Articles
12 February 2021

Key events in developed markets next week

Next week, US retail sales and industrial production data should show the US economy started 2021 on a strong footing, while Eurozone PMIs are likely to shed some light on the manufacturing recovery and if it is petering out. The UK will get inflation data but we think the reflation story is unlikely to stick

US: Retail sales to rebound off stimulus checks, and industry data to show strength as well

Next week, the US data highlights will be retail sales and industrial production numbers for January and both should show the US economy started 2021 on a strong footing.

Daily credit and debit card transaction numbers show consumer spending jumped immediately after the $600 stimulus cheques started hitting bank accounts from early January and this suggests there is clear upside risk to the consensus forecast of a 0.8% month-on-month gain after a 0.7%MoM fall in December. We also know that car sales strengthened in January.

Meanwhile, factory activity remains strong based on information in the ISM survey while higher energy prices are leading to rising rig counts with 384 in operation at the end of January versus 348 at the end of December. Colder weather is also likely to boost utility demand. Rounding out the numbers, we have housing figures which should continue to benefit from record-low mortgage rates.

Eurozone: PMI and industrial data to shed light on the recovery

In the eurozone, the week starts with eurozone data on industrial and export performance in December. Expect a tick down from November for industrial production, which was influenced by a huge jump in Irish output.

Perhaps more important are PMI numbers that will come out on Friday, which should provide some insight into whether the manufacturing recovery is petering out as the second wave of the pandemic continues.

UK: Reflation is a key story in the US, but is it coming to the UK too?

For the time being, the data suggests that’s not the case. Inflation, like everywhere else, likely remained depressed by energy prices in January, while retail sales look set to plunge once more. More timely data has shown a post-Christmas dip in spending.

But like the US, the UK should experience some pent-up demand once the economy reopens in the spring. There are caveats though, one being that it will inevitably boost services more than goods. That could imply that retailers won’t benefit fully from any post-Covid spending splurge (although some things, like clothing, may buck the trend).

Inflation will likely rise through the middle of the year – partly because of energy prices, but also as the impact of higher shipping costs are factored in. But the price impact of pent-up demand may not be huge. Aside from a few examples of pandemic price spikes (cars and bikes!), and retailers expanding margins on goods, the impact isn’t gigantic. Something similar will probably be true of any rebound in services prices through this year.

So while inflation will rise to roughly 2% later this year, it’s not a massive concern for the Bank of England, particularly given that unemployment is set to rise in tandem.

Developed Markets Economic Calendar

Source: ING, Refinitiv
ING, Refinitiv
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