This week

With pubs and restaurants counting the cost of lost earnings during the build up to Christmas, it seems the corks from any leftover Champagne will be popping at a number of UK High Street retailers this week, with consumers choosing to stay at home and indulge over Christmas rather than venture out.

Indeed it was food, glorious food that helped both M&S and Tesco to enjoy strong festive trading as demand for premium sustenance and drink spiked, with the supermarket aisle rather than the bar being the location of choice for shoppers. Illustrating something of a staggering contrast, Tesco sold more than 8 million bottles of champagne and sparkling wine during the run up to Christmas, whilst pub and restaurant chain owner Mitchells & Butlers said their sales fell 10.2% in the four weeks over the festive period compared with pre-pandemic trading.

The results come hot on the heels of Next’s trading statement last week, for which it raised its full-year profit outlook for a fifth time in 10 months, after beating guidance for sales in the run-up to Christmas, boosted by an unexpected revival in demand for adult formal and occasion fashion. In contrast, the fizz had well and truly come out of online competitor ASOS, who reported that its sales, while in line with downgraded forecasts, had been limited by consumer demand and supply chain constraints.

On the economic data front, inflation data from the US showed that prices in the world’s largest economy were still on the frothy side, rising 0.6% on a monthly basis. However, the underlying numbers did suggest that inflation was beginning to stabilise, with shelter price inflation (one-third of the CPI basket) moderating from 0.5% m/m in November to 0.42% m/m in December. It must be said that household goods (1.3% m/m) and apparel (1.7% m/m) still saw particularly strong rises throughout the month.

Putting on quite the spread at the end of the week was domestic GDP data, surpassing pre Covid levels, rising 0.9% between October and November. Spurred on predominantly by warmer weather a buoyant construction sector, which showed a 3.5% rise, the numbers will lead many to raise a toast as the economy passes the important milestone. However, the figures do not cover the period during which the Omicron variant brought about the government’s Plan B measures, causing concern that growth could slowed again. Food for thought indeed.

Next week

With the upcoming week being ushered in by “Blue Monday”, touted as the most depressing day of the year, we should expect a full spectrum of emotions throughout the coming days. With the gloomy weather, tight purse strings, Christmas a fading memory and no sign of a bank holiday on the horizon, the day is even backed up by a mathematical equation for its depressive qualities.

The opening day of the week will also be subdued from an investment point of view as the US remains closed in observance of Martin Luther King Day. However over in the Land of the Rising Sun, investors will be hoping for a somewhat rosier outlook as the bank of Japan delivers its views on their economy.  Such addresses are useful as they provide a valuable insight into the bank's view of economic conditions and inflation, the key factors that should shape the future of the country’s monetary policy.

The following day sees just how much green those in the UK have been earning over the past 3 months, as the Office For National Statistics releases its Average Earning Index data. The numbers will represent the 3-month moving average compared to the same period a year earlier and will help us to gauge inflation expectations, as the more the consumer is paid, typically more is spent.

We should receive of an insight into the Bank of England’s (BoE) view on inflation later on in the week as Governor Andrew Bailey is due to Due to testify, along with BoE Deputy Governor Jon Cunliffe, on the bank’s Financial Stability Report before the Treasury Select Committee, in London.

The week is wrapped up in the US as commodity markets will focus on the nation’s crude oil inventory numbers. With black gold prices having climbed back up above $80 per barrel, the data acts as the primary gauge of supply and demand imbalances in the market, which can lead to changes in production levels and heightened price volatility.

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 in January 2022.