We are entering the quietist week of the month in terms of economic reports. The emphasis will be more on what is said and the actions of governments and the financial sector.

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 It is most likely that the problems in the banking sector may take the top bill for the week. If this settles down then we will be back to normal business. Regardless, we will see a large amount of interest in the US FOMC interest rate decision. It is expected to be left untouched by the majority of forecasters, although a few are calling for a drop.

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 There were some good results out for the UK last week, that said many of the numbers were still showing contraction albeit at a slower rate than expected. There was no surprise as the Bank of England left the rate untouched for another month.

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Economy 

We have a number of key reports due out this week, in particular the inflation reports for the US, Europe and the UK. We have already seen the

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We have the Federal Reserve, the European Central Bank and Bank of England announcing their interest rate decisions this week. This may take the main focus although all are expected to be held. Obviously any variation to this will cause quite a response. With oil prices falling back, there may be some relief within each of the committees. With the BoE being the highest and the poor economic data that we have seen recently, there is an off-chance that we may see a cut.  

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 There was a slight surprise in the Bank of England minutes, as we saw the voting come in at 7 to 2 for the rate to be left unchanged. The surprise was more in the fact that one member had voted for an increase. Personally I think this would be extremely damaging for the UK economy as I have written in last months newsletter.

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Inflation came in ahead of expectation for both the UK and US showing the effects of high oil and food prices are really hitting the economies hard. US retail sales came in below expectation which would suggest that the previous high figures were solely related to the tax refunds. In the UK British Retail Consortium’s figure on retail sales suggested that we too saw a blip last month, with indications that this weeks official figure will come in lower.

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If it was not already clear, the slowdown in the UK housing market and associated industries was highlighted by the poor figures during last week. What was also shown was that individual borrowing has taken a dive, not good for the retail sector, or banks.

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In the UK we have already seen the GfK NOP Consumer Confidence figure released. This report was actually leaked 3 minutes early. Maybe they just wanted to get the bad news out as soon as they could, as the report revealed the lowest level of confidence in June since records began. It has only been worse than this on one other occasion, that was in March 1990 when we were in a full blown recession. It may appear even worse for the prospects as those that were surveyed do not see things getting better in the next 12 months.

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We take a look at inflation once again this week, watch out for possible fireworks! Early indicators may suggest we will see inflation rise higher than previously predicted. Inflation in the UK is now expected to reach 3.8% later in the year, double the level that the government has set.

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