Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
News just out: UK inflation jumped to 3.2% in August, from 2% in July, the highest rate since March 2012. The Office for National Statistics says:
The increase of 1.2 percentage points is the largest ever recorded increase in the CPI National Statistic 12-month inflation rate series, which began in January 1997; this is likely to be a temporary change.
The consumer prices index rose 0.7% between July and August, compared with a 0.4% drop in August last year.
The statistics office said higher prices in transport, restaurants, hotels and for food and drinks pushed up the consumer prices index. It noted that in August 2020 many prices in restaurants and cafes were discounted because of the government’s temporary Eat Out to Help Out scheme, which was not repeated this year.
The figures come a day after inflation across the US economy eased in August from July’s 13-year highs, in a sign that some of the pandemic price pressures may be fading.
The US Consumer Prices Index rose by 5.3% in the 12 months to August, down from 5.4% in July. Energy prices rose by 25% over the year, while the food index increased 3.7%. Core inflation, which strips out volatile items such as energy and food, fell back to 4% from 4.5%.
Even though this was what investors wanted to see, stock markets still fell back and bond yields fell over concerns that growth is starting to slow.
Over in China, retail sales slowed sharply, showing the impact of port disruptions and localised Covid restrictions that were reintroduced because of the spread of the delta variant. Retail sales rose by 2.5% in August, a big fall from July’s 8.5% increase. Industrial production also slowed, to a 5.3% increase from 6.4% in July. Asian markets fell after the data, with Japan’s Nikkei losing 0.5% and China’s CSI 300 down 1%.
Michael Hewson, chief market analyst at CMC Markets UK, says:
If investors weren’t worried about a slow down in China’s economy before today’s numbers they probably are now. As a gauge of how much damage the resurgent delta variant is doing to economic activity you couldn’t see a starker example.
- 7.45am BST: France inflation final for August (forecast: 1.9%)
- 9am BST: Italy inflation final for August (forecast: 2.1%)
- 10am BST: Eurozone industrial production for July
- 12pm BST: US MBA mortgage applications for week of 10 September
- 1.30pm BST: Canada inflation for August (forecast: 3.9%)
- 2.15pm BST: US Industrial production for August