The US retail sales report and inflation data coming from Canada, New Zealand, and the UK are expected to be scrutinized by economists today and tomorrow. With the Federal Open Market Committee (FOMC) having its interest rate meeting next week, the US retail sales report is expected to show how consumers react to higher rates and the Fed’s monetary policy tightening strategy.

The Reserve Bank of Australia (RBA) minutes revealed that the board agreed that some further tightening may be required and noted that it would reconsider at the August meeting. The RBA kept interest rates unchanged after its last board meeting, although some members were in favor of a 25bps hike.

Speaking to LBC, the UK’s prime minister Rishi Sunak said that inflation is not dropping as quickly as the government would like. Commenting on the inflation’s persistence he said that “So, the first of my priorities is to halve inflation. Is that taking longer than any of us would like? Yes, it is. I think people trust me when it comes to managing the economy, and they trust me to be honest with them because, you know what, bringing inflation down does mean you have got to make some difficult decisions sometimes because they are the right long-term ones for the country.”
 

Canada CPI June report

Statistics Canada is expected to publish its June CPI inflation report later today. Market analysts suggest that headline inflation will come in at 3%, lower than May’s 3.4% figure. Scotiabank’s analysts suggest that “this one is probably just a placeholder that may spark some market volatility but without settling anything in terms of positioning for the Bank of Canada’s next potential move. That’s because the BoC has just splashed fresh ink on a new forecast to accompany their decision to hike again. They don’t have to come off the bench again until September 6th and so they have most of eight weeks to ponder their next move, do further analysis.”

The Bank of Canada (BoC) hiked interest rates by 25 basis points and while inflation has been decreasing for some time, it does so at a slower pace than the central bank would want and remains far above its 2% target.
 

US Retail Sales Grow in June?

On Tuesday afternoon, the US Census Bureau will publish data regarding retail sales in June. Market analysts suggest that retail sales grew by 0.5% on a month-to-month basis. If the forecast is confirmed, it would signal a 0.2% increase when compared to May’s figure. Economists note that retail sales make up almost 30% of the total consumer spending in the US.

However, the retail sales report does not include air travel tickets, some forms of healthcare, and insurance purchases so the print does have a weakness when it comes to giving the whole retail sales picture. A lower-than-expected reading would show that the Fed’s monetary policy tightening has started to deliver results while a higher than anticipated could force the Fed to consider more rate hikes in the next few months.
 

New Zealand CPI Inflation in Q2 2023 

Statistics New Zealand will release its Q2 2023 CPI inflation report on Tuesday evening. Market analysts suggest that headline inflation could come in at 5.9% on an annualized basis, significantly lower than the first quarter’s figure of 6.7%. On a monthly basis, inflation is expected to fall to 0.9%, 0.3% less than in the first quarter.

Earlier in the month, the Reserve Bank of New Zealand (RBNZ) kept interest rates on hold in line with economists’ expectations. However, the RBNZ’s board said in its post-meeting statement that inflation in New Zealand remains too high and added that interest rates would need to remain at a restrictive level for the foreseeable future.
 

UK CPI Inflation in June

On Wednesday morning, investors will have the opportunity to review the UK CPI report published by the Office for National Statistics (ONS). Economists expect the figure to come in at 8.2% on an annualized basis, while on a month-to-month basis, they anticipate a figure close to 0.7%. Elevated consumer prices are one of the biggest problems for the UK government as well as the Bank of England (BoE).

Inflation reached double figures and four-decade highs earlier in the year with the government vowing to halve it by the end of 2023. A higher-than-expected CPI figure could force the BoE to proceed with more than anticipated rate hikes, strengthening the pound against the US dollar or the euro. A lower figure could make the BoE reevaluate its monetary policy and adjust upcoming rate hikes accordingly.

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