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Did US consumer inflation slow in April?  -Dlight News

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US consumer price inflation is expected to have fallen in April, which could add to investor confidence that the Federal Reserve will cut interest rates later this year.

The Bureau of Labor Statistics will release its latest US consumer price index report on Wednesday, which is expected to show that headline inflation was 3.4 per cent in April year over year, according to a poll of economists by Reuters. That compares with 3.5 per cent in March.

Core inflation, which strips out the volatile food and energy sectors, is expected to be 3.6 per cent, down from 3.8 per cent in March, the Reuters poll found. 

Progress on pushing down inflation towards the Federal Reserve’s long-term target of 2 per cent has stalled in recent months, as rent and housing price rises have persisted while petrol and vehicle prices have surged. TD Securities economists argue that the April headline number is still likely to fall, despite the rise in petrol prices.

The higher levels of inflation in the first quarter have led traders in the futures market to dramatically pull back their expectations for interest rate cuts, from six forecast quarter point reductions in January to between one and two today.

But a softer inflation print could help solidify expectations of two cuts, and strengthen conviction that the Fed will make its first reduction at its September meeting. Kate Duguid

What will Chinese economic data tell us about global demand? 

China is scheduled to release economic data for April on Friday that will cover consumption, unemployment, real estate sales and fixed asset investment.

But two metrics that will be particularly important to investors are industrial production and retail sales, because economists see them as indicators of the extent to which China has been a contributor to a recent upturn in global demand.

Industrial production is forecast to rise 5.4 per cent and retail sales 3.8 per cent in April, according to a Bloomberg poll of 15 analysts. In the previous month, industrial production grew 4.5 per cent year on year and retail sales rose 3.1 per cent year on year.

The improving domestic economy has also helped lift share prices in Hong Kong and Shanghai, with the Hang Seng index rising about 11.2 per cent and the CSI 300 index up 6.9 per cent so far this year.

Some analysts are optimistic that Beijing will continue to try to stimulate the economy and consumer spending. “Targeted policies such as for the property sector and growth industries like technology and green development will also provide support,” analysts at HSBC wrote in a recent note. William Sandlund

Did UK wage growth slow in April?

Investors will be watching the latest UK jobs data on Tuesday to see if it helps cool expectations of a summer interest rate cut.

Economists polled by Reuters expect annual wage growth to fall to 5.5 per cent in the three months to March, from 5.6 per cent in the three months to February. Wage growth has declined from its peak of 8.5 per cent in the summer of last year.

The Bank of England left interest rates unchanged at a 16-year high of 5.25 per cent this week but left the door open to a cut at coming meetings. Swaps markets put a 95 per cent probability on the first cut coming in August.

BoE governor Andrew Bailey said a cut at the June meeting was neither “ruled out” nor a “fait accompli”, with a decision reliant on crucial data such as jobs, wage growth and services inflation.

Rob Wood, an economist at Pantheon Macroeconomics, expects Tuesday’s figures to show further easing of labour market tightness but another strong rise in wages. However, he added that “pay growth has still slowed markedly since mid-2023 . . . and the MPC [Monetary Policy Committee] should feel confident enough to ease the restrictiveness of its monetary policy in June”. 

Earlier this year the BoE flagged “some concern” over the effect of the increase in the national living wage from April. But the central bank last week said businesses’ wage growth expectations for the year ahead declined to 4.6 per cent in April, down from 5.1 per cent at the start of the year. Valentina Romei

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