Will US consumer price growth reach the highest level since 1990?

Will US consumer price growth reach the highest level since 1990?

US consumer price growth is forecast to accelerate once again in October, ending a streak of more modest increases and reinforcing concerns that high inflation will persist for much longer than anticipated.

Consumer prices are expected to have risen 5.8 per cent from the same month a year ago, Wall Street economists predicted ahead of a release on Wednesday from the Bureau of Labor Statistics. That would mark a step up from the 5.4 per cent pace recorded in September and be the highest level since 1990.

Consensus forecasts compiled by Bloomberg suggest prices jumped 0.6 per cent on a month-over-month basis. Between August and September, they rose 0.4 per cent.

October’s price gains are expected to be more moderate once volatile items like food and energy are stripped out, but still remain elevated. Core CPI is forecast to rise 4.3 per cent on an annual basis, up from 4 per cent in September. Gains of 0.4 per cent from the previous month are expected, double the last reading.

Economists and policymakers will be closely scrutisining Wednesday’s data for further signs inflationary pressures are broadening beyond sectors most sensitive to pandemic-related disruptions, such as used cars. Rents and other housing-related expenses are expected to have risen once again.

The latest inflation figures come after the Federal Reserve’s most recent policy meeting. The US central bank not only announced a scaling back of its asset purchase programme, but also acknowledged more directly the risk that inflation will continue rising and highlighted the severe supply-chain disruptions that are fuelling today’s price pressures.

Chair Jay Powell also stressed that the Fed stands ready to use its tools in the event inflation becomes a more pronounced problem, although he reiterated he expects a reprieve eventually as bottlenecks are resolved. Colby Smith

How much did UK economic growth decelerate in the third quarter?

The UK economic rebound is expected to have slowed sharply in the third quarter, economists said ahead of the release of fresh data on Thursday. The Bank of England forecast in its latest monetary policy report that output growth slowed to 1.5 per cent in the three months to September, down from 5.5 per cent expansion in the previous quarter and below what it had been expected previously.

This would leave gross domestic product 1.8 per cent below its pre-pandemic level, bigger than the 0.5 per cent gap for the eurozone.

The UK economy is now expected to return to pre-coronavirus levels only in the first quarter of next year, three months later than the BoE had anticipated in August, as growth is forecast to slow to 1 per cent in the final three months of 2021. The BoE also downgraded its forecast for next year by one percentage point to 5 per cent.

“The weaker near‑term outlook mainly reflects the impact of supply constraints, both domestic and global, although UK consumer demand is expected to be a bit weaker as well,” the BoE said.

Ellie Henderson, economist at the wealth management group Investec forecast marginally lower growth in the third quarter at 1.4 per cent, as the economy is expected to grow only 0.3 per cent month on month in September. This is because she expects industrial production to be held back by supply chain disruptions and construction activity to have flatlined following rising production costs.

Henderson said that the moderation in the headline growth numbers is “no surprise” as the so-called low-hanging fruit of the reopening has already been picked. Valentina Romei

Will supply shortages and the ecommerce transition squeeze British retail earnings?

Next posted better than expected third-quarter sales this week, but the clothing and homeware group stopped short of raising its full-year outlook. It warned that pent-up demand is now waning at a time when supply-chain challenges and inflation are hampering consumer spending. A host of earnings reports due in the coming days will show how far such factors have influenced trading at other British retailers.

Those corporate updates will also detail the extent to which shopping has moved into the digital realm, after coronavirus restrictions accelerated a well-documented shift away from bricks and mortar venues. The proportion of UK retail sales made online rose to 28.1 per cent in September, according to the Office for National Statistics — much higher than the 19.7 per cent level recorded in February 2020.

Marks and Spencer, which reports half-year numbers on 10 November, has taken steps in recent months to speed up its transition to a digital-first company, committing over £20m to a tech fund run by investment firm True. The company said in late August that performance overall had been “encouraging” since the uncertainty at the start of 2021.

Meanwhile, high-street chain Primark lacks an ecommerce presence, but owner Associated British Foods — which reports full-year numbers on November 9 — said in a trading statement that the operating margin had remained strong in the fourth quarter of its financial year that ended on September 18. Analysts are projecting operating profits for ABF of £959m, down from £1.02bn according to FactSet consensus estimates.

From the high-street to the high-end, luxury group Burberry reports on Thursday 11 November — the first since it was announced that Jonathan Akeroyd will join from Versace as chief executive. “As well as [current boss Marco] Gobbetti’s departure, worries about a slowdown in China, a lucrative market for luxury brands, had also been dragging down the share price,” said Susannah Streeter at Hargreaves Lansdown. Burberry’s investors “will be keen to watch out for any fresh indications about consumer confidence there”.

Shares in M&S are up more than two-fifths year-to-date. AB Foods’ shares are down 16 per cent. Burberry’s are up 12 per cent. Harriet Clarfelt