Key inflation data releases to watch out for this week

The week ahead has plenty to look forward to for investors, as the earnings season continues on and a range of highly anticipated inflation data becomes available from the likes of China and the US among others.

High inflation that very recently wreaked havoc across the globe is slowly becoming a thing of the past, as is likely going to become clear from recent CPI figures. Many economists are now asking when monetary policy tightening will reach its end in many of these major economies, and how long it will be until the first rate cut eases some of the pain for borrowers.

Predictions vary, and change regularly, and even the central banks have made some notoriously inaccurate forecasts lately. Remembering back to when Jay Powell asserted that inflation would be 'transitory' long after analysts had suggested that it clearly wouldn’t be. Phillip Lowe also insisted that the RBA would not raise interest rates until 2024, and President of the European Central Bank, Christine Lagarde suggested that a rate hike in 2022 would be "very unlikely."

Let's take a look below at what can be expected from Inflation figures this week.

Chinese inflation data

This Wednesday, at 1:30 AM GMT, China will share its figures on Inflation and the Producer Price Index.

It was anticipated that China's economy would begin to show signs of improvement this year. Instead, many experts have been compelled in recent days to downgrade their estimates for China's economic growth, and it is likely that more will follow suit in the near future.

Deflationary pressures are increasing throughout the country, which means there is a real requirement to restart development or risk slipping into an economic trap that may be difficult to come back from.

Contrary to market estimates and May's 0.2% growth, China's consumer prices unexpectedly flattened to 0% in June. This was the lowest number since deflation was also recorded back in February 2021, and it was caused mostly by falling prices for goods other than food.

Producer prices also decreased by 5.4% year over year in June, worse than the market expectations and a greater decline than the previous month's 4.6% dip. Due to weaker demand and lowering commodity prices, it was the ninth straight month of producer price deflation and the sharpest decline since late 2015.

This week, expectations are for a -0.3% annualized rate of Inflation to be recorded for July, and -0.5% rate of decrease in the Producer Price Index.

New Zealand’s business inflation expectations

This Wednesday at 3:00 AM GMT, the RBNZ releases its latest Inflation Expectations from the perspective of local economists and industry leaders.

Business inflation expectations in New Zealand relate to the two-year inflation projection but there are also projections over one, five and ten years as well. Any change in the monetary policy of the central bank is generally expected to affect prices within two years, which is why this measure is important.

Expectations for New Zealand's inflation dropped from 3.3% in the first quarter of 2023 to 2.79% in the second quarter. While a further dip to 2.5% is expected to be recorded this week for the third quarter.

Recent data showed last month that New Zealand's economy fell into a technical recession this year after the RBNZ aggressively raised interest rates to a 14-year high to tackle its inflation woes.

US inflation and PPI

This Thursday and Friday, both at 12:30 PM GMT, the US Bureau of Labour Statistics publishes highly anticipated Inflation and Producer Price Index data, which is hoped to confirm the positive impact of the Federal Reserve tightening of monetary policy on the economy.

In spite of interest rate hikes, the US economy has continued to stubbornly show resilience of late. However, a number of indicators are trending in the right direction to cool demand and prices more recently. The increase in job openings and decline in retail sales growth for example, show that supply and demand are slowly evening out.

After halting the tightening cycle in June, the Fed's Board agreed to restart rate hikes in July by 25 basis points, to a range of 5.25% to 5.5%. Since interest rates were hiked from almost 0% early last year, the US inflation rate has steadily declined, from over 9% at its peak to the current level of 3%.

However, after last month’s considerable decrease from 4% down to 3%, economists polled by Reuters anticipate that the annual headline inflation rate was 3.3% in July- the first increase in over a year, which will likely be troubling to the Fed.

Core consumer price inflation however, which excludes volatile commodities like food and energy, is expected to cool slightly to 4.7% after last month's decrease to 4.8%, and from 5.3% in May.

Wholesale prices have also been rising slower than expected in recent months as shown by the Producer Price Index. Following an upwardly corrected 0.4% drop in May, producer prices for final demand crept up 0.1% month-over-month in June, and it’s expected that a further 0.2% increase may be revealed in the July data. The annual rate slowed to 0.1% in June, the lowest since the deflation recorded in 2020, however a 0.7% rise is forecast for July’s annual rate.

A whole host of other economic data will come together prior to the Federal Reserve's next Monetary Policy meeting on the 20th September, including another month's worth of inflation data. It’s hoped that whatever information is released in the meantime would support the tightening cycle's end, but that remains to be seen.