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China’s GDP figures will be issued Tuesday, providing the latest indication of whether US President Donald Trump’s trade war is focused on the economy.
Despite trade tensions and deflationary pressures, the country is widely expected to report strong figures. Economist Bloomberg polls predict that in the first six months of 2025, it will grow 5.3% in line with the government’s growth target of about 5%.
However, strong growth is being helped by “front load activities,” Deutsche Bank said in a recent memo. Trump’s real-life, imaginary tariffs have urged businesses around the world to hurry shipments and orders before duties come into effect, boosting the short-term economic figures of export-oriented economies such as China.
The current consensus is that the country is below 5% of the total yearly economic growth. According to Bloomberg, the median bank forecast is 4.6%.
Recent price data confirmed that China is still fighting deflationary pressures as economic demand remains weak.
According to official data from the National Bureau of Statistics, such efforts have seen an increasing number of talks among analysts on “supply side reform” that will help address some of the vicious price competition that contributes to deflation, but such efforts may rarely revive economic demand, where consumer confidence remains at record levels.
Consumer trust has fallen in 2022 as real estate market conflicts and choking pandemic restrictions took hold and has not yet recovered. William Sandland
Will the June inflation data continue to pending the Fed?
The US is scheduled to report inflation pickups in June, which could reduce the possibility of interest rate cuts by the Federal Reserve later this year.
The Bureau of Labor Statistics will release its latest US consumer price index report on Tuesday, according to an economist voted by Bloomberg.
The core rate, which removes the volatile food and energy sector, is also expected to reach 2.9% rate forecast for June, compared to 2.8% in May.
Fed officials argue that inflation remains curbed, but more evidence is needed before considering reducing borrowing costs. The futures market is currently priced at two rate cuts by the end of the year, with the first being fully priced by October, but not all analysts are satisfied and the outlook could change depending on inflation data.
BNP analysts say June will be the first month when the impact of President Donald Trump’s tariffs will be revealed in inflation data. Effective tariff rates – taking into account both nominal tariffs on products and taxation on inputs – remained stable in April and May, but rose in June as businesses began pushing the cost of taxation on consumers.
“The June CPI is the first of three previous reports from the September FOMC (Federal Open Market Committee), which informs the committee’s tariff pass-through decision and strongly influences interest rate policy decisions,” wrote BNP analysts.
“I think the visible tariff pass-through and associated risks will continue to pending the Fed until the end of the year,” they added. Kate Duguid
Is UK inflation rising?
Investors will carefully review UK inflation data released on Wednesday and assess the interest rate path ahead of the Bank of England’s monetary policy decision next month.
Economists voted by Reuters predict that the UK’s annual inflation rate will rise to 3.5% in June, far exceeding the BOE target of 2% from 3.4% in May.
Service inflation, which BOE closely monitors as a better measure of basic price pressure, is expected to ease slightly from 4.7% the previous month, up to 4.6% in June.
There is concern about inflationary pressures caused by rising food prices, and the UK retail consortium reports that sector prices are growing faster, in part, as a result of warmer climates. The rise in food prices could surge in restaurant prices amid high employer national insurance contributions.
A significantly higher reading in June rekinds fears that higher inflation is ingrained in the economy, providing a reason why policymakers are cautious about cutting interest rates.
However, the UK economy contracted in April and May, losing momentum after a strong start to the year, with official data released on Thursday showing clearer signs of a loose job market and can ease wage pressure.
Economists expect regular wage growth, which excludes bonuses, to slow down from 5.2% in May to April in three months to 5%. The number of employees with salaries, which have been declining at an accelerated rate since November 2024, also reveals the impact of slow growth and increased taxes on the labour market.
“Continuingly slacking the labor market amid eerie economic growth by lowering wage pressures and squeezing inflation in services, means that the recent surge in food price inflation is a temporary phenomenon,” Valentina Romee
