Every Monday, Mint’s Plain Facts section features key data releases and announcements to watch out for in the coming week. India is among four major economies that will announce their August inflation figures this week. The data releases could very well act as a nudge to central banks that are currently grappling with steep price rise and a vulnerable economic recovery. Here are the key releases to watch out for in next seven days:
- India inflation
The consumer and wholesale inflation data for India are due for release on Monday and Tuesday, respectively. Both prints eased significantly in July: retail inflation to 5.6%, and the wholesale one to 11.2%. With the gradual unlocking, supply-side issues are progressively getting addressed, even as demand-side impulses remain flat, limiting the pass-through from the wholesale side to retail.
The current retail inflation trajectory is broadly mapping the central bank’s latest projection of 5.7% for 2021-22. The figure is not expected to budge much in August as some external factors provide the much-needed cushion: lower demand is keeping crude oil prices under check, while global food prices remain range-bound. However, some weight of the benign expectations is also resting on a good monsoon, which has largely been a damp squib so far. The RBI expects inflation to ease only by the next quarter, aided by kharif harvest arrivals.
2. US inflation
Supply-side bottlenecks and a reopening-led disequilibrium with demand have led to a rise in retail prices in the US. However, with a steady headline print for the past two months, price pressures no longer appear rampant even at a 13-year high. Experts will keenly watch the consumer prices data, which will be out on Tuesday, for any early signs of peaking.
A Centrum research report expects inflation to become a more broad-based phenomenon by mid-2022. As of now, just three to four items were contributing roughly 65% to the inflation surge, the report said.
A raft of high-frequency indicators shows the economy is set to continue its strong recovery, but the turnaround seems to be a little sporadic with muted retail sales and real wages. Also, the fears emanating from rising infections due to the Delta variant are inescapable. Yet, with healthy signs of a labour market rebound, monetary policy normalization could gain pace.
3. UK inflation
After reaching a three-year high of 2.4% in June, headline inflation in the UK eased marginally in July. The Bank of England (BoE) estimates it to have jumped to 3% in August. The final data is due on Wednesday.
The July moderation was more of a temporary blip than any real easing of prices. Economists still expect inflation to reach double the BoE target of 2% by year-end before it starts to decline. The slowdown was partly due to the high base of last year, when lockdown restrictions were first eased. Consumer items led the downward trend, while fuel and industrial raw materials stayed expensive due to supply chain issues.
Labour shortage and the resultant wage growth, has been a major contributor to upward price pressures. A policy action from the BoE seems far, until the economy gains durable strength.
4. Euro area inflation
Headline inflation in the euro area rose to 3% in August, the highest since November 2011. Updated statistics are awaited on Friday. Only four countries in the bloc had their inflation below 4% in August, preliminary data showed.
The decade-high inflation was driven by a rebound, higher energy costs, bottlenecks in global supply chains and reversal of tax cuts in Germany, the largest economy in the region.
While the price rise is still being seen as temporary for the most part, the recent jump nudged the European Central Bank (ECB) last week to moderately scale back its bond purchase programme. However, in effect, it’s only a reversal to the March 2021 pace: unlike the US Federal Reserve, the ECB has indicated no plan to end the stimulus yet.
Growth, meanwhile, is progressing at a strong pace, largely led by the services sector returning to business. This could only keep inflation hot for some months.
5. OPEC monthly report
Opec’s monthly report on the global crude oil market is due on Monday. The previous edition had left global demand projections for 2021 unchanged despite increasing risks of the Delta variant. This contradicted the International Energy Agency’s view, which saw demand declining due to covid-19 surges in Asia. Will the Opec revisit its projections in the September report?
In India at least, oil demand is expected to reach pre-covid levels by the December quarter as mobility rises. Not much change is likely there this time, though investors will look for commentary on the possible impact of global trends. The cartel’s new GDP growth estimate for India for 2021 will also be of interest: in its last report, it had pared the forecast to 9.3% from 9.5%, citing possible headwinds from inflation and financial stress as well as the pandemic.
Markets will eye remarks on crude prices, too, which have declined since the July deal to raise output, but not enough.
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