Finance

Signs of Easing: US Core Inflation May Show First Slowdown in Six Months

(Bloomberg) -- After a series of unexpected increases, an anticipated moderation of the US core inflation in April signals a potential turning point for the relentless inflationary pressures. Preliminary projections suggest the core consumer price index (CPI), which strips out the volatile food and energy components, could see a 0.3% uptick from the previous month after consistent 0.4% rises throughout the initial quarter. This data, eagerly awaited by the Bureau of Labor Statistics, is slated for release on Wednesday.

Core Inflation and the Federal Reserve's Concern

April's year-on-year projection for core CPI marks an increase of 3.6%, which if realized, would represent the most modest annual surge in three years. However, this pace remains uncomfortably high for the Federal Reserve policymakers, who have been seeking consistent signs of slowing inflation before considering interest rate reductions.

A Battle Against Stubborn Inflation

The stubbornness of inflation can be partly attributed to persistent underlying services costs, despite core goods prices showing signs of retreat. The general CPI is anticipated to maintain its 0.4% climb for the third consecutive month, coinciding with a six-month high in gasoline prices.

Strengthening this inflationary resilience is the American consumer, whose spending continued to rise robustly in February and March. However, projections for April indicated possibly more conservative spending behaviors, an element to watch closely in the upcoming Wednesday report.

For an in-depth analysis of what is to come, Bloomberg Economics provides a detailed outlook for the coming week in the US here.

Under the Economic Microscope

Further insights will be sought from Tuesday's producer prices report, which will highlight crucial categories influencing the Fed's preferred personal consumption expenditures price index. This includes sectors like health care and portfolio management, offering a clue on the trajectory and transmission of inflation.

The same week will bring additional reports on economic indicators such as housing starts and April's industrial production, all of which will be scrutinized for their implications on economic health.

Powell and Fed Presidents on the Global Stage

Fed Chair Jerome Powell is set to address an audience at a foreign bankers' conference in Amsterdam on Tuesday. Joining the discourse are Cleveland Fed President Loretta Mester and Atlanta Fed's Raphael Bostic, both of whom hold a vote on policy this year, further spotlighting the Fed's stance and potential measures.

Bloomberg Economics shares their perspective on the CPI report, "April’s core CPI report could appear encouraging as we anticipate a deceleration from March. However, the core PCE reading—a greater concern for the Fed—could still present robust figures."

Canadian Markets and Rate Cut Speculations

Shifting focus to Canada, existing home sales data for April will shed light on the spring market's temperature as buyers mull over potential rate cuts. With several additional economic reports for manufacturing and wholesale data due, economic observers will have much to consider.

International Economic Benchmarks

Attention will also be drawn to China and Japan as data releases unravel the health and challenges within their economies. Growth indicators for industrial output, retail sales, and fixed asset investment are expected, alongside a continued watch on China's property market downturn.

Japan’s numbers, awaited on Wednesday, may confirm a contraction in its economy influenced by private consumption, business investment, and adverse net exports, marking a year's first. Bloomberg Economics postulates a recovery in Japan's second quarter driven by the auto industry's resurgence.

In anticipation of further economic insights, Bloomberg Economics presents a comprehensive outlook for Asia here.

The European, Middle Eastern, and African Prospects

In Europe, the UK's labor data could underscore inflation trends and influence monetary policy. A potential decrease in average weekly earnings growth, sans bonuses, will likely capture the attention of the Bank of England officials amid debates on borrowing costs.

Speeches by key UK policymakers, including the Bank of England’s chief economist Huw Pill on Tuesday, are expected to provide clarity on the economic standing and decisions ahead for the country.

Simultaneously, the European Central Bank's (ECB) officials from the key EU economies will also be active, with the ECB’s financial stability review unveiling later in the week and Germany's investor confidence numbers surfacing as a significant data point.

Concurrently, the European Commission in Brussels will release its economic forecasts, which will include growth, inflation, debt, and deficit projections come Wednesday.

Sweden, which saw a recent rate cut by the Riksbank, will disclose their decision minutes and the inflation reading, with Norway and Poland also slated to publish their GDP figures.

As inflation eases in Romania, the central bank may initiate a rate cut for the first time in three years, a decision accompanied by new consumer-price and growth figures.

Russia's economy, as per Bloomberg Economics, appears to have grown 5% year-on-year in the first quarter, bolstered by war spending and consumer confidence, defying the global trend.

Bloomberg Economics offers further insights into the global economic calendar for the EMEA region here.

The Israeli Economy and African Central Banks

Down south, the Israeli economy might reflect slowing inflation, creating a ripple of optimistic speculation amid geopolitical strains. In Nigeria, a stark rise in consumer-price growth is projected, partially propelled by the tripling of electricity prices in certain urban areas.

Central banks in Africa, particularly in Zambia and Angola, face pivotal decisions on interest rates as they address their respective economic challenges and inflationary pressures.

Latin America's Economic Mosaic

Looking southwest to Latin America, Colombia's economy is expected to present a minor first-quarter expansion, influenced by admirable February figures and altering growth forecasts. Also anticipated are industrial output, manufacturing, and retail sales data, which have yet to deliver a positive outcome over the past year.

Brazil's economy demonstrated resilience at the year's outset, finding support in the minimum wage increase and social programs catering to low-income households.

Recent months may show a softening in Peru’s economic activity, despite a remarkable February. The country is projected to recover from its previous-year recession, but this comes with a social cost, marking a distressing high in extreme poverty rates.

In Uruguay, inflation remains aligned with the central bank targets, opening a window for a consecutive rate cut from the current 8.5%.

Argentinian President Javier Milei's stringent economic measures are showing favorable impacts, with analysts predicting a reduction in month-on-month inflation rates and refined year-end forecasts.

Further elaboration on the Latin American economic environment is delivered by Bloomberg Economics’ comprehensive outlook here.

In conclusion, the coming week presents a wealth of economic data across the globe, each with the potential to impact the discourse on inflation, economic growth, and monetary strategies. From the US's hopeful signs of inflation deceleration to varied indicators of economic resilience or distress around the world, policymakers, investors, and the public will keenly await the outcomes and prepare for the implications on the global economic landscape.

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