US inflationary pressures slowly softening

ISM prices paid component falls again

Chart of the Day

The ISM manufacturing survey was out yesterday, and the prices paid component fell by more than economists had predicted. It suggests the peak is in for US inflation, but isn’t pointing to a substantial decline just yet. Anyhow, the Fed will be much more interested in this Friday’s non-farm payrolls report with regard to when it will feel ready to taper its ongoing asset purchases.

Macro

Ahead of the US non-farm payrolls report, the ADP employment report showed an increase of 374,000. That was much weaker than economists had predicted, and could be a bad sign for Friday.

The headline US ISM manufacturing index was little changed at 59.9 in August.

German retail sales fell sharply by 5.1% MoM in July. The retail sales index is still higher than before Covid hit.

The weekly EIA report showed crude inventories fell by a much larger-than-expected 7.2 mn barrels last week and are now 0.8% lower than their average at this time of year over 2017-19.

Markets

Although crude inventories built, gasoline inventories rose. That contributed to a steep fall in gasoline prices of 7.5%.

Iron prices have been falling sharply on the slowdown fears in China, as well as some curbs on steel output there.

The weaker iron ore price may explain the drop in the Baltic Dry Index this past week, of 4.3%. The China Containerized Freight Index is up by a further 1.0%.

The weakness of growth there is in part due to the tightening of credit - the six-month credit impulse has been negative for some time.

Sell iron, buy ethereum - heading toward a new all-time high?

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