From the US inflation data due on Tuesday will be the focus. In June, core goods prices (excluding autos) rose 0.6% MoM, the largest jump since February 2022. For July, we expect a similar increase, with autos also likely driving inflation higher. Vehicle prices, which surprisingly fell in June despite tariff pressures, and rising car auction prices add upside risk. We forecast a 0.4% MoM rise in core CPI, above the 0.3% consensus.
The Fed is unlikely to face a repeat of 2021/22’s supply shock-driven 9% inflation. Key factors like oil prices, housing rents, and wage growth, which fueled inflation then, are now cooling and should help offset tariff effects in the coming months.
On Friday we will get retail sales and consumer confidence data. Strong auto sales may boost retail figures, but weak consumer confidence, driven by tariff concerns, job market worries, and household wealth volatility, suggests slower activity in the second half of the year.
In the UK we have jobs data due on Tuesday which will be key given the BoE decision this week as well as the upgraded forecasts.
The BoE remained calm about the job market in August, even as payrolls have steadily declined. Another sharp drop in hiring is possible, though these figures are often revised upward later. GDP data will follow on Thursday where Q1 saw a boost from export surges ahead of US tariffs, but Q2 has been weaker. Still, overall activity likely grew modestly in the spring.