Has US consumer price growth finally started to slow?
The upcoming US Consumer Price Index report is expected to show that inflation continued to rise in April, albeit at a slightly slower pace than in previous months.
Economists polled by Bloomberg forecast that consumer prices in the United States rose at a pace of 8.1% year-on-year, compared to 8.5% in March. Inflation at this level would remain near four-decade highs, but would represent the first slowing in pace since August 2021.
The so-called core CPI, which excludes the effects of volatility in the food and energy sectors, is also expected to have slowed compared to April last year. But the data, due out on Wednesday, could still show core inflation accelerating from the previous month.
The category to watch will be housing costs, according to Greg McBride, chief financial analyst at Bankrate. “Housing makes up 40% of the CPI – as it does for many household budgets – and with double-digit increases in rents it puts the household budget in a stranglehold even as food costs and energy stabilize,” he said. .
It is one of two consumer price reports that will be considered by the Federal Reserve at its June meeting, when it is widely expected to raise rates again. interest of 0.5 percentage point. A large deviation from the CPI forecast, in either direction, could alter the Fed’s calculation. Kate Duguid
How much did UK GDP rise in the first quarter?
The Bank of England expects Britain’s economy to have grown 0.9% in the first quarter, boosted by the easing of all Covid-19 restrictions at the start of the year.
Economists polled by Reuters expect gross domestic product to have risen 1% in the quarter when data is released on Thursday, but they also expect output to have risen 0.1% between February and March. The reading would confirm the slowdown seen in February when growth fell to just 0.1% from 0.8% in January.
“We expect the economy to have returned to some growth,” said Ellie Henderson, an economist at Investec. It expects a 0.1% expansion in March, led by services, with manufacturing and construction poised to contract as they did in February. She said a slowdown in Covid vaccinations would be less of a pain, but rebounds in the leisure and hospitality sector would also have diminished.
After the first quarter, the BoE expects economic growth to slow “sharply. . . reflecting the significant negative impact of rising global commodity and goods prices on the real incomes of most UK households and the profit margins of many UK businesses,” according to its latest outlook published last week.
The BoE’s forecast was “distinctly gloomy,” said Ross Walker, an economist at NatWest Markets, with quarterly growth expected to shift from near-stagnation to outright contraction this year and next.
The prospect of UK inflation hitting a 40-year high at the end of this year, largely reflecting soaring energy costs following Russia’s invasion of Ukraine, is expected to lead to a decline of nearly 1% in economic output in the fourth quarter. And by the second quarter of 2025, the UK economy is expected to be less than 1% larger than it is today. Valentina Romei
Who will fill the void left by Ukraine in the wheat market?
Agricultural commodity markets have been disrupted by the war in Ukraine, as grain and vegetable oil buyers from the country as well as Russia try to find alternative sellers.
Soaring food import bills for poorer countries have led to worsening hunger, as well as concerns about political instability. Russia is the largest wheat exporter in the world, while Ukraine is the fifth. Together, they account for 30% of global exports, according to the Food and Agriculture Organization of the United Nations. The two countries also account for over 60% of the world’s sunflower oil trade.
“My biggest concern right now for the agricultural markets is wheat,” said Craig Turner, senior commodities broker at StoneX. India, which had a bumper harvest in 2021, benefited from the surge in wheat prices. This year’s harvest was initially expected to be a record, but the extreme heat wave hitting India could damage crops and trigger export restrictions.
“The world needs exportable supplies of wheat, and things could get very tough this summer,” Turner added.
The U.S. Department of Agriculture releases its Agriculture Production Report on Thursday along with its monthly report of global agricultural supply and demand estimates covering grains, oilseeds and other agricultural commodities. The production report will include estimates of the U.S. winter wheat crop this year, while WASDE will offer information on producing countries that can fill the gap in export markets. Emiko Terazono