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US inflation data will give investors a snapshot of how the world’s biggest economy entered Donald Trump’s war in Iran and how price pressures changed during the first month of the conflict.
February’s core personal consumption expenditures index — the Federal Reserve’s preferred inflation metric, which strips out volatile food and energy prices — will be released on Wednesday. Economists polled by Reuters expect it to show a 0.4 per cent increase in the month, matching the rise in prices in January. The headline figure is expected to tick up to 0.4 per cent from 0.3 per cent in January.
Data for March inflation due two days later will show how much that picture changed after the US and Israel launched strikes on Iran on the last day of February.
The consumer price index for the month, due on Friday, is expected to show the headline figure surging 0.9 per cent, up from a 0.3 per cent gain in February, driven by petrol prices. But economists do not expect the March data to show any significant second-order effects: the core figure is expected to tick up modestly to 0.3 per cent from 0.2 per cent in February.
Oil prices are higher than $100 a barrel, up more than 45 per cent since the war started and it is still far from clear how long disruption to global oil supplies will last — along with supplies of fertiliser and other vital inputs.
“The energy shock has been prolonged enough for some level of inflationary impact to be a certainty,” said Danni Hewson, an analyst at AJ Bell. “It’s now the size of the impact which is in question.” Alexandra White
Inflation data from China on Friday will provide a glimpse of how the war in Iran is affecting the world’s biggest supplier of manufactured goods.
Economists polled by Reuters expect the consumer price index, showing year-on-year price changes, to be little changed at 1.2 per cent in March from 1.3 per cent in February.
But a measure of producer prices is expected to show a 0.4 per cent annual gain, its first positive reading since 2022.
Higher energy prices have the potential to help pull China out of a deflationary struggle that has dragged its sovereign bond yields below those of other big economies in recent years. Analysts at Citi estimate that a 10 per cent rise in oil prices could eventually feed through to a 1.15 percentage point rise in China’s PPI and a 0.2 point rise in its CPI.
The near-term pass-through to consumer prices will be limited by measures to cushion the blow on motorists. But China has other tailwinds, including an increase in AI-related demand. So changes in its consumer and producer prices will be watched closely. Ian Smith
Will the Iran war bolster inflation in China?
Inflation data from China on Friday will provide a glimpse of how the war in Iran is affecting the world’s biggest supplier of manufactured goods.
Economists polled by Reuters expect the consumer price index, showing year-on-year price changes, to be little changed at 1.2 per cent in March from 1.3 per cent in February.
But a measure of producer prices is expected to show a 0.4 per cent annual gain, its first positive reading since 2022.
Higher energy prices have the potential to help pull China out of a deflationary struggle that has dragged its sovereign bond yields below those of other big economies in recent years. Analysts at Citi estimate that a 10 per cent rise in oil prices could eventually feed through to a 1.15 percentage point rise in China’s PPI and a 0.2 point rise in its CPI.
The near-term pass-through to consumer prices will be limited by measures to cushion the blow on motorists. But China has other tailwinds, including an increase in AI-related demand. So changes in its consumer and producer prices will be watched closely. Ian Smith
Will Eurozone retail sales pile further pain on the euro?
The euro has been one of the currency losers from the Iran conflict, falling 2.2 per cent against the dollar in March alone as investors feared a rerun of the 2022 energy shock.
The single currency’s fall is more remarkable given that swaps traders have moved to price in two or three quarter-point interest rate increases by the European Central Bank in reaction to an expected rise in inflation, whereas the US Federal Reserve is expected to hold rates steady. A move higher in relative interest rate expectations typically supports a currency.
Eurozone retail sales figures for February, due to be published on Wednesday, could pile further pain on the currency. Economists polled by Reuters expect a 0.2 per cent fall, which would be slightly weaker than January’s 0.1 per cent decrease but a stronger performance than December’s 0.5 per cent fall.
Analysts said the figures would not yet reveal the full effect of the surging oil and gas prices caused by the war in Iran.
“Energy supply shocks take time to impact retail figures — next week should only show a limited portion of that impact,” said Florian Ielpo, a multi-asset portfolio manager at Lombard Odier Investment Managers.
Nonetheless, the figures could help investors “to assess where the next direction could be in terms of sales growth”, he added. Rachel Rees
