Has the Fed’s preferred inflation measure continued to fall?

Has inflation slowed US consumer spending?

The United States is already at the peak of inflation, says Gregory Daco, chief economist at EY-Parthenon, but the biggest factor for consumers will be the pace at which price growth cools down, and the level it eventually reaches.

The core PCE price index, a measure that excludes food and energy prices, has begun to recede. Core personal consumption expenditures rose 5.2 percent year on year in March, compared to an increase of 5.3 percent in February. Economists expect a further decline to a rate of increase of 4.9 percent in April data, to be published on Friday. PCE is released after other inflation reports, including Consumer Price Indexbut as the Fed’s preferred inflation measure, it is closely watched by investors.

Oren Clashkin, chief US economist at Oxford Economics, will also monitor consumer spending figures included in PCE data to see if there is a shift from goods to services. “We actually want to see a rotation toward services,” he said. “This means that we are back to normal after more than two years of dealing with Covid.”

Dako said a decline in the consumption of goods was expected, but a decline in spending on services, particularly in the entertainment categories, would indicate that the economy was more fragile than expected.

Recent quarterly earnings show spending on goods may slow. Wal-Mart cuts Full year profit forecast Last Tuesday I reported the goal a 52 percent decrease In net income the next day. Garen Care

Will the Turkish Central Bank act to stabilize the lira?

The Turkish lira has returned to choppy waters in recent weeks, losing 16 percent of its value against the dollar this year amid soaring inflation and a tough global economic outlook. But this does not mean that Turkey’s central bank will take action.

MPC members are almost certain to opt to keep the rate steady at 14 per cent on Thursday.

The bank – effectively run by President Recep Tayyip Erdogan, who holds unorthodox views on monetary policy – has remained on the sidelines even as inflation hit 14 times its official target of 5 per cent, reaching nearly 70 per cent last month.

As extremely negative real interest rates put pressure on the currency, the authorities have sought to hold the lira steady using a combination of unconventional measures. It includes a government-backed savings plan that seeks to entice the Turkish population to own the lira by promising to protect them from exchange rate losses. The central bank has also put increasing pressure on companies not to buy foreign currency – urging commercial banks not to sell it to them.

But analysts warn that these tactics may reach their limits. Per Hammarlund, chief emerging markets strategist at Swedish bank SEB, said a “perfect storm” was gathering for the lira with rising inflation, a widening current account deficit, soaring global energy prices and the risk of a slump in vital export earnings. Growth is slowing worldwide.

“A rate hike and a credible commitment to lower inflation would permanently stabilize the lira,” he wrote in a recent note to clients. But with President Erdogan staunchly opposed to price hikes, it would only be a last resort. ” Laura Beetle

How does business in the eurozone hold up?

Business activity in the eurozone has stalled this year so far. But economists worry that this could soon change if the fallout from Russia’s invasion of Ukraine and the strict coronavirus lockdowns in China cause even greater production losses.

A major test on Tuesday will come from the latest S&P Global survey of purchasing managers, which ECB policymakers will watch as they weigh how close they are to stop buying more bonds and start raising interest rates.

The survey is expected to show business activity in the euro zone was flat in May compared to the previous month, with the composite PMI reading down 0.5 points to 55.3, according to a Reuters poll of economists.

Service companies are expected to report a slight increase in activity by lifting coronavirus restrictions, offsetting slower growth in manufacturers due to fallout from the war in Ukraine and supply chain disruptions.

Annalisa Piazza, an analyst at MFS Investment Management, said China’s coronavirus shutdown will hit the eurozone industry in two ways. “This will lead to more supply constraints and this will further slow down production, especially in intermediate industrial goods,” Piazza said. “But for eurozone exports, there is also sure to be an immediate impact.”

German manufacturers are particularly vulnerable to such headwinds. Investors will learn more about their expectations on Monday when the Ifo institute in Munich publishes the latest results of its business survey, which is expected to show a drop in sentiment due to expectations dropping to a two-year low. Martin Arnold

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