Investors are currently unable to access crucial inflation data for September, initially set for release on Wednesday, due to a government shutdown in the U.S.
Bloomberg’s economists were expecting the consumer price index from the Bureau of Labor Statistics to reflect rising inflation pressures, but instead, the BLS announced a new release date of October 24.
This delay, although frustrating, still coincides with the Federal Reserve’s upcoming interest rate-setting meeting on October 28-29, allowing policymakers to consider it for their decisions. In its last gathering, the Fed suggested it was more worried about potential slowdowns in the labor market than inflation itself. The projections from the Fed indicate inflation may hover around 3% by the end of this year, which is just slightly higher than the current rate.
Lack of this inflation data might limit investors from making significant market moves. Many have turned to private data sources and survey materials like the Fed’s “Beige Book” for insights into the economy.
Meanwhile, a recent post by President Trump on Truth Social regarding potential new tariffs on China caused stock prices to dip and increased volatility. This hints that some investors might react regardless of the economic data, especially if they perceive high risks.
How is the UK economy faring?
Looking ahead, investors will be paying close attention to labor market data due on Tuesday and GDP figures released Thursday, aiming to glean insights into inflation and overall economic health.
Reuters economists predict a slight decline in annual wage growth (excluding bonuses) to 4.7% for the three months leading up to August, down from 4.8% for the three months preceding July. They anticipate the unemployment rate to remain steady at 4.7%.
Officials at the Bank of England have expressed concern that wage growth remains too high in light of the sluggish productivity in the UK, which could hinder efforts to meet the 2% inflation target.
In recent years, low survey response rates have muddied the picture of the labor market. Analysts are particularly interested in whether job losses are sufficient to slow wage growth. A notable decrease in wages alongside employment might raise expectations for a rate cut in 2026.
Market projections suggest that the Bank of England could reduce interest rates in the early part of next year.
Regarding GDP, economists estimate a month-on-month growth of 0.1% for August, showing an improvement from zero growth in July, while the Office for National Statistics revises its three-month growth forecast to 0.3%, a slight uptick from the previous 0.2%.
Ellie Henderson of Investec also anticipates a modest rise in growth for August, though she notes that expected tax increases in the November Budget might dampen economic activity in the fall.
“Surveys indicate that the prospect of fiscal tightening is already prompting households and businesses to hold back on spending and investment,” she mentioned. Speculation about the scale of necessary adjustments is likely to increase as we move closer to future growth.
Will China’s trade surplus hold steady?
Despite U.S. tariffs imposed during the Trump administration, foreign exports continue to flourish. China’s exports are projected to rise again when September trade data is released on Monday.
Economists anticipate a boost in Chinese exports for the month by 7.1% year-on-year, up from a 4.4% increase in September. Imports are expected to grow at a rate of 1.5%, which is a slight increase from 1.3%, and China’s trade surplus could reach about $100 billion.
These robust numbers run counter to many economists’ expectations that these tariffs would stifle China’s export capabilities, especially considering the dollar’s weakness this year and a 2.4% appreciation of the yuan against the dollar.
However, some analysts have pointed out that the yuan is depreciating on a trade-weighted basis, having fallen 8.6% against the euro this year, which could make exports to Europe more competitive.
China’s trade surplus with the Eurozone is rapidly growing. In the first eight months of this year, exports to Europe rose by 5.4%, while imports saw a decline of 9.9%. Specifically, there has been a sharp increase in China’s exports of steel and textile, amid rising trade tensions.
Jacqueline Long, chief China economist at BNP Paribas, suggested that the recovery in China’s exports to markets outside the U.S. is driven more by shifting market dynamics than merely adjusting trade routes with the U.S. He observed that the rise in exports to Europe is “largely attributed to China’s expanding market share rather than just transportation adjustments.”
