This week just ended

In a busy week for numismatists and investors alike, the Royal Mint announced it is issuing five million commemorative 50p coins marking the coronation of King Charles, allowing the public to "find a piece of history in their change". However, we may still have to wait a while for the 27 billion 50p pieces that are still in circulation from the late Queen Elizabeth II’s reign to work their way out of the system before we see his face on a more regular basis.

To coin a phrase from French Philosopher, Simone De Beauvoir “Buying is a profound pleasure,” meaning that if we take the British Retail Consortium’s data from this week at face value, the high street is not a very happy place to be right now at all. It would seem it has just been the Royal Mint making money recently as retail sales rose a disappointing 1.8% on an annual basis, compared to expectations of an increase of 3%.

It would appear the heavy summer rain we have been experiencing is mostly culpable for consumers shying away from the shops. The data showed that as the storm clouds came out, shoppers retreated, with like for like sales growth for the high street pretty dismal for July. Furniture and food and drink were the best sellers, whilst the wet weather meant there was no need to revamp those summer wardrobes, with all categories of clothing falling into negative sales territory in what is usually a busy month for clothing retailers.

It also seems the consumer is still counting the pennies, with an observation from the survey remarking that retailers are introducing an ever-increasing amount of promotions to get shoppers through the door, battling to keep market share. Whilst the consumer has been remarkably resilient throughout the cost-of-living crisis, persistent inflation could soon test that will to spend even further.

The cost of living was the talk of markets during the week, as China reported its inflation figures, showing it was all change for the world’s second largest economy as prices fell for the first time in 2 years. On Wednesday the Chinese National Bureau of Statistics reported the consumer price index (CPI) dropped 0.3% on an annual basis. The weaker than expected data led many to believe the Chinese government will soon be forced to act to increase demand in China, leading the heavily commodity exposed FTSE 100 to rally 0.8%, its largest daily gain in three weeks.

A penny for the thoughts then of the US Federal Reserve on Thursday as data showed that price rises in the world’s largest economy increased moderately during July, with higher rents mostly being offset by declining costs of goods such as motor vehicles, a trend that could persuade the central bank to leave interest rates unchanged when it next convenes. Rising 3.2% annually, just below expectations of 3.3%, the inflation outlook was further brightened by a separate report from the US Labor Department showing initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 248,000, well ahead of the 230,00 expected.

Whilst the Royal Mint’s announcement may have excited coin collectors across the land, it was news from the Office for National Statistics on Friday that was far more noteworthy for economists. It seems that the resilience of the UK economy remains despite the Bank of England’s (BoE) best efforts in raising rates, highlighted by data showing growth of 0.2% over the quarter, against expectations of a flat reading. Dragged up by 0.5% growth during June, with manufacturing enjoying its strongest quarter since early 2019. Business investment also surged, up 3.4% during the quarter.

The stronger than expected news could prove a headache for the BoE who may have been pencilling in pausing upcoming rate rises, however with such strong data still coming through, predicting the chances of further hikes could come down to the toss of a coin…

This coming week

They say it’s the hope that kills you, a feeling many economists know well regarding Chinese data during 2023. Regarded as the great hope for financial markets after scrapping its zero covid policy and reopening its economy earlier this year, China’s economic recovery has proven patchy at best, as the country seemingly heads into deflationary territory. Monday morning offers up not only Chinese retail sales data to analyse but also the country’s industrial production numbers too.

With China’s economy still majorly focussed on manufacturing, the data will prove key to allowing us to gauge the demand the world’s second largest economy is facing. The numbers are highly regarded as they act as a leading indicator of economic health, with production the dominant driver of the economy, reacting quickly to the ups and downs in the business cycle.

Kicking off the week on domestic shores, we have the UK’s claimant count data, detailing the change in the number of people claiming unemployment-related benefits during the previous month, a key piece of data in understanding the overall strength of the labour market. The numbers should take on added significance considering just how robust the jobs market has been during the Bank of England’s rate hiking cycle, with very few signs of cooling down just yet. Analysts and those on Threadneedle Street alike will be scrutinising the various facets of the data to identify any possible cracks that could help sway the central bank’s rate decision one way or another.

On Wednesday the US Federal Reserve will hold a press conference releasing the minutes from their previous meeting, we should gain a greater insight into why each member voted the way they did concerning rates and what their outlook for the future of the US economy is.

The newsworthy events of the coming week are very much centred during its first few days, potentially setting the tone for the rest of the week and what is to come.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used, you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 11 August 2023.