UK, Canada And New Zealand Inflation In Sight

The week started with market analysts focusing on geopolitical developments in the Middle East after a rather tense weekend. Although some expected oil prices to spike, this has not been the case yet.

In news from the eurozone, industrial production increased by 0.8% in the euro area in February, according to Eurostat, compared with January. However, industrial output was 6.4% lower than in February 2023, on an annual basis, across the euro area.

In the US, retail sales grew in March by 0.7% on a month-to-month basis, surpassing expectations. The report by the country’s Commerce Department could play a role in the Federal Reserve rate cut plans.

China Q1 2024 GDP Growth Surprises Analysts

Good news came from China as a report released by the country’s National Bureau of Statistics showed the economy growing by 5.3% in the first quarter of 2024, surpassing expectations. The Chinese government has set a 5% GDP growth target for this year. Economists at Moody’s Analytics told Reuters that “the strong first-quarter growth figure goes a long way in achieving China’s 'around 5%' target for the year. Industrial production also supported through the quarter, but weak March data is cause for some concern. Similarly concerning, China’s households continue to keep their wallets closed."

Some market analysts suggested that the elevated economic growth figure could make the People’s Bank of China (PBoC) to postpone any interest rate cut, especially as the Federal Reserve in the US is also revaluating the situation.

UK CPI March 2024 Report

The UK CPI inflation report is expected to be published on Wednesday morning. Market analysts suggest that headline inflation could drop to 3.1% in March, on a yearly basis, from 3.4% recorded in February. Core inflation is also expected to tick lower, coming in at 4.3% from 4.5% in February.

With the UK pound hovering around a five-month low, the Bank of England (BoE) got a relief coming from the UK’s GDP data for the first quarter showing that the economy could likely exit the technical recession registered in the second half of 2023. As economic conditions seem to be improving, the BoE may be able to hold back interest rate cuts until it sees inflation close to the 2% target in a sustainable manner.

On April 11th, the BoE’s Monetary Policy Committee (MPC) member Megan Green told the Financial Times that  UK’s services inflation is higher than in the US. Green said that “markets now expect the Bank of England will cut rates earlier and by more than the Federal Reserve this year,” and added that “higher inflation expectations have translated to higher pay growth, by metrics.”

Canada CPI Inflation March 2024 Report

On Tuesday afternoon, analysts will have the chance to scrutinise CPI inflation data coming from Canada for the month of March.

Economists at RBC bank wrote in a report that inflation is likely to edge higher. In their note, they suggest that “Slower price growth in Canada in recent months and a sharply underperforming Canadian economy have increased confidence among BoC policymakers that inflation will continue to slow. But the central bank wants to see more evidence before shifting to interest rate cuts. We expect year-over-year price growth in March to tick higher to 3% from 2.8% in February largely due to higher gasoline prices pushing energy costs further above year-ago levels.”

New Zealand CPI Q1 2024 Report

On Wednesday, Statistics New Zealand will release data regarding the country’s CPI inflation in the first quarter of the year. Economists forecast CPI inflation to fall to 4.1% in Q1 2024, on an annualised basis, from 4.7% recorded in the previous quarter. On a quarterly basis, the report is expected to show a 0.7% rise.

ANZ analysts see the CPI rising by 0.6% in the quarter, which would take the annual rate to 4%. “Weakness in activity and the emergence of spare capacity across the economy, particularly in the labour market, should be sufficient for the Reserve Bank to tolerate near-term strength, given our assessment of a pipeline of domestic disinflation ahead. All up, disinflation progress is occurring more slowly than the Reserve Bank anticipated, but progress is being made. However, given a potential reemergence of global inflation pressures the Reserve Bank is likely to remain cautious amidst the uncertainty,” they noted.

New Zealand Finance Minister Nicola Willis had unveiled the nations’ Treasury half yearly update at the end of March. According to the government forecast, New Zealand is expected to see annual CPI for FY24 at 3.3%, down from +4.1% forecast in previous reading.

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