US inflation ideas will be tested this week with the consumer price index for June the major focus for investors on Wednesday and then the Producer Price Index the day after. There’s also Chinese economic data for last month, further interest rate rises in New Zealand and South Korea, as we see small improvements in the strength of the markets and commodities.
GDP data for the UK, China and Singapore will also grab some attention. At the same time, industrial production data for Japan, Eurozone, India, China and the UK will be released and expected to show a softening in activity.
The central banks of NZ, South Korea and the Bank of Canada are widely expected to lift rates – the RBNZ by half a per cent, the bank of South Korea by 0.25% and the Canadian central bank a 75 basis point rate hike, following two consecutive 50 basis point rises.
Friday’s June jobs data surprised on the upside with 372,000 new jobs created, much better than the 250,000 in market forecasts and adding to the belief that the Fed will raise the federal funds rate by 0.75% at its meeting later this month.
The headline US CPI is expected to rise to a new high of annual rate of 8.8%, according to AMP Chief Economist Shane Oliver in his weekly note at the weekend thanks to higher energy prices and higher food prices,
But Dr Oliver says the core US inflation will probably slow for a third month in a row – to an annual 5.7% rate, signalling that inflation has peaked for the time being.
He forecast a modest rise in retail sales in June on Friday, flat industrial production and continued softness in the New York manufacturing conditions index.
US June quarter earnings reports will start to flow with the consensus expecting at 5%.
Banks led by JPMorgan, Wells Fargo, Citi, Morgan Stanley US Bancorp, PNC Financial Services on Thursday and Friday. Pepsi Co, Delta and Blackstone are also down to report.
Wednesday should see the Reserve Bank of New Zealand raise its cash rate by 0.5% to 2.5%.
In Australia, the NAB business survey for June (tomorrow) is expected to show a further softening in conditions and confidence, the Westpac/MI consumer confidence index for July (also Tuesday) is expected to show a further fall to very weak levels after the latest rate hike and floods and June jobs data (Thursday) is expected to show a slowing in employment growth +15,000 with unemployment falling to 3.8%, according to Dr Oliver.
Chinese consumer price inflation rose to a near two-year high of 2.5% in June, topping market forecasts and the 2.1% annual rate in May.
The continuing rise, even at these lower levels compared to Australia, the US, UK and elsewhere shows that not even the still state-dominated Chinese economy can escape the pressures from what is happening as a result of the Russian invasion of Ukraine in energy markets.
But producer prices eased to a 15-month low as commodity prices softened, according to data from China’s National Bureau of Statistics.
The rise in the CPI was the highest since July 2020, with food prices rising the most in 21 months as consumption strengthened further as the improvement in China’s COVID-19 situation (2.9% vs a 2.3% rise in May).
Non-food inflation accelerated further (2.5% vs 2.1%), thanks to higher petrol and oil prices (8.5% vs 6.2% in May).
On a monthly basis, consumer prices unexpectedly were flat in June, beating consensus of a 0.1% drop and after easing 0.2% in May.
The annual rate of growth in producer prices in June eased to 6.1% from 6.4% in May and compared with market forecasts around 6%.
It was the 18th straight month of slowing producer prices, amid measures to contain COVID-19 infections and fears about global recession that triggered a sell-off in metals such as iron ore and copper.
On a monthly basis, producer prices were unchanged in June, after gaining 0.1% in May. For the first half of the year, China’s PPI rose 7.1% according to the monthly report from the National Bureau of Statistics.
Chinese June quarter GDP data this Friday is expected to have contracted by 2% quarter on quarter reflecting Covid lockdowns dragging growth down to an annual rate of 1.2% from 4.8% in the March quarter and 8.1% in 2021.
China’s GDP target for this year is about 5.5%, so the will have to be a rapid pick up in activity in the current quarter for any chance that the target will be reached by the end of December.
Wednesday sees China’s trade data for June out with a small rise in exports and imports and another large trade surplus.
Besides the GDP data on Friday, June data on industrial production, retail sales and investment will be mixed while a small fall in unemployment is forecast.
Credit data is likely to show a further pick up. Chinese property prices will weak in the June data to be issued this week as well.