A raft of UK economic data this week

US equity markets remain close to historic highs despite an inflationary report that pointed to inflation rates remaining stubbornly above the Fed’s 2% target during the week. Some forecasters expect US inflation to remain above the Fed’s 2% target until 2027. We then received a weak retail sales report on Friday, indicating an abrupt pullback in consumer spending. We made the point a few weeks ago that the drivers of a resilient US consumer, legacy COVID savings, and credit card use were beginning to look tapped out. The possibility that Mr Trump may orchestrate a peace settlement between Russia and Ukraine, sending German equities to record highs. European stocks are being driven higher by relative valuation to US ones; the probability rates will fall further in Europe, against the likelihood the Fed will not cut again till later in the year, if at all.

There is a raft of UK economic data this week, starting tomorrow with the unemployment report and the monthly wages index. The unemployment rate is expected to rise to 4.5% from 4.4%, and wages are expected to rise year over year to 5.9%. Fewer people are getting paid more, it would look like. Further increases in the minimum wage are pushing up wages across the board. Later tomorrow morning, we will get a speech from Andrew Bailey, and it will be interesting to hear his current take on matters. We get a raft of inflation data on Wednesday, with consumer and producer prices expected to rise. Core inflation is expected to rise to 3.7% year over year from 3.2%. Then, on Thursday, CBI industrial trends orders are forecasted to show another decline. No wonder the phrase stagflation keeps getting banded about in the press despite a slightly better-than-expected GDP report at the end of last week. Friday, the monthly retail sales report, where a slight recovery is expected, may be consumers taking advantage of sales season. Sterling reached its highest level this year against the dollar, which may have had more to do with a weaker dollar than a stronger pound.

For a change, it’s a quieter week for US data. The jobless claims report will be of some interest, as jobless claims appear to be on the rise—the final reading of the monthly Michigan consumer sentiment and inflation expectations will also be watched. Finally, at the end of the week, we get the monthly flash PMIs from around the globe.

Equity markets are starting the week on a mildly positive note. With all the uncertainty around tariffs, peace talks with Russia, and what feels like a fragile peace agreement between Israel and Hamas, the VIX fear Index fell to its lowest level in almost 6 months.