Numbers to watch this week: US, India inflation, UK GDP | Mint

Numbers to watch this week: US, India inflation, UK GDP

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Summary

India will release its monthly retail inflation figures this week. US inflation data is also due, and will reveal the impact of the new variant on both demand and supply there. The OPEC monthly report will offer a glimpse of global oil demand projections, including India’s, amid rising risks of the delta variant.

Every Monday, Mint’s Plain Facts section features key data releases and announcements to keep an eye out for in the coming week. On the domestic front, July numbers for retail inflation and equity mutual funds flows are awaited this week. Globally, inflation data from the US and the monthly outlook report from the Organization of the Petroleum Exporting Countries (Opec) will be keenly watched. Here are the key numbers to track over the next seven days:

1. India Inflation

India will release the all-important retail inflation data for July this Thursday. The figure has been above the Reserve Bank of India’s 6% upper limit for two months and is likely to stay elevated. The data will give a peek into the evolving push factors on prices amid continuing supply constraints.

Inflation is increasingly being steered not just by the sky-high fuel prices. Core inflation, which excludes food and fuel, has also crossed 6%, and food prices are rising, too. All this hints at a broad-based surge, which forced the central bank last week to significantly raise its inflation projections for this year.

Retail prices will only move north as more businesses pass on rising input costs to consumers. With producer price inflation still higher than 10%, there remains ample space for a retail-side spillover. Global food and commodity prices are also major upside factors, but some moderation is likely on that front in July because of supply-side interventions by the government.

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2. Mutual Funds

Net inflows in equity mutual funds (MFs) declined 50% in June as investors booked profits amid a market rally. The numbers in July are likely to be higher, suggests the activity from domestic institutional investors. More details will be clear when the Association of Mutual Funds in India (Amfi) releases the July data on Monday.

After net outflows for eight months in a row, trends reversed for equity MFs in March and have stayed that way so far. This has been because of positive sentiment in equity markets among both foreign and domestic investors. In July, foreign portfolio investors sold net equities worth $1.5 billion, but domestic institutional investors stayed positive on Indian equities.

Robust earnings growth for listed companies has kept sentiments bright and so have high-frequency indicators showing quick recovery from the second wave. Fund inflows are likely to improve further as the threat of a policy tightening by the US central bank gets delayed.



3. US Inflation

Consumer inflation in the US has exploded this year, reaching a 13-year high of 5.4% in June. A head-wind has finally appeared, though it is not really good news: the Delta variant. Was the fresh risk big enough to tame the inflation streak? The data for July, due on Wednesday, will give answers.

Prices have been fuelled by a spending burst amid supply shortages. In large part it is a sign of healthy recovery from the pandemic, as robust gross domestic product (GDP) data shows, but inflation is outpacing wage growth. Core inflation, which excludes volatile food and fuel prices, is also elevated.

For US President Joe Biden, whose generous stimulus cheques also stoked prices, inflation is fast becoming a political issue. He already has in the works another fat stimulus plan, which could have a hard time in the Congress if prices don’t taper.

While the Delta risk could tame demand, it also threatens to keep supplies short of demand for longer—which could ignite inflation later.


4. UK GDP

By May, the UK’s recovering economic output had bridged much of the gap with pre-pandemic levels. However, the pace of growth had slowed a bit too early for comfort for the nascent recovery. Data for June, and the full quarter, will be out on Thursday. The growth has been led by a resurgent services sector as lockdowns have eased. However, renewed spread of the virus may have hurt activity towards June-end. Supply shortages continue, hurting most sectors, and by mid-July an IHS Markit-Cips survey reported staff shortages as a result of self-isolating workers. An upward push in June could come from the gradual revival in jobs and some recovery in construction, which had a setback from the fourth rainiest May since 1862.

The pace of recovery may improve if the virus stays low. The International Monetary Fund has raised its 2021 growth forecast from 6.3% to 7%. For now, the worst-hit advanced economy of 2020 is still playing catch-up with the miles-ahead US.



5. Opec Monthly Report

Opec will release its monthly report on the global crude oil market on Thursday. The report comes weeks after Opec and its allies (Opec+) agreed to lift output from August to rein in prices. It will make projections for demand in key markets, including India, at a time when the world faces a rising threat of covid-19 infections.


In its July report, Opec had estimated that India’s demand, which shrank during the May lockdowns, will surpass pre-pandemic levels by the December quarter. The August report will give an update on these projections and also estimate the June demand, which is likely to show an uptick because of greater mobility. Meanwhile, market participants will watch for any possible downgrade in global demand projections, with China and the US facing fresh covid-19 cases: the surge is already weighing on prices.

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