The latest percentages arrived in the early afternoon from the United States, the previous ones, published in the morning by Eurostat, surprised the markets positively. And so now according to investors there are no more doubts: inflation is doing better than expected both in the Eurozone and the central banks no longer have any reason not to proceed with the first (for the Fed) and the second (for the ECB), rate cuts in 2024. And the stock markets are celebrating what has now become a real certainty.
US: Inflation stable at 2,5%
In the United States Inflation is in line with expectations. According to the Department of Commerce on personal income and consumer spending, in July, the PCe data (personal consumption expenditures price index), the Federal Reserve's preferred measure for calculating it, rose 0,2% from the previous month, in line with consensus, and is grew by 2,5% compared to a year earlier, a figure equal to the estimates and the previous month. The “core” component of the data, adjusted for volatile elements, also grew by 0,2% compared to the month, equal to the estimates and the previous month, and by 2,6% compared to a year earlier, a figure unchanged from June, with expectations at 2,7%.
Another important piece of data published today concerns the consumer spending in the United States, which rose 0,5% in July after posting a 0,3% increase in June, according to the Commerce Department. Again, the data was in line with expectations and suggests that the economy remains on solid ground at the start of the third quarter, casting doubt on the possibility of a half a percentage point cut in rates of interest by the Federal Reserve next month. Most economists believe that in fact The Fed will oppose a half-point rate cut percentage, as the economy continues to move forward and inflation remains above the central bank's 2% target, even as price pressures continue to ease. Since Fed Chairman Jerome Powell's speech in Jackson Hole, investors have been wondering how big the now certain cut will be: 25 or 50 basis points. The latest data therefore seem to suggest the first option.
Eurozone: Inflation falls more than expected
After the positive data that arrived in the last few days on consumer prices in Germany and Spain, the percentages released by Eurostat are surprising the markets today. The flash estimate says that Inflation in the Eurozone fell to 2,2% year-on-year from 2,6% in July. Looking at the main components of euro area inflation, services are expected to post the highest annual rate (4,2%, compared with 4% in July), followed by food, alcohol and tobacco (2,4%, compared with 2,3% in July), non-energy industrial goods (0,4%, compared with 0,7% in July) and energy (-3%, compared with 1,2% in July).
Down too i Italian prices, with inflation slowing down again in August, mainly due to the widening of the decline in the prices of non-regulated energy goods. According to provisional data released this morning by Istat, in the month in question the NIC showed increases of 0,2% on a quarterly basis and 1,1% on a yearly basis, compared to expectations of +0,3% and +1,2% respectively. Finally, in France, the consumer price index increased in August by 1,9% on an annual basis. The indicator is below the symbolic threshold of 2% for the first time since August 2021.
Stocks hit record highs after inflation data
The excellent inflation data have pushed European stock markets up, reaching new records, only to then recover slightly, while waiting for the world stock markets to close the fourth consecutive month on the rise. The Ftse Mib of Milano rises by 0,5%, consolidating the 34 thousand points reconnected on Thursday, also positive the CAC of Paris (+0,2%), the Ibex of Madrid (+0,3%) and the Ftse 100 of London (+0,17%), the Dax of Frankfurt (+ 0,2%).
Contributing to the positive mood were the comments of Isabel Schnabel, member of the ECB's governing council, who said that inflation will return to the 2% target by the end of 2025. Not only that, according to the governor of the Estonian central bank, Madis Muller“We can be increasingly confident that it will be possible to reduce monetary policy rates in September,” Muller told Bloomberg, citing slower wage growth and other macro data that came in line with ECB projections.
The US stock market also opened positively, with the S & P 500 which gains half a percentage point, the Nasdaq which is proceeding with momentum with a rise of 0,9%. Further back is the Dow Jones, which marks +0,2%.
