- UK MoM GDP for January set to underwhelm
- Chinese PPI and Inflation to show big disparity
- ECB monetary policy statement – no change expected but nuance to be closely watched
The latest US Consumer Credit data kicks off the week with January’s print set to be announced on Monday. As we’ve said before, the importance of this reading is the fact that if consumers slow down their borrowing to fund purchases, then this risks putting something of a drag on the wider economy. There has certainly been a degree of volatility in this print of late, although the expected month-on-month uptick from $18.9bn in December to something just ahead of $20bn will likely underline the Fed’s ability to proceed with rate hikes.
More consumer data is due on Tuesday, with the UK BRC Retail Sales Monitor for February set to be released. The number lurched higher last month, but the ongoing cost of living squeeze is likely to see momentum severely eroded here. The question is just how dramatic a reversion will play out and after January’s 8.1% improvement, the decline could be rather eye-catching. This number in isolation won’t be sufficient to change the Bank of England’s course, but it could lay bare the challenges facing retailers who are hunting discretionary spend.
German Industrial Spend data for January is also set to be released on Tuesday. This is forecast to have rebounded from the contraction seen in December, but with spiralling fuel prices, just how much of a toll will this take? What seems inevitable is the February figure will be significantly worse, so failure to achieve some meaningful growth here of at least 0.5% will likely be seen as another red flag for the Eurozone’s economic powerhouse.
Wednesday sees the release of Chinese Inflation and PPI data for February. This is going to be a fascinating paring to watch, with forecasts suggesting input prices are running about 10% hotter than a year ago, whilst output inflation will be closer to 1%. That can only happen with a significant squeeze on margins and will again call into question the extent to which free market economics is really being used in China. Adding this to the isolation of Russia and we really are looking at a very different economic landscape than we had just a year or two ago.
The big news on Thursday will be the latest ECB Monetary Policy meeting. There’s still no suggestion that rates will be tightened quickly and the situation between Russia and Ukraine – plus the consequent rally in energy prices – means that the timing of this is now likely to be pushed back even further. However, with a slightly less hawkish outlook expected from the Fed too, the lasting downside on things like Euro/US Dollar is likely to be limited.
Also on Thursday, we have the latest US Inflation reading for February. This still shows no sign of relenting which in turn will keep some pressure on the Fed to make those rate hikes even with the distressed geopolitical situation. 8% could be achieved here.
Friday morning sees the latest UK GDP data for January being released. Annualised growth of around 10% and month-on-month growth of less than 0.5% is anticipated. The key issue here however is that rising prices should be flattering for this figure in the short term, although the broader global backdrop is likely to be what is left driving sentiment rather than concerns over a dip in this print.
Article by Tony Cross
of Monk Communications