On Monday, the UK unemployment rate held steady at 4.7% in the three months to June. While the headline figure suggests stability, underlying data points to a gradual softening in the labour market, with payrolls falling for six consecutive months and job vacancies continuing to decline. Economists note that although there is no widespread wave of redundancies, businesses are slowing recruitment in response to economic uncertainty and rising cost pressures, including the recent increase in Employer National Insurance Contributions. Meanwhile, private-sector wage growth (closely monitored by the Bank of England for its inflationary potential) eased to 4.8% in the three months to June, while overall average weekly earnings excluding bonuses were flat at 5%. With both measures still outpacing inflation, the case for further interest rate cuts is complicated.
TACO strikes again! In a late-stage reversal, U.S. President Donald Trump announced on Truth Social that he had signed an executive order pushing back the planned hike in tariffs on Chinese imports until 10th November, leaving existing truce arrangements intact. Beijing, in a reciprocal move, declared a 90-day freeze on new tariffs of its own and deferred planned restrictions on selected U.S. companies. The delay offers a crucial window before the seasonal rush of Christmas-bound imports. By holding Chinese import duties at 30% and U.S. export tariffs at 10%, the move heads off a sharp escalation that might otherwise have brought trade flows to a standstill. Financial markets welcomed the development, with Asian equities climbing and regional currencies firming, as optimism grew over the possibility of fresh negotiations and a potential Trump–Xi summit later this year.
On Tuesday, the annual inflation rate in the U.S. held steady at 2.7% for July, matching June’s figure. Price increases accelerated in several categories, notably used cars and trucks and transportation services. Conversely, inflation eased slightly in the shelter category, dipping to 3.7% from 3.8%, while energy costs fell more sharply, down 1.6% compared to June’s 0.8% decline. The core Consumer Price Index rose by 0.3% month-on-month, in line with expectations and marking its strongest increase in half a year, following a 0.2% gain in June. The data release reassured investors, easing concerns that President Trump’s tariffs policies might drive up prices. Both the S&P 500 and Nasdaq Composite closed at fresh record highs on Tuesday.
Investors are eyeing Friday’s planned meeting between Presidents Putin and Trump in Alaska, aimed at ending Russia’s war with Ukraine. While no Ukrainian officials will be in attendance, Trump – despite months of criticising Putin’s refusal to halt attacks – says progress is likely this time, with the potential of some swapping of land between the two countries. With Russia struggling under international sanctions and inflation at 9.4%, economists see the meeting as not only a symbolic win for Putin, but as having the potential to include the easing of such sanctions with a ceasefire deal. Markets welcomed the announcement, with European and U.S. equities rising, while European defence stocks fell on expectations that peace could curb NATO military spending.
Still to come this week we have UK GDP and balance of trade, EU GDP, U.S. PPI and Chinese retail sales.
Kate Mimnagh, Portfolio Economist