Week Ahead: Acronyms a-go-go – CPI, PMI & GDP releases

Week Ahead

A lot of economic data is released in key economies this week. Starting with the UK, CPI and retail sales figures are released, with furlough and lockdown still looming large over the economy. US GDP numbers for the first quarter are finalised but the focus will be on business sentiment showing up in a fresh batch of PMI releases from the US, UK and Eurozone amid vaccine progress that is diverging in the major economies.  

UK CPI 

Investors and FX traders will be watching UK inflation figures this week following the Bank of England decision. 

Inflation is in focus in the UK right now, as the effects of rising bond yields, further government economic support via Chancellor Sunak’s “spend now, tax later” budget, and the Bank of England’s response continue to colour the economic picture. 

ONS data shows the latest full-year CPI at 0.9%. Across 2021, the CPI is expected to rise to 1.5% across the year. Some estimates suggest it may even rise to 1.8% by April. 

 CPI inflation for the UK came in at -0.2% monthonmonth in January, down on December’s 0.3%, but the figure was above the -0.4% the market was expecting. 

CPI inflation rose 0.7% year-on-year in January, which is above December’s figure of 0.6% and above the consensus expectation for a reading of 0.6%. January’s upward trend was driven by rising prices of food, transport, and household goods. 

UK Retail Sales 

UK retail sales data is released this week. The latest industry data suggests February was a solid month for the UK’s retail sector, according analysis from KPMG. 

Total sales were up 1% in February on a like-for-like basis against last year’s stats. Importantly, this was a sharp reversal of January’s retail sales, where sales contracted 1.3% against 2020’s figures. 

Driving February’s growth was March’s reopening of schools across England. Spending on non-food items, like school uniforms and stationery, was up as shopper’s fell into the back-to-school trend.

Non-essential stores still remain shuttered in England and will remain so until April 12th. Online sales are benefitting greatly from lockdown, mainly because consumers have no other choice but to use digital outlets to get their non-essential items. Non-food spending accounts for 61% of February sales – up nearly double compared with 31% in February 2020. 

However, overall consumer spending is down, Barclaycard reports, slipping 13.8% y-o-y in February. Lockdown restrictions on hospitality and leisure continue to weigh heavy. No doubt they’ll surge once full lockdown restrictions are removed in June, but until then the sector is going to greatly underperform. 

US, UK, EU PMI 

PMI data is released in major economies this week as the UK, US, and EU share index findings. 

Starting with the UK, observers will be hoping the momentum started in February will continue into March. The IHS Markit/CIPS Composite PMI gave a reading of 49.6 for February, up from an eight-month low of 41.2 in January.  

Some industries are performing above expectation. According to IHS Markit, UK construction was perkier than forecast in February, with the construction PMI at 53.3 from 49.2, as projects halted by Covid-19 were given the green light to continue or begin. Manufacturing continued an upward swing too, rising to 55.1 last month. 

However, services remain disappointing, with the revised February figure chalked up as 49.5 – still below the 50 growth threshold. This is perhaps to be expected. Leisure and hospitality are still heavily restricted, so don’t expect any upward trends in March. 

EU leaders were breathing a little easier after  February’s numbers.  For instance, manufacturing was up to 57.9 in February from 54.8 in January – a 3-year high – led by strong performance from The Netherlands and Germany. 

However, since then the outlook for Europe has deteriorated as Covid cases in France and Germany have spiraled and Italy has entered a fresh lockdown. Survey data may not reflect the recent developments fully. 

Hopping across the Atlantic, the US enjoyed a smash-hit manufacturing PMI in February, blowing the EU’s impressive numbers out the water. The US manufacturing PMI came in at 60.8 – the highest level seen for 3 years. However, that impressive figure may be cooled by issues in the supply chain.  

According to manufacturers surveyed by the Institute for Supply Management (ISM), commodities and component prices are rising. The steel price is up, for instance, which massively affects pricing for the US manufacturing sector. 

US GDP 

The final reading for US Q4 2020 GDP comes this week but all eyes are really on the updated forecasts we are getting for 2021. Last week the Federal Reserve raised its outlook for growth to 6.5% this year, up from 4.2% expected at the time of the December meeting.  

The OECD and several investment banks have also upped their guidance for US growth this year. Therefore, high frequency data like the weekly unemployment claims and personal income and spending figures will be the ones to watch, particularly as the arrival of $1,400 stimulus cheques begins to be felt. 

Markets, however, like to look forward, not backward. Q1 2021’s GDP figures will be very interesting for the market. On that front, the outlook is optimistic. 

Back in December, Goldman upgraded its Q1 2021 GDP figure to 5%, following the passing of $900bn in stimulus. Joe Biden’s further $1.9bn stimulus package has been passed, which may influence the quarter’s GDP movement. 

More recently, the Philadelphia Fed has put Q1 2021 GDP growth at 3.2%, citing a brighter outlook for labour markets, although it has also bumped its inflation expectations up to 2.5% for this quarter’s CPI release. The Atlanta Fed is even more upbeat than its cousin to the north. Its initial Nowcast puts the quarter’s GDP growth at 5.2% – in line with Goldman’s December estimate.  

The point about unemployment raised by Philadelphia is pertinent here. The last Nonfarm payrolls indicated the jobs market was beginning to come off life support, surging 379,000. More people at work suggests more productivity, suggests healthy Q1 GDP growth. 

Essentially, we’re looking at a healthier US economy in 2021 so far. Morgan Stanley has even gone so far as to suggest pre-pandemic GDP growth will kick in as early as the end of March. That might be a bit too ambitious, but it’s an indicator of increased confidence regarding the United States. 

Major economic data 

 

Date  Time (GMT)  Currency  Event 
Wed 24 Mar  7.00am  GBP  UK CPI y/y 
  8.15am  EUR  French Flash Manufacturing PMI 
  8.15am  EUR  French Flash Services PMI 
  8.30am  EUR  German Flash Manufacturing PMI 
  8.30am  EUR  German Flash Services PMI 
  9.00am  EUR  Flash Manufacturing PMI 
  9.00am  EUR  Flash Services PMI 
  9.30am  GBP  Flash Manufacturing PMI 
  9.30am  GBP  Flash Services PMI 
  1.45pm  USD  Flash Manufacturing PMI 
  1.45pm  USD  Flash Services PMI 
  2.30pm  USD  US Crude Oil Inventories 
       
Thu 25 Mar  8.30am  CHF  SNB Monetary Policy Statement 
  12.30pm  USD  Final GDP q/q 
  2.30pm  USD  US Natural Gas Inventories 
       
Fri 26 May  7.00am  GBP  Retail Sales m/m 
  9.00am  EUR  German ifo Business Climate 

 

Key earnings data 

 

Date  Company  Event 
Mon 22 Mar  Saudi Aramco  Q4 2020 Earnings 
        
Tue 23 Mar  Adobe  Q1 2021 Earnings 
   Markit  Q1 2021 Earnings 
        
Wed 24 Mar  Tencent Holdings  Q4 2020 Earnings 
   Geely Motors  Q4 2020 Earnings 
        
Thu 25 Mar  CNOOC  Q4 2020 Earnings