After an uneventful few days over the tail end of last week and the beginning of this week, the economic calendar moves into high gear with the all-important US and UK January consumer price indices due for release just before Shares goes to print.

Markets often go up during quiet periods, and the last week has been no exception with the S&P 500 index in the US approaching the 5,000-point level for the very first time although the FTSE 100 was held back by a few disappointing large-cap earnings reports.

Goods inflation has been falling steadily thanks to easing supply chains and energy disinflation, but we are coming to the point where base effects could make further progress rather slow.

Service inflation was a lot slower to start falling, which it now is, but it needs to keep declining for the headline figure to move towards the central banks’ targets and with wages being a big part of service costs this is likely to be the area the market focuses on.

Aside from the inflation figures, which will be in the rear-view mirror by now, there is UK fourth-quarter GDP which the ONS (Office for National Statistics) forecasts was just 0.1% after zero growth in the third quarter.

On an annual basis, and taking into account the rate of inflation, real GDP is expected to have grown by just 0.6% last year against 4.3% in 2022, and is seen growing by 0.7% this year as ‘squeezed real wages, higher interest rates and unwinding government support all weigh on economic activity’ according to the OBR’s November 2023 economic and fiscal outlook.

The GDP figures are followed by UK January retail sales, which should show an improvement from December’s disastrous number: currently the consensus expects a 1.5% month-on-month rise in the headline figure and a 1.7% rise in core sales.

Next week sees the release of the Rightmove house price index and public sector net borrowing in the UK and, much more significantly, the minutes of the Federal Reserve's latest meeting. Investors will be hunting for clues on the future trajectory of interest rates across the Atlantic. 

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