In today’s briefing:
- Ifo Watch: The German de-industrialization continues
- EM by EM #19 The Simsek Effect kicking in?
- CX Daily: China’s Richer Diet Is Straining the Agricultural Industry
- EA: Re-Fuelled Upside in Aug-23
Ifo Watch: The German de-industrialization continues
- Yesterday morning we had the anticipated German Ifo report come out in full, and while most parameters did not surprise, some might just be worth a closer inspection – an inspection we’ve decided to carry outKey takeaways up front: Manufacturing components of Ifo showing 2% inflation already yearService components of Ifo showing stickiness Orders to Inventory in Germany bombed out – a recession is the base case with no signs of a restocking regime / cyclical reboundIt was yet another dovish print from the manufacturing sector with regards to price expectations and as we have been highlighting throughout the year the backbone of the German economy points towards headline inflation hitting 2 % around year-end.
- Ifo noted that the companies taking part in the survey saw demand weakening this time.
- We see two key themes that might throw a wrench into the works: The fragile natural gas situation which we have laid out here and then the sticky core part.
EM by EM #19 The Simsek Effect kicking in?
- When we last visited the Turkey case, rumors of Simsek’s potential return to office were surfacing as the markets grew increasingly restless due to the escalating economic challenges.
- Hyperinflation reached its climax in the autumn of 2022, propelled by soaring energy prices, while the reserves at the Bank of Turkey were rapidly dwindling creating a rather destabilizing cocktail for Erdogan’s administration.
- This was the state of the Net International Reserves on the first of June where our last Turkey piece was written.
CX Daily: China’s Richer Diet Is Straining the Agricultural Industry
- Food /: China’s richer diet is straining the agricultural industry
- China-U.S. /: China visit ‘excellent start’ to resolve trade issues, U.S. Commerce secretary says
- Mortgages /: Rate cuts on existing home loans ‘highly probable,’ China Merchants says
EA: Re-Fuelled Upside in Aug-23
- EA inflation failed to slow from 5.3% in August, shocking the consensus by 0.2pp in only the second upside surprise since Oct-22. However, it was only 4bps above our forecast.
- Core pressures were broadly slightly stronger again but partially offset in our forecast by energy prices, although energy was probably the source of upside for the consensus.
- Base effects remain set to drive a substantial slowing over the next two months. We still expect the ECB to hold rates while reserving the option to resume hiking.
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