Macro

UK: Bank of England mortgage data showed a 10% fall in the number of approved but incomplete home loans in July compared to the previous month. Meanwhile, UK house prices experienced a significant drop of 5.3% in August, the sharpest decline since July 2009, as reported by mortgage lender Nationwide.

EU: According to preliminary estimates from Eurostat, the official statistical office of the European Union, the annual inflation rate in the eurozone remained stable at 5.3% in August, . This figure slightly exceeded the 5.1% forecast by economists surveyed by FactSet. Core inflation, which excludes volatile food and energy prices was in line with expectations, slowing to 5.3% from July, showing a 20-basis-point improvement. (One basis point is equal to 0.01 percentage points.)

The minutes from the European Central Bank’s (ECB) July meeting highlighted the robust labor market in the euro area and suggested the possibility of a gradual slowdown in economic activity. The seasonally adjusted unemployment rate remained at a record low of 6.4% in July, in line with consensus expectations.

In Germany, consumer price inflation eased in August, reaching 6.1% year-on-year, matching the 14-month low seen in May. In contrast, retail sales in July declined by 0.8% sequentially, deviating from the 0.5% drop predicted by economists surveyed by FactSet.

US: Surprisingly, job openings decreased by 338,000 in July, reaching their lowest level since March 2001. The number of job layoffs, considered a more reliable labor market indicator, also fell significantly. The non-farm payrolls report for August, released on Friday, suggested a weakening labor market, with employers adding 187,000 jobs, slightly above consensus expectations, although with downward revisions for the previous two months totaling 110,000. Average hourly wages rose just 0.2% for the month, slightly below expectations, and the unemployment rate increased from 3.5% to 3.8%, its highest level since February 2022, as 736,000 individuals re-entered the labor market, which increased the labor force participation rate to 62.8%, its highest since February 2020.

Despite the labor market slowdown, hopes grew that the economy could avoid a significant slowdown in 2023, often referred to as the “no-landing scenario.” In July, personal spending rose 0.8%, beating expectations and beating the 0.2% increase in consumer prices for the month. In addition, the Institute for Supply Management’s measure of manufacturing activity, while still pointing to a slowdown in the sector, improved unexpectedly to its highest level since February. Overall business activity in the Chicago region also exceeded expectations.

Atlanta Federal Reserve Bank President Raphael Bostic added to sentiment by stating that current interest rate levels are “appropriately restrictive” and are on track to bring inflation down to the Fed’s target of around 2.0%. His comments, along with the inflation and employment data, fueled hopes that the Fed would not raise rates again this year. The probability of the Fed remaining on hold for the remainder of the year, as indicated by the CME FedWatch tool, rose sharply over the week from 44.5% to 59.8%.