13 February 2023

• According to Fed Chairman Jerome Powell, the US market is starting to show signs of disinflation as a result of the raising of interest rates in the good sector, however, the service sector has not been yet touched by the decrease.
• After the significant surprises on the previous Friday, the week’s scant economic data calendar mostly met consensus expectations. At 196,000, weekly unemployment claims were somewhat more than anticipated but were still close to recent nine-month lows. Preliminary consumer sentiment data for February, issued by the University of Michigan on Friday, was moderately above forecasts and rose to its highest point (66.4) since January 2022.
• Following the most recent rate-setting meeting, a number of European Central Bank (ECB) governors reaffirmed their hawkish approach and cautioned against complacency in the fight against inflation. At the beginning of the week, remarks made by Executive Board member Isabel Schnabel caught the market’s attention. While pointing out that underlying inflation was still extremely high, she emphasized that the current slowdown in inflation wasn’t necessarily the result of ECB policy. Joachim Nagel, the president of the German Bundesbank, Martins Kazaks, the governor of the Latvian central bank, and Klaas Knot, the governor of the Dutch central bank, all said that rates would need to rise further after what is anticipated to be a second half-point increase in March.

What to watch out for this week

A rather busier week awaits us with the upcoming data:

• The Labor Department’s January CPI and PPI index will be closely watched by market participants, making the upcoming week critical in terms of economic statistics. The annual rate of inflation is expected to have slowed to 6.2% from 6.5% in January despite the headline inflation likely rising by 0.5% month over month, the most since June 2022. It is anticipated that core CPI would increase by 0.4% from the prior month, bringing the annual rate to 5.5%. In the meantime, economists anticipate that producer prices would increase 0.4% month over month in January, bringing the annual rate to 5.4%. Retail sales will also be a key factor, with predictions pointing to a 0.9% gain month over month after two straight months of decrease.
• Building permits, housing starts, industrial production, the Philadelphia Fed manufacturing index, and import and export prices are among the additional items that will be made available. Finally, traders will closely follow the forecast provided by Cleveland Fed President Loretta Mester and St. Louis Federal Reserve President James Bullard after this week’s aggressive comments on the interest rate path from several Fed governors.
• Investors in the UK are anticipating important news on retail sales, inflation, and employment. For the first time in a year, consumer prices are anticipated to drop 0.4% month over month, bringing annual inflation to a four-month low of 10.2%. Retail sales are anticipated to decline for the third consecutive month in January, while the unemployment rate is predicted to remain constant in Q4. Second estimates are likely to indicate that the Euro Area economy experienced a weak 0.1% GDP growth in Q4, which was the worst since early 2021, elsewhere in Europe. Other nations, such as Poland and the Netherlands, will release their first Q4 GDP figures.
• The release of preliminary GDP numbers, which are expected to show a recovery in economic activity in the third quarter driven by private consumption and net trade, will make this a busy week in Japan as well. It is anticipated that the Japanese economy will grow by 0.5% on a quarterly basis, bringing the annualized pace up to 2%. Core machinery orders as well as trade statistics are upcoming, and export growth is anticipated to decelerate significantly. Consumer and wholesale inflation in India will be the focus; retail inflation is predicted to increase to 5.9% from 5.7% and the WPI will decelerate to 4.5% from 4.95%. The PBoC in China will reveal the interest rate for its one-year Medium Term Lending Facility (MLF).