020 7898 0500On Friday the UK released data which showed that the manufacturing sector contracted in January. The drop-off has been attributed to the ‘highly erratic’ pharmaceutical sector.
To put this in context, we had already seen a slowdown in the services sector. A slowdown in both sectors may now have knock-on effects on other economic data.
Last week sterling continued its decline against the euro, while it appeared to have found a level of support against the US dollar. The fall against the euro was mainly due to the slightly positive statement from the European Central Bank, which supported the euro.
Looking ahead, much of the focus this week will be on the employment data due to be released on Wednesday, followed by the Bank of England meeting on Thursday.
Employment data will be closely watched for a number of reasons. The headline number is expected to remain steady but it’s the claimant count that may be of concern. Following the previous two months of declines, it is expected that the number of individuals claiming unemployment benefits will increase. In addition, the average earnings figure is expected to decline for the third month in row.
With inflation forecast to continue its upward trend, it may not be long before it outpaces average earnings growth. This effectively means that the pound in your pocket will be worth less.
For Thursday, markets don’t expect the Bank of England to announce any interest rate changes. However, markets will analyse Governor Mark Carney’s rhetoric for clues on future policy action.
Of course, the biggest market driver this week could be the triggering of Article 50.
