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Daily Financial Market Outlook


2011-03-24 07:07:01

The UK Chancellor downgraded the 2011 growth forecast to 1.7% from 2.1% in yesterday's Budget and official retail sales figures for February, due this morning, will provide an indication of the health of domestic spending. Anecdotal evidence, including from the Bank of England's Agents' Summaries and our Consumer Barometer, indicates that there is likely to be a pullback from last month's surprisingly strong numbers.
We expect retail sales volumes to fall by 1.6% in February (1.2% ex fuel), below the -0.5% consensus. Before the retail sales numbers, Bank of England MPC member Spencer Dale is scheduled to speak at 09:00 GMT.
In the euro area, we look for modest declines in the 'flash' manufacturing and services PMI surveys to 58.3 and 56.3, respectively. Nevertheless, they will remain at very robust levels, particularly for the manufacturing sector. The dominant influence of Germany behind this expansion is expected to be further underlined by the German IFO survey tomorrow.
In the US, the housing sector remains the economy's Achilles' heel, but it also means that manufacturing is helping to drive the economy forward. The market consensus is looking for durable goods orders to rise 1.0% in February (2.0% ex transportation), following an upwardly revised 3.2% increase in January.
CHART: The stellar rise in UK January retail sales looks unsustainable