Inflationary pressures will be a key theme for this week’s data releases.
Headline inflation rates have been depressed by lower energy prices but policymakers remain concerned about developments in core inflationary pressures.
UK companies are increasingly confident about the prospect of passing on higher prices to consumers. This will be reflected in today’s producer price inflation data for April with the consensus forecast pointing to a rise from 0.3 per cent in March to 0.5 per cent.
UK annual inflation hit 3.1 per cent in March and the consensus for April, due tomorrow, is for a fall to 2.8 per cent.
Wednesday brings UK labour market data with the unemployment rate expected to remain unchanged at 5.5 per cent.
Attention will focus on the growth in average earnings, which jumped from 4.2 per cent in January to 4.6 per cent in February. Another rise – to 4.8 per cent – is expected in March, an important month for bonus payments.
Analysts will also look at the growth rate excluding bonuses, which is expected to rise from 3.6 per cent to 3.7 per cent.
While policymakers may be relieved earnings growth has not so far followed rising inflation, relatively low growth will put downward pressure on consumers’ disposable income.
Consumer spending has remained robust in the face of rising interest rates but is expected to slow. The consensus forecast for April UK retail sales growth, due on Friday, is of 4.7 per cent against 4.8 per cent in March.
Headline US inflation rose to 2.8 per cent in March, partly due to higher gasoline prices. The April figure, due tomorrow, is expected to fall back to 2.6 per cent. Core inflation fell to 2.5 per cent last time but further improvements could prove difficult.
Analysts at JPMorgan said that lower US productivity growth and tight labour markets would keep upward pressure on core inflation. The US housing market slowdown may lead to weaker growth in rents, which could be important as this has a high weight in the core inflation index.
The US National Association of Home Builders index has shown renewed weakness in the past two months and May’s report, due tomorrow, is expected to show further softening in the property market.
Hopes are growing that US manufacturing has turned a corner after a stronger-than-expected ISM survey.
The consensus forecast for April, due on Wednesday, is for annual growth to remain around the 2.7 per cent seen in March.
Eurozone inflation in April is expected to remain unchanged from the initial estimate of 1.8 per cent.
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