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This week

During another sweltering week for the UK, it was e-commerce behemoth, Amazon, that was kicking up dust, or rather helping to get rid of it, as the week began with some rather interesting acquisition news.

The beginning of the week saw Amazon’s ever increasing collection of connected devices expand to robotic vacuums, as it announced the purchase of Roomba maker, iRobot, for $1.7 billion. Amazon’s acquisition is all part of its broader strategy of trying to ensure that its Prime service is always at the top of consumers’ minds, and by selling more physical products that connect to the platform, it can do just that. It is becoming increasingly clear that Amazon is heavily invested in the future of smart homes from Alexa enabled speakers to air purifiers, but it is this latest acquisition that should really help them clean up.

However, whilst Amazon where expanding into the area, it was the UK government that was being explored to escape it. With the cost of living crisis set to worsen in the coming months, according to the Bank of England (BoE), Boris Johnson was criticised for creating a “political vacuum”. Any political response has been overshadowed by a leadership campaign set to run until early September commented former Labour Prime Minister, Gordon Brown, who warned that the country was facing an "economic time bomb" if it did not draw up a plan now for the difficult winter ahead.

Whilst inflation is still a major issue for most economies around the world, there were some signs that price rises may be reaching their peak. Wednesday saw the US Consumer Price Index (CPI) come in flat against consensus forecasts of a 0.2% monthly rise. Static prices were largely driven by a 20% drop in fuel prices over the month, with rental prices remaining unmoved. It was not a clean sweep however, with food prices increasing by 1.1% over the month.

On the news, Fed futures moved to price in only a 43% chance that the US central bank will hike rates by 0.75% when it meets in September, compared with 68% before the data was released. A 0.5% hike is now seen as a 57% probability. With the chances that the Fed may ease back on future rate hikes, it was no surprise that the more growth orientated indices took the news well, with the tech heavy NASDAQ soaring 2.89%.

On the economic data front, there was also encouraging news on domestic shores as the British Retail Consortium reported stronger than anticipated sales data. Demand for summer clothing and picnic food during the hot weather helped push up transactions and spending last month, with perhaps the most eye-catching being Tesco’s report of a 1,400% rise in paddling pool demand. Sales of fans and air conditioning units were also on the rise, up 640% and 525% respectively, purchases that unlike Amazon’s Roomba, won’t be gathering dust any time soon.

Next week

With the summer holidays now in full swing and another week of temperatures consistently above 30°C to come, there may be some data released on Monday that shows at least one area is starting to cool down.

The beginning of the week will see Rightmove, the online estate agent, releases its House Price Index data, detailing the change in the asking price of homes for sale on its website. Although this acts as the UK's earliest report on housing inflation, the data actually tends to produce a relatively mild impact due to asking prices and selling prices not always being correlated. With the Bank of England embarking on an aggressive rate rise trajectory and introducing their largest single hike for 27 years last week, the effects on the housing market are finally being felt. With prices rising at their slowest pace for the past year according to last month’s numbers, many will be hoping for a continuation of the trend.

From buying houses in the UK to buying consumer goods in China, Monday will also detail Chinese retail sales data, an essential piece of information, that has a wide-reaching impact to a number of European luxury brands. The numbers themselves will act as a primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Its back to domestic shores by the middle of the week for inflation numbers, released by the Office for National statistics. The data will be scrutinised by both Westminster and Threadneedle Street as the cost of living crisis shows no signs of abating. However, with US inflation gauges showing a plateau in prices last week, many will be hoping for the same pattern this side of the pond.

The end of the week will be wrapped up in the US, as the Federal Reserve releases the minutes from its latest meeting. These will act as a detailed record of their most recent meeting, providing in-depth insights into the economic and financial conditions that influenced their vote on where to set interest rates. The minutes will take on added significance due to the various mixed messages coming from the central bank. However, after last week’s inflation numbers, the market is now pricing in a 57% chance of just a 0.5% rate hike at the bank’s next meeting.

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 12 July 2022.