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Week Ahead: Inflation In The United States And China Are The Highlights Of The Week

Bruno T
Analysis & Opinion
August 06 2023 09:30AM

The forthcoming week will have global financial markets keenly observing the US inflation report slated for release on Thursday, as well as the ongoing earnings season. Market participants in the US will be watching producer prices and the Michigan Consumer Sentiment in addition to notable updates from China regarding its inflation and trade data, GDP growth numbers from the UK and the Philippines, the Reserve Bank of India’s interest rate decision, and inflation data from Brazil and Mexico.

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While the pace of earnings announcements in the US is expected to decelerate, significant reports are still projected from major corporations like The Walt Disney Co, AMC Entertainment, Novo Nordisk, Barrick Gold, Eli Lilly and Co, Take-Two Interactive Software, Twilio, and Upstart Holdings.

Investors will be honed in on the release of the US CPI report on Thursday, anticipating an acceleration in inflation from 3% in June to 3.3%. If realized, this would be the first headline inflation increase since June 2022, mainly attributed to energy costs’ base year effects. The core rate is expected to hold steady at 4.8%, significantly surpassing the Federal Reserve’s 2% target. Other key economic data to watch out for include the initial estimate of Michigan Consumer Sentiment, producer prices, foreign trade data, IBD/TIPP Economic Optimism Index, and the government’s monthly budget statement.

Across the Americas, Canada’s foreign trade data and the inflation rates for Mexico and Brazil will also be of interest.

In the UK, the ONS will release preliminary Q2 GDP estimates, together with industrial production, construction output, and trade balance reports. It is likely that the UK’s economy maintained its growth trajectory from April through June.

Meanwhile, in Europe, the economic calendar is light, with investors anticipating the final CPI figures to confirm that Germany’s inflation rate dipped to 6.2% in July. In France, inflation is thought to have cooled to a 17-month low of 4.3%, and in Italy, it reportedly fell to a 15-month low. Conversely, Russia’s inflation rate appears set to rise for a third successive month. Russia’s GDP is likely to have recovered in Q2, signifying a shift from the previous year’s contraction. Other significant data includes Germany’s industrial production, Switzerland’s unemployment rate, and Turkey’s industrial output and unemployment rate.

In Asia, following last week’s revealing PMI figures highlighting its Covid recovery challenges, China will be releasing additional economic data for July, including trade figures, inflation rates, and a variety of credit data. Japan will be focusing on the BoJ’s Summary of Opinions for clues about the bank’s decision to relax its yield curve control policy. The RBI in India is expected to maintain its tightening cycle, keeping interest rates steady due to potential inflation risks caused by increased agricultural and energy commodities. Additionally, South Korea will be releasing trade figures and the Philippines will be sharing its Q2 GDP.

Down under in Australia, market watchers await key forward-looking indicators, such as Westpac Consumer Confidence for August and NAB Business Confidence for July. New Zealand is also set to share its manufacturing PMI for July.