After a quiet week on the data front last week, this week has proved anything but. In the UK we have heard about the jobs market, inflation, growth, and retail sales. Starting with economic growth, this fell in the final quarter of 2023, meaning that the UK fell into a technical recession, defined as two consecutive quarters of negative growth. A contraction of 0.3% was seen, following a decline of 0.1% in Q3.

Falls we seen across most sub-categories, including services, industrial production, and construction. Despite the news the markets took it within their stride, perhaps comforted by the Governor of the Bank of England Andrew Bailey’s comments that they believe we are now starting to see green shoots. He would have, therefore, taken comfort in the retail sales figures for January, which came out way above expectations. Month on month these were expected to have risen by 1.5%, 1.7% year on year. Instead, however, we saw figures of 3.4% and 3.2% respectively. A sharp rise in sales was seen across all sub-sectors with the exception of clothing stores.

Strong retail sales were chalked down, in some sectors, to January sales. The consumer was, perhaps, still feeling confident to spend due to the jobs market remaining strong. The unemployment rate for December came in at 3.8%, below the consensus forecast of 4%. At the same time, average earnings excluding bonuses rose by 6.2%, which was ahead of expectations of a 6% figure. If we compare this to the consumer price inflation figure of 4%, this represents a real wage gain of over 2%. Whilst wage increases were lower than the previous reading of 6.7%, this is a positive result for the consumer all the same.

Sticking with inflation, we saw the release of January’s figure. This came in at 4% year on year. Whilst this was in line with December’s figure, it was below the market’s expectation of 4.2%. The current rate of course remains double the target set for the Bank of England. For the consumer, however it was perhaps pleasing to see the reduction in food prices. Whilst the rate of inflation here still remains higher than most are comfortable with, at 6.9%, it was markedly lower than the previous months reading of 8%.

Hopping across the Atlantic, we also saw the release of the latest inflation data for the US. Here the inflation rate surprised to the upside, coming in at 3.1% year on year against a forecast of 2.9%. It still, however, represented a fall from December’s figure of 3.4%. Month on month, however there was a pickup of 0.3%. Whilst an increase was expected, a rate of 0.2% was forecast. So, while the overall direction remains down, we should perhaps be aware that inflation data volatility may persist on its journey back to 2%.

And finally on the inflation front, for those of you who celebrated Valentine’s Day, a belated verse from the European Central Bank for you;

Roses are red
Violets are blue
We’re nearing our target
And we will reach 2

And on that note…

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