This week’s UK economic data hardly seems worth highlighting but even before this week’s heightened Brexit uncertainty, UK retail sales fell for a second month running in October. The 0.5% decline is a worrying sign ahead of Black Friday and the key Christmas trading period (unless of course it is simply consumers delaying purchases ahead of the Black Friday offers). Additionally, both the headline and core CPI inflation for October was unchanged (at 2.2% and 1.9% respectively).
In the US, the Fed Chairman, Jay Powell, did nothing to dissuade me that the Fed won’t increase interest rates again in December (its fourth increase this year) as he indicated the central bank would maintain its policy of raising short-term interest rates given that the US economy was “in a good place”. However, and more importantly, he subtly indicated at some potential headwinds that would result in a slower trajectory of interest rate increases, or even a pause: slowing overseas economies; fading fiscal stimulus in the US; and the lagged economic impact of the recent interest rate increases. Additionally, given there is a rising chorus of concern from business on trade, as I have previously indicated, Fed policy error could mean that the time difference between the end of this interest rate hiking cycle and the start of the next interest rate cutting cycle could be very short!
It is a quiet week ahead in terms of big data releases thanks to Thanksgiving, although we do have US housing starts and existing home sales.
Ian Copelin, Investment Director