Last week saw the release of the second quarter Eurozone growth, showing GDP increased by 0.3% over the quarter and 1.6% year on year, in line with expectations. This was helped by better than expected German GDP coming in at 0.4, against the 0.2% expected. However, weak data from Italy stoked concerns over the country’s debt, both public and private. With Italy’s banking sector struggling under a large underperforming loan book it is unlikely that lending growth will support the real economy. Ironically, the country desperately needs to see growth to lower its debt to GDP ratio to levels which are sustainable. Given the size of Italy’s economy relative to the rest of the Eurozone the county’s health is becoming a concern to many investors.

US retail sales were unexpectedly flat last month after a 0.6% jump in July. This surprised economists who were predicting another solid increase on the back of continued tightening in the labour market. However, such data is always volatile and should always be viewed as a trend rather than isolated months. Therefore, given the supportive jobs growth figures and a strong dollar, it is likely that the data will rebound in August.

The oil price has now been trading in a range around $50/barrel for over four months as the market continues to speculate over OPEC policy and demand growth. Interestingly, year on year the oil price is flat in dollar terms, meaning that the impact of oil on inflation should no longer be negative. Furthermore, given the weakening of the pound relative to the dollar, oil should become an inflationary pressure for the first time in over two years. This, on top of other commodity price rises and more expensive imports, may mean that the UK inflation rate overshoots the 2% target in the medium term.

UK CPI inflation and retail sales figures are released on Tuesday and Thursday respectively.