US inflation and UK GDP data will be the two major releases for the rest of this week with market analysts waiting to scrutinise the accompanying reports. These reports are expected to influence the monetary policies of the Federal Reserve (Fed) and the Bank of England (BoE) respectively.

In the UK, the National Institute of Economic and Social Research (NIESR) said that the UK economy, which is 0.5% below its pre-pandemic level, will not rise over that level until the third quarter of 2024. Analysts at NIESR noted that “the triple supply shocks of Brexit, Covid and the Russian invasion of Ukraine, together with the monetary tightening that has been necessary to bring inflation down, have badly affected the UK economy.”

A survey by S&P Global suggested that “it is possible, but not certain, that the Australian economy can manage a ‘soft landing’ with inflation decreasing to the RBA’s target range.” The report noted that “the key risk is that inflation in Australia is more sticky than expected and the RBA has to hike interest rates more strongly. If the rise in Australian unemployment rate can be limited to around one percentage point, economic & financial fallout should remain manageable.”

US CPI Inflation July Report

On Thursday, the US Bureau of Labour Statistics (BLS) will release the country’s inflation data for the month of July. Economists suggest that CPI inflation rose by 0.2% on a month to month basis while increasing to 3.3% on an annualised basis. The Fed has set a 2% inflation target which has struggled to reach in the last year.

Analysts suggest that an inflation uptick could be expected as energy prices are elevated when compared to last year’s figures. Philadelphia Federal Reserve Bank President Patrick Harker said that “we are making progress against inflation. It has been slow progress, and I am watchful of any reemerging price pressures. We remain unwavering in our commitment to bring inflation back to target. I expect only a modest slowdown in economic activity to go along with a slow but sure disinflation.”

UK GDP Q2 2023 Report

On Friday, the Office for National Statistics (ONS) will publish the UK’s GDP data for the second quarter of the year. Economists forecast that the UK economy grew by 0.2% on a month to month basis in June, thus returning to positive territory. On a quarterly basis, the UK GDP growth is expected to come in at 0.2% on an annualised basis.

Economists at Société Générale noted that “we forecast Q1 GDP growth of 0.1% QoQ (0.3% YoY), the same as Q1, thanks to a rebound in June GDP growth of 0.2% following the contraction of -0.1% in May. The BoE forecasts growth of around 0.2% in H1 and a similar rate in the near term.”

China’s Consumer Prices Fall In July

Earlier today, the National Statistics Bureau of China reported that the consumer price index fell by 0.3% in July on a yearly basis but was up by 0.2% when compared with June. This was the first year-on-year decline in the last two and half years.

Oxford Economics’ analysts wrote in their report that “China’s weak demand follow-through in Q2 can be attributed to its relatively contained demand-side stimulus during Covid, years of regulatory tightening, and an ongoing housing correction,” adding that they expect inflation to grow by 0.5% this year and the producer price index to fall by 3.5%.

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