abrdn’s Thomas Watts on the week ahead

by | Jan 30, 2023

Thomas Watts, Investment Analyst, abrdn, comments on the economic data releases this week;

“As January transitions into February, perhaps the Anglo-Saxons were on to something when they used to refer to the month as Solmonath, literally translating to “mud month”.

“With the month providing a backdrop where very little gardening can be done (apart from pruning your Wisteria and Hydrangeas of course), the coming week starts inside the home, with Nationwide’s Housing Price Index data being released on Monday morning. Detailing the change in the asking price of homes mortgaged by the provider, the data acts as the UK’s earliest report on housing inflation. The housing industry’s health should not be overlooked when gauging the wider industry activity it can spur. The property market has a wide-reaching impact on banks, mortgage providers, estate agents and even greatly impacts DIY and furniture companies who should benefit from increased activity in the sector.

“From housing prices to household confidence, Tuesday bring US Consumer Confidence, released by the American Conference Board. The survey is so well respected due to its breadth, asking 3,000 households to rate the relative level of current and future economic conditions including the ease of getting a new job, business conditions and their overall economic situation. Consumer confidence is incredibly important to economists as it acts as a leading indicator of consumer spending, which accounts for the majority of overall economic activity.

“The remainder of the week should be a tale of three central banks as the US Federal Reserve, the Bank of England and the European Central Bank hold press conferences throughout Wednesday and Thursday, and are widely expected to raise rates further, although perhaps at a slower pace here in the UK and the US.  By how much is still up for debate but we should expect a volatile end to the week as a range of central bankers give their views on the economy and clues to future rate policy.

“As ever, the first Friday of the month brings US Non-Farm Payroll data. A key piece of information when determining the US central bank’s thinking on inflation, the employment data itself will be accompanied by Average Hourly Earnings, allowing us to more accurately gauge future demand expectations as the more consumers earn, the more they tend to spend. It all combines to be a vital piece of data for the Fed and should take on added significance considering the extra impetus put on such data going forward from Jay Powell and co.”

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