This, though, is not as worrying as it seems. The rise will probably owe more to good news falling out of the annual comparison than to new bad news entering; in June 2012, petrol and utility bills fell and food prices were soft, which gives June 2013’s price level a tough comparator.
Other news in the week should dampen inflationary fears. Tuesday’s numbers should show than manufacturers’ output prices have actually fallen since February, implying there’s no inflation pressure from this source. And Wednesday’s figures are likely to show wage inflation in the last three months of only around 1.5 per cent.
Minutes of the latest Monetary Policy Committee meeting should show that members are not much worried by inflation, and are worrying more that the recovery is still fragile.
Two numbers might corroborate those concerns. Wednesday’s figures could show that unemployment is still hovering around 2.5 million – and much more if we take into account part-timers who want to work longer and the inactive who’d like a job. And Thursday’s retail sales could post a slight fall in June, albeit after a huge rise in May.
Overseas figures should show that the world economy is growing steadily. On Monday, official figures should show that US retail sales rose a little in June, implying a rise of just under one per cent (in nominal terms) quarter-on-quarter. And whilst Tuesday’s industrial production data might show only a small rise in June, economists hope that surveys by the Philadelphia and New York Feds confirm last month’s news of improving business conditions.
In Germany, Tuesday’s ZEW survey could show a small improvement, consistent with financial professionals looking forward to an economic upswing later this year.
And on Monday, official Chinese figures could show that GDP growth in Q2 was a little higher than the 1.6 per cent recorded in Q1. This, though, won’t assuage fears that the economy will slow down over the medium-term, perhaps disruptively so.
For equity investors, one important but often overlooked piece of news will be Tuesday’s figures from the US Treasury on capital flows. These have recently shown a rise in foreign buying of US equities, which is a sign of an increase in confidence, which has in the past often led to lower returns in the following 12 months. A continuation of that trend would therefore be slightly concerning.
