The Day at a Glance | October 1 2021

The Top

*Inflation in Europe increased more than expected during September (3.4% annual).

*Biden signs funding bill passed by US Congress in order to prevent government shutdown through December 3rd.

*Members of the US Congress have not resolved dispute regarding the debt ceiling, which is why the risk of default by October 18th remains in place.

*Inflation (PCE) in the United States accelerated slightly more than estimated during August (0.4% m/m; 4.3% y/y).

*China calls on state owned energy companies to ensure supply at any cost; oil rebounded in light of this news.

*The Bank of England could be the first to increase interest rates among advanced economies.

*Biden administration will reveal its trade strategy with China on Monday.

Economic environment

Europe records its highest rate of inflation in 13 years. The Eurozone`s Consumer Price Index accelerated to a 3.4% annual rate during September, boosted by a rise in prices – not only among energy related goods. Industrial goods logged a 2.3% increase in prices in light of productive chains disruptions and the economic reopening; while energy logged a 1.3% hike. The underlying component also increased to 1.9%, level not seen since 2008. The European Central Bank expects inflation to reach its peak acceleration at the end of 2021 before slowing down during 2022. However, the productive sector has warned about greater deterioration among supply chains and has started transferring costs to consumers in order to protect its profit margins, something that has translated into an overall rise in prices. This has raised doubts about the temporariness of inflation. Inflation in the Eurozone is expected to reach record levels – close to 4% – by November. The greatest fear is that growing inflation could impact wage negotiations and reinforce the hike in prices.