Investors will finally get a better picture of how the Trump administration’s trade war affected US inflation in September when delayed consumer price data is released on Friday.
The ongoing government shutdown has halted official data releases, pushing back CPI data, which had been due to come out on Wednesday this week. The Federal Reserve has nevertheless called in a limited number of employees to put out the delayed data, which is scheduled for October 24, more than a week late.
Delays in official data have left investors “flying blind” amid concerns over lingering price pressures and the health of the world’s largest economy, with many instead relying on private data and Fed surveys such as the Beige Book for insight into the US economy.
Economists polled by Reuters expect the data to show a rise in the annual inflation rate to 3.1 per cent from 2.9 per cent, while the core rate is forecast to stay at 3.1 per cent.
The data will be considered by the Fed at its upcoming two-day meeting starting on October 28. At its last meeting, the central bank shifted its focus towards the risks of a weakening labour market over rising inflation. Its so-called dot plot shows policymakers expect inflation to reach 3 per cent at the end of the year.
Traders are pricing in a 0.25 percentage point cut this month and a further reduction in December.
Until the data arrives, many investors may hold off on placing major market bets, with the vacuum of reliable information complicating forecasts for interest rates and corporate earnings. Kate Duguid
Will UK inflation make it harder for the BoE to cut interest rates?
In a busy week ahead for UK economic data, investors will be focused on September’s inflation numbers for clues about the Bank of England’s next move on interest rates.
Economists polled by Reuters expect headline consumer price index inflation to rise to 4 per cent, the fastest pace since the end of 2023, from 3.8 per cent the previous month.
The rate would match the BoE’s forecast and is widely expected to mark this year’s peak before inflation begins to ease again. Services inflation — a closely watched measure of domestic price pressures — is forecast to have risen from 4.7 per cent in August to 4.9 per cent in September.
A stronger than expected reading, especially in services, could reinforce the view that inflation is proving sticky and strengthen the case for keeping interest rates higher for longer.
Traders are pricing in a roughly 50 per cent chance of a 0.25 percentage point reduction in rates by December, while a cut is fully priced in by March.
The rise in UK inflation in September is expected to have been driven by higher fuel, airfares and clothing costs. Some analysts also point to a delayed pass-through from the imposition of VAT on private school fees from January.
Food prices remain a concern, with inflation in August at 5.1 per cent — the highest since January 2024 — highlighting the risk of entrenched price expectations. However, a stabilisation of global food costs is expected to be reflected in the UK data.
The IMF this week warned the UK was on track to post the highest inflation in the G7 this year and next.
Updates on retail sales, public finances and the latest S&P purchasing managers’ indices are also due during the week. Valentina Romei
How severe is the slowdown in China’s economy?
China will release a range of data on Monday, including third-quarter GDP, that is expected to show slowing growth in the world’s second-largest economy.
The data follows an escalation in the country’s trade dispute with the US, and comes as Chinese officials convene to discuss its next five-year plan.
The consensus among economists is that growth slowed in the third quarter, with an average forecast of a reading of 4.8 per cent year on year, down from 5.2 per cent three months earlier.
Recent data has been weak, which economists say reflects the impact of Beijing’s so-called anti-involution campaign to trim excess production capacity in response to deflationary pressures. Fixed-asset investment slowed sharply over the summer due to weak construction activity and an ongoing contraction in property investment.
However, while there has been a slowdown in domestic investment, exports have been strong, despite the trade war, rising 8.3 per cent in September.
“Exports have been more resilient than initially feared on the back of the increased US tariffs,” Goldman Sachs analysts said in a recent note.
On Monday, authorities will also announce the five-year loan prime rate — the benchmark for home mortgages — which is expected to be held at 3.5 per cent, as well as September retail sales, industrial production and fixed-asset investment.
“We do not believe September’s data release will trigger monetary policy easing and interest rate cut in the near term,” ANZ economists wrote in a note.
Meanwhile, analysts say that China’s mix of export dominance and domestic weakness are a result of policies pursued in its previous five-year plan to redirect investment from real estate into manufacturing and technology.
Officials in Beijing appear unlikely to fundamentally change course from this strategy even if they promote the private sector, services and consumption, say analysts.
“There are no signs that policymakers are about to pivot away from the technology centric growth model they adopted in 2020,” Adam Wolfe, an emerging markets economist for Absolute Strategy Research, wrote in a recent note. William Sandlund
