This week
Reportedly born in what is modern-day Turkey and having slayed a dragon in what is now Libya, old St. George’s popularity in England dates back to well before the 8th century. However, it was not until during the Crusades that his cult gained special status, when Richard I placed his army under the protection of a red and white cross, making George the special patron of soldiers. By the Tudor period, during the Reformation St. George had become so popular, he finally became the patron saint of England in 1552, complete with his own feast day.
After St. George’s day fell on Sunday this week, it was up to online estate agent, Rightmove, to fly the flag for domestic data, releasing its House Price Index numbers. Showing that the monthly pace of house prices increases slowed to 0.2% from 0.8% in March, it seems property owners are turning more cautious about higher asking prices. Average asking prices rose 1.7% from a year ago in April too, the slowest pace since December 2019 before the pandemic and government tax breaks triggered something of a buying frenzy.
Worries over how buoyant the consumer is feeling is just one of the many dragons that central banks will need to slay going forwards, therefore Tuesday’s US consumer confidence figures would have held great importance with the US Federal Reserve. Coming in at 101.3 v consensus expectations of 104.1 and down from 104 in March, it is clear that some Americans have become more pessimistic over the economy recently. Drilling down into the data, it seems that while consumers' relatively favourable assessment of the current business environment improved somewhat in April, it is their expectations for the future that are falling, remaining below the level which often signals a recession looming in the short-term.
Staying with the US, Thursday saw the world’s largest economy release it Gross Domestic Product (GDP) figures for the previous quarter. It seemed economic growth slowed more than expected during the first quarter to just 1.1%, down from 2.6% the previous quarter, as an acceleration in consumer spending was offset by businesses cutting back on inventory investment in anticipation of weaker demand this year amid higher borrowing costs. Following January's surge, which economists attributed to unseasonably mild weather and difficulties adjusting the data for seasonal fluctuations, economic data seems to have been weaker, with retail sales slumping in February and March.
Friday also saw Personal Consumption Expenditures (PCE) released in the US, reportedly the Federal Reserve’s favourite metric when judging inflation. Core PCE on an annual basis edged lower to 4.6% from 4.7% during the same period, compared to analysts' forecast of 4.5%. On a monthly basis, Core PCE rose 0.3%, in line with consensus.
It is also interesting to note that St George never actually set foot on English shores, spending the majority of his life in mainland Europe. With his chivalry and martyrdom also celebrated in Venice, Genoa, Catalonia, Portugal and of course Georgia to name a few, it is only right therefore that we end the week on the continent. Friday saw a raft of economic data that painted a mixed picture for growth and inflation, potentially making the European Central Bank's interest rates decision next week even more difficult.
The euro zone's two largest economies, Germany and France, stagnated or barely grew in the first three months of the year as a surge in exports was offset by a decline in domestic consumption by households. However, the Spanish and Italian economies expanded more than expected, partly attributable to that same rebound in trade.
Next week
Kicking off the first of the two four-day weeks in a row, the coming week sees domestic and continental markets closed in observance of May Day.
Known as “Beltane” in Celtic, a time for when the summer pastures would open for livestock, investors all over the world will be chewing the cud about central banks this week. First, Wednesday will give us a press conference from the US Federal Reserve announcing its current borrowing rate. As well as giving its views on the American economy, the Federal Reserve are now widely expected to increase rates by 0.25% once more before pausing, with the odds of the increase having shortened dramatically after another strong labour report last month.
With the Fed’s press conference likely to set the tone for the week, we will also have news from the European Central Bank (ECB) on Thursday, who are widely expected to increase rates too. With borrowing costs in Europe currently sitting at 2.5%, many expect the ECB to carry on raising rates by 0.5% although the outlook has been muddied slightly by problems in the banking system with the collapse of Swiss banking behemoth, Credit Suisse in March.
Come what May, the first Friday of the month brings with it the US Non-Farm Payroll data. A key piece of information when determining the US central bank’s next rate move. The employment data itself will be accompanied by Average Hourly Earnings, allowing us to gauge future inflation expectations as the more consumers earn, the more they tend to spend. Combined, it’s a vital piece of data for the Fed and should take on added significance considering the extra impetus put on such data going forward from Jay Powell and co.
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 28 April 2023.