Economic Update
Stay informed about the latest economic developments in the UK, Eurozone and the US. Get insights into key indicators and currency trends in this comprehensive economic update blog.
US Core PCE Price Index expected to rise to 0.4%
6 minute read26 February 2024
GBP
Thursday last week, the latest data from the UK's Manufacturing and Services Purchasing Manager's Index (PMI) was released. This is an important indicator for investors who will be looking for signs as to whether the situation is improving in the UK following a long period of stagnant growth.
The Manufacturing PMI was forecast at 47.5 but came in slightly below expectation at 47.1, but still increased from last month's reading of 47.0, and the Service PMI matched last month's reading of 54.3.
The maintained strength of the services data could indicate the private services industry, which includes finance, insurance, communications and non-retail consumer companies, has an optimistic outlook for the year after it posted the strongest reading for six months in January.
This Friday, the monthly UK Nationwide House Price Index is released, which is expected to fall from 0.7% to 0.3%. This indicates the change in the selling price of homes backed by Nationwide mortgages.
EUR
We also saw Manufacturing and Services PMI data from France, Germany and the EU as a whole last Thursday. The data was expected to continue to creep upwards, with both France and Germany forecasting slight gains in last month's readings in both industries. France's PMI data came in above expected, posting 46.8 for Manufacturing and 48.0 for Services, ahead of the forecasts of 43.5 and 45.7, respectively.
Germany's data was more mixed, coming in below expectations for Manufacturing at 42.3 and slightly above for Service at 48.2.
As they are two of the biggest EU economies, their results were reflected in the overall Manufacturing and Services PMI data, which landed at 46.1 and 50.0, respectively. This was the first time the Eurozone Services data wasn't below the key 50 threshold that separates growth and contraction since July last year. The majority of readings, however, remain below 50, indicating continued industry contraction.
The latest inflation data for January was also released for the euro area Thursday, showing that it had fallen to 2.8%. This puts inflation back on its downward trajectory after a slight increase in December.
The only notable data out this week is German month on month Preliminary CPI inflation data. Forecasters expect CPI to rise from 0.2% to 0.5%. The Dollar could continue its gains this week. The US Core PCE Price Index is expected to land higher than last month, rising to 0.4% from 0.2%. This could be the most significant market data of the week when it comes out on Thursday at 1:30pm. This is generally regarded as the Fed's favoured measure of inflation. Bloomberg's World Interest Rate Probability tool is currently showing markets are expecting the Fed to make a total of four rate cuts by the end of this year. An increase in PCE could further reduce market expectations of a rate cut in the next few months and provide further support to USD, which continues to be the strongest-performing G10 Currency of 2024*. Also released this week are the US Durable Goods Orders released on Tuesday at 1:30pm, forecasted to fall from 0.0% last month to -4.7%. The metric is a leading indicator of production, and falling numbers could signal that manufacturers are reducing the activity of products with a life expectancy of over three years, like cars, computers, and appliances. This will be closely followed by US Conference Board Consumer Confidence at 3pm, which indicates consumer spending is expected to remain steady at 114.8. On Wednesday, we'll see the US Preliminary quarterly GDP come out, which is expected to remain at 3.3%, and on Thursday, unemployment claims are forecasted to rise from 201K to 209K. Finally, on Friday, we're expecting to see Revised UoM Consumer Sentiment remain at 79.6 and the US ISM Manufacturing PMI, which is forecasted to rise from 49.1 to 49.5; this follows last week's US Flash manufacturing, which rose from 50.5 to 51.5, whilst US Flash Services PMI fell from 52.4 to 51.3. USD
This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory. *Bloomberg's World Currency Tracker
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