Week ahead: UK Inflation, Retail Sales and PMIs dueOn May 18, 2020 by Thomas Belayneh
By Thomas Belayneh
This week’s schedule is jam-packed with updates on important indicators for investors in the UK. Key readings on CPI (Wednesday 20th), Services, Manufacturing and Composite PMI (Thursday 21st) and Retail Sales (Friday 22nd) are due.
Taking consumer price inflation first, it will be intriguing to see how food price inflation affects the headline figure. As has been widely reported, panic-buying by UK shoppers has caused stock issues for basic items like flour and pasta.
Although these issues have somewhat been rectified, with chains like Aldi having removed quantity restrictions on purchases of certain products, it remains to be seen whether price increases in light of strong recent demand has occurred nevertheless.
Core CPI (excluding the impact of the more volatile food and energy prices) will give some sense of the underlying price trends at play. The Bank of England has not taken negative rates off the table of potential policy measures, so a strong reading on this metric calls into question the sensibility of such a move.
Furthermore, there are reports that as many as 30 million vaccines could be ready by September, which, depending on the successful result of Oxford University’s Jenner Institute’s clinical trials, may lead to a rapid rolling back of restrictions and return to ‘normal’ economic activity.
The UK government’s announcement of a clear three-step process to ‘re-open’ the economy should make the releases of Thursday’s PMIs an intriguing affair. Although backward looking components of the surveys are still likely to be downbeat, a key area worth noting will be businesses’ assessment of future conditions particularly since this will be the first glimpse of understanding the optimism, if any, that businesses have towards the government plans.
Market expectations are: 0.8% in CPI (year-on-year) and -22.5% in retail sales (year-on-year).
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