According to the data released by the National Bureau of statistics on May 18, the UK consumer price index (CPI) reached 9% in April, a significant increase from 7% in March, and has reached the fastest growth rate since 1982.
In the eurozone across the English channel, high inflation also puts "great pressure" on the European Central Bank. According to the data previously released by the European Bureau of statistics, the reconciled CPI of the eurozone in April increased by 7.5% year-on-year, the highest level since the statistical record was set in 1997.
Due to the implementation of extreme quantitative easing monetary policy in Europe and the United States in the past two years, and the conflict between Russia and Ukraine this year, European energy prices and international wheat prices have reached an all-time high, coupled with the sluggish global supply chain, the inflation rate in many European countries has been rising, and the European people are also very dissatisfied with the high prices.
According to a McKinsey consulting poll, soaring prices in almost all areas of life have surpassed the conflict between Russia and Ukraine and the covid-19 pneumonia epidemic, becoming the most worrying problem for Germans. The soaring cost of living has forced both high-income and low-income people to cut consumer spending. Moreover, EU economists and analysts believe that prices will continue to rise this year and next.
In the face of record inflation and public discontent, nort, member of the Governing Committee of the European Central Bank and President of the Bank of the Netherlands, said on May 17 that he supported raising interest rates by 25 basis points in July. If the inflation data continues to deteriorate, the European Central Bank may take more radical measures and does not rule out the possibility of raising interest rates by 50 basis points. Especially when the EU and Russia are deadlocked on the issue of energy supply, there is a risk of further acceleration of inflation in the eurozone. On May 17, chairman Powell reiterated that the Fed would fight inflation at all costs.
The consistent stance of the European and American central banks in fighting inflation has greatly increased the probability of the European Central Bank raising interest rates in July, and immediately responded to it. On May 18, European bonds fell and yields soared. Among them, the yield of German two-year Treasury bond hit the highest point of 0.423% since December 2011, and then fell back to 0.394%. On May 17, the German 10-year bond yield rose 10 basis points to 1.04%, and the Italian 10-year bond yield rose 12bp to 2.96%.
The rise in the yields of short-term and long-term treasury bonds means that the price of funds in the market has risen in an all-round way, and the cost of using funds has increased, which has an immediate inhibitory effect on the price of risky assets. In addition to investors' concerns about the economic outlook, the three major European stock markets fell across the board on May 18, with London stock market in the UK falling by 1.07%, Paris Stock Market in France falling by 1.20% and Frankfurt stock market in Germany falling by 1.26%, Among them, consumer stocks are "falling first for respect".
Although the recent European economy has benefited from the gradual relaxation of epidemic control measures to a considerable extent, at present, investors' sentiment towards the capital market has changed, and consumers' willingness to spend is generally conservative.
According to the data released by the European Automobile Manufacturers Association (ACEA) on May 18, the number of new car registrations in Europe in April was about 830400, down 20% year-on-year, the largest decline this year. Meanwhile, the European auto industry is still mired in a supply chain crisis, and record inflation may deter consumers, leading to the decline of European auto sales for the 10th consecutive month. Automobile consumption is often the leading indicator of regional economic development. When automobile sales decline sharply, the risk of economic downturn increases significantly.
According to the 2022 spring economic outlook report released by the European Commission on May 16, the real GDP growth rate of the EU and the eurozone in 2022 and 2023 were 2.7% and 2.3% respectively, lower than 4.0% and 2.8% in the February outlook report, respectively. At the same time, the European Commission has also significantly raised its forecast for the annual inflation rate in 2022, which is expected to rise from 2.9% in 2021 to 6.8% in 2022.
