This week

After an extra-long Jubilee bank holiday weekend, with the bunting being taken down and the commemorative crockery put safely back in the cupboard, it seemed a different facet of stereotypical British life could now be under threat.

It was reported this week that chippies up and down the land are being battered due to the rising cost of fish, with some seaside resorts having to charge up to £12 for a takeaway cod and chips. Whilst the price of a treat by the seaside may be getting more expensive, it is not just fish that is forcing the consumer to scale back…

It was also announced this week that the soaring cost of fuel saw its biggest daily jump in 17 years on Tuesday, with a rise of more than 2p a litre. The average price of diesel also rose by almost 1.5p to another record high of 186.57p per litre this week, making the average cost of filling a 55-litre family car £102.61.

Whilst consumer confidence falters in the west due to rising costs, the luxury goods sector received a much-needed boost as China, a considerable market for most high-end brands, announced it was loosening its Covid restrictions placed on the cities of Beijing and Shanghai. Although the week started strongly for European fashion houses and watch makers, it became apparent that time was a luxury the European Central Bank (ECB) can’t afford.

Thursday saw European shares hit two-week lows after the ECB struck a more hawkish tone, whilst raising its inflation forecast and cutting economic growth expectations for the year. With inflation sitting at a record high 8.1% and still rising, the ECB now fears that price growth is broadening out and could soon become a hard-to-break wage and price increase spiral, ushering in a new era of stubbornly high prices.

To combat this, the ECB has now ended its long running stimulus scheme coupled with an announcement that it will be introducing a 0.25% rate rise on 21 July and then possibly a 0.5% hike during September.

"We will make sure that inflation returns to our 2% target over the medium term…It is not just a step, it is a journey" ECB President Christine Lagarde commented to the press during the announcement.

Spiralling inflation is very much a global issue and with the US also struggling to stem price rises. The end of the week saw US Consumer Price Index numbers released, showing that prices increased 1% during May against forecasts of 0.7%. With inflation overshooting estimates, it seems almost inevitable that the US Federal Reserve will hike rates by another 0.5% during their meeting next week, with perhaps the trajectory carrying on until at least September.

Next week

During the last week before the summer solstice, it could actually feel like the longest day on Monday, especially on domestic shores as a glut of UK-centric data is released first thing.

Economists will have the chance to analyse domestic construction PMI, goods trade balance data, industrial production and most importantly, monthly GDP. The measurements are useful for economists as it measures the change in the total value of all goods and services produced by the economy and is often regarded as the broadest measurement of economic health.

Staying in the UK on Tuesday, with inflation continuing to remain stubborn, worker’s average hourly wage information could prove invaluable when evaluating potential price rises to come. The actual data will represent the 3-month moving average compared to the same period a year earlier. A figure that excludes bonuses is also released but often carries less weight due to the skew bonuses can add to the figures. A continued worry, especially from central banks is that, in response to rising prices, workers demand increased wages, causing an inflationary spiral. Tuesday’s figures should prove to be useful in seeing if that pattern is transpiring.

Across to China during the middle of the week, with the National Bureau of Statistics of China releasing their yearly retail sales figures. With the two major Chinese cities of Shanghai and Beijing having endured prolonged lockdowns over recent months, the numbers should make for fascinating reading, especially when determining just how much of an impact such precautions have taken on the consumer’s ability to spend in China.

The tone for the second half of the week should be set by two central bank appearances, domestically, the Bank of England, and over in the US, the US Federal Reserve. Both will discuss their views on their respective economies, especially on the hot topic of inflation. With the market pricing in another rate rise to be announced by both banks, it will be the forward guidance that is given that should really decide the direction of financial markets in the weeks 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 10 June 2022.