### Summary
The Czech Republic's inflation rate dropped to 10.2% in July, although it still ranks fourth among EU nations with the highest inflation rates.
### Facts
- 💰 The Czech Republic's inflation rate dropped to 10.2% in July, but it remains one of the EU nations with the highest inflation rates.
- 🇪🇺 The European Union as a whole saw a moderate drop in year-on-year inflation rate from 6.4% to 6.1% in July.
- 💹 The eurozone's inflation declined slightly from 5.5% to 5.3% in July.
- 📉 Inflation rates in the EU spiked last summer due to a surge in energy prices, reaching 9.8% for the EU and just under 9% for the eurozone.
- 📊 Among EU nations, Belgium had the lowest year-on-year inflation rate at 1.7%, while Hungary had the highest at 17.5%.
- 🌡️ In a month-on-month comparison, consumer prices in the EU remained stagnant in July, with a marginal 0.1% decline in the eurozone.
- 💶 The European Central Bank continues to face the challenge of persistently high inflation and has implemented nine consecutive interest rate hikes since July 2020.
- ⚖️ The Czech Republic has also maintained a similar strategy, keeping its base interest rate at 7% in an attempt to curb inflation and attract foreign investors.
### Summary
European stock markets edged higher, supported by a drop in German producer prices and a smaller-than-expected rate cut from China. German producer prices fell significantly in July, indicating a retreat in inflationary pressures. The European Central Bank is considering a pause in its hiking cycle, which could help alleviate economic difficulties in Germany. In China, the rate cut announced by the People's Bank of China was seen as underwhelming, as analysts had expected a larger cut. The U.K. housing market also slumped, with the fastest decline in August since 2018. Oil prices rebounded, supported by the Chinese rate cut and expectations of lower output from top producers in August.
### Facts
- 📉 German producer prices dropped 1.1% in July and fell 6.0% annually, indicating a retreat in inflationary pressures.
- 🇩🇪 Economic difficulties in Germany are affecting the eurozone's growth and may lead to a recession.
- 🏦 ECB President's speech at Jackson Hole will provide clues on the central bank's next move in September.
- 🇨🇳 The People's Bank of China announced a smaller-than-expected rate cut, disappointing analysts.
- 🏘️ The U.K. housing market experienced its fastest decline in August since 2018.
- 🛢️ Oil prices rose due to the Chinese rate cut and expectations of lower output from top producers.
### Summary
German producer prices in July saw their first year-on-year decline in over two-and-a-half years, falling 6.0%, due to easing energy price pressures, signaling a potential abatement of inflation in Europe's largest economy.
### Facts
- 📉 German producer prices declined by 6.0% in July compared to the same month last year.
- ⚡ Energy prices sank 19.3% in July on a yearly basis, with electricity prices falling by 30.0%.
- ❌ Excluding energy prices, producer prices in July rose 2.0% compared to the previous year.
- 📉 On a monthly basis, producer prices decreased by 1.1% in July.
- 🔍 Germany's producer price index, a key indicator for inflation, fell to 6.5% in July.
### Summary
Real wages in most European countries have fallen due to record-high inflation, with nominal wage growth being eroded.
### Facts
- :chart_with_downwards_trend: Real hourly wages decreased in 22 out of 24 European countries between Q1 2022 and Q1 2023, primarily due to inflation exceeding nominal wage growth.
- :chart_with_upwards_trend: Belgium and the Netherlands were the only countries where real hourly wages increased during this period.
- :chart_with_downwards_trend: France, the UK, and Germany also experienced a decline in real hourly wages.
- :money_with_wings: Nominal hourly wages increased in all 24 countries, but the inflation rate was higher, causing real wages to decrease.
- :moneybag: Real wages in Europe have fallen below pre-pandemic levels in most countries, despite recent nominal wage growth.
- :chart_with_downwards_trend: Cumulative change in real hourly wages between Q4 2019 and Q4 2022 ranged from -9.6% in Estonia to 7.1% in Lithuania, with 18 out of 25 countries experiencing a decline.
- :briefcase: Workers in low-paying industries fared relatively better, with real wages performing better than in high-paying industries in many European countries.
(Note: Some bullet points have been omitted for brevity.)
Real wages have fallen in most European countries as record-high inflation has eroded the nominal wage growth, with Hungary experiencing the largest decline of 15.6 percent, while Belgium and the Netherlands saw small increases.
The euro fell to a two-month low against the dollar and a 12-month low against the pound after German and eurozone business activity slumped more than expected in August, leading to concerns about the state of the European economy and potential pauses in tightening measures by the European Central Bank, while the dollar rose to a two-month peak amid positive U.S. economic data.
Euro zone business activity declined more than expected in August, particularly in Germany, while some inflationary pressures returned, posing a challenge for the European Central Bank's efforts to control inflation without causing a recession.
Germany's business activity has seen a sharp decline, leading to concerns of a recession, as the country's Purchasing Managers' Index (PMI) dipped to its lowest level in over three years. This decline in activity is impacting the wider eurozone economy as well, with the region at risk of slipping into recession. This economic downturn is accompanied by a worrying uptick in inflation and slow growth, particularly in Germany.
Germany, once known as the "sick man of Europe," is facing a new economic downturn characterized by sticky inflation, falling output, and structural issues such as an aging population and high corporate tax rate, prompting concerns of a prolonged recession; however, the country's strong employment levels, record public finances, and adaptability through its Mittelstand of small and medium-sized businesses provide hope for recovery.
The Swedish economy is expected to experience a downturn over the next two years, with GDP forecasted to shrink in 2023 and 2024 due to low domestic demand and a slowdown in export growth, making it one of the worst-performing economies in the EU; however, there is uncertainty and the possibility of a milder downturn depending on the resilience of the economy. Furthermore, the Swedish krona is expected to continue weakening until mid-2024, and household incomes are projected to fall until 2025, but households are strengthening their financial positions and reducing debt.
The German economy stagnated in the second quarter of 2023, following a winter recession, with zero growth and a contraction in adjusted GDP, according to data from the statistics office.
The contraction in euro area business activity has intensified, particularly in Germany, leading to expectations that the European Central Bank will pause its interest-rate hike campaign; US mortgage applications for home purchases have hit a three-decade low due to rising borrowing costs; South Korea's exports continue to decline, indicating lackluster global trade; Turkey's interest-rate increase has triggered a rally in the country's assets; shrinking water levels at the Panama Canal due to climate change may cause delays in restocking inventories before Christmas.
The US economy is expected to slow in the coming months due to the Federal Reserve's efforts to combat inflation, which could lead to softer consumer spending and a decrease in stock market returns. Additionally, the resumption of student loan payments in October and the American consumer's credit card addiction pose further uncertainties for the economy. Meanwhile, Germany's economy is facing a contraction and a prolonged recession, which is a stark contrast to its past economic outperformance.
German inflation beats forecasts, complicating the ECB's task, while US labor data eases and GDP is revised lower, causing the dollar to weaken and the euro to strengthen.
The outlook for the euro area remains uncertain as economic activity has slowed and indicators suggest weakness ahead, but the labor market remains resilient; a restrictive monetary policy is critical for bringing inflation back to the 2% target in a timely manner, and a data-dependent and robust approach to monetary policy is warranted due to the high level of uncertainty.
Germany's economic model and banks are struggling, with forecasts showing low growth and poor profitability, highlighting issues such as politicized governance, diminished private sector, and outdated funding methods.
Germany, once hailed as Europe's economic powerhouse, is now facing structural problems and could be on the verge of decline, according to experts, with factors such as stagnant GDP, high inflation, an aging population, overdependence on exports, and underinvestment contributing to its current predicament.
Despite weakening economic growth, the unemployment rate remains low, which is puzzling economists and could lead to a "full-employment stagnation" scenario with a potential recession and low unemployment rates, posing challenges for the Federal Reserve and the overall economy.
Europe's struggle with inflation and economic growth contrasts with the United States, as the European Central Bank's aggressive tightening risks pushing the euro zone into a downturn, with the manufacturing and services sectors already showing signs of contraction.
The US dollar's strength in the foreign exchange market, along with discussions of de-dollarization, highlights the divergence between the US and other major economies. The Dollar Index is on an eight-week rally, reaching a record high in international payments, while the euro's share has declined to a record low. In the week ahead, the US CPI and the ECB meeting are expected to be major events, with the US showing signs of inflation and weaker demand, and the euro facing challenges amid stagnation and inflation. China's CPI and PPI have shown some improvement, but the focus will be on yuan loans and real sector data. The eurozone's focus will be on the possibility of a rate hike by the ECB and the release of July industrial production figures. Japan's household consumption continues to fall, and the country may experience a contraction in Q3. The UK will release employment data and GDP details, while Canada will see data on existing home sales and the CPI. Australia will release its August employment data, and Mexico's peso positions may continue to adjust due to the winding down of the currency forward hedging facility.
Germany is predicted to experience a prolonged recession this year, making it the only major European economy to contract in 2023, according to the European Commission, with its growth expectations also being cut for 2024; this is attributed to struggles following Russia's invasion of Ukraine and the need to end energy dependency on Moscow.
The euro zone's economy is expected to grow slower than previously forecasted due to high inflation and Germany slipping into recession, according to the European Commission.
Germany's economy is expected to contract by 0.4% in 2023 due to higher inflation, rising interest rates, and weaker consumer spending, making it the worst-affected major country in the eurozone, according to the European Commission. The overall eurozone economy is expected to expand by 0.8% in 2023 and 1.3% in 2024, leading to a potential halt in the European Central Bank's tightening of policy. Inflation in the eurozone is projected to average 5.6% in 2023.
The European Commission has lowered its growth outlook for the Eurozone due to Germany's declining economy and the negative effects of energy policies, leading to potential political consequences and a possible economic downturn for the entire EU.
The European Central Bank (ECB) has raised interest rates to a record high of 4% in an attempt to combat rising inflation, but suggests that this increase could be the last for the time being. The ECB expects inflation to fall in the coming years, but acknowledges that higher rates have impacted economic growth projections for the eurozone.
Germany is projected to be the most heavily impacted by the global economic slowdown due to higher interest rates and weaker global trade, according to the Organisation for Economic Co-operation and Development (OECD), with its economy likely to shrink this year alongside Argentina and experience a weaker 2024. The slowdown in China, inflationary pressures, and tightening monetary policy are among the factors affecting Germany's growth. The OECD also warned of persistent inflation pressures in various economies and called for central banks to maintain restrictive interest rates until underlying inflationary pressures subside.
Germany is facing an economic contraction due to challenges in the manufacturing sector, a disappointing China reopening boost, and higher energy costs, leading to a recession in Europe's largest economy. However, there are still some positive aspects, such as opportunities in Germany's small and mid-sized companies.
The annual rate of inflation in the eurozone has been revised down to 5.2% for August, but it remains well above the European Central Bank's 2% objective despite a decrease in consumer prices.
The euro zone economy is expected to contract this quarter and remain in recession as the impact of central banks' interest rate rises hampers growth, according to a survey by HCOB's flash euro zone Composite Purchasing Managers' Index (PMI), with Germany and France experiencing significant declines in business activity.
Germany's economy, once dominant in global markets, has become the worst-performing major developed economy due to the loss of cheap Russian natural gas and other chronic problems, leading to criticism and concerns about de-industrialization and job losses.
Germany, once the beating heart of the European economy, is facing structural challenges and a sense of decline, with forecasts predicting slow growth and contraction in the coming years due to its heavy reliance on manufacturing and struggle to transition to renewable energy and a service-based economy.
The German economy is projected to contract by 0.6% in 2023 due to rising interest rates and high inflation, according to five economic institutes.
The Federal Reserve's forecast for the U.S. economy shows that while inflation and unemployment are close to their goals, economic growth will remain weak, primarily due to low labor productivity.
Deutsche Bank's economists are still predicting a US recession despite the ongoing resilience of the economy, pointing to rapidly rising interest rates, surging inflation, an inverted yield curve, and oil price shocks as the four key triggers that historically have caused recessions and are currently happening.
The sharp decline in inflation in Europe in September raises hopes for relief from high consumer costs, but concerns remain regarding higher oil prices and the ECB's ability to achieve its 2% inflation target.
Europe's economy is facing trouble as interest rates rise and debt servicing costs increase, particularly in the eurozone where the European Central Bank will struggle to provide support due to the constraints of the euro; fiscal deficits and breaches of budget deficit limits persist, with countries like Italy and France openly defying spending cuts, while Germany's reluctance to break from balanced budgets and increase investment spending exacerbates the contracting economy.
Summary: The U.S. stock market had a bad quarter, with all indexes falling, while the World Bank lowered its growth forecast for developing economies in East Asia and the Pacific, and China's demand for commodities continues to grow despite the downgrade. Additionally, a last-minute spending bill was passed to avoid a government shutdown, and this week's focus will be on the labor market.
The euro zone economy likely contracted last quarter due to decreased demand, rising borrowing costs, and higher prices, with retail sales falling more than expected in August, according to a survey by HCOB's final Composite Purchasing Managers' Index (PMI).
The euro area is experiencing stagnated economic activity and weakening growth, leading the European Central Bank (ECB) to adjust its monetary policy by raising interest rates to combat inflation; however, uncertainties remain regarding the transmission of monetary policy and potential risks to economic growth.
The dollar weakened and global equities dipped as investors grappled with U.S. unemployment data suggesting a tight labor market and the Federal Reserve's commitment to higher interest rates, while European stocks rebounded from losses.
Germany is projected to experience a deeper recession than previously forecasted, with its economy expected to contract by 0.5% this year due to inflation, manufacturing decline, weakness in interest-rate-sensitive sectors, and slower trading-partner demand, according to the International Monetary Fund (IMF).
