UK DATA: DMP Report Shows Bad News All Around
Feb-06 14:19
- Impacts from the Budget continued to dominate the DMP with 61% of firms expecting to increase prices, 54% to reduce employment and 37% to lower wages in response to the employers NIC contributions. These have stayed fairly constant for 3-months now with the exception of higher prices (which was only expected by 54% of firms a month prior).
- Mean expected price growth picked up another 0.1ppt on the 3-month measure to 3.9%Y/Y in the 3-months to January (up from 3.5% prior to the Budget). While mean realised price growth remained at 3.8%Y/Y in the 3-months to January (same as December).
- Mean expected employment growth posted another -0.1% on the single month measure (as it did in November but picked up to 0.3% in December). This puts the Y/Y 3-month average down to flat (0.024%). This was the lowest 3-month print since November 2020.
- Mean realised employment growth saw the single month measure turn negative for the first time since August 2021 in January (-0.5%) with the 3-month realised employment growth number at 0.4%Y/Y in the 3-months to January (from 0.9% in the 3-months to December). This was the lowest 3-month print since October 2021.
- Respondents estimates of current CPI inflation picked up for the first time since January 2023 to 2.6% (albeit still only lower in that period in December 2024). 1-year ahead expectations picked up on the 3-month measure to 3.0%Y/Y (the single month remained unch at 3.0%) while 3-year ahead expectations picked up a tenth (on the 3-month measure) to 2.8%Y/Y, but the single month reverted back to 2.7% (where it was in November).
- Overall, there's little in this report to be happy about - price intentions increasing and employment intentions falling further.
- It adds to the conundrum for the MPC - do they look through prices moving higher now and cut more aggressively, or do they still only cut quarterly due to the labour market slowing? The MPC had access to this data during their deliberations this month and this should already be baked into their forecasts.
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EQUITIES: EU Tech Index is extending gains
Jan-07 14:09
- The upside continuation in US Equities, these are small slow moves, help the European Tech sector {SX8P Index} back towards it earlier intraday high.
- The initial rally in Tech stocks started Yesterday after Microsoft said that it planned to spend $80bn on AI centers this Year.
- SX8P is breaking above 850.00, the highest traded level since late July, and next resistance is seen further out, up to 864.89.
EUROPEAN INFLATION: GS See Core CPI M/M Higher Than ECB Estimate
Jan-07 14:07
- We wrote earlier how Eurozone service CPI inflation momentum continued to cool in December despite the monthly pace increasing to 0.34% M/M, but also how there have been concerns in recent months about whether the seasonal adjustment process is biasing this lower.
- On that subject, Goldman Sachs write that they estimate sequential core inflation at a seasonally adjusted 0.33% M/M in December, “notably stronger than the ECB's estimate of 0.21%mom and higher than the November reading of 0.02%mom, driven by an acceleration in sequential services.”
- “We update our Euro area inflation path, and still expect core inflation to reach target sustainably by the end of 2025. As for headline inflation, we now see it slightly above target for the entirety of 2025.”
STIR: Effective Fed Funds Rate
Jan-07 14:03
FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $280B
