U.S. and European Economies

■ European Economy ? Growing characteristics of stagflation

 New home sales (annualized 685,000 units, up 28.8% month-over-month) rose sharply in August for the first time in three months, while the increase in the number of sales led to a five-month low in sales inventory (8.1 months). The sales price (median, $436,800) was down from last month's record high, but still at a high level.

 Personal Consumption Expenditures (PCE, +0.4% MoM) increased for the first time in two months in August. Consumption of goods (-0.5% YoY) fell for the second consecutive month, while consumption of services (+0.8% YoY) rose sharply. Growth in the core PCE deflator (4.9% y/y, 0.6% m/m) accelerated again, indicating that underlying inflationary pressures remain strong.

 Consumer confidence (108.0 in September, up 4.4 points month-over-month) increased for the second consecutive month, reaching its highest level in five months. The current situation and outlook have improved due to the employment situation, rising wages and lower gasoline prices. The publication expects inflation to slow further in September, and the analysis suggests that the risk of recession remains based on the fact that gasoline prices have fallen to their lowest level since the beginning of the year and the low expectations index.

 The Eurozone Consumer Price Index (HICP, preliminary, 10.0% YoY) accelerated for the fourth consecutive month in September and remained at its highest level since statistics became available. The core HICP, which excludes energy, food, alcohol and tobacco, also continued to accelerate (up 4.8% year-over-year), confirming that prices in the industrial and other sectors are rising rapidly.

 In September, the Eurozone Business and Consumer Survey showed that business confidence (93.7, down 3.6 points month-on-month) fell for the seventh consecutive month, reaching its lowest level since November 2020. The Business Conditions Index declined in all sectors, including manufacturing (-0.4) and services (4.9), while consumer confidence (confirmed, -28.8) reached an all-time low. This suggests that the eurozone economy is deteriorating rapidly.

 The German (Germany) Ifo business confidence index (84.3, down 4.3 points month-over-month) fell sharply in September to its lowest level since May 2020. The breakdown shows a significant decline in both current conditions and expectations, indicating that the slowdown has intensified further since September.