Our convictions change over time, thank you to verify that your preferences always match your expectations.

Pins are saved using cookies. Deleting them from your browser will delete your preferences.

delete all my pins


Eurozone inflation exceeds expectations and accelerates gradually in August

06 September 2017

The market sentiment remains volatile this week. Geopolitical tensions escalated sharply at the beginning of the week as North Korea launched a missile over Japan.

But macro took the central stage quickly. Incoming data remained strong and the global growth recovery is firming up.

In US :

  • Second quarter growth was revised upward to 3.0% from 2.6% with stronger household spending and a bigger gain in business investment. Momentum accelerated clearly into the second half of the year. Consumer spending, biggest part of the economy, grew by 3.3%. However, fallout from Hurricane Harvey could trim third quarter growth
  • Manufacturing sector accelerated sharply in August as ISM Manufacturing index rises to 58.8 at the top the year
  • However, US jobs report for August was weak. Payrolls missed expectations (156.000 jobs created vs 180.000 expected) with higher unemployment rate (4.4% vs 4.3% in July). Also, wage growth remained weak. This figure has to be consider with caution as payroll numbers have been often volatile during summer                                                                                                           

In China, data continues to be supportive. The manufacturing PMI came in stronger-than-expected at 51.7 in August from 51.4 in July. The growth outlook remains robust for the second part of the year.

In Europe, all lights are green before the ECB meeting next week, apart from the rise of the euro that could become a concern for central bankers as discussed in the minutes.

  • Inflation is slowly rising, driven primarily by the energy prices. The Eurozone inflation picked up more than expected in August and rose to +1.5%, with a strong support coming from German inflation at +1.8%
  • Economic confidence rose to the highest level in a decade. Euro economy is booming. Growth accelerated in the second quarter, spreading to more countries. But that has not yet translated into significantly faster inflation and rising wages

Market sentiment remains very positive in Europe but euro strength began to hit European equities and could put economic recovery in danger and impact the inflation.

Next week, all eyes will be on the ECB monetary policy meeting. ECB will update economic forecast:

  • Projections are likely to see a cut in the September inflation mid-points for 2018 and 2019
  • Overall, we expect no change in the ECB’s communication regarding the exit strategy (QE tapering). The ECB has been quite clear that there will be no change in policy stance before the autumn
  • Mario Draghi is likely to keep a cautious stance as underlying inflationary pressures (core inflation) still remain too low and the trend is far from anchored
La Française & You

La Française Group provides access to the expertise of a number of asset management companies around the world. To provide you with the most relevant information, we have developed an interface to present the full range of products available for your investor profile and country of residence.

Institutional investors
Wealth management professionals
Individual investors
When navigating on our website, you agree to this policy and consent to our use of cookies in accordance with the terms of this policy. Find out more.