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This week

With the final headcounts being formalised and the chairs being counted, it’ll soon be time for the Christmas food shopping to commence, ‘tis the season as they say. However maybe it will be without the seasonings this festive period as market research firm, Kantar, released the rising cost of cooking Christmas dinner for the family this week.

According to the data, shoppers will have to spend an extra £60 in December to buy the same items as last year, whilst the cost of a Christmas dinner for four is up 9.3% to £31. Even the delayed football World Cup has failed to inspire consumers, with beer sales nudging up just 5% to £230 million, mostly attributed to increased prices rather than volume. Hopefully there will still be some Prosecco-ho-ho with sparkling wine prices reportedly increasing far less than other alcohol drinks.

With plenty giving economists food for thought over the week, it was domestic house prices that are being sleighed as values saw their biggest drop in 14 years during last month, falling 2.3% according to mortgage lender, Halifax. However, these falls should be put into context given the rapid increase in property prices since the end of the pandemic, with the annual rate of growth in property prices falling from 8.2% to 4.7%. Interestingly, the data showed that Wales and the glorious South West had recorded particularly sharp slowdowns in house price growth. Both regions had been at the forefront of house price inflation during the pandemic, when the race for space trend among buyers boosted demand for rural and coastal properties.

With the potential for fewer Christmas crackers at the dinner table, US weekly unemployment numbers went off with something of a bang, helping US indices snap a 5-day losing streak. Stronger than expected Non-Farm Payroll data from last week had worried investors that the Fed may have to keep up the pace of recent rate hikes, Thursday’s data however, showed the number of Americans filing claims for jobless benefits increased moderately last week, while unemployment hit a 10-month high towards the end of November.

Providing the trimmings this week was further news from the US, as Producer Price Index numbers were released, detailing the prices of finished goods and services sold by manufacturers. Proving to be something of a turkey, the numbers fanned worries of the Federal Reserve sticking to its policy tightening for longer. The US Labor Department's report showed producer prices edged 7.4% higher last month on an annual basis versus expectations of 7.2%, causing US futures to put the party on hold for a while yet.

Next week

As the end of year fast approaches, there will be no chance for global financial markets to start to wind down just yet, as a story of two central banks could shape not only the coming week but also the months ahead.

With the Bank of England (BoE) due to meet for the final time this year on Thursday, financial markets are currently pricing in a 78% chance of a 0.5% rate rise to drag borrowing costs up to 3.5% for the year, with only a 22% chance of a more hawkish 0.75% rise on the cards. It seems inflationary fears are trumping recessionary uncertainties over on Threadneedle Street, so the coming week will give the bank plenty of opportunities to gauge how strongly the economy is performing, starting on Monday with the broadest economic measurement of all, GDP.

Measuring growth on a monthly basis, Monday’s data will quantify the total value of all goods and services produced domestically and give us some idea of how close to the most hotly anticipated recession in years. With many economists believing the UK is already in recession, the numbers should make for fascinating reading as we head towards the end of the year.

With headline inflation sitting at 11.1%, five times more than the BoE’s target of 2%, Wednesday’s annualised inflation numbers should set the tone for the rest of the year on these shores at least. However, it is not just in the UK that inflation is playing centre stage, in the US, the world’s largest economy, the Federal Reserve are also finding that price rises are proving very difficult to tame. The coming week will also see the US release its equivalent inflation figures, allowing us to see how price rises are faring across other major economies.

The US Federal Reserve also meet during the middle of the week to announce their latest rate policy. Having hiked rates by 0.75% for much of the second half of the year, markets are now seeing the Fed slowing their pace, with a 0.5% hike well telegraphed to investors. In fact, barring any huge surprises, the market is seeing a 93% chance of such a rise.

Even with the two central banks potentially taking investor attention, Friday brings with it a host of economic data, including a range of Purchasing Manager readings from Europe’s largest economies, covering both the Manufacturing and Services sectors. We will also get updates on from the UK and the US on how optimistic their Purchasing Managers are, with the data being particularly valuable for economists. The readings act a leading indicator of economic health, businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 09 December 2022.