August 31, 2022

Daily Report 31/08/2022

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UK mortgage approvals increased to 63,800 for July from 63,200 previously and higher than expectations of 61,800. There was a small decline in overall mortgage lending for the month, but overall lending to consumers remained strong. The annual increase in consumer credit growth was the highest since March 2019 with credit card borrowing increasing at the fastest rate since October 2005. There were concerns that higher credit-card borrowing is a function of distress borrowing to fund energy bills rather than evidence of confidence. Overall confidence in the outlook remained very weak with the CBI industrial confidence index sliding to the lowest level since May 2020. The survey also noted that businesses increased price at the fastest rate for more than 20 years, but still faced shrinking margins. Overall confidence in the UK outlook remained notably weak which undermined confidence and sentiment deteriorated further as equities declined.

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Euro-Zone industrial sentiment dipped to 1.2 for August from 3.4 the previous month with services sentiment retreating to 8.7 from 10.4. Overall business and consumer confidence declined to 97.6 from 98.9 the previous month and slightly below consensus forecasts, maintaining reservations over the outlook. ECB chief economist Lane stated that he did not rule out a mild and temporary technical recession in the Euro-Zone. He also stated that the central bank should raise rates on a step-by-step basis which dampened speculation to some extent that the central bank would raise rates by 75 basis points at the September policy meeting. Fellow council member Knot, who usually adopts a hawkish stance, stated that he would prefer a 75 basis-point hike at this point, but he added that he was open to discussion. Muller stated that the inflation outlook has failed to improve and that the central bank should discuss a 75 basis-point hike in September, although he will also go into the meeting with an open mind. German CPI inflation held at 7.9% for August and slightly above consensus forecasts of 7.8%.

Key Data 

10.00 HICP (YoY) (Aug) Exp. 9% Prev. 8.9%

10.00 HICP-X F,E,A,T (YoY) (Aug) Exp. 4.1% Prev. 4%

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US consumer confidence increased to a 4-month high of 103.2 for August from a revised 95.3 previously and above consensus forecasts of 97.9 as lower gasoline prices helped underpin sentiment. JOLTS job openings increased to 11.24mn for July from a revised 11.04mn previously with further evidence of a tight labour market.

Key Data 

13.15 ADP Employment Change (Aug) Exp. 200K Prev. 128K