US PPI up 1.2% in July. The PPI jumped sharply in July, reflecting the tail end of the commodity price boom but also unexpected strength in core factory price pressures, as well as core input and intermediate prices. The surprise was the 0.7% jump in the core measure. It reflected a 1.4% jump in auto prices charged to dealers, and 0.8% for light trucks (which might help explain why auto sales are slumping); a 0.1% rise in clothing prices (still down in annual terms but the weaker US$ and transport costs might be impacting here); and a way above trend 0.8% increase in capital equipment prices (which make up nearly 40% of the core rate). Even though the headline PPI will be falling sharply from next month, if these core pressures persist, recent above trend rises in the core CPI might persist too, and that will be of particular concern to many at the Fed.
On that point, the Fed's most hawkish regional president, Richard Fisher from Dallas, said that 'the recent burst of cost-push inflation is giving the beast digestion problems that might manifest themselves in the form of a lingering inflationary fever'.
German ZEW improves from -63.9 to -55.5 in August. The ZEW expectations survey of 320 or so German analysts and economists posted a partial bounceback in August which we suspect reflects the recent depreciation of the euro, the less hawkish ECB, lower oil prices and the gains on the stockmarket over the past month. But the current measures continued to tumble, consistent with the fall in GBP growth we saw in Q2 and may well see repeated in Q3.
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