Inflation cooling? The Week Ahead from Thomas Watts, abrdn

by | Sep 11, 2023

Thomas Watts, Investment Analyst, abrdn, comments on the economic data releases this week;

“The coming week will hopefully act as an indicator that not only have outside temperatures begun to drop, but that the hot inflation we have experienced over the past 18 months is also beginning to cool.

“Our first clue should arrive as early as Tuesday morning, in the form of UK claimant count figures, detailing the change in the number of people requesting unemployment related benefits during the previous month. Acting as a proxy for the strength of the domestic labour market but generally considered as a lagging indicator, the number of jobseekers is an important signal of overall economic health due to its high correlation with consumer spending and therefore inflation. Alongside the data, we will also receive the average hourly earnings numbers for the previous three months, again giving us a good gauge on what consumer spending and inflation should look like, as the more people earn, the more they tend to spend. 

“Wednesday should prove to be a pivotal day for investors across the globe, as not only does the Office for National Statistics release the broadest set of data for the UK economy, in the form of Gross Domestic Product, there is also key data from the US released in the afternoon. With the Federal reserve’s ongoing fight with inflation still in the balance, many investors are still unsure as to whether the central bank has reached the peak of its rate hiking cycle just yet, Consumer Price Index data should be crucial in forming our understanding. The readings will come in two parts, Core and Non-Core, with Core stripping out the more volatile sectors of the reading, such as energy and food prices, to give a more accurate gauge on how price rises are behaving.  

“The week will be rounded off with a host of further US economic data, including retail sales and consumer confidence, however it is in Europe that investor’s gaze will settle. Thursday will see the European Central Bank (ECB) announce the latest in a long line of rate hikes. Although a further 0.25% rise has been largely priced in by investors, it is the central bank’s forward guidance that should really pique attention. Much like the US Federal Reserve and the Bank of England, the ECB should be close to halting their rate cycle, and so the bank’s accompanying press conference should take on added significance for any hints as to what they will opt for next.” 

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