ONLY VERY weak data in the coming days is likely to prompt any rethink on interest rates in the UK, US or eurozone as the main central banks struggle to contain inflation.
All three have data on consumer confidence this week, and the UK and US have further details on housing markets - an important driver of sentiment.
Consumer confidence in the UK, published on Friday, is expected to have retracted further as the economic gloom deepens.
Howard Archer, analyst at Global Insight, said: "Concerns about the housing market, elevated utility, food and petrol prices, the credit crunch and financial market turbulence, a lack of confidence in the government, together with news that unemployment is now rising and reduced expectations of further interest rate cuts from the Bank of England will do little for consumer confidence."
House prices in the UK are expected to have fallen for a seventh successive month, as measured by the Nationwide Building Society. Furthermore, the British Bankers Association is expected to report tomorrow that tight lending conditions have further depressed mortgage activity in April after reporting in March that approvals fell to a record low of 35,417 from 43,147 in February.
US consumer confidence for May is reported tomorrow along with April new home sales and is likely to have fallen back as house sales continue to slide.
Durable goods numbers are also expected to be soft, offsetting any hawkishness generated by a likely upward revision to first-quarter growth in gross domestic product.
On Thursday, the Federal Reserve's preferred inflation measure, the core PCE deflator, is expected to remain at an annualised 2.2 per cent in the first quarter.
The European Central Bank is less likely to be moved by soft consumer confidence and rising unemployment data, out later in the week, than it is by an expected rise to 3.5 per cent in annualised consumer price inflation.
"The question is whether the slowdown in the US, UK and eurozone will be sufficiently pronounced to encourage an easing in policy later this year," said Daragh Maher at Calyon.
"The week's data may provide some fuel for that ultimate reversal but it will take longer than a week to rebuild the case for rate cuts with inflation now the more dominant consideration."
April's reading on industrial production on Friday will be keenly watched following March's unexpectedly sharp 3.4 per cent month-on-month fall. Economists expect a modest recovery.
The pace of US consumer spending probably slowed as property values and confidence sank, economists have said. Purchases were up 0.2 per cent in April after rising 0.4 per cent in March.
Other figures may show home prices declined at a faster rate and consumers were the most pessimistic in at least 15 years.
- (Financial Times, Bloomberg)
