The overall rate of CPI inflation in Canada has remained very well behaved this year, unlike the experience of most other countries. If, however, the consensus forecast for June is realized, then Canada will start to catch up to its trading partners. Although the overall rate of CPI inflation could very well breach the top end of the Bank of Canada's 1 percent to 3 percent target range over the next few months, the core rate of inflation should remain within the range, which should keep the Bank of Canada on hold for the foreseeable future.
Retail sales data for May will be released on Tuesday. Consumer spending continues to grow, albeit at a slower rate than early this year. With the labor market remaining generally solid, growth in consumer spending should remain positive.
Previous: 2.2% (year-over-year)
Consensus: 2.9%
German Ifo Index • Thursday
The Ifo index of German business sentiment is widely followed by investors because it has a high degree of correlation with German industrial production growth. If, as is expected, the index falls again in July, then IP growth probably slowed further this month. Although the German economy is not likely to slip into recession this year, real GDP growth likely will fall well below 2 percent.
Investors will also be interested in the Euro-zone manufacturing and service sector PMIs for July, which also print on Thursday. Both indices have slipped below "50" recently. Although the readings on the PMIs are not yet at recession-like levels, the indices are consistent with slow growth.
Previous: 101.3
Consensus: 100.0
U.K. Real GDP • Friday
Like the U.S. economy, growth in the United Kingdom has slowed over the past year. In many respects, the British economy looks and smells like the U.S. economy. Home prices in many parts of Great Britain rose significantly between 1997 and 2007, and some consumers are stretched financially. Although consumer spending has held up well over the past few months, which probably guarantees a positive GDP outturn in the second quarter, the recent weakening of the labor market suggests that growth in consumer spending probably will slow in the quarters ahead.
Some analysts believe the United Kingdom will slip into recession this year. Although we do not have a bona fide recession in our forecast, we project growth this year will be the slowest since 1992 when the U.K. economy was last in recession.
Previous: 0.3% (not annualized)
Consensus: 0.2%
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