Macroeconomics: The Day Ahead for 10 June 2026

Today’s inflation readings confirmed that, very unsurprisingly, China is not immune to energy and resource pressures, but weak domestic demand continues to limit pass through to consumer prices. PPI was driven higher by a further surge in mining PPI (15.8% y/y vs. prior 10.6%), and more limited pressures in Raw Materials (9.2% y/y vs. prior 7.1%) and Manufacturing (2.3% y/y vs. prior 1.5%), while Consumer Goods PPI remained negative (-0.8% y/y vs. -1.0%); adverse base effects also add to the upward pressure. CPI was lower than expected at 1.2% y/y, with core edging lower to 1.1% y/y, with upward pressure primarily from road fuel and gold prices (though the latter is easing) more than offset from falling food prices (primarily pork), and flat or falling Clothing, Housing, Education and Entertainment. Per se, the biggest concern is margin compression for many sectors of the economy.

The consensus look for a largely gasoline driven rise of 0.5% m/m in headline CPI that would see the y/y rate push up to 4.1%, while core is forecast to rise a more modest 0.3% m/m to edge up the y/y rate to 2.9%. Outside of gasoline, the other upward driver is likely to be airfares (headline and core) as well as computer equipment (though this has a low overall weighting), but the upward pressure from housing due to October’s govt shutdown should dissipate, while autos and recreation services will likely counter upward pressures. Market reaction will likely be less driven by any detail, with an upside miss raising fears of more hawkish messaging at next week’s FOMC meeting, and an as or lower than expected outturn welcomed and seen as already discounted in current Treasury term premia. While some are speculating that this month’s rise may be the peak, that assumes a US/Iran deal will be achieved soon, and that the threat to energy prices over coming months from very low inventories will not crystallize in a significant way.

** Canada – BoC rate decision **

With the small contraction Q1 GDP putting Canada in a technical recession, labour market indicators proving to be very volatile (May’s 87.8K surge followed readings of -17.7K, +14.1K, -83.9K and -24.8K), and inflation pressures very much concentrated in energy related areas, but otherwise subdued, the BoC is expected to hold rates at 2.25%. The key question is whether the BoC tones down its hawkish bias after warning about sequential rate hikes at its last meeting if there was evidence of passthrough from high energy prices. It will likely seek to dismiss ‘technical recession’ chatter but still concede that H1 GDP will be no better than around 1.0%, somewhat weaker than it had previously been assuming, and also note that core inflation measures are essentially at target. For the time being, the BoC looks likely to be on hold until the end of the year.