Focus On US Inflation Report, UK Unemployment And Earnings Rise

The US CPI inflation report and some sets of data coming from the UK are the main reports in the spotlight of investors and traders just a day before the Federal Reserve interest rate decision.

In Australia, the ANZ bank pushed its Reserve Bank of Australia (RBA) rate cut forecast further out, expecting the first reduction to be made in February 2025. ANZ analysts forecast 3 cuts in total next year, taking the cash rate to 3.6%.

UK Unemployment Rate & Average Earnings Rise

According to a data report by the Office for National Statistics (ONS), the UK’s unemployment rate rose to 4.4% in the February-April quarter, coming in higher than analysts’ forecasts. This is the highest unemployment rate figure recorded since September 2021.

On the other hand, the same report revealed that average earnings excluding bonuses grew by 6.0% in the three months to the end of April, just 0.1% less than analysts’ expectations. The ONS report noted that “this month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong.”

China CPI Inflation May 2024 Report

Early on Wednesday morning, China’s National Bureau of Statistics will release the CPI inflation report for the month of May. Markets expect the figure to come in at 0.3% on a yearly basis, matching April’s figure.

ING economists suggest that CPI inflation could start rising in the second half of the year. “China will publish its May CPI and PPI inflation numbers on Wednesday. We are expecting headline CPI inflation to remain broadly stable around 0.3% year-on-year. While inflation is likely to remain low in the second quarter, it should begin to pick up in the second half of the year. Recent indicators point to real interest rates remaining too high for current economic conditions,” they note in their report.

UK GDP April 2024 Report

The UK GDP April growth rate will be announced by the ONS on Wednesday. The figure is expected to come in at 0%, dropping from the 0.4% March figure. Although economists pay more attention to quarterly GDP figures, analysts could get a view of where the economy could head for the second quarter of the year.

The British Chambers of Commerce (BCC) upgraded its outlook regarding the UK economy suggesting it is now on track to grow 0.8% this year and by 1% in 2025. However, it notes that long-term growth was "unlikely to be strong" and left its 2026 forecast unchanged at 1%.

US CPI May 2024 Report

On Wednesday, the US Department of Labour Statistics will release the CPI inflation report for the month of May. The data batch is significant as it will come just hours before the Fed’s interest rate decision and could play a role in the Federal Open Market Committee (FOMC) decision.

Economists forecast CPI inflation to come in at 3.4% on an annualised basis in May, matching April’s figure. On a month-to-month basis, analysts suggest that inflation could drop to 0.1% from the 0.3% recorded in April.

Economists at RBC Economics wrote in their report to investors: “We look for headline CPI growth in May to hold at 3.4% year-over-year with the underlying details looking slightly better. Energy prices likely declined in May as oil prices edged lower. But “core” (excluding food and energy) price growth is also expected to edge down to 3.5% (from 3.6% in April) on a more normal-looking 0.2% month-over-month increase. The diffusion index, which measures the breadth of inflation pressures, has shown little improvement over the past few months.”

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