17 August 2022
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German ZEW surveys deteriorate in August

By Daniel Richards

  • Germany’s ZEW surveys saw a further deterioration in August, with both components coming in lower than the previous month. The expectations measure fell to -55.3, down from -53.8 in July and confounding the consensus projection that the index would tick up modestly to -52.7. The current situation also fell, from -45.8 in July to -47.6, although this was marginally better than the consensus estimate of -49.0. With persistent high energy prices set to continue impacting both consumers and businesses through the second half of the year, the German economy will come under concerted pressure and will struggle to expand.
  • Canada’s CPI inflation print came in at 0.1% m/m and 7.6% y/y in July, both in line with analyst expectations. These compared to 0.7% and 8.1% the previous month as lower gasoline prices in particular cooled some of the upwards pressures seen in recent months. Nevertheless, with headline CPI still at multi decade highs, and core inflation still ticking upwards – it came in at 5.3%, up from 5.2% in June – the central bank will likely still hike rates once more at its September 7 MPC meeting, with a 75bps hike the probable action.
  • US industrial production rose 0.6% m/m in July, compared to a -0.2% contraction in June and exceeding expectations for 0.3% growth. The expansion was driven by a 0.7% increase in factory output, the first gain in three months, which was itself underpinned by a 6.6% increase in automotive production, suggesting that some of the supply chain issues around chips that have held back the industry over the past two years are starting to ease.
  • The RBNZ hiked its benchmark cash rate by 50bps to a seven-year high 3.00% this morning, as had been widely anticipated. This was the fourth straight half-point hike by the central bank and there are more to come as the MPC ‘agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment.’

Today’s Key Economic Data and Events

  • 10:00 UK CPI inflation, % y/y, July. Forecast: 9.8%
  • 13:00 Eurozone GDP, % q/q, Q2. Forecast: 0.7%
  • 16:30 US retail sales, % m/m, July. Forecast: 0.1%

Fixed Income

  • Yields on USTs picked up once more yesterday as some of the recession fears at the start of the week seemingly eased. The 10y added 2bps to 2.8041%, while yields on the 2y added 8bps to 3.2574%.
  • Yields on New Zealand’s 10y have gained 5bps to 3.440% this morning in the wake of the RBNZ decision, following a 10bps drop recorded on Tuesday.


  • The US dollar closed broadly flat against its basket of currencies yesterday, closing down just -0.04% at 106.50. EUR gained 0.1% to 1.0171 while GBP added 0.3% to 1.2096. Both currencies remain low by historic standards.
  • The NZD lost further ground yesterday as the weak Chinese data weighed on commodity currencies, dropping -0.3% against the greenback to 0.6346. It is strengthening this morning on the back of the RBNZ decision, however, currently trading up 0.2%.


  • Global equity markets saw mostly gains yesterday despite mounting concerns around economic growth. In the US, the S&P 500 (0.2%) and the Dow Jones (0.7%) both gained, but the NASDAQ slipped -0.2%. In Europe, the CAC, the FTSE 100 and the DAX added 0.3%, 0.4% and 0.7% respectively.
  • Locally, the DFM gained 0.5% but the ADX dropped -0.2%. The Tadawul closed flat.


  • Oil prices lost more ground yesterday as concerns around global economic growth from China to Germany weighed on demand projections, while the prospect of Iranian crude returning to market remained in play.
  • Brent futures dropped -2.9% to close at USD 92.34/b while WTI fell -3.2% to USD 86.68/b. Both benchmarks are trading up modestly so far this morning but remain new six-month lows.

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Written By

Daniel Richards Senior Economist

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