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Economics Weekly: Economic news and indicators released this week.The US interest rate decision and the quarterly Bank of England Inflation Report feature alongside UK and US trade data this week.
Weaker than expected US labour market data published on Friday gives more scope for the US Federal Reserve to keep rates on hold at 5.25% on Tuesday. Just 113,000 jobs were added in July, average earnings grew by 3.8% pa compared with 3.9% in June, while the unemployment rate rose to 4.8% from 4.6% in June, the first increase since February. However, recent price data justifies the Fedâ€™s concern over inflation and this will keep it vigilant and open to further tightening in the months ahead. Last weekâ€™s publication of the monthly core PCE index, the inflation measure preferred by the Federal Reserve, shows that inflation rose by 0.2% in June and the annual rate to 2.4% - the highest rate since September 2001.
On the data front, US unit labour costs for Q2 are published on Tuesday, and are expected to have jumped sharply to 3.2%, twice the rate in Q1, due to the slowing economy and higher wages. On Thursday, the US trade deficit could come in at $65bn in June compared with $63.8bn in May, see chart b. The weaker currency, alongside high oil prices - currently above $75 a barrel - could see a further widening in the deficit over coming months. On Friday, US retail sales for July are expected to have risen by 0.6%, rebounding modestly after a couple of weak months.
In the wake of sterlingâ€™s strength and soaring interest rate yields, the publication of the UK Bank of England Inflation Report will be keenly awaited on Wednesday for a view of the thinking behind last weekâ€™s surprise decision to raise interest rates by 25bp to 4.75%. Other UK economic news includes, published today, industrial and manufacturing output. We expect the monthly figures to show growth, but the annual numbers are still very weak. The UK trade deficit, published on Wednesday, is forecast to improve from Â£6.8bn in May to Â£6.3bn in June, see chart a. With rising imports being the key problem, the recent appreciation in the trade weighted index, which means that goods are cheaper to import, could bring some benefit.
The ECB publishes its monthly bulletin on Thursday, elaborating on the reasoning behind last weekâ€™s 25bp interest rate hike to 3.0%. French and German industrial output for June could be weaker according to recent business surveys.
Nichola James, Senior Economist
Lloyds TSB Bank,
London EC3R 8BQ
0207 283 - 1000
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