As has been the case for several months, any time data on inflation is on the economic calendar, market participants sit up and take notice. And so it is once more the case, with inflation from four major economies this week. We are also keeping an eye out for some more growth numbers for Q4 and a clutch of tier one UK data.

Watch for: 

  • North America – US Retail Sales and Canadian CPI inflation
  • Europe & Asia – Inflation for China, UK and Japan, in addition to GDP data for Japan and the Eurozone
  • LatAm – A light calendar with Colombian GDP the highlight

North American data: 

  • New York Fed Manufacturing (Tuesday 15th February, 1330GMT) After a surprise negative number last month, the survey is expected to recover to +3.5 in February (from -0.7 in January)
  • US PPI (Tuesday 15th February, 1330GMT). Headline PPI is expected to increase to 10.0% in January (from 9.7% in December). Core PPI is expected to also increase slightly to 8.5% (from 8.3%).
  • US Retail Sales (Wednesday 16th February, 1330GMT) Adjusted (ex-autos) sales are expected to have grown slightly by +0.3% MoM in January (-2.3% in December)
  • Canadian CPI (Wednesday 16th February, 1330GMT) Headline CPI is expected to rise slightly to 5.0% in January (from 4.8%) with core CPI expected to increase to 4.2% (from 4.0%)
  • US Industrial Production (Wednesday 16th February, 1415GMT) Production is expected to fall by -0.3% on the month in January, which would drag YoY production down to +2.8% (from +3.7% in December)
  • US Building Permits and Housing Starts (Thursday 17th February, 1330GMT) A slight improvement is expected for both in January, to 1.885m on permits (from 1.790m) and to 1.702m on starts (from 1.680m)
  • US Weekly Jobless Claims (Thursday 17th February, 1330GMT) 220,000 claims are expected (similar to the 223,000 last week).
  • Philly Fed Manufacturing (Thursday 17th February, 1330GMT) An increase to +27 is expected in February (from +23.2 in January).
  • US Existing Home Sales (Friday 18th February, 1500GMT) Sales of existing homes are expected to fall slightly in January to 6.10m (from 6.18m in December).

After a surprise sharp monthly decline in December, US Retail Sales are the key focus for major markets this week. December sales were the worst in 10 months and market participants will be looking for a recovery in January, even if this would be merely a stabilization. With Industrial Production expected to decline slightly in January, this would be the second straight month of (mild) decline). The harsh winter and the Omicron variant will be playing a role but the early 2022 sectoral trends are looking a little subdued for the US. This would put more emphasis on next month’s data that will need to show signs of improvement.

US Industrial Production

A general trend of deceleration is also in evidence on the regional Fed surveys recently. This week we could see this trend improve slightly. The New York Fed activity is expected to respond well to last month’s surprise slowdown and bounce back above zero. The Philly Fed is expected to remain on its mild trend of improvement. 

ISM Services PMI

Market Reaction: 

  • Expect USD to react with elevated volatility to the PPI on Tuesday.
  • CAD will be positive if Canadian CPI increases more than forecast

Europe & Asia: 

  • Japan GDP – Q4 prelim (Monday 14th February, 2350GMT) Growth is expected to be +1.4% in Q4 (after a decline of -0.9% in Q3) 
  • UK Unemployment and earnings growth (Tuesday 15th February, 0700GMT) Unemployment is expected to remain at 4.1% in December (4.1% in November), whilst total Average Earnings are expected to decline to 3.8% (from 4.2%)
  • Eurozone GDP – Q4 prelim (Tuesday 15th February, 1000GMT) Growth is expected to remain at 4.6%, unrevised from the first reading for Q4 (3.9% in Q3). 
  • German ZEW Economic Sentiment (Tuesday 15th February, 1000GMT) Sentiment is expected to pick up in February to 55.1 (from 51.7 in January).
  • China CPI (Wednesday 16th February, 0130GMT) Headline inflation is expected to fall slightly to 1.4% in January (from 1.5% in December).
  • UK CPI (Wednesday 16th February, 0700GMT) A mild increase of inflation is expected in January for both headline CPI, up to 5.5% (from 5.4% in December) and core CPI, up to 4.3% (from 4.2%)
  • Australian Unemployment (Thursday 17th February, 0030GMT) Unemployment is expected to increase to 4.3% (from 4.2% in January)
  • Japan core CPI (Thursday 17th February, 2330GMT) Core inflation is expected to drop again, to +0.3% in January (from +0.5% in December).
  • UK Retail Sales (Friday 18th February, 0700GMT) 

Once more we see inflation is the key focus across major economies, with China, the UK, Canada and Japan all updating. Inflation fears remain paramount, especially for bond markets which have been selling off hard recently. US CPI was the catalyst last week. Elsewhere for major economies, looking at the consensus it seems to be a bit of a mixed bag this week. For the Asian majors, inflation seems to be tracking lower, with both China and Japan expecting mild declines. However, we are also expecting prices to continue higher for both the UK and Canada. Upside surprises will increase the pressure on the Bank of England and Bank of Canada to tighten policy faster.

Major Economy Core Inflation

Other notable data comes with the German ZEW Economic Sentiment which is expected to continue its improving trend. This is likely to be helped this month by what is forecast to be a pick up in current conditions too, suggesting the reduced impact of Omicron. Also, keep an eye out for Australian unemployment. Last month’s surprise decline fuelled an AUD rally, but unemployment is expected to tick higher in January. This could weigh on AUD.

Market Reaction: 

  • GBP with increased volatility throughout the week across several tier-one announcements
  • EUR moving on any GDP surprise but also German ZEW
  • Any upside surprise to Australian unemployment would be AUD negative

Latin America: 

  • Colombian Industrial Production (Monday 14th February, 1500GMT) Production is expected to reduce to 11% in December (from 13.9% in November)
  • Colombian Retail Sales (Monday 14th February, 1500GMT) Sales are expected to have been strong in December with an increase to 9.5% (from 7.4%)
  • Colombian GDP – Q4 (Tuesday 15th February, 1600GMT) Quarterly growth is expected to come in at 2.5% in the fourth quarter (5.7% in Q3)

Outside of Colombia, it is a fairly quiet week for Lat Am data. December looks set to have been a bit of a mixed month for the sectors. Colombian Industrial Production is expected to have slipped but remains in double-digit growth for the year. However, Colombian Retail Sales are expected to have picked up again after a slightly disappointing November. Colombian GDP growth looks to have moderated slightly in Q4 down to 2.5%. This would be a slightly subdued end to the year. 

Lat Am currencies

Market Reaction

  • COP to be positive on any upside surprises to growth data