Macroeconomics: The Day Ahead for 13 February

The tariffs spectre will continue to be a focal point, though the ‘rapprochement’ between the US and Russia as talks between Trump and Putin are tabled will be the talking point, even if yesterday’s CPI ‘shock’ was a reminder that economic data cannot be ignored. Statistically, the focus will be on UK Q4 GDP and US PPI, with the UK RICS House Price Balance, US weekly jobless claims and Polish Q4 GDP also on the agenda. There is a sprinkling of European central bank speakers accompanied by rate decisions in the Philippines, Peru and Uruguay, and a rather busier day for corporate earnings above all in Europe, with Barclays, Commerzbank, Nestle, Siemens and Thyssenkrupp among the likely highlights. Trump has in effect gone over the heads of the EU and President Zelenskiy by setting up a dialogue with Putin, and it will be interesting to see how the EU and above all Polish PM Tusk (as president of the EU council for H1 2025) responds.

** U.K. – Q4 prov. GDP, Dec activity data **

– Q4 GDP is expected to post a marginal drop of -0.1% q/q (vs. Q3 Flat q/q) in line with the BoE’s forecast, though December monthly GDP is seen holding at +0.1% m/m. In the detail, Private Consumption is forecast to rise 0.3% (vs. prior 0.5%), with a rebound in Government Spending to 0.6% (vs. prior 0.1%), but offset by a -0.6% q/q drop in Fixed Capital Formation and Business Investment, and a drag from Net Exports. Monthly activity data are expected to see modest rebounds in Industrial Production (0.3%) and Manufacturing Output (0.1%), a weak but steady 0.1% m/m in the Index of Services, a slight deceleration in Construction Output (0.2%), and a marginal narrowing of the Trade deficit. Per se, these data points will only add to the pessimism about the UK growth outlook.

** U.S.A. – January PPI **

– Yesterday’s above forecast CPI was clearly something of a shock for markets, though a closer inspection of the details suggest that the FOMC will be less troubled than markets, which pushed back the timing of the next Fed rate cut to September. Energy (1.1% m/m) and Food (0.4%) at headline level, and Used Car Prices posting an unexpected 2.2% m/m rise in no small part due to the annual revisions to seasonal adjustment factors pressured core along with a 1.2% m/m rise in Airfares, but Services and Shelter (both 0.3% m/m) were better behaved, even if still elevated, while CPI ex-Food, Energy & Shelter was well contained at 0.2%. Today’s headline PPI is expected to rise 0.3% m/m, thanks to energy prices, but a reversal of some of December’s surge in airfares should see a more limited 0.2% m/m rise in core PPI, partially offset by rising Medical Care costs. While markets will be wary of an upside surprise following the CPI prints, PPI will be an increasingly sensitive market factor in the coming months, as the impact of tariffs become visible, and feeds into the Fed’s inflation outlook.