Overview of the week commencing 23 January
Graham Cross, CEO
The week commencing 16 January brought higher-than-expected inflation in the UK and precisely-as-expected growth from China. That higher-than-expected inflation jolted the bond markets into revising a scheduled rate rise, bringing the next shift forward from the third quarter of 2019 to the fourth quarter of 2018.
1.6 percent is a little faster than was expected of inflation for December. Food prices fell a little while everything else increased in price; most notable, and perhaps least surprising, is the driving contribution from transport costs when compared with the same a year earlier.
The pound’s slump has encouraged rising import prices but domestically oriented price rises also played their part in taking CPI to a 2½ year high.
The year ahead likely sees inflation peaking at somewhere near 3.0 percent. Moody’s expect a rate as high as 3.3 percent as soon as July by when April’s planned increase in the minimum wage (from £7.20 to £7.50 per hour) and a 0.5 percent apprentice levy begin to bite. Our feeling is that inflation will not rise quite that far quite that fast but we certainty don’t think that Moody’s are far off the mark.
The Chinese authorities – not known for their propensity to forgive – set a 6.5 to 7.0 percent target for growth at the start of the year and by the end of the year said growth comes in at 6.7 percent. We have nothing more to say on that!
The week ahead provides us with an opportunity to gauge UK and US GDP growth for the whole of last year.