March Flash PMIs, UK Inflation, Fed Comments in Focus

 | Mar 20, 2022 05:27

h2 March flash PMIs, UK inflation, Fed comments in focus

March flash PMIs will be released in the coming week for a first look at economic conditions since the outbreak of the Ukraine war. A series of Fed speakers will also be watched post the Fed FOMC meeting with central bank meetings also scheduled in Switzerland, Norway and the Philippines. UK, Singapore and Malaysia inflation figures are meanwhile updated for February but also watch out for US durable goods orders, US, UK and eurozone consumer sentiment, US fourth quarter GDP revisions and production data out of Taiwan and Thailand.

Soaring inflation rates have seen the US Fed raise interest rates for the first time since 2018 and the Bank of England hike for a third successive meeting, with higher inflationary pressure expected amid persistent elevated prices across energy and broader commodity markets (see box). A greater uncertainty will be the resilience of economic growth against the headwinds of these higher borrowing costs, a widespread cost of living crisis, geopolitical stress from the invasion of Ukraine, China's latest COVID-19 shutdowns, financial market volatility and the withdrawal of pandemic fiscal stimulus.

The coming week will provide some clues as to how robust business and consumers are coping in the face of these headwinds. Consumer sentiment data from the Eurozone, UK and US are widely expected to see households struggling under the weight of soaring energy bills, while business sentiment looks set to be hit by the uncertainty caused by the Ukraine war and renewed concerns in manufacturing over supply chains and costs. Less clear will be the extent to which downward risks to output across manufacturing and services have been offset by the reopening of economies from COVID-19 restrictions. Policymakers will be hoping to see some resilience here.

h2 Commodity price spike/h2

In addition to providing the first major glimpse into economic growth, supply chains and business confidence following the invasion of Ukraine, the coming week's flash PMI business surveys will provide guidance on the extent to which inflationary pressures are continuing to build, with particular concern relating to the potential passthrough of higher energy and other commodity prices through the value chain to consumers.

The invasion has seen commodity prices spike higher: the IHS Markit Materials Price Index (MPI) jumped another 5% in the second week of March, following the record-breaking 8.1% increase the week before. Commodity prices now sit 11.7% above the previous all-time high set in April 2011.