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Week Ahead: Global Services PMI; Focus On BoE

Published 05/02/2018, 06:41
Updated 05/03/2021, 15:50
  • Worldwide releases of IHS Markit Services PMI data will provide further insights into global economic growth and price trends at the start of 2018
  • Central banks in Australia, New Zealand, Russia, India, the Philippines, Thailand and Brazil are all deciding on monetary policy…
  • … but main market focus is on BoE

Worldwide releases of IHS Markit Services PMI surveys will provide further insights into global economic growth and price trends at the start of 2018. A number of central banks are deciding on monetary policy, but markets will likely focus on the Bank of England. Other key data highlights include China’s trade figures.

Bank of England

In the UK, a highlight of the coming week will be the monetary policy decision of the Bank of England.

The UK economy enjoyed further resilient growth in the closing quarter of 2017, but risks to the outlook remained, not least the extent to which higher prices and falling real pay will continue to erode consumer spending power, and the degree to which Brexit uncertainty is holding back business investments. As a result, the focus will be on the central bank’s assessment of the economy and its latest Inflation Report, with markets not expecting any policy changes. Meanwhile, in the wake of similar releases for manufacturing and construction, the publication of services PMI data for January will provide greater clarity as to how the economy fared at the start of 2018. Preliminary official data showed that the UK economy expanded at a faster rate of 0.5% during the fourth quarter.

UK PMI And GDP Compared

US services in the spotlight

Analysts will eagerly await updates to the US services PMI surveys for further clues of future Fed policy. The acceleration of manufacturing growth and upward price trends have been grist to the mill for Fed hawks, adding to the likelihood of interest rates rising in March. Markets widely anticipate a March rate move, with the CME FedWatch measure implying an 80% chance, up from about 70% before the latest FOMC meeting.

US GDP Annualised QQ Change

No changes to RBA policy expected

In Australia, the headline inflation rate at the end of 2017 remained below the central bank’s target range of 2–3%, but markets are expecting the Reserve Bank to leave monetary policy unchanged at its next meeting. The latest CBA Manufacturing PMI showed that recent pressures on input costs and strong demand are pushing manufacturers to lift output prices, which could filter through to consumer prices in coming months. The release of the CBA Services PMI will also offer more clues of domestic demand and price pressures.

CBA Australia Manufacturing PMI

Monday 5 February

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