3 Numbers to Watch: US Industrial Production,CPI; UK Unemployment

After yesterday’s strong US retail sales figures, markets will be watching Wednesday to see if that impressive performance is matched by a second consecutive monthly rise in US industrial production. Data on the US Consumer Price Index (CPI) is also due out in the day amid concerns of growing price pressures caused by the recent drought in the US. Meanwhile, in the UK unemployment figures will be released during the European session. 

US CPI (12:30 GMT) Consumer price inflation in the US is forecast to rise to 1.9% in July, up from 1.7% in June, according to analysts’ estimates. Although the Federal Reserve prefers to use PCE deflator, the CPI measure is a good indicator of headline inflation. Food prices are expected to rise sharply in the coming months, as the country is suffering through its worst drought in decades, with vast amounts of corn and soya bean fields thought to have been wiped out. However, the Federal Reserve will be more concerned about the overall economic recovery. Nick Beecroft, Senior Markets analyst at Saxo Bank, expects that with the presidential elections due in November, the last opportunity the FOMC will have to introduce further quantitative easing this year will be at its September 12 and 13 meeting. 

US Industrial Production (13:15 GMT) US manufacturing picked up in the month of July, according to regional surveys. The Empire State Manufacturing Survey indicated that manufacturing activity expanded modestly over the month, and the general business conditions index rose five points to 7.4. Manufacturing production, which accounts of 75% of industrial production, continues to grow robustly at 5.8% year-on-year. The consensus expects a mild increase of 0.6% month-on-month in July following June’s 0.4% figure. Meanwhile, capacity utilisation in the US is expected to rise 0.4 percentage points to 79.3%.

UK Unemployment data (08:30 GMT) The number of jobless claimants in the UK is expected to have grown by just 7000 in April, while the unemployment rate is likely to remain constant at 8.1%, according to a consensus. The reasonably steady labour market data has been somewhat of an anomaly, given that employment edged slightly higher for the second quarter of 2012 while the economy contracted by 0.7%. Even policymakers don’t know what to make of it. At the Bank of England's Inflation Report press conference last week, Charlie Bean, a deputy governor at the BoE, admitted the central bank could not explain the recent trend. “We really are in a genuine economic puzzle…we really don’t have any explanation,” he said. However, the reality is that unemployment in the UK remains stubbornly high, around 3 percentage points above 2008 levels. The BoE will have to factor this into its next meeting as the downside risks to growth begin to materialise. Minutes from the BoE’s August 1 & 2 meetings, also due to be released today, could offer some insight into the MPC’s thought process.