GLOBAL MORNING BRIEFING: UK GDP & CBR Rate Decision

Friday’s data schedule sees multiple key data points, including the final German CPI, UK’s Q4 GDP and IP, Swiss CPI, the Bank of Russia rate announcement and the US Michigan sentiment in the afternoon.

German Final Inflation Print to Confirm Downwards Shift (0700 GMT)

Germany’s headline inflation for January is expected to confirm the flash estimate of +4.9% y/y and +0.4% m/m, moderating from +5.3% y/y and +0.5% m/m in December. Ignoring the tick downwards in June 2021, German inflation has steadily risen since December 2020, where it was at a deflationary -0.3% y/y. The harmonised reading is seen confirming the flash estimate at +5.1% y/y, dampening for the second consecutive month from 5.7% y/y in December. The base effects of the VAT reduction is expected to fade from January, however upside risks remain substantial.

The ECB’s Isabel Schnabel and the Bundesbank President Joachim Nagel both expressed hawkish commentary about reassessing rate hike possibilities if inflation numbers continue to rise, with Nagel expecting German inflation to rise "significantly" above 4% this year, although ECB Chief Economist Philip Lane has been more circumspect.

UK GDP at +1.1% for Q4 (0700 GMT)

UK GDP is projected to have grown by +1.1% q/q in the prelim Q4 estimate, remaining in line with the Q3 print, with the service sector as the key contributor. Compared to Q4 2020, consensus is expecting a softening to +6.4% y/y, down from +6.8% y/y. However, extremely weak consumer sentiment in December -- when the Omicron Covid variant swept through the UK -- introduces a degree of downside risk to forecasts, as retail and vehicle sales both plunged in December.

UK Industrial Production and Manufacturing Slowing (0700 GMT)

UK IP is expected to have weakened in December, almost stalling at +0.1% m/m, down form +1.0% m/m in November. On the year, slight growth is projected at +0.6% y/y, following +0.1% y/y in November. Analysts are also anticipating a slump in manufacturing growth, dipping to +0.2% m/m from +1.1% m/m in November 2021.

The key downwards drivers here remain persistent supply bottlenecks and the Omicron covid outbreak, which has seen cases in the UK rise to record highs over the winter months.

Russia Interest Rate Decision at +100bp (1030 GMT)

Markets are pricing a 100bp hike to 9.5% in the CBR’s key rate decision this morning, following Wednesday's CPI reading which saw headline inflation at +8.7% y/y and core inflation beating forecasts at +9.2% y/y. Russian households are experiencing considerable inflationary pressure on disposable incomes as food prices remain the key driver, jumping to +11.1% y/y in January.

Prelim US Michigan Sentiment to Slide Further (1500 GMT)

The Michigan sentiment index is projected to edge down to 67.0 in the preliminary February reading, down from 67.2 in January, the lowest reading since 2011 on the back of low consumer confidence due to the Omicron covid wave and inflation concerns squeezing disposable income.

Today’s policymaker appearance schedule is relatively light, with just the ECB’s Frank Elderson participating in a panel discussion on sustainable finance this morning. The link to the event is in the calendar below.

Source: ONS

Date	GMT/Local	Impact	Flag	Country	Event
11/02/2022	0700/0700	**		UK	UK monthly GDP
11/02/2022	0700/0700	**		UK	Output in the Construction Industry
11/02/2022	0700/0700	**		UK	Index of Services
11/02/2022	0700/0700	***		UK	Index of Production
11/02/2022	0700/0700	**		UK	Trade Balance
11/02/2022	0700/0700	***		UK	GDP First Estimate
11/02/2022	0700/0800	***		DE	HICP (f)
11/02/2022	0730/0830	***		CH	CPI
11/02/2022	0805/0905			EU	ECB Elderson on sustainable finance discussion at Finance Summit
11/02/2022	1500/1000	***		US	University of Michigan Sentiment Index (p)