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The Week Ahead ...
The Week Ahead

1:30pm Tues 14 Jan-Retail Sales (Dec). The volume of retail sales fell 0.4% in November, which was surprising given that consumer spending grew 0.5%. However, the consensus is looking for a rebound in sales pre-Christmas, to the tune of 0.4%.

1:30pm Tues 14 Jan-Consumer Prices (Dec). The energy price rise should not have had as much of an impact on consumer prices as it did on producer prices.

In addition, there should have been some offsetting influence from the first decline in food prices for almost two years.

The headline index is expected to have grown 0.2% m-on-m, leaving the annual inflation rate unchanged at 3.2%. The core index is also expected to have grown 0.2%, up 2.7% y-on-y, the lowest December reading since 1965.

1:30pm Fri 17 Jan-Housing Starts (Dec). US housing starts jumped 9.2% in November, following declines in the previous two months. This figure suggested a rebound in housing activity following a steep fall in mortgage rates over the last few months, and it is expected that there was further growth last month.

1:30pm Fri 17 Jan-International Trade (Nov). There was a sharp narrowing of the US trade deficit in October, (from $11.4bn to $8bn), which is likely to have reversed in November. The deficit is expected to have widened out again, from $8bn to $11bn in November.

However, despite a reversion to double digit deficits we should still expect to see a significant contribution from net exports to GDP growth in the fourth quarter. 2.15pm Fri 17 Jan-Industrial Production/Capacity Utilisation (Dec).

There could well be more good news on US industrial production growth in December if the latest purchasing manager's index is anything to go by. (The composite measure rose 1.3 points despite consensus expectations for a 0.5% decline, and put the index at its highest level since June).

The Week Just Past

Headline producer prices rose 0.5% in December, largely reflecting a 5.2% rise in gasoline prices and a 4.9% rise in heating oil prices. Ex food and energy prices were only 0.1% higher.

For 1996 as a whole, headline PPI grew 2.8%, up from 2.3% in 1995. Excluding food and energy, the PPI grew 0.6% in 1996 versus 2.6% the previous year.

Given that producer price inflation remains very subdued, (once energy prices are excluded), a slightly stronger than expected headline index is unlikely to have any implications for Federal Reserve policy.

If anything news that underlying price pressures remain so low should be well received by global bond markets.

In December 262,000 non-farm jobs were created, rather more than anticipated, while the unemployment rate remained at 5.3%.

Average hourly earnings surprised on the upside, rising from $11.99 to $12.05, and average weekly hours ticked up from 34.5 to 34.8.

The US Treasury market reacted predictably to the news of a more buoyant than expected labour market, with the 30-year bond yield rising to 6.88% following the announcement, its highest level since October.

Analysts said the report reignited fears of a near term Federal Reserve tightening, with the stronger than expected wage growth being especially worrying.

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