In this weekly market commentary, the presenter previews the key economic releases for the United States and United Kingdom from February 13‑17, 2023, focusing on inflation and retail data and their implications for central‑bank policy. For the US, the year‑on‑year CPI is expected to fall to 6.2% (the slowest since Oct 2021) with core CPI easing to 5.4%, but the decline may be moderated by higher housing costs, rising energy prices, and a notable increase in used‑car prices that could add ~0.15 pp to the month‑on‑month rate. Federal‑funds futures show a 91 % probability of a 25‑basis‑point Fed hike on Tuesday, with the next hike not anticipated until March 22. Retail sales are projected to rebound to a 2 % rise, helped by milder January weather and strong auto sales. Additional US data this week include weekly jobless claims, housing starts, and building permits. For the UK, headline CPI is forecast at 10.2% (a four‑month low) while core CPI is expected to edge down to 6.2%, remaining elevated. Analysts cite lower fuel prices and competitive retail pricing as modest headwinds, but service‑sector components such as housing and personal services keep inflation sticky. The Bank of England is closely monitoring inflation persistence and is likely to keep rates on hold, contrasting with the Fed’s more aggressive stance. UK labour market data (average earnings growth expected at 6.5%) and retail sales (real‑term spending down in most months) will be watched for signs of easing pressure and potential GDP slowdown. The presenter wraps up by emphasizing the importance of drilling into line‑by‑line CPI data and monitoring these releases for clues on future monetary policy.
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Okay, hello and welcome back to the channel. Hope you had a great weekend. And not too much in the way of major market-moving information coming out this weekend, more so a look ahead for the week because of course we've got US CPI coming out on Tuesday. It's really the highlight of the week. We've also got US retail sales, housing starts, permits, weekly jobless claims, and we've got also major UK economic data throughout the week. Jobs data on Tuesday, CPI Wednesday, and retail sales on Friday as well. So before I begin, if you're new to the channel, if you like what you hear, don't forget to like and subscribe to the video. But let's dive straight in and talk about US CPI. And this is what we can see here, the year-on-year figure on my screen right now. And although US inflation, you can see here, has been quite clearly trending lower since we peaked in the summer of last year, You can see we've gone from 9.1% all the way down to 6.5%. Economists have forecast that in January, the decline will likely have moderated somewhat, owing to persistent price pressures, particularly in housing and an uptick in the prices of energy and also used cars. So let's just dive into that a bit more detail. So in terms of expectation, the year-on-year is expected to have declined, but again, at a more moderate pace. So instead of dropping like we saw last time, 7.1% down to 6.5%. It's expected on a median consensus basis on the street to drop down on a year-on-year reading to 6.2%. That would represent though the slowest rate since October 2021, but the smallest decrease in the annual rate since September going back to here. Higher petrol prices is expected to have boosted the, the top headline rate. Looking over at the core figure, So that's what we're looking at here. You can see we peaked up in the last 12-month readings going back to September last year at 6.6%. Last time out we were down at 5.7%. Um, this core reading of course is what strips out things like volatile components like food and energy. It's expected to slow to an annual rate of 5.4%, down from 5.7%. High rents will have prevented a bigger drop though in core inflation, as according to Barclays, and they're particularly putting a lot of emphasis on higher prices of used cars. And that's been something that's been quite common amongst the bank research I've read this weekend. The jump in auto sales saw dealers raise their profit margins with car auction prices jumping around 2.5% according to Mannheim data. And given the high weighting of used vehicles within the basket of goods and services to calculate consumer price inflation, this could add around 0.15 percentage points to the month-on-month rate on its own, irrespective of everything else. So yeah, definitely be keeping an eye on this, one of the key measures of course of the week. And at the moment, as far as the market is priced, looking at federal funds rate futures, still around 91% or so looking for a 25 basis point rate hike following the downshift that we've seen from the Fed more recently. The next rate hike though not coming for some time, not until the 22nd of March. Also from the US though, we do get retail sales. You can see here we've had two negative prints back to back in the last month, the worst of the bunch that we've seen here in the last 12 readings. One of the first things that the Dutch bank ING, their analysts are noting is the weather is going to be particularly prevalent for this particular data point we'll get on Wednesday. And the reason why is that January activity data generally, they say, is going to be strong throughout. The contrast, they say, between the, the weather in mid-late December where it was incredibly cold versus a very mild January couldn't be any more different, essentially. And that means that there'll be delayed consumption plus better weather, meaning more people are out and about, which likely means then the likelihood it will lift January spending. And we could see this more evident in this week's number. Um, we already know that auto sales are very strong, I just mentioned that, and that will likely lift the retail sales quite a substantial amount anyway on its own. In terms of the Street consensus, looking for around a 2% positive reading. So you can see here quite reversal from what we've had last 2 months. And in fact, if it comes out just in line with expectations, that will put us back up at a 12-month high, going back to the high we had at January of 2022. The other things in the US to look out for this week, as I said, Thursday you get your regular weekly jobless claims data, January housing starts, building permits also coming out on the same day. Pivoting over to the UK, um, CPI of course going to be the main feature, um, of the 3 major releases, UK annual inflation is expected to have slowed to a 4-month low of 10.2%. You can see here that would mark from a decline of 10.5%. So it would be pretty consistent, but still at a quite high level, certainly in comparison to when we were just looking at the US. Analysts at Investec, they expect inflation to have subsided further in January because of lower fuel prices and more intense competition among retailers amid ongoing easing of supply chain disruptions and of course the squeezed disposable income situation with the cost of living crisis still biting very much so at this present point in time. However, just flipping this over to the core rate, uh, analysts expect that when stripping out food and energy to have slowed to just 6.2%, so just 0.1% lower. So still hanging around up at this most elevated level that we've seen it. Despite the more persistent slow decline that we're seeing. So you can see here inflation really is hanging tough, a lot more than what we're seeing here in the core inflation reading in the US and the top headline rate, which has come down pretty rapidly. The UK definitely not mirroring that to the same degree, or at least the same aggressive nature. A couple of things there. In recent policy meetings, this being the Bank of England, officials have said they're now closely monitoring indicators of inflation persistence. To judge whether or not further tightening is needed. Remember, they in the ECB didn't downshift like the Fed, they stuck at the 50 basis point mark. And with that in mind, it's the service sector components of the inflation basket. So once again, the devil is in the detail. And if you are really looking at these more closely, definitely go on the Office of National Statistics website like you would in the US, comparable the Bureau of Labor Statistics. Look at the CPI data table and look at the individual line-by-line items on the different categories to really identify this because service sector components of inflation basket are typically less volatile but tend to experience more persistent trends. So think of things like housing services, recreational, personal services, things like that, rather than things like food, for example, that would see quite high jumps. These other points are much more sticky, and that's probably a reason why the Bank of England are going to have to hang tough a little bit longer with the fact that more people are leaning on, um, kind of still rate rising at this point comparative to the Fed. Even though the Bank of England might stop raising, them cutting seems a distant, far away future comparative to what markets are expecting in the second half of this year for rate cuts in the US. Other things in the UK to account for: we do have jobs data, it's released on Tuesday, it'll be scrutinized for signs of easing labor market tightness. Analysts at ING expect average earnings growth ex-bonus to accelerate to 6.5% in December from 6.4% in the previous month. So again, another quite key thing here to, to monitor in the UK, why inflation has been so sticky. And then retail sales on Friday in the UK, real-term spending has fallen in 12 of the last 14 months here in the UK, and it's unlikely that January was any exception. And if so, that would point to a modest fall in GDP through the first quarter as the main likelihood. So that is it. I'm not going to go any further than that. I hope it was useful, um, just encapsulating some of the key things to look out for. So best of luck, and I will see you next time. Take care.
