. Even the announcement of Microsoft to return more money to its shareholders could not turn the mood on the trading floor. The software company increased its quarterly dividend by +11% to 62 cents per share and announced a new USD 60 billion share buyback program.

Minimal decline in inflation rate in the US

Official consumer price inflation in the United States eased slightly in August. On an annual basis, the inflation rate fell marginally to +5.3% from +5.4% in July. Compared with the previous month, the price level increased by +0.3%. Looking at the core rate, which excludes energy and food prices, which are often susceptible to fluctuations, consumer prices rose by +4.0% year-on-year in August (July +4.3%). Analysts had on average expected a core inflation rate of +4.2%. The Federal Reserve (Fed) continues to expect inflation to moderate again in the coming months. Fed Chairman Jerome Powell recently expressed confidence that inflationary pressures are mainly limited to a relatively narrow number of goods and services directly driven by the effects of the pandemic and the reopening of the economy.

Inflation in Spain continues to pick up

Consumer prices in Spain rose +3.3% year-on-year in August, driven by higher electricity and transport costs. This represents a further increase in price pressure compared with the previous month when an inflation rate of +2.9% was recorded. Compared to the previous month, the cost of living increased by +0.4%.

OECD leading indicator points to a weakening of the economic recovery

The leading indicator of the Organization for Economic Cooperation and Development (OECD) is designed to detect early signs of economic turnarounds. It is designed to anticipate turning points relative to the trend six to nine months before the change. In August, the leading indicator for the OECD area now rose by 0.08 percentage point to 101.0 points, but this represents a slowdown in the recovery trend signaled in recent months. The strongest increases were recorded in the euro area and China, while the indicator for the US, for example, stagnated.


Economic Indicators September 15

MEZ Country Indicator Last period
08:00 UK Consumer Prices (August, y/y) +2.0%
08:00 UK Core Consumer Prices (August, y/y) +1.9%
08:00 UK Producer Prices (August, y/y) +3.9%
08:45 FR Consumer Prices (August, y/y) +2.4%
10:00 IT Consumer Prices (August, y/y) +2.6%
11:00 EZ Industrial Production (July, m/m) -0.3%
14:30 US NY Fed Empire State Manufacturing Index (September) +18.3
14:30 US Import Price Index (August, m/m) +0.3%
15:15 US Industrial Production (August, m/m) +0.9%


Earnings Calender September 15

Country Company Period
SP Inditex H1


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