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The Week Ahead ...
The Week Ahead

9:30am Mon 13 Jan-Producer Input/Output Prices (Dec). Input prices fell more than 3% m-on-m in November, -5.5% y-on-y, (one positive side-effect of sterling's continued appreciation).

Input prices should have fallen a further 1% last month, -6.5% y-on-y.

Output prices will have been inflated by higher duty on tobacco and petroleum announced in the Budget although these effects should have been less pronounced than last year. The consensus expects prices to have risen about 0.6% m-on-m, 1.9% y-on-y.

Wed 15 Jan-Monthly Monetary Meeting between the Chancellor of the Exchequer and the Governor of the Bank of England.

9:30am Weds 15 Jan-Unemployment (Dec). The introduction of the job seekers allowance delayed the processing of claims in November, contributing to the huge reported 96,000 unemployment fall.

However, even accounting for this, conditions in the labour market are tightening. The consensus expects a more modest 40,000 decline in December, and a fall in the unemployment rate, from 6.9% to 6.7%.

9:30am Weds 15 Jan-Average Earnings (Nov). Underlying average earnings growth remained unchanged at 4.0% for the fourth consecutive month in October, and is expected to have remained at this level in November.

However, October's headline figure masked higher service sector wage, a worrying trend which looks set to continue.

9:30am Weds 15 Jan-Unit Wage Costs (Nov). Manufacturing unit wage cost growth has been above 4% for almost a year now. However, as productivity improves unit cost growth should ease, and the consensus expects a figure of 3.7% for November.

9:30am Thurs 16 Jan-Retail Prices (Dec). A key influence last month will have been the increase in excise duty announced in the Budget, while the inflationary impact of strong domestic demand should offset the deflationary impact of sterling's appreciation.

Both the headline and underling rate should ease modestly, with the RPI down from 2.7% to 2.6% and the RPI ex MIPs down from 3.3% to 3.2%, (but still a long way off the government's target).

9:30am Fri 17 Jan-PSBR (Dec). With a little help from the sale of MOD married quarters, the PSBR currently remains on track to achieve a 96/97 target of£26.5bn.

However, disappointing corporation tax receipts in January and/or a pre-election spending surge in March could still cause a significant overshoot. The consensus expects a PSBR of about£1.3bn in December, up from£0.6bn in December 1995.

The Week Just Past

M0 money supply grew in line with expectations last month, up 0.9% m-on-m, 7.1% y-on-y. Narrow money growth has been above its official monitoring range for almost four years now, and December's figure suggests that pre-Christmas spending remained strong.

Although the latest CBI Distributive Trades Survey shows retail sales volumes in December higher than at the end of 1995, it suggests pre-Christmas spending disappointed expectations.

A net positive balance of 33% reported growth in sales over the year, well down on the net balance of 53% who had predicted an increase a month earlier.

This ties in with anecdotal evidence that Christmas shopping was slow to get going in December and confirms that, while the consumer sector is strong, we are not experiencing a 1980s style boom.

Manufacturing output fell unexpectedly in November, down 0.5% m-on-m, reversing October's 0.5% gain. One explanation for manufacturing weakness could be that sterling strength is having a more immediate impact on output than anticipated.

However, it is more likely to reflect a simple pause in activity following two fairly strong months-manufacturing can be a volatile series.

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