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Astute Market Overview - 21st February 2023


Roses are red, violets are blue, welcome to this week’s Astute Market Overview!

It was St. Valentine’s Day last week, a day that we use to commercially celebrate romance and love, however things weren’t heating up for economic growth.

A recent release of UK GDP data shows 0% growth for the UK in the last quarter of 2022. Whilst no growth sounds like nothing to celebrate, it shows that the UK has, so far, avoided a technical recession (two consecutive quarters of negative GDP growth).

Whilst there is a chance that we could avoid a recession (which would likely be a boon for markets), we believe that a recession in the UK is still likely, however it may not be as painful or deep as markets first feared. Market movements surrounding recession have been focussed on how deep and painful a recession will be – how many job losses and businesses closing? How much decreased economic output?

Before the start of Lent this week we have Shrove Tuesday (which is commercially observed as Pancake Day). This mid-week pick-me-up is looking likely to cost a lot more this year: whilst January’s CPI inflation number came in below the previous month at 10.1%, showing that inflation is easing, there were still pressures keeping inflation high, notably from flour, milk, eggs and sugar.

Those items in the basket that are easing the pressure behind inflation are personal computers, mobile phone equipment and second hand cars, all costing less than in January 2022.

Earlier this month, the US observed Groundhog Day, and in the spirit of feeling like you’ve heard something before, let’s talk about US inflation. Last week, we had the release of January’s CPI inflation number for the region which showed that – although inflation is still well above targets at 6.4% – it was continuing to cool.

Coming up this week, some data releases worth noting include:

  • The release of eurozone CPI inflation for January, and the release of US Q4 GDP, and
  • The release of Japan CPI inflation for January. Whilst prices in Japan haven’t risen as much as in many other countries across the world (the last reading for the region was 4%), the country is still experiencing the highest inflation for 41 years. In other news, it’s a shortened week for key markets in Japan, due to the Emperor’s Birthday public holiday.

See you next time.

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