Markets await US, UK CPI inflation reports

Inflation, GDP and retail sales reports are going to be the “talk of the town” this week as investors and traders will be able to scrutinise a plethora of data sets. The US and UK CPI inflation reports will show if monetary tightening policies have reduced inflationary pressures. 

In Japan, the government will present the nominees for the Bank of Japan’s (BoJ) governor seat to parliament. Some economists suggest that the central bank will adjust or back away from its stimulus program under a new governor. Haruhiko Kuroda is set to retire on April 8th, after serving as governor for ten years.

Japan GDP Q4 2022 report and the new BoJ governor 

The Japanese Cabinet Office will publish its preliminary Q4 2022 GDP report on February 13th. Economists monitoring the Japanese economy suggest that the report will show a 0.6% expansion on a quarterly basis.

Japan’s finance minister Shun'ichi Suzuki said on Friday, February 10th that pulling the economy out of deflation remains an important policy challenge. The Japanese government will present nominees for the BoJ governor’s seat to parliament this week.

UK unemployment rate unchanged in December? 

The Office for National Statistics (ONS) is expected to publish its ILO unemployment rate report on Tuesday, February 14th. Analysts suggest that the UK’s unemployment rate remained steady at 3.7% in the three months to December. Another report regarding average earnings is expected to show that salary increases lagged behind inflation.  

It should be noted that the Bank of England’s (BoE) Governor Andrew Bailey urged employers and employees to consider the anticipated sharp fall in inflation this year when negotiating salaries.

Eurozone GDP Q4 2022 second estimate

On Tuesday, Eurostat will publish its second estimate report regarding the Eurozone’s GDP growth in the fourth quarter of 2022. Preliminary data released on January 31st showed that the euro bloc’s economy grew by 0.1% during the last quarter of the previous year. The preliminary report had surprised market analysts as a Reuters poll had forecast a 0.1% contraction.

Economists at S&P Global Market Intelligence said that “the headline GDP figure gives a misleadingly favourable impression of economic conditions in late 2022. The key takeaway from member states' data is the breadth of weakness in private consumption, with the acute squeeze on household real incomes due to soaring inflation belatedly biting.”

Fed to scrutinise US CPI inflation report

Valentine’s Day will end with the US Bureau of Labour Statistics (BLS) report on inflation. Economists forecast headline inflation to have dropped to 6.2% in January, on an annualised basis. Core inflation is likely to have increased by 0.4% on a month-to-month basis. Federal Reserve Chairman Jerome Powell said that inflation is beginning to fall, though he expects it to be a long process.

Currency strategists at OCBC Bank noted that “the broad picture is the Fed doing policy calibration ... but for the near term there is caution, given recent Fed speakers and how the disinflation trend may be bumpy.”

UK inflation: Will it drop more?

The CPI inflation report, one of the most important sets of financial data coming from the UK, will be published on February 15th. Economists suggest that headline inflation recorded a small drop (-0.3%), reaching 10.2% (y/o/y) in January. Inflation in the UK is still close to a 40-year high and five times the BoE's target of 2%.

According to a GDP report released by the ONS on February 10th, the UK’s economy recorded zero growth in the last quarter of 2022, in line with analysts’ expectations. Finance minister Jeremy Hunt said that “the fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared. However, we are not out the woods yet, particularly when it comes to inflation.”

US retail sales: Consumers battle inflation

Economists expect US retail sales to have returned to positive growth (+0.9% m/o/m) in January. Retail sales had contracted in November and December 2022, pulled down by declines in purchases of vehicles and a range of other goods. A high reading could be seen as positive for the US dollar, while a low figure could hurt the currency’s value against its competitors.

Data published on January 27th showed that real consumer spending (adjusted for inflation), which drives more than two-thirds of all U.S. economic activity, declined by 0.3% in December 2022.

UK retail sales: Are they on the rise?

On Friday February 17th, market analysts will focus on the ONS report regarding January retail sales in the UK. Economists forecast a 1.8% growth on a yearly basis, but zero growth on a month-to-month basis. A better than expected figure could boost the UK pound, whilst a lower than anticipated figure could weaken the currency.

According to a British Retail Consortium (BRC) and KPMG report, retail sales rose by 4.2% year-on-year in January, around half December’s pace and down from 11.9% growth a year earlier.

Does trading on macroeconomic news interest you? Learn how this approach works with our free webinars. Meet and interact with expert traders. Watch and learn from live trading sessions.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.