Market Report: 20 February 2017
Last week there were a couple of economic announcements from the UK, the US and the EU. On Tuesday, the latest UK CPI figures were released. Inflation rose by 0.5%, same as the previous month, while the annual estimate increased by 1.8%, slightly below than the market consensus. Also on Tuesday, latest update on the economic growth in the EU was announced. The results went in line with the economists’ expectations and in the fourth quarter of 2016 the EU GDP grew by 0.4%. The year-over-year data showed 1.7% increase.
The UK Labour Market Report, published on Wednesday, revealed a robust job market at the end of 2016. The number of unemployment claimants fell further than expected in December down by -42,400. The ILO Unemployment rate remained the same as the prior estimate at 4.8%.
Later the same day, the first inflation figures under the new US president were announced. The US CPI rose double than forecasted in January, up to 0.6%. However, the annual increase matched the analysts’ expectations of 2.5%.
Finally, the most surprising data came from the UK on Friday. The retail sales were unexpectedly poor and fell -0.3% in January. This contributed to the year-on-year growth in sales was 1.5%, far below the expectations of 2.7% increase. Economists argue that this drop in consumer confidence, mainly in food and petrol, may be the first sign of Brexit impact on the economy as exit negotiations are approaching.
The most important economic data in the week ahead will be released again from the EU, the UK and the US. The flash Composite Purchasing Managers' Index in the Eurozone, which provides an early estimate of current private sector output, will be launched on Tuesday. Analysts expect slightly lower economic activity in the EU in February, forecasting 55.0, while the prior number was 55.2.
Later on Tuesday, the US PMI will be also published. Economists do not expect changes in the volume of economic activity in February and set the market consensus at 55.0, the same as in January.
Revisions to the UK Q4 GDP number are published on Wednesday, the QoQ figure is expected to remain unchanged at 0.6% while the year on year figure could see a slight revision up to 2.2%. On the same day, the ECB will release the January inflation figures in the EU. Economists expect that inflation slowed down in February to -0.8%, but the year-over-year forecast is set the same as the prior figure of 1.8%.
Author: Helal Miah, Investment Research Analyst