Last Week In Markets: Aug 8 - Aug 12 2022

In the US, July core consumer prices (excluding food and energy) rose 5.9% y/y and 0.3% m/m—both lower than anticipated. The July headline inflation rate, which includes food and energy, decelerated from June’s 9.1% y/y to 8.5% y/y and was flat month-over-month. Media coverage pointed to falling gasoline prices and recent Fed moves as the cause of the deceleration, but we think an underappreciated explanation is the “base effect.” The inflation rate, as a year-over-year calculation, measures the percentage change between prices in one month and that same month a year prior. The “base” is that year-ago price level, which is the denominator in the calculation. A higher denominator can result in a slower current inflation rate by comparison, which is what happened in July. In our view, July’s results show that even with volatility from month to month, the base effect can still stabilize the headline rate enough to help sentiment improve and likely continues to have a balancing effect from here. For more, please see our 8/10/2022 commentary, “An Overlooked Reason Behind Julys Slowing Inflation.”

In the eurozone, June industrial production increased 2.4% y/y and 0.7% m/m, more than expected. In the UK, the first estimate of Q2 2022 GDP showed a 0.1% q/q contraction, less than forecast. For more, please see our 8/12/2022 article, “The Puzzle in UK GDP.” Preliminary Q2 2022 imports fell 1.5% q/q, while exports rose 2.4% q/q, both missing consensus estimates. June industrial production rose 2.4% y/y but fell 0.9% m/m, with both figures beating expectations. June manufacturing production rose 1.3% y/y, in line with expectations, but fell 1.6% m/m.

In Japan, preliminary July money supply (M2) increased 3.4% y/y, more than forecast. In China, July money supply (M2) rose 12.0% y/y, higher than expected. July exports increased 18.0% y/y, exceeding expectations, while July imports rose 2.3% y/y, missing consensus estimates.

The Week Ahead

The US releases July industrial and manufacturing production data. The US, UK, Japan and China report retail sales. The UK, eurozone and Japan report July inflation data. Japan and the eurozone release first and second estimates of Q2 2022 GDP, respectively. Japan reports preliminary July trade data and June industrial production.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.