Has U.S. core inflation resumed its decline?

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U.S. inflation pressures are expected to ease slightly in February, which the Federal Reserve will welcome as it assesses when to start cutting interest rates this year.

Economists polled by Reuters said the U.S. Bureau of Labor Statistics will release its latest U.S. consumer price index report on Tuesday, which is expected to show headline inflation unchanged at 3.1% in February.

However, core inflation, which strips out the volatile food and energy components and is used as a measure of underlying price pressures in the economy, is expected to fall to 3.7% from 3.9% a month ago.

The data follows a hot inflation report in January that showed headline inflation slowed less than expected, while core inflation was unchanged. Even as the Fed raises interest rates, the “housing” category – which includes housing costs for rent and owner-equivalent rent – has remained strong, keeping core price gains elevated.

Data in line with survey expectations could be good news for the Federal Reserve, which will release an updated “dot plot” at its March meeting showing where officials see interest rates in the year ahead.

Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, said any upside surprise would increase the likelihood that Fed policymakers will lower their forecast for rate cuts this year to just two quarters from the current three. Kate Duguid

Are UK wages still rising?

Solid wage growth in the UK has made the Bank of England cautious about cutting interest rates. Investors will be watching data this week that will provide the latest clues on the extent to which pay is adding to broader inflationary pressures.

Economists polled by Reuters expect annual wage growth to remain unchanged at 6.2% in the three months to January. That's down from a recent peak of 7.9% in the three months to August, but the rate suggests the Bank of England has a lot of work to do to achieve its 2% inflation target.

Only a sharp drop would prompt markets to raise expectations for a rate cut this year after scaling back in recent weeks.

“The next round of official labor market data is unlikely to be available [BoE] Robert Wood, an economist at Pantheon Macroeconomic Consulting, said that was a strong case for an imminent rate cut.

As surveys continue to suffer from low response rates, it is difficult to get a clear picture from the employment data of the degree of labor market tightness and corresponding wage pressures. “We forecast the unemployment rate will rise slightly to 3.9% in January, but we are not confident and in any case we have zero confidence in the outcome,” said economist Ellie Henderson.Investec Group

Instead, January gross domestic product data released on Wednesday should indicate whether the country is emerging from recession in the second half of 2023.

Henderson predicted that January GDP data will send a “more optimistic message”, with a month-on-month increase of 0.3%, “paving the way for what we believe will be quarterly output growth.” [the first quarter], which will end technological decline. ” Valentina Rome

Will Chinese house prices fall further?

China's National Bureau of Statistics will release February house price data on Friday, providing an important update on the country's weak property market.

Real estate has become one of the biggest drags on investor and consumer confidence in China, with house prices falling in all but two of the past 21 months. But in January, prices fell only 0.4%, a slight improvement from December's decline.

Housing was once the preferred investment vehicle for Chinese consumers to store their savings. Previously, the real estate sector was also responsible for about a quarter of economic activity and land sales to developers long-term funded by local governments. Now, as falling prices and a liquidity crunch still weigh on developers, home prices have contracted, eroding consumer confidence at a time when Beijing needs greater demand to help boost the economy and fight deflation.

But while the days of steady house price growth may be over, there are signs that China's real estate market has at least stabilized near more sustainable levels, which will be welcomed by investors and domestic property owners. February's data will be the first since China lowered its five-year prime loan rate, the national benchmark for mortgages.

Even so, Lu Ting, chief China economist at Nomura Securities, said a real estate recovery is “not in sight yet.” Lu added that developers are “still reluctant to take the land” [and] We expect land sales revenue to shrink further in 2024.” However, if house prices end up rising in February, it could give market sentiment a shot in the arm. William Sandlund