US economy enters disinflation mode. A report by the US Labour Department published on Wednesday showed that inflation in the US fell to its lowest annual rate in more than two years in June as a result of the deceleration in costs and easy comparisons with months when prices were rising at a pace not seen in 40 years. The US consumer price index, or CPI, rose at an annual rate of three percent in June compared with the same month of last year. This was a notable pullback in the inflation rate that was the smallest 12-month increase in more than two years. This time last year, US inflation was running at an annualised rate of more than nine percent. The core CPI, which excludes volatile items like food and energy, increased by 0.2 percent in June, the smallest gain since August 2021. "Fed officials will be relieved to see the deceleration in core CPI, in particular, but the pace still remains too high for comfort," Kathy Bostjancic Chief Economist at Nationwide said.

UK record pay rises fuel fresh inflation fears. Wages in the UK increased at the joint-fastest rate on record, fuelling concerns that inflationary pressures will not ease any time soon, official data showed on Tuesday. According to a report by the Office for National Statistics (ONS), average regular pay for the three months to May of this year was 7.3 percent higher when comparing to the same period in 2022. This represents the joint highest increase since the data series began in 2001 – the other high being the three months to April of this year. Despite the record increase, pay rises are not keeping up with inflation. The rate of wage rises has come under the increasing scrutiny of the Bank of England as it tries to bring inflation under control.

German ZEW index adds to growth worries. A closely watched survey showed on Tuesday that Germany's economic sentiment has worsened to a seven-month low in July as financial market experts are expecting the economy to deteriorate as the European Central Bank continues to raise interest rates. The ZEW Indicator of Economic Sentiment for Germany, a gauge of financial analysts’ assessment and expectations of economic and financial developments, recorded a decrease in the current July 2023 survey. The economic sentiment came in at minus 14.7 points, 6.2 points below last month’s value. The assessment of the economic situation also worsened. The corresponding indicator fell by three points, reaching a value of 59.5 points. Weak German macro data dented analyst’s optimism in recent weeks, as well as the US debt ceiling debate, banking turmoil and expectations of further rate hikes.

China’s consumer inflation rate slows to zero. The risk of deflation in China increased in June due to weak demand, as consumer prices remained flat, indicating that the post-pandemic economic recovery is losing steam. The National Bureau of Statistics reported on Monday that the CPI for the world’s second largest economy was unchanged last month from a year earlier. The reading was below expectations of a 0.2 percent increase and compared to May’s reading of 0.2 percent. Core CPI declined by 0.2 percentage points to 0.4 percent in June. "It is estimated that with more stimulus policies in the pipeline, consumption will gain recovery in the third quarter, driving up the core CPI," said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

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