- UK wage growth to underline emerging cost of living crisis
- UK consumer confidence also set to be rocked.
- US existing home sales tipped to fall but remain well ahead of long term average
The week starts with an update from China, where Q4 GDP growth will be published on Monday. Expectations are for further slowing to be seen here, with a marked decline from Q3’s reading of 4.9% anticipated. That’s a consequence of rising fuel prices and challenges with global supply chains, so the print will also be well short of the government’s target of at least 6%. The question is how quick can growth resume and how will the country’s COVID management strategy play out from here.
Tuesday sees the publication of the latest round of UK employment data. One component that will be very closely followed here is the average wage increase for November, which is tipped to come in at 3.4% excluding bonuses. That’s going to be well below inflation which printed 5.1% in November and given rising energy prices plus those expected tax increases in April, a cost of living squeeze now seems imminent, adding to government woes. UK general retail stocks could take another hit here.
On Wednesday, the latest UK Inflation reading will be published, covering December. Again this is tipped to march higher, with a reading of around 5.5% expected and concern is building as to how this can be brought lower. Even the non-core reading, so excluding food and fuel, is set to come in well ahead of 4%, arguably pushing the Bank of England into more rate hikes at a time when consumers can ill afford them.
It’s a relatively quiet week for data from the US, but December’s Existing Home Sales print could provide some interest on Thursday. The US is struggling more than the UK when it comes to wages not keeping up with costs, although any shortfall in this print may be easier explained by tighter inventory and buyers being put off by rising mortgage rates. Regardless, it should be borne in mind that activity here remains well above pre-pandemic levels so it’s likely to be some time before any slowdown becomes a genuine cause for concern.
Friday sees the Gfk UK Consumer Confidence reading published. Cost of living concerns means this is set to deteriorate from the -15 recorded in December to something around -18. What’s more further downside pressures are likely to emerge here in the months that lie ahead – it’s genuinely difficult to see how there will be a reversal here until inflation eases. Also on Friday, UK Retail Sales data for December is expected. Opinions are divided as to whether we’ll see meaningful growth here, with the deployment of pre-Christmas restrictions to battle COVID likely to have taken a toll on some discretionary spend, as already reported by fashion retailers. November’s upbeat print may also serve to take some heat out of the reading. All told, it has the potential to be a difficult week for a fair number of UK equities, although Sterling could find cause for cheer.
Article by Tony Cross
of Monk Communications