The second look at UK GDP will give investors more insight into the strength of the UK in the last three months of 2016 and may well surprise to the upside again. The first look at UK growth showed the economy growing at 0.6%, beating analysts’ expectations of +0.5%, making the UK the fastest growing economy in the G& during 2016. And with recent better-than-expected industrial production and construction output data, some analysts’ have mooted a further upgrade to +0.7% on Wednesday. Howard Archer, chief UK and European economist at IHS Markit notes that while industrial production and construction output only account for 14.6% and 5.9% respectively of GDP, taken together the upwardly revised performances add 0.0497% to GDP growth in the fourth quarter. In addition, the ONS estimates that the dominant UK services sector expanded by +0.8% q/q in the fourth quarter, while the service sector PMI for December showed economic activity at a 17-month high. At the November Inflation Report, BOE governor Mark Carney, upped the central bank’s growth forecast for 2017 to 1.4% from 0.8% three months earlier, the largest ever upgrade by the bank.
Pairs to Watch: EUR/GBP, EUR/JPY, EUR/USD
02/22 Wednesday | 10:00 GMT | EUR Euro-Zone Consumer Price Index (JAN)
Inflation remains stubbornly low in the Euro-Zone, despite near-term advances on the headline CPI figures. European Central Bank Mario Draghi, in the central bank’s meeting in January, made clear that any near-term advances in inflation were being looked through, or in other words, dismissed as a short-term aberration. The divergence between core (+0.8% y/y) and headline (+1.8% y/y) figures is largely due to base effects stemming from oil prices over the past year, not necessarily a sign that aggregate demand is picking up in the Euro-Zone. The monthly reading is due to show a significant decline (-0.8% m/m), reinforcing the notion that the ECB will need to keep its policy accommodative throughout 2017.
