Week Ahead: Economic Indicators (EU)
EU, Week Ahead

Week Ahead: Economic Indicators (EU)

Tuesday February 12th

UK Unemployment Change
Change in the number of people claiming unemployment-related benefits during the previous month, released by the ONS (Office National Statistics). As the UK provides a lot of benefits to its population, requiring a lot of money, the more people that sign on, the money that will have to be pooled from the government’s budget to support people.

UK Unemployment Rate
The ILO (International Labour Organisation) Unemployment Rate released by the National Statistics is the number of unemployed workers divided by the total civilian labor force. It is a leading indicator for the UK Economy. If the rate is up, it indicates a lack of expansion within the U.K. labor market. As a result, a rise leads to weaken the U.K. economy. Generally, a decrease of the figure is positive (or bullish) for the GBP, while an increase is negative.

UK Employment Change
Change in the number of employed people. Data represents the 3-month moving average compared to the same period a year earlier.

UK Average Weekly Earnings Ex Bonus
The Average Earnings Index is an indicator of inflationary pressures emanating from the labour market. The effect of a higher or lower figure than expected can be both bullish or bearish.

UK Average Weekly Earnings
The Average Earnings Index measures change in the price businesses and the government pay for labor, including bonuses. The Average Earnings figure gives us a good indication of personal income growth during the given month.

A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

German ZEW Economic Sentiment
The ZEW Indicator of Economic Sentiment is calculated from the results of the ZEW Financial Market Survey. The ZEW is followed closely as a precursor and predictor of the Ifo Sentiment Survey and as such is followed closely by market participants. The data is released around the middle of the month for the current month. The survey provides a measure of analysts’ view of current economic conditions as well as a gauge of expectations about the coming six months. The latter measure tends to have the larger market impact and reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic. About 350 financial experts take part in the survey.

German ZEW Current Conditions
This survey summarizes the net percentage of positive and negative responses regarding the expectations for economic growth in the next 6 months, as given by financial analysts from banks, insurance companies and large industrial enterprises. For example, if 50% believe that the economic situation will improve and 20% believe it will get worse, the result will be +30.
The survey deals with the markets of Germany, the USA, Japan, Great Britain, France, Italy and other EU countries.

Market Reaction
A reading that is stronger than forecast is generally supportive (bullish) for the Euro, while a weaker than forecast reading is generally negative (bearish) for the Euro.

13th February Wednesday

(Jan) UK Inflation
The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in the UK. Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
The Bank of England usually puts a heavy focus on annual changes when it comes to reviewing the affects of monetary policy.

Market Reaction
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

(Q4 2023) Eurozone GDP

Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
GDP is the broadest measure of aggregate economic activity and encompasses every sector of the economy. There are two preliminary estimates which are based on only partial data. The first is the preliminary flash, introduced in April 2016 and limited to just quarterly and annual growth statistics for the region as a whole. This is issued close to the end of the month immediately after the reference period. The second flash report, released about two weeks later, expands on the first to include growth figures for most member states but still provides no information on the GDP expenditure components.

Market Reaction
In the current context, a stronger than expected reading of GDP usually leads to a stronger euro, and a weaker stock market. Stronger reads may lead to markets repricing the expectations of when the ECB could reduce rates. If the economy continues to push on, it may mean inflation picks up again from the increase in productivity and spending.

Thursday 15th February

(Q4 2023) UK GDP
Gross Domestic Product measures the total value of a country’s industrial output over a given period. It consists of the aggregate domestic production of goods and services by individuals, businesses, and government. Quarterly publications provide a much more detailed picture of the economy than the monthly indicators, covering all of gross domestic product (GDP), sector accounts, business investment, balance of payments, consumer trends, and profitability of UK companies.

Low levels of growth are negative to most asset classes and are common to recessionary cycles. The Bank of England (BOE) places a great deal of emphasis on monthly and yearly GDP. Robust growth is often a prelude to monetary tightening, while stagnate levels provide an environment conducive to Quantitative Easing (QE).

(Dec) UK Business Investment QoQ
The estimates in this release are short-term indicators of investment in non-financial assets in the UK, such as dwellings (residential buildings), transport equipment (planes, trains and automobiles), machinery (electrical equipment), buildings (non-residential buildings and roads) and intellectual property products (assets without physical properties – formerly known as intangibles). This release covers not only business investment, but asset and sector breakdowns of total gross fixed capital formation (GFCF), of which business investment is one component.

UK GDP Estimate YoY & MoM (These are non seasonally adjusted)
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The monthly report is based on output data only as the income and expenditure series are not available.
UK GDP estimate measures the change from the previous month NOT the previous quarter as the UK GDP Prelim QoQ, MoM and YoY do.

For instance GDP for February will be measured comparing it to the previous month.
The Estimate GDP YoY for February will measure GDP for February comparing it to last year’s month of February.

UK Trade Balance
Trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy’s competitiveness. Data are supplied by over 30 sources including several administrative sources, HM Revenue and Customs (HMRC) being the largest.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Market Reaction
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

Friday 16th February

(Jan) UK Retail Sales

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90% of the retail industry in terms of turnover.

Core Retail Sales
The Core number excludes Auto Fuel, which tend to be very volatile.

Market Reaction
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.

2:45 AM ET
(Jan) French Inflation
Harmonised Index of Consumer Prices, is the same as CPI, but with a joint basket of products for all Eurozone member countries.

Market Reaction
The impact on the currency may go both ways, a rise in CPI may lead to a rise in interest rates and a rise in local currency, on the other hand, during a recession, a rise in CPI may lead to a deepened recession and therefore a fall in local currency.