This week has been relatively uneventful with the absence of big data and central bank meetings. Major highlights for the week were the PMI data for the Eurozone area, US revised growth figures and of course the major event of the week, the Jackson Hole Symposium.
- Eurozone Services PMI stood at 59.7.
- Eurozone Manufacturing PMI edged down to 61.5.
- German Flash Manufacturing PMI slowed to 62.7.
- German Flash Services PMI exceeded expectations at 61.5.
- ECB Minutes: tapering is not on the table yet.
- US Prelim GDP came at 6.6%.
- US weekly Unemployment Claims rose by 353K.
- Fed members support tapering measures this year.
Eurozone PMIs close to 15-year High
Eurozone business activity continued its growth at one of the strongest paces over the past two decades in August. The bloc’s economic recovery retained impressive momentum in August, as the flash PMI held near July’s 15-year high supported by further reopening of the economy.
Eurozone Services PMI came at 59.7 in August, settling near the previous month’s 15-year high of 59.8 and compared to market expectations of 59.6. Output and new order growth rates slowed from recent peaks as the recent rise in COVID-19 cases put some firms under pressure, while jobs growth reached its highest levels since September 2018.
The Manufacturing PMI edged down to 61.5 in August from 62.8 in July. The sector suffered the slowest growth in factory activity in 6 months, although it remained a robust one. The eurozone enjoyed the fastest growth of the world’s major economies for a second month running in August, as reported by HIS Markit.
The latest ECB meeting for July’s policy meeting revealed that policymakers were only concerned about the implementation of the new strategy rather than the forward guidance. Back in July, the bank had its first strategy review since 2003, which included targeting inflation at, not near or close to, 2%. The bank still sees inflationary pressures as transitory, with no plans to reduce policy stimulus for the horizon.
Fed Members advocate Tapering
St. Louis Fed president James Bullard said on Thursday that the Federal Reserve should start reducing its monthly asset purchases, currently at $120 billion, adding that the tapering process should be completed by the end of Q1 of 2022. Bullard stated that the stimulus was needed back in 2020 to support the economy through the pandemic, but now it can lead to financial bubbles and runaway inflation.
Also, Kansas City Fed President Esther George has reportedly said that given the progress seen, it’s appropriate for the Fed to pull back its monthly asset purchases as a first step. She added that the progress made in the job market and high inflation urge the Fed to let go of its crisis-era stimulus.
On the data front, The US economy grew at an annual rate of 6.6% in Q2, slightly higher than the advanced estimate of 6.5%, and below forecasts of 6.7%. The weekly unemployment claims rose by 353 thousand in the week ending 21 August, following a four-week period of consecutive declines sending the number of new claims to the lowest level since March 2020.
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