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Inflation concerns loom over Australian and global markets

Inflation returns to haunt Australian markets this week with the monthly inflation indicator for the Consumer Price Index for August set to be released on Wednesday. It is expected to continue raising questions for the Reserve Bank and the new Governor, Michelle Bullock, about monetary policy.

There’s also an important indicator for inflation in the US, with the August personal consumption expenditure (PCE) data set to be released, along with its inflation component. Additionally, September inflation data is due for release in the EU later this week.

Two other crucial data releases are on the agenda this week: the quarter job vacancies figures on Thursday and preliminary retail sales figures for August, also set to be released on Thursday.

All three releases will provide insights into how the economy was performing midway through the third quarter. This assessment follows a better-than-expected 0.4% rise in the three months to June (which was the same as the upwardly revised figure for the March quarter – originally estimated at 0.20%).

AMP chief economist, Shane Oliver, suggests that the rise in the monthly indicator, back over an annual rate of 5.8%, would be due to the 8% rise in petrol prices in August, which more than reversed the 7.6% fall in petrol costs in July.

Of interest will be whether the core rate dips below the 5.8% recorded in July, which excludes petrol, holidays, and fruit and vegetables.

Dr. Oliver predicts a 0.2% rise in retail sales for August, following a 0.5% increase in July, and anticipates job vacancies to fall from 461,600 in May.

This week also features some annual results, including those of Brickworks, Washington H Soul Pattinson, Sigma Healthcare, and Premier Investments. Investors will be looking for Premier to provide an update on its strategic review and possible spin-off of some of its retail chains.

The FL and NRL grand finals are scheduled for this weekend, with Brisbane Lions and Collingwood facing off in the AFL, and Penrith Panthers and Brisbane Broncos meeting in the NRL game on Sunday.

The third quarter and September year and half-year finishes this Saturday for banks such as Westpac, ANZ, NAB, Macquarie, Orica, CSR, James Hardie, Nufarm, Incitec Pivot, GrainCorp, and Elders.

In the US, the PCE data will be released along with the third and final estimate of June quarter GDP, which was cut to 2.1% in the second estimate a month ago. This week’s release will contain updated trade and other figures.

Dr. Shane Oliver from AMP suggests that the PCE data release could show a slowing in personal spending growth and a slowdown in inflation for August to 3.5% year on year, reflecting a rise in energy prices. However, core PCE inflation is expected to fall to 3.9% year on year from 4.2%.

The US will also see the release of durable goods orders, industrial production, consumer confidence, and house price figures this week.

Federal Reserve Chair Jay Powell is scheduled to speak on Wednesday, a week after the latest Fed decision and his media conference, indicating a message to reinforce with markets in mind.

Additionally, Jerome Powell will deliver a speech on Wednesday, marking another significant communication from the Fed.

Several offshore earnings reports are expected, including Costco and Cintas on Tuesday, Micron and Hennes & Mauritz (H&M) on Wednesday, and Accenture and Nike on Thursday. Wishing everyone a great weekend!

Dr. Oliver mentions that Eurozone September CPI inflation on Friday is likely to show a fall to 5.1% year on year from 5.2%, with core inflation falling to 5.2% year on year from 5.3%. Japanese industrial production for August is expected to show a rise, with unemployment remaining unchanged at 2.7% (both due on Friday).

Finally, the two Chinese business conditions activity surveys for September, scheduled for Friday and Saturday, are likely to remain stable but relatively subdued.

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