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MNI European Morning Briefing

MNI (London)
     LONDON (MNI) - It is a busy day on both sides of the Atlantic Tuesday, with
German GDP numbers and UK inflation data likely to be the key stand outs in the
morning session.
     The European calendar gets underway early, with the publication of the
German GDP data at 0600GMT. At 0815GMT, Bundesbank Board member Andreas Dombret
speaks at the African Association of Central Bankers, in Pretoria, South Africa.
     The UK data will cross the wire at 0830GMT and includes the July consumer
and producer inflation data and the June house price data.
     Despite slowing in June, the general consensus is that the upward march of
UK inflation still has some legs and CPI could even reach 3.0% before the close
of the year. July could have seen its upward march resume.
     Falling to 2.6% in June from 2.9% in May, CPI inflation recorded its first
decline in eight months, courtesy of a drop in motor fuel prices and selected
recreational goods and services.
     Like June, motor fuel prices look set to weigh on the inflation numbers
again in July along with clothing and footwear items which traditionally are on
promotion during the summer months.
     Upward pressure will be exerted from rising utility prices, off the back of
a 7.2% price hike from energy supplier EDF Energy.
     Despite talk of CPI potentially hitting 3.0% before the end of the year it
appears the rise in prices may have to wait until the August data is published.
Of the eight analysts polled to date, five see CPI holding firm at 2.6% with the
other two seeing inflation edge up to 2.7% and 2.8%, respectively. Likewise, RPI
inflation is expected to have moved sideways, unchanged at 3.5% y/y in July.
     Input price inflation is seen to have weakened in July, falling from 9.9%
y/y to the MNI median of 6.6% y/y. Factory gate prices are also though to have
moderated though by not as much. Output price inflation is expected to have
slowed by 0.1pp to 3.2% y/y.
     Across the Atlantic, the main US releases are expected from 1230GMT, with
the release of the July retail sales numbers, the import/export price data and
the Empire State index.
     Retail sales are forecast to rise 0.3% in July after a 0.2% decline in
June. Seasonally adjusted industry motor vehicle sales rose modestly in July,
while AAA reported that gasoline prices pulled back further in mid-July compared
with one month earlier. Retail sales are expected to rise 0.3% excluding motor
vehicles after June's 0.2% decline and analysts see a strong reading for the
control group after recent soft gains.
     The Empire State index is expected to rise to a reading of 11.0 in August
after dipping to 9.8 in July.
     The latest Redbook Retail Sales Index is expected at 1255GMT, with the
Canadian CREA Home Sales due at 1300GMT.
     At 1400GMT, the US June business inventories and the NAHB home builder data
will cross the wires.
     Business inventories are expected to rise 0.5% in June. Factory inventories
were already reported as up 0.2% in the month, while wholesale inventories rose
0.7% and the advance report pointed to a 0.6% rise for retail inventories. Taken
together, an MNI calculation looks for a 0.5% increase for business inventories.
As for sales, factory shipments were down 0.2% and wholesale sales rose 0.7%,
while retail trade sales fell 0.1% in the advance retail sales report. An MNI
calculation looks for a 0.2% increase in business sales, barring a large
revision to the retail trade sales number.
     Late US data sees the TICS numbers released at 2000GMT.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com