European stock markets are narrowly mixed in quiet trade, following on from subdued trading in Asia overnight, where the Hang Seng closed up a modest 0.27% and the Nikkei managed a 0.05% gain, while the ASX 200 was down -0.08% at the close. Trading volumes were lower than usual and while investors seem to have shrugged off Trump’s attack on North Korea in his first address to the United Nations, they are clearly holding back ahead of the Fed announcement today. The DAX is slightly up the FTSE 100 is slightly down with the latter’s underperformance underpinned by a stronger pound after stronger than expected retail sales numbers. UI.S. stock futures are narrowly mixed, oil prices are higher on the day.
UK August retail sales beat expectations, rising 1.0% month over month and by 2.8% on the year-on-year comparison. The respective median forecasts had been for much more modest growth rates of 0.2% month over month and 1.3% year over year. July data were also revised higher, to 0.7% month over month, from 0.5%, and to 1.7% year over year, from 1.5% year over year. Good news as the consumer sector is the dominant driver in the UK economy, and with BoE having said that it is keeping a close eye on how households respond to developments related to the process of withdrawing from the EU.
The BoE Agent Report Shows Slowing Growth
Despite a robust retail sales report, the BoE agents report is a survey of anecdotal activity across the economy, comparing activity and prices from a year earlier. Today’s release covers the period from May to August of this year and found that demand growth in several consumer-facing sectors had slowed and that investment intentions had weakened with the dominant services sector, though were more position for goods exporters. It also noted that while growth in labor costs had been subdued, recruitment difficulties remained elevated, with conditions becoming “very tight” for some skills, which is something that the BoE’s hawkish-leaning statement of last week highlighted.
European institutes see steady growth ahead. The joint forecast by Ifo, which is in Germany, Istat, in Italy and the KOF, in Switzerland for the Eurozone going ahead project growth of 0.6% quarter over quarter in Q3 and Q4 this year, followed by a marginal slowdown in the quarterly growth rate to 0.5% in the first quarter of 2018. Annual growth rates are seen steady at 2.4% throughout the forecast period. Inflation is expected to average 1.5% but fall back to 1.1% in Q1 next year, which will give the doves at the ECB something to argue with.