By Chris Flood
Published: October 11 2009 18:16
Rising gold prices and falling government bond yields reflect investors’ uncertainty over whether inflation or deflation is the threat to fear for price stability. This week’s data should provide fuel for both sides of that debate.
UK inflation data for September, due out on Tuesday, should show the headline consumer prices (CPI) measure fall from 1.6 per cent in August to 1.3 per cent, the lowest rate for five years. Higher petrol and diesel prices contributed to upward pressure on inflation in July and there was also a jump in used car prices. However, September will probably mark the trough for UK CPI inflation and sharp increases are forecast before the end of the year.
(Click to enlarge)
Inflation rates have turned negative in the US, the eurozone, Japan, Switzerland and Sweden but the UK’s performance has been affected by rising import prices due to sterling’s weakness. Prices for imported goods (excluding oil) rose 5.2 per cent year-on-year in August.
Michael Saunders of Citigroup expects headline CPI inflation to average 3.4 per cent next year, well above the market consensus of 1.8 per cent, due to the weak pound and tax changes.
“The UK’s prospective inflation overshoot may well be even bigger or more protracted, notably if sterling falls further or if the seemingly inevitable post-election fiscal restraint includes extra indirect tax hikes,” says Mr Saunders.
Such an outcome would present a problem for the Bank of England, particularly if the economy’s recovery remains tepid.
Wednesday brings UK labour market data. The unemployment rate is expected to increase from 7.9 per cent in July to 8 per cent in August, while headline earnings growth is seen falling from 1.7 per cent to 1.4 per cent. The pace of job cuts appears to have eased as more companies have opted to reduce pay and hours.
One in three UK companies has frozen workers’ pay this year, according to research by Incomes Data Services, which said that if inflation rose as predicted there would be upward pressure on private sector pay increases next year. A big rise in inflation would also make a post-election public sector wage freeze much more problematic.
The Week’s Data Releases
A calendar of key statistical reports due out over the next seven days from Informa Global Markets
US retail sales data for September, due on Thursday, will reflect the end of the “cash for clunkers” scheme with car sales down 35 per cent last month. Headline retail sales are forecast to drop 2.1 per cent, extending the year-on-year decline from -2.8 per cent in August to -3.2 per cent.
US inflation data for September, due on Thursday, is expected to show the decline in the headline CPI ease from -1.5 per cent in August to -1.4 per cent. The Federal Reserve’s September statement said inflation was expected to remain subdued for some time. But some members of the Fed have sounded more concerned about the outlook for inflation which could be reflected in the minutes of last month’s meeting, due out on Wednesday.
US industrial output data for September, due on Friday, is expected to show an increase of just 0.1 per cent, but the year-on-year decline should slow from -10.7 per cent in August to -6.9 per cent.
In the eurozone, industrial production data for August, due on Wednesday, is forecast to show a rise of 1 per cent, slowing the year-on-year decline from -16.2 per cent to -15.8 per cent.
Copyright The Financial Times Limited 2009
0 comments:
Publicar un comentario