Inflation takes centre stage once more in the macro week ahead with the US central bank’s preferred pricing gauge and Eurozone inflation figures up for release.
Connoisseurs of economic data will also be kept busy with US GDP data, the ISM manufacturing survey, plus a batch of consumer confidence updates.
In the UK, it is a quieter week ahead with house price and mortgage approvals the figures of note.
US inflation to maintain downward path?
We start with US inflation and the release of the Personal Consumption Expenditures data next week which will likely provide the main economic focus.
Investors will be hoping the US Federal Reserve’s preferred measure of inflation remains on a downward path as market chat turns to when interest rates might come down rather than whether they have peaked.
But as Richard Hunter at interactive investor points out, any “unexpected spike higher will put the Fed back on alert, which in turn will unsettle investors who are now beginning to debate the potential for rate cuts next year as opposed to any more rises in the meantime.”
ING Economics expects a 0.2% month-on-month rate of price increases which is broadly in line with what the central bank wants to see and, if repeated over time, would bring the annual rate of inflation as measured by the core personal consumer expenditure deflator back to 2%.
Elsewhere stateside, investors will be digesting housing numbers, which should signal healthy new home sales, plus the closely watched ISM manufacturing index for any signs of a rebound after having been in contraction territory for the past 12 months.
There will also be a second estimate of third quarter gross domestic product.
Initial figures from the Bureau of Economic Analysis showed quarter-on-quarter gross domestic product in the US grew 4.9% on an annualised basis in the three months to September 30. In the second-quarter, GDP had risen 2.1%.
It was the biggest quarter-on-quarter GDP rise since a 7.0% increase in the fourth quarter of 2021.
Eurozone inflation heading towards 2%
Over to Europe, and here too the focus will be on inflation.
ING pointed out inflation dropped more than expected in September and October, and the question now is whether the low inflation trend will continue.
“We expect some continued improvement, with core inflation falling to 4% and headline inflation dropping to 2.7%,” economists at ING said.
“Still, there are signs of continued inflation pressures that shouldn’t be ignored after a few encouraging data releases,” it pointed out, noting the November PMI showed that businesses still see increased input costs.
In October, the eurozone harmonised index of consumer prices rose by 2.9% annually in October, slowing from a 4.3% increase in September. In October of 2022, inflation stood at 11.5%.
In the UK, no major releases are expected but there will be an indication on the state of the housing market with the release of the Nationwide house price index and mortgage approvals data.