General

During this period, the monetary policies of developed economies such as Europe and the United States continued to tighten, and expectations for interest rate hikes were also rising. A number of data last week showed that the high inflation pressure faced by Europe and the United States has not been significantly eased by raising interest rates, and inflation is gradually increasing the restraint on consumer demand.

Import and export data show that Germany's consumer price index (CPI) rose by 7.9% year-on-year in August, hitting a historical high again after a two-month short-term correction; Sweden's inflation rate reached 9% in August, refreshing the record of 1991 again. The highest since December; the UK CPI rose 9.9% year-on-year in August, a slight decline from the previous month, but still at a high level in 40 years.

Some analysts pointed out that due to the continuous impact of the Ukraine crisis, rising energy and food prices have become the main reason for the current high inflation in Europe. The high inflation has caused the living cost of European people to rise rapidly, and the real purchasing power has declined, which in turn has curbed consumer demand. Take the United Kingdom as an example. From April to July this year, the inflation level in the United Kingdom continued to hit a new high in 40 years. In July, the CPI growth rate was the first among the G7 countries to break through double digits, reaching 10.1%. Soaring prices and high energy costs are hard for UK consumers to digest, and there is little they can do but reduce consumption. On September 16, the UK Office for National Statistics import and export data showed that UK retail sales in August fell by 1.6% month-on-month and 5.4% year-on-year, the largest decline since December 2021. Retail sales in all major industries, including food, non-food and fuel, fell in August. Under the pressure of inflation, the cautious attitude of the British people towards consumption is evident. From the perspective of the situation in the euro area, the final value of the consumer confidence index in August was -24.9, a slight rebound from the previous month, but still close to a historical low.

Huacheng Import and Export Data Observation reported that compared with Europe, the situation in the United States is more complicated. After the outbreak of the new crown pneumonia epidemic, the United States launched an ultra-loose policy in an attempt to boost demand and drive recovery. However, due to its domestic supply side problems, it pushed up demand while supply could not keep up, until it caused inflation to run out of control. Therefore, unlike the European rate hike to deal with imported inflation, the US rate hike has the consideration of actively pulling down demand to curb inflation. However, as interest rates continue to rise, U.S. inflation remains high in the ups and downs, which makes U.S. interest rate hikes to curb demand gradually slip to the other extreme.

The U.S. Department of Labor’s import and export data showed that the U.S. CPI rose 8.3% year-on-year in August, although it was down from 8.5% in the previous month, but higher than the 8.1% that was widely expected by the market. Not only that, the US core CPI excluding energy and food in August increased by 6.3% year-on-year, higher than the market expectation of 6.1%, and higher than the previous value of 5.9%; the month-on-month increase of 0.6%, higher than the previous value of 0.3%. Some institutions believe that the core CPI data is still rising strongly, "this is the most disturbing". The outlook for U.S. domestic consumer demand is uncertain as inflation remains high. On September 16, the University of Michigan released a consumer confidence index of 59.5 in September, lower than the expected 60.0. Reports suggest that U.S. purchases of durable goods such as cars and appliances remain near record lows, and consumers have not become more optimistic about their financial prospects, with about 42 percent still believing high prices are eroding their living standards.

At present, U.S. inflation has not shown a clear turn, and the increase in interest rates has gradually increased the restraint on demand, which has also led to more economic costs to curb inflation, and even raised concerns about a substantive recession. According to the observation of import and export data, on September 16, Goldman Sachs lowered its economic growth forecast for the United States in 2023 from 1.5% to 1.1%, and its forecast for the unemployment rate at the end of 2023 and the end of 2024 was also raised from 3.8% and 4% to 4.1%. % and 4.2%. While downgrading its growth forecast, Goldman Sachs still said the U.S. recession would be "mild" and U.S. authorities tried to instill confidence in the market that a "soft landing" could be achieved. However, the US authorities have to raise interest rates to reduce inflation, keep the unemployment rate from becoming too high, and ensure that the economy does not tighten too much and fall into recession. Such a "tightrope walk" is really daunting.