Astute Market Overview - 18th April 2023
Whilst Easter Monday marked a shortened trading week for some, it has been a strong week for many equity markets, as key global indices continued to climb gradually in April.
In the US last week, we had minutes from the last Federal Open Market Committee Meeting. The meeting started by covering the recent developments in the banking sector (or at least they were recent when the Committee sat on 21st and 22nd March). The vice chair, John Williams, confirmed that the US banking system is sound and resilient.
Last week, we had the US CPI measure out for March, a key reading of inflation. The year on year measure for March came in at 5%, which shows inflation is continuing to cool in the US. Alongside CPI, the Fed will look to other data ahead of their next interest rate decision in May, for some stronger evidence that inflation is being tamed.
In the UK, the ONS released Real Gross Domestic Product (GDP) data showing that the UK economy stagnated in February, with no growth from the previous month. However, alongside the release showing lacklustre economic growth for February, January’s GDP figures (which had previously been released) were revised upwards to 0.4%.
This boost shows that January’s growth finally brought the UK economy above its pre-covid levels.
Drilling down into February’s GDP figures, service sector output fell by 0.1% in February, with services being a large part of the UK economy. Some of the largest detractors from growth in services were education, and public administration and defence, partially explained by industrial action within the civil service and teaching professions, campaigning in part for an above inflation pay rise.
The production sector also saw a fall in growth in February. Some of the largest detractors in production were electricity, gas, steam and air conditioning due to falls in the manufacture of gas and electric power generation, transmission and distribution. This is partially explained by the milder than average temperature in February.
The GDP figures will serve as paint on the canvas which, alongside UK CPI inflation data and jobs data out this week, will paint the scene of the UK economy, and how successfully the Bank of England’s interest rate decisions are tackling inflation.
Some of this week’s key releases include UK and Eurozone CPI, Chinese GDP and UK retail sales. See you next time.