A report issued by the National Bank of Kuwait said that the increase in job vacancies in the United States highlighted the extent of the tightening of the labor market conditions, as the vacancy index rose unexpectedly to 11.24 million in July, compared to 11.04 million in June.
Employers added jobs at a strong but more moderate pace in August, while wage growth slowed marginally. Nonfarm payrolls rose by 315,000 jobs last month, and average hourly earnings rose 0.3% in August from 0.5% in July.
The unemployment rate unexpectedly rose to 3.7%, compared to 3.5% last month, with the labor force participation rate rising, which reached 62.4%, to record the highest level since the beginning of the pandemic in 2020.
On the other hand, the Conference Board Consumer Confidence Index rose to its highest level recorded in three months during August to reach 103.2 points, which reflects the strength of plans to purchase electrical appliances and cars.
Manufacturing activity was also better than expected during August thanks to lower US gasoline prices and higher orders. The US Institute of Resources Management’s manufacturing purchasing managers’ index came to 52.8 in August, unchanged from July’s levels, but it was better than expectations of 51.9.
The sudden improvement of the latest indicators indicates that despite the rise in interest rates, the demand for employment rates and consumer demand is still strong, which increases the risks of continuing inflationary pressures.
In light of the importance of reining in prices, which have reached their highest levels in 40 years and their emergence as one of the core priorities that Federal Reserve officials are addressing, the pace of tightening monetary policies may continue and raise interest rates by 75 basis points, as the latest wave of data showed the resilience of consumer confidence and rising labor demand.
The Fed’s hopes for a “soft landing” depend on a rare phenomenon, which is that rising unemployment is not driven by workers losing their jobs, but rather because more unemployed people are looking for vacancies.
European inflation flares up
Energy and food prices continue to fuel inflation in the euro zone, with prices accelerating in the 19-country region, reaching an all-time high in August of 9.1% compared to last year.
Excluding food and energy, core inflation rose to a new record high of 4.3%, highlighting price pressures that have become widespread.
In the region, German inflation accelerated to its highest level in 40 years, reaching 8.8% in August compared to 7.5% in July, and the Swiss inflation rate rose in August, reaching its highest level in 30 years at 3.5% compared to 3.4 % in July.
Although the pace of price increases in Spain and France slowed marginally in August, it is still at high levels and is still linked to higher energy prices.
On the other hand, the Spanish inflation rate declined for the first time in four months, reaching 10.4% compared to last year’s levels, compared to 10.8% in July, and the French inflation rate rose to 6.5% compared to last year’s levels, compared to 6.8% in July.
the bell of danger
With overall inflation more than quadrupling the 2% target, and indications that price hikes will extend to more than just food and energy, a weaker euro is exacerbating the problem by increasing the cost of imports.
The European Central Bank is expected to raise interest rates once more by at least 50 basis points this week following several officials expressed their concerns following recent data, which emphasized the need for strong measures. Germany’s central bank, Joachim Nagel, said that the need to raise interest rates has become clear, but it remains to be determined how high they will be.
Board member Martins Kazak is pushing for a rate hike of at least 50 basis points and has joined the vote for a 75 basis point hike. Board members Robert Holzmann and Klaas Knott agreed that at least that step should be considered.
The Swiss National Bank is also set to discuss another rate hike at its policy meeting later this month following it already raised it by 50 basis points in June.
China’s economy is slowing down
The dangerous combination of unwavering commitment to “zero-Covid” policies, regional shutdowns, energy shortages, and the ongoing real estate crisis across the country has negatively affected consumer and business spending and slowed the economic recovery in China, as factory activity remained in contraction for the second month in a row. in August.
Despite the good performance of the official manufacturing PMI, which measures the performance of major government companies, which rose to 49.4 from 49.0 in July, the reading is still in contraction territory. The decline in China’s Caixin Manufacturing PMI, which tracks small, private and export-oriented companies, continued its contraction path to 49.5 in August, adding to indications that the manufacturing sector’s recovery is losing momentum.
The official non-manufacturing index also fell to 52.6 from 53.8 in July. The Caixin Services PMI will be released next week.
smash demand
With consumer budgets increasingly tightened and economies around the world growing at a slower pace, the pace of rise in commodity prices has slowed.
The fundamentals of the oil market from east to west are still uncertain in light of weak data from China, an energy crisis in Europe, the US Federal Reserve tightening its monetary policies and the strength of the dollar.
Oil prices fell somewhat ahead of the meeting of OPEC and its allies next week, during which planning for production policy and talks on the continuation of Iranian nuclear discussions are scheduled, but despite this, oil ended the week’s trading below $100 a barrel.
Gold prices fell following Federal Reserve Chairman Jerome Powell dashed any hopes that the US Federal Reserve would start easing its monetary policies soon, and instead indicated to continue raising interest rates and insisting that they remain high to curb inflation.
The strong performance of the dollar also contributed to a negative impact on gold, which ended the week’s trading at 1712.19 dollars an ounce.
On the other hand, the recent decline in the prices of many basic commodities as a result of the weak pace of demand would contribute to lowering prices across the global economy.
This is in addition to consumers shifting away from the unusual shopping habits that emerged during the lockdown measures during which more was spent on goods and shifted to services.
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