UK inflation dominated headlines yesterday as we saw the release of the consumer price index. The figure posted significantly below the official 2% target at 0.3%. Core CPI (which excludes the volatile food and energy prices) missed expectations and posted 1.2%. The monthly CPI reading dropped substantially by 0.9% to - 0.8%, its worst reading in a year, leaving CPI for the year and the headline figure slightly higher at 0.3%. The reason for the substantial move in CPI can again be related to oil, as we saw it dip below $30 a barrel last month.
China is stepping up support for the economy as it ramps up spending and considers rule changes to free up more cash for bank lending. China’s measure of new lending surged to a record high recently, prompting the amendment. The Shanghai Composite Index appreciated over 3%, whilst the Yuan weakened following its biggest one day jump in more than 10 years, this followed the release of the new lending data yesterday.
The UK is again in the spotlight as the Average Earning figure is posted. With the recent Unemployment figure, earnings is one of the gauges that the BoE are also watching, in its assessment of when a rate rise could be seen. The Average Earnings and Unemployment rate are both forecast to decline, Unemployment is forecast at 5% and if met would mark a low, last seen in March 2006. Focus then switches to the US where the FOMC minutes are released.