UK in focus as data on inflation, jobs and retail sales are out

Posted On 12 Feb 2016

Next week, markets will first focus on fourth quarter economic growth figures for Japan. These figures out on Monday as forecast to come in at a 1.2% annualized rate of decline, suggesting the economy slipped back into contraction after reviving in the third quarter with 1.0% growth. Weak data will spur further hopes of more stimulus from the Bank of Japan.

Also important to look out for will be inflation data for the US, UK and China.

The US CPI data will be released on Friday, with the headline rate expected to hit a one-year high of 0.7% in December, while the policy-sensitive core inflation is expected at to have risen to 2.1%. Any further uplift will strengthen the case for the Fed to hike rates again soon, potentially as early as March. Clearly, weak numbers will add to the growing clutch of data which suggest the Fed may need to be more patient.

China’s inflation numbers are due on Thursday. These will be important to watch, as low inflation in the world’s second largest economy is a key factor behind global deflationary trends.

Inflation hit a three-month high of 1.6% in December and any signs of a soft number will pile more pressure on the authorities to do more to stimulate the economy.

Meanwhile, UK inflation data are due on Tuesday. December’s headline CPI rate rose to an 11-month high at 0.2% but was still way off the Bank of England’s target of 2%. Little change is expected in January’s inflation rate as low oil prices are keeping the headline CPI rate down.

More important to watch will be the UK employment report, especially wage growth data released on Wednesday. The unemployment rate is likely to fall from 5.1% to 5.0%, but despite the tighter labour market, wage growth is forecast to remain disappointingly weak.

Also out of the UK will be retail sales numbers due on Friday. It is hoped they will show a firmer trend after falling 1.0% in December as low fuel prices help boost spending on other goods.

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