Investment Institute
Weekly Market Update

Take Two: Core Eurozone inflation eases; US Q2 economic growth revised down

  • 04 September 2023 (3 min read)

What do you need to know?

Eurozone inflation remained unchanged at 5.3% year-on-year in August, according to a flash estimate. Eurostat, the statistical office of the European Union said the main components of price rises over the month were thought to be food, alcohol, and tobacco – with an annual rate of 9.8% compared to 10.8% in July. However, core inflation, which excludes volatile food and energy prices, eased to 5.3% from 5.5% a month earlier. While the decline should be welcomed by the European Central Bank, the bloc’s labour market remains tight, adding to the uncertainty over whether policymakers will raise interest rates again when they meet next week.

Around the world

US second quarter (Q2) GDP growth has been revised down to 2.1%, after an initial estimate of 2.4%. Following 2.0% expansion in Q1, an official report showed growth over the period was driven by consumer spending and outlays by state and local governments. The revision may well be welcomed by Federal Reserve (Fed) officials, as the report also highlighted that inflation had eased somewhat over the three-month period, potentially taking pressure off the Fed to further raise rates. At the recent Jackson Hole Symposium, Fed Chair Jerome Powell maintained a potentially higher for longer stance on interest rates in a bid to continue to bring inflation closer to the Fed’s 2% target.

Figure in focus: 25 years

Japan’s government struck an optimistic tone last week suggesting the country’s 25-year battle with deflation may be at an ‘inflection point’. In its annual economic white paper, it noted the country had seen broadening price and wage rises, noting that such changes suggest the economy is “reaching a turning point”. It added: "We should not dismiss the fact a window of opportunity may be opening to exit deflation.” Notably, the Bank of Japan has also been more upbeat and has indicated the paring back of the nation’s significant fiscal and monetary support may come with evolving corporate price and wage-setting behaviour.

Words of wisdom

Flexible batteries: Malleable power sources which can be bent and twisted to suit their need, such as for wearable devices. These rechargeable batteries, which can have enhanced flexibility and conductivity, are based on lithium-ion or zinc-carbon systems. The market for these flexible batteries is expected to grow rapidly over the coming years with the primary driver of growth expected to be increasing demand for the miniaturisation of electronics and wearable devices. One analysis has estimated that global flexible battery market will grow by US$240m between 2022 and 2027.1

What’s coming up

Australia’s central bank meets to set interest rates on Tuesday, when final composite Purchasing Manager Indices are also reported for Japan, the Eurozone and the UK. On Wednesday the Bank of Canada holds its own monetary policy meeting while Australia posts its Q2 GDP growth rate – it expanded 2.30% year on year in Q1. Thursday sees a third estimate of Eurozone Q2 GDP growth published, while Japan follows with its own final Q2 GDP growth numbers on Friday.

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    Disclaimer

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.