If the succession of macroeconomic numbers in the United States tends to confirm that the inflationary peak is finally behind us (inflationary peak reached in June) and that the noose is slowly beginning to loosen, the road will nevertheless be long. Indeed, the US economy is still showing some signs of resilience, which is fertile ground for monetary tightening by the Fed (founded on continuing to believe in a “not too hard” landing in the short term).
As such, the ISM manufacturing index, for example, remained stable in August at 52.8, i.e. largely in an expansion phase when it was expected to fall, with sub-components also well oriented. New orders are rebounding while supplier delivery times are falling, companies are now having less difficulty recruiting and inflationary pressures (prices paid) are falling sharply (the ISM Prices Paid thus goes from 60 to 52.5). But across the Atlantic, it was the employment figures that were particularly expected last week. Although the labor market is showing some signs of easing, it is still not very compatible with an economy technically in recession in the first half. Although the job market is a lagging indicator, it still raises questions! In detail, while the pace of job creation continues to slow, it is still above its pre-covid average and no sector is showing job destruction. The unemployment rate increased by 0.2% to reach 3.7%, but the drop is explained more by the rise in the participation rate than by a real deterioration in market conditions. The pressure on wages is still present but less than in previous months. These figures, broadly in line with expectations, therefore reflect an image of a job market that is still just as solid, but with nevertheless a drop in tensions. Not enough to change the course of the Fed, which should once again increase its rates by 75 bps in two weeks.
Although the financial markets reacted very well to the publication of this employment report, proof that investors are waiting with their fingers on the trigger for the signs to come of a change in direction by central banks, they were very quickly caught up by the geopolitical news and Putin's new warning shot. In response to the desire of the G7 members to establish a maximum price on oil, Russia has indeed announced the closure of the Nord Stream 1 gas pipeline for an indefinite period. The “stop and go” on deliveries should therefore continue, Russia not being able to completely do without the European financial windfall either. Unlike in the United States, inflation is therefore not about to stall. After a further rise in August (9.1% after 8.9%; see the graph of the week), inflation is heading towards the "double digit", which should prompt the ECB to hit hard on Thursday during its monetary policy meeting, which will be followed on Friday by the emergency meeting of EU energy ministers. It should be noted that while the ECB is desperately seeking to withdraw liquidity to fight against inflation, the European States are, for their part, forced to put in place support plans to avoid too sudden a shock, which reduce the effect of restrictive monetary policies. From there to say that we have entered a vicious circle, there is only one step...
