EZ – Consumer Confidence fell slightly to -8.5 in August

EZ – moderate increase of inflation in August expected

EZ – PMI slightly lower in August (by 0.2 points)

EZ – Consumer Confidence fell slightly to -8.5 in August

Emerging Markets – industry PMI data for August due next week

EA - moderate increase of inflation in August expected

Next week, the flash estimates for the inflation rate of the Eurozone for August will be published. Our and market expectations are at +0.4% y/y (previously: +0.2% y/y). The main reason for the increase is the oil price. The annual rate of change in oil prices in the monthly average is expected to be for the first time since mid-2014 in the range of +/-0%. Thus, the energy component of inflation, and consequently headline inflation, should improve. For core inflation, no significant change is expected. It is still anticipated that core inflation is just below 1% (0.9-1% in August).

Assuming that the oil price and the Euro Area economy continue to stabilize, we expect an increase in inflation by the end of this year to 1.3-1.4% y/y. Core inflation, which reacts a little more slowly and therefore does not respond to the same extent as headline inflation (because energy and food prices affect headline inflation only with second-round effects), should stabilize by the end of the year at 1%.

EZ - PMI slightly lower in August (by 0.2 points)

The industry PMI for August published this week slightly decreased for the Eurozone, by 0.2 points to 51.8 points. In Germany, we observed a slight cooling from 53.8 points in July to 53.6 points in August. Positively, the purchasing manager indices in France increased by 0.2 points to 50 points in August. The PMI for Italy is to be published next week (02/09). Given the tense situation in the Italian banking sector, we expect the PMI to cool a bit further.

EZ - Consumer confidence fell slightly to -8.5 in August

The flash estimate of consumer confidence was published this week, slightly decreasing in August, in the context of the Brexit vote, from -7.9 in July to -8.5. Together with the relatively stable PMI data, consumer confidence indicates a neutral picture for the expected indicator of economic development (ESI), which is afflicted by slight downside risks, due to the Brexit vote. Given the above-mentioned indicators, we expect that the ESI, an important leading indicator of GDP growth in the Eurozone, will remain stable at the current level of about 104 points.

In general, leading indicators thus far point to a stable growth pace for the Eurozone in 3Q16, despite the Brexit vote.

Emerging Markets: Industry PMI data for August due next week

Next week (September 1), Industry PMI data for August for major Emerging Markets (China, India, Brazil and Russia) will be released. In July, the business climate improved markedly in Brazil, while it remained stable in the other countries.

Based on the GDP dynamics, main Emerging Market countries (China, India, Brazil, Russia and Mexico) seem to have bottomed out in 4Q15. As of 1Q16, growth started to accelerate and the EM leading indicator from the IIF currently indicates further growth acceleration for 3Q16. Despite the ongoing recovery, Emerging Market countries are still struggling with different kinds of structural issues that, in our opinion, are dampening the future growth prospects. For example, China still has not solved its debt issues, while Brazil remains politically unstable after the impeachment of President Rousseff. Short-term, however, the recovery is of course positive and should also give Eurozone exports positive impulses during the coming quarters.

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